As filed with the Securities and Exchange Commission on September 3, 1999
Registration No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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A.I. Receivables Transfer Corp.
(Depositor to the Trust described herein)
(Exact name of registrant as specified in its charter)
Delaware 22-3674608
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
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160 Water Street
New York, New York 10038
(212) 428-5400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
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Scott B. Rose, Esq.
A.I. Receivables Transfer Corp.
160 Water Street
New York, New York 10038
(212) 428-5400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies To:
Daniel Mette, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
(212) 310-8000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable on or after the effective date of the Registration Statement. If
only the securities being registered on this form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. |_|
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Amount to be Proposed Maximum Proposed Maximum
Registered Aggregate Offering Price Aggregate Offering
Title of Each Class of (1)(2) per Unit (2)(3) Price (3)(4) Amount of
Securities to be Registered Registration Fee
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<S> <C> <C> <C> <C>
Asset-Backed Notes........... ------ ------ $1,000,000 $ 278
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(1) If any registered securities are issued at an original issue discount, then
such greater principal amount as shall result in an aggregate initial
offering price of $1,000,000. In no event will the aggregate initial
offering price of securities registered hereunder exceed $1,000,000 or the
equivalent thereof in one or more foreign currencies or composite
currencies, including the euro.
(2) Not specified as to each class of securities to be registered pursuant to
General Instruction II.D of Form S-3 under the Securities Act of 1933.
(3) The proposed maximum offering price per unit or share will be determined
from time to time by the Registrant in connection with, and at the time of,
the issuance by the Registrant of the securities registered hereunder.
(4) Estimate solely for the purposes of computing the registration fee pursuant
to Rule 457(o) of the Rules and Regulations of the Securities and Exchange
Commission under the Securities Act of 1933.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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INTRODUCTORY NOTE
This Registration Statement contains (i) a form of Prospectus relating to
the offering of series of Asset Backed Notes by A.I. Receivables Transfer Corp.
(the "Registrant") and (ii) a form of Prospectus Supplement relating to the
offering by the Registrant of the particular series of Asset Backed Notes
described therein. The form of Prospectus Supplement relates only to the
securities described therein and is a form which, among others, may be used by
the Registrant to offer Asset Backed Notes under this Registration Statement.
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SUBJECT TO COMPLETION, DATED [____], 1999
Prospectus Supplement to Prospectus Dated [ _______ ], 1999
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
such State.
AIG Credit Premium Finance Master Trust
Issuer
A.I. Receivables Transfer Corp.
Seller
SERIES [ ]-1
$[ _________ ] Floating Rate Asset Backed Notes
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Consider carefully the Risk Factors beginning on page S- [ ___ ] in this
prospectus supplement and page [ ___ ] in the prospectus.
Neither the notes, nor the underlying loans, deferred payment obligations or
receivables are insured or guaranteed by any governmental agency.
The notes will represent obligations of the trust only and will not represent
interests in or obligations of AIGCC, AIC, AICCO, IP Finance I, IP Finance II
and IP Funding or any of their affiliates.
This prospectus supplement may be used to offer and sell the notes
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The Trust will issue
Series [ ]-1 Series [ ]-]
Class A Notes Class B Notes
------------- -------------
Principal amount $[ ____ ] $[ ____ ]
Note rate One-month LIBOR + One-month LIBOR + [ ____
[ ____ ] % annually ] % annually
Interest paid Monthly Monthly
First interest payment date [ _____ ] [ ____ ]
First principal [ ____ ] [ ____ ]
payment date
Legal final maturity [ ____ ] [ ____ ]
The Trust will also issue the following securities, which are not offered by
this Prospectus Supplement--
o Series [ ]-1 Class C Floating Rate Notes, with a principal amount of $[ ___
].
Credit Enhancement--
o Subordination
The Class B Notes are subordinated to the Class A Notes. Subordination of
the Class B Notes provides credit enhancement for the Class A Notes. The
Class C Notes are subordinated to the Class A Notes and the Class B Notes.
Subordination of the Class C Notes provides credit enhancement for both the
Class A Notes and the Class B Notes.
o Yield Enhancement Account
A portion of collections that would otherwise be paid to the Trust will be
used to fund a reserve account called the Yield Enhancement Account for the
benefit of Noteholders.
This prospectus supplement and the accompanying prospectus relate solely to
the offering of the Class A Notes and Class B Notes only.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disproved these notes or determined that this
prospectus supplement and the accompanying prospectus is accurate or complete.
Any representation to the contrary is a criminal offense.
Underwriter of the Class A Notes and Class B Notes
[Goldman, Sachs & Co.]
The date of this Prospectus Supplement is [ ___________ ], 1999
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IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the notes in two separate documents
that progressively provide more detail: (a) the accompanying Prospectus, which
provides general information, some of which may not apply to your Series of
notes and (b) this Prospectus Supplement, which describes the specific terms of
your Series of notes.
If the terms of your Series of notes vary between this Prospectus
Supplement and the accompanying Prospectus, you should rely on the information
in this Prospectus Supplement.
We include cross-references in this Prospectus Supplement and the
accompanying Prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying Prospectus provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus Supplement and the accompanying Prospectus are defined under the
caption "Index of Terms for Prospectus Supplement" beginning on page S-[ ___ ]
in this document and under the caption "Index of Terms for Prospectus" beginning
on page [ ___ ] in the accompanying Prospectus.
[THE UNDERWRITERS MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR
OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING OVER-ALLOTMENT, STABILIZING
AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES AND THE IMPOSITION OF PENALTY
BIDS, IN EACH CASE IN CONNECTION WITH THE OFFERING OF THE NOTES. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING" HEREIN.]
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TABLE OF CONTENTS
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Page
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SUMMARY OF TERMS........................................................................................1
OFFERED SECURITIES......................................................................................1
Interest Payments.......................................................................................1
Principal Payments......................................................................................1
OTHER SECURITIES........................................................................................1
The Class C Notes.......................................................................................1
SECURITY FOR THE NOTES..................................................................................2
CREDIT ENHANCEMENT......................................................................................2
Subordination...........................................................................................2
Yield Enhancement Account...............................................................................2
OTHER INTERESTS IN THE TRUST............................................................................3
Other Series of Notes...................................................................................3
The Trust Interest......................................................................................3
TRUST ASSETS............................................................................................3
Receivables.............................................................................................3
AIC Trust Transferor Certificate........................................................................4
COLLECTIONS BY THE SERVICER.............................................................................4
ALLOCATIONS AND PAYMENTS TO YOU AND YOUR SERIES.........................................................4
Allocations of Collections of Finance Charge Receivables................................................5
Allocations of Collections of Principal Receivables.....................................................7
[REFINANCING OF THE NOTES..............................................................................11
SHARED PRINCIPAL COLLECTIONS...........................................................................11
DENOMINATIONS..........................................................................................11
REGISTRATION, CLEARANCE AND SETTLEMENT.................................................................11
TAX STATUS.............................................................................................11
ERISA CONSIDERATIONS...................................................................................11
NOTE RATINGS...........................................................................................12
[EXCHANGE LISTING......................................................................................12
RISK FACTORS...........................................................................................13
Possible Effect of Indirect Ownership Interest in AIC Trust Receivables via Transferor Certificate
of AIC Trust......................................................................................13
Possible Effects of Lack of Historical Experience With Deferred Payment Obligations....................13
Possible Effect of Year 2000 Problems..................................................................13
Possible Effect of Geographic Concentration and Adverse Economic Factors on Origination................14
THE AIGC PREMIUM FINANCE PORTFOLIOS....................................................................15
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General ..............................................................................................15
Premium Finance Obligation Origination; Collection Policy..............................................15
The Originators Premium Finance Portfolio..............................................................16
THE RECEIVABLES........................................................................................22
AIC Trust Interest.....................................................................................23
MATURITY ASSUMPTIONS...................................................................................24
Controlled Amortization Period.........................................................................25
Rapid Amortization Period..............................................................................25
Pay Out Events.........................................................................................25
Other Considerations...................................................................................26
THE TRUST, THE SELLER, THE ORIGINATORS AND THE SERVICER................................................27
DESCRIPTION OF SERIES PROVISIONS.......................................................................27
General ..............................................................................................27
New Issuances..........................................................................................29
Interest Payments......................................................................................29
Principal Payments.....................................................................................31
[Postponement of Controlled Amortization Period........................................................32
Subordination..........................................................................................32
Allocation Percentages.................................................................................33
Reallocation of Cash Flows.............................................................................34
Application of Collections.............................................................................36
Shared Principal Collections...........................................................................41
Defaulted Receivables; Investor Charge-Offs............................................................41
Yield Enhancement Account..............................................................................43
Excess Funding Account; Minimum Trust Interest; Excess Receivables Amount..............................44
Pay Out Events.........................................................................................46
Servicing Compensation and Payment of Expenses.........................................................49
[Refinancing...........................................................................................49
Reports to Noteholders.................................................................................49
Amendments.............................................................................................49
ERISA CONSIDERATIONS...................................................................................50
Class A Notes..........................................................................................50
Class B Notes..........................................................................................50
Consultation With Counsel..............................................................................51
UNDERWRITING...........................................................................................51
ANNEX I OTHER SERIES ISSUED AND OUTSTANDING...........................................................54
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT...............................................................55
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SUMMARY OF TERMS
o This summary highlights selected information from this document and does
not contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of the offering of the
notes, read carefully this entire document and the accompanying Prospectus.
o This summary provides an overview of certain calculations, cash flows and
other information to aid your understanding and is qualified by the full
description of these calculations, cash flows and other information in this
Prospectus Supplement and the accompanying Prospectus.
OFFERED SECURITIES
AIG Credit Premium Finance Master Trust (the "Trust") is offering the Series [
__ ]-1 Class A Floating Rate Asset Backed Notes (the "Class A Notes") and the
Series [ __ ]-1 Class B Floating Rate Asset Backed Notes (the "Class B Notes")
as part of Series [ __ ]-1. The Class A Notes and the Class B Notes (together,
the "Offered Notes") represent debt obligations secured by a partial, undivided
interest in the assets of the Trust.
The Class B Notes are subordinated to the Class A Notes.
Interest Payments
The Class A Notes will accrue interest for each Interest Period at the Class A
Note Rate. The "Class A Note Rate" is an annual rate equal to one month LIBOR +
[ ____ ]%, [not to exceed [ __ ]%].
The Class B Notes will accrue interest for each Interest Period at the Class B
Note Rate. The "Class B Note Rate" is an annual rate equal to one month LIBOR +
[ ____ ]%[, not to exceed [ __ ]%].
Interest accrued during each Interest Period will be due on each Payment Date.
Any interest due but not paid on a Payment Date will be payable on the next
Payment Date together with additional interest at the applicable note rate plus
[ __ ]% per annum.
o A "Payment Date" is the 15th day of each month, or if that day is not a
business day, the next business day. The first Payment Date is [ ____ ].
o Each "Interest Period" begins on and includes a Payment Date and ends on
but excludes the next Payment Date. However, the first Interest Period will
begin on and include [ ____ ] (the "Closing Date") and end on but exclude [
____ ], the first Payment Date.
Principal Payments
The Class A Noteholders and Class B Noteholders are expected to have available
an amount equal to $[ _____ ], the "Controlled Distribution Amount," to make
payments of principal on each Payment Date from [ _____ ] to [ _____ ] (the
"Class A Controlled Amortization Period"). The Class B Noteholders are scheduled
to receive a single payment of principal, the "Class B Controlled Distribution
Amount", on the Payment Date in [ _____ ], the ("Class B Controlled Amortization
Period"). However, certain circumstances could cause principal to be paid
earlier or later, or in reduced amounts. No principal will be paid to the Class
B Noteholders until the Class A Noteholders are paid in full. See "Maturity
Assumptions" in this Prospectus Supplement and in the accompanying Prospectus
and "Description of Series Provisions--Allocation Percentages" in this
Prospectus Supplement."
The final payment of principal and interest on the Offered Notes will be made no
later than [ ____ ], 20[ __ ], or, if that date is not a business day, the next
business day, called the "Legal Final Maturity" or the "Series [ __ ]-1
Termination Date."
See "Description of Series Provisions--Principal Payments" in this Prospectus
Supplement for a discussion of the determination of amounts available to pay
principal.
OTHER SECURITIES
The Class C Notes
The Trust is also issuing the Series [ __ ]-1 Class C Floating Rate Asset Backed
Notes (the "Class C Notes" and together with the Offered Notes, the "Notes"),
which represent debt obligations
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secured by a partial, undivided interest in the assets of the Trust. The Class C
Notes are subordinated to the Offered Notes. As a subordinated interest, the
Class C Notes are a form of credit enhancement for the Offered Notes.
The Class C Notes are not being offered under this Prospectus Supplement and the
accompanying Prospectus.
SECURITY FOR THE NOTES
The Notes are secured by a partial, undivided interest in the assets of the
Trust, which interest is referred to as the "Investor Interest" and is described
in greater detail below. The Notes generally are not secured by the remaining
undivided interest in the assets of the Trust, which is referred to as the
"Trust Interest". The Trust's right to receive the proceeds of Trust assets
allocable to the Trust Interest is not subordinate to the Noteholders' right to
receive payment on the Notes from the proceeds of Trust assets allocable to the
Investor Interest, except to the limited extent described below.
CREDIT ENHANCEMENT
Credit enhancement for your Series is for your Series' benefit only, and you are
not entitled to the benefits of any credit enhancement available to other
Series.
Subordination
Subordination of the Class B Notes provides credit enhancement for the Class A
Notes. Subordination of the Class C Notes provides credit enhancement for the
Class A Notes and the Class B Notes.
The Class C Investor Interest and the Class B Investor Interest must be reduced
to zero, and the Class B and Class C Notes must be written down to zero, before
the Class A Investor Interest or Class A Notes will suffer any loss of
principal. The Class C Investor Interest must be reduced to zero, and the Class
C Notes must be written down to zero, before the Class B Investor Interest or
Class B Notes will suffer any loss of principal.
On any Payment Date, no interest will be paid on the Class C Notes until all
interest due and owing on the Class A Notes and Class B Notes is paid in full.
On any Payment Date, no principal will be paid to the Class B Notes until all
principal due and owing to the Class A Notes and all interest due and owing on
the Class A Notes and Class B Notes is paid in full. On any Payment Date, no
principal will be paid to the Class C Notes until all principal due and owing on
the Class A Notes and Class B Notes is paid in full.
For a description of the events (other than payments of principal) which may
lead to a reduction of the Class A Investor Interest, the Class B Investor
Interest and the Class C Investor Interest, see "Description of Series
Provisions--Reallocation of Cash Flows," "--Excess Funding Account; Minimum
Trust Interest; Excess Receivables Amount," "--Application of Collections" and
"--Defaulted Receivables;" "Investor Charge-Offs" in this Prospectus Supplement
Yield Enhancement Account
The Notes will also have the benefit of credit enhancement in the form of an
account (the "Yield Enhancement Account") which will be maintained by the
Indenture Trustee for the benefit of the Noteholders.
Funds on deposit in the Yield Enhancement Account on each Transfer Date will be
added to Excess Spread and made available for application on the next Payment
Date in respect of the Notes to the extent and in the priorities set forth under
"Description of Series Provisions--Application of Collections--Excess Spread."
On each Transfer Date, the Servicer will deposit the Available Yield Enhancement
Amount into the Yield Enhancement Account, which will be available for credit
enhancement for the Notes. Such deposit will be made out of Receivable
collections otherwise allocable to the Trust Interest. In addition, the Servicer
will deposit into the Yield Enhancement Account on each Transfer Date any
remaining amounts.
The "Available Yield Enhancement Amount" will be equal to [ ___ ]% of Receivable
collections during the preceding Monthly Period times the Floating Investor
Percentage; provided that the Available Yield Enhancement Amount will be capped
so that it will not exceed the Monthly Interest due on the Notes for such
Transfer Date.
In general, on each Transfer Date, any amount in excess of the 91 Day
Delinquency Amount
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remaining in the Yield Enhancement Account after application of the funds on
deposit therein for the purposes described above will be paid to the Trust,
provided that a Pay Out Event has not occurred See "Description of Series
Provisions--Yield Enhancement Account."
OTHER INTERESTS IN THE TRUST
Other Series of Notes
The Trust expects to issue additional Series of notes. When issued by the Trust,
the notes of each of those Series will also represent debt obligations secured
by a partial, undivided interest in the assets of the Trust. The Trust may issue
additional Series with terms that may be different from any other Series without
prior review or consent by any Noteholders.
The Trust has previously issued one Series of notes which are Variable Funding
Notes. You can review a summary of the terms of the outstanding Series of notes
under the caption "Annex I: Other Series Issued and Outstanding" included at the
end of this Prospectus Supplement.
The Trust Interest
AIC, AICCO, IP Finance I, IP Finance II and IP Funding (together, the
"Originators") each will own a one fifth equity interest in A.I. Receivables
Transfer Corp. (the "Seller" or "ART"). The Seller initially will own 100%
ownership interest in the Trust which in turn will retain unencumbered ownership
of the "Trust Interest," which represents the remaining interest in the assets
of the Trust not securing the Notes, any other Series of notes or the other
interests in the Trust or other obligations of the Trust. The Trust Interest is
not subordinated to the Notes, although a portion of collections from
Receivables otherwise allocable to the Trust Interest provides yield enhancement
for your Series and other outstanding Series. See "Description of Series
Provisions--Yield Enhancement Account."
In addition, under the circumstances described under "Description of Series
Provisions--Excess Funding Account; Minimum Trust Interest; Excess Receivables
Amount," a portion of losses on Receivables exceeding specified concentration
levels (based on the identity of the related Insured or insurer to whom financed
premiums were paid or are due) that would otherwise be allocable to the Notes
may be allocated to the Trust Interest. See "Description of Series
Provisions--Yield Enhancement Account," "--Excess Funding Account; Minimum Trust
Interest; Excess Receivables Amount" and "--Defaulted Receivables; Investor
Charge-Offs."
TRUST ASSETS
Receivables
The Trust assets include the entire beneficial interest in receivables
transferred to the Trust (the "Receivables") related to loans to Insureds to
finance commercial property and casualty insurance premiums ("Loans") and
deferred payments to become due from Insureds to finance commercial property and
casualty insurance premiums ("Deferred Payment Obligations" and, together with
the Loans, the "Premium Finance Obligations"). See "Business of A.I. Receivables
Transfer Corp. and the Originators--General" and "--Premium Finance Obligations"
in the Prospectus. However, the total outstanding principal balance of
Receivables related to Deferred Payment Obligations will initially be limited to
[ __ ]% of the total outstanding principal balance of all Receivables
transferred to the Trust. Such percentage may be increased subsequently upon
satisfaction of the Rating Agency Condition.
The Receivables consist of both Principal Receivables and Finance Charge
Receivables.
"Principal Receivables" are, generally, (a) with respect to Loans, amounts
borrowed by Insureds to pay premiums for property and casualty insurance and (b)
with respect to Deferred Payment Obligations, the portion of the deferred
payments equal to the purchase price paid by the Originator for the rights to
such Deferred Payment Obligation.
"Finance Charge Receivables" are (a) with respect to Loans, the related finance
charges and certain fees and (b) with respect to Deferred Payment Obligations,
the portion of the deferred payments in excess of the purchase price of the
payments, which excess is deemed finance charges.
See "Business of A.I. Receivables Transfer Corp. and the Originators--General"
and "--Premium Finance Obligations" in the Prospectus.
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3
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AIC Trust Transferor Certificate
The Trust assets will also include the transferor certificate of AIC Premium
Finance Loan Master Trust (the "AIC Trust") which represents a beneficial
interest in receivables which make up the assets of the AIC Trust which in turn
represent a beneficial interest in premium finance loans funded by AIC and AICCO
(the "AIC Trust Receivables"). Until the final maturity (the "AIC Trust
Termination Date") of all outstanding series of certificates of the AIC Trust,
AIC and AICCO will continue to sell AIC Trust Receivables to the transferor of
the AIC Trust, A.I. Receivables Corp. ("AIR") and not to ART. After the AIC
Trust Termination Date, AIC and AICCO will transfer the remaining AIC Trust
Receivables to the Trust. AIC and AICCO will sell the AIC Trust Receivables to
ART. The final maturity of the AIC Trust is expected to be November 15, 2000.
See "--Trust Assets--Receivables."
COLLECTIONS BY THE SERVICER
The Servicer will collect payments on the Receivables and will deposit those
collections in an account. The Servicer will keep track of those collections
that are Finance Charge Receivables and those collections that are Principal
Receivables.
ALLOCATIONS AND PAYMENTS TO YOU AND YOUR SERIES
Each month, the Servicer will allocate collections and the amount of Receivables
that are not collected and are written off as uncollectible, called the "Default
Amount," among:
o your Series, based on the size of the Investor Interest (initially $[
______ ]);
o other outstanding Series, based on the size of the investor interests in
the Trust securing such Series; and
o the Trust, based on the size of the Trust Interest.
The Trust assets allocated to your Series will be allocated to the following,
based on varying percentages:
o holders of the Class A Notes, based on the Class A Investor Interest
(initially $[ ______ ]);
o holders of the Class B Notes, based on the Class B Investor Interest
(initially $[ ______ ]); and
o the holders of the Class C Notes, based on the Class C Investor Interest
(initially $[ ____ ]).
See the following chart and "Description of Series Provisions--Allocation
Percentages" in this Prospectus Supplement.
The following chart illustrates the Trust's general allocation structure only
and does not reflect the relative percentages of collections or other amounts
allocated to the Trust Interest, to any Series, including your Series, or to
holders of the Class A Notes, the Class B Notes or the Class C Notes.
Allocation of Trust Assets
Trust Assets
Other Your Trust
Series Series Interest
Class A Class B Class C
Notes Notes Notes
You are entitled to receive payments of interest and principal based upon
allocations to your Series. The Investor Interest, which is the basis for
allocations to your Series, is the sum of (a) the Class A Investor Interest, (b)
the Class B Investor Interest and the Class C Investor Interest. The Class A
Investor Interest, the Class B Investor Interest and the Class C Investor
Interest will initially equal the outstanding principal amount of the Class A
Notes, the Class B Notes and the Class C Notes. The Investor Interest will
decline as a result of principal payments and may decline due to the writing off
of Receivables or other reasons. If the Investor Interest declines, amounts
allocated and available for payment to your Series and to you will be reduced.
For a description of the events
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4
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which may lead to these reductions, see "Description of Series
Provisions--Reallocation of Cash Flows" in this Prospectus Supplement.
Allocations of Collections of Finance Charge Receivables
The chart on the following page demonstrates the manner in which collections of
Finance Charge Receivables are allocated and applied to your Series. The chart
is a simplified demonstration of certain allocation and payment provisions and
is qualified by the full descriptions of these provisions in this Prospectus
Supplement and the accompanying Prospectus.
Step 1: Collections of Finance Charge Receivables for your Series are allocated,
based on varying percentages, among the Class A Investor Interest, the
Class B Investor Interest and the Class C Investor Interest.
Step 2: Collections of Finance Charge Receivables allocated to the Class A
Investor Interest are applied to cover, in the following priority:
o the interest payment due to the Class A Noteholders;
o the Class A Noteholders' portion of servicing fees due to the Servicer, if
any; and
o the Class A Noteholders' portion of the Default Amount, if any.
Collections of Finance Charge Receivables allocated to the Class B Investor
Interest are applied to cover, in the following priority:
o the interest payment due to the Class B Noteholders; and
o the Class B Noteholders' portion of servicing fees due to the Servicer, if
any.
Collections of Finance Charge Receivables allocated to the Class C Investor
Interests are applied to cover the Class C Noteholders' portion of servicing
fees due to the Servicer, if any.
Remaining collections of Finance Charge Receivables allocated to the Class B
Investor Interest and the Class C Investor Interest are applied in Step 3
because of their subordinated status.
Step 3: Collections of Finance Charge Receivables allocated to your Series and
not used in Step 2 are treated as Excess Spread and together with amounts
on deposit in the Yield Enhancement Account are applied, in the following
priority, to cover:
o the interest payment due to the Class A Noteholders, the Class A
Noteholders' portion of the servicing fee due to the Servicer, if any, and
the Class A Noteholders' portion of the Default Amount, each to the extent
not covered in Step 2;
o reimbursement of certain reductions of the Class A Investor Interest and
the Class A Notes;
o the interest payment due to the Class B Noteholders and the Class B
Noteholders' portion of the servicing fee due to the Servicer, if any, to
the extent not covered in Step 2;
o the Class B Noteholders' portion of the Default Amount;
o reimbursement of certain reductions of the Class B Investor Interest and
the Class B Notes;
o the interest payment due to the Class C Noteholders;
o the Class C Noteholders' portion of the servicing fee due to the Servicer,
if any, to the extent not covered in Step 2;
o the Class C Noteholders' portion of the Default Amount; and
o reimbursement of certain reductions of the Class C Investor Interest and
the Class C Notes.
Remaining amounts are deposited in the Yield Enhancement Account. Amounts on
deposit in the Yield Enhancement Account are paid to the Trust to the extent
that amounts on deposit in the Yield Enhancement Account exceed the 91 Day
Delinquency Amount.
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ALLOCATIONS OF COLLECTIONS OF FINANCE CHARGE RECEIVABLES
<TABLE>
<CAPTION>
Collections of Finance Charge
Receivables Allocated to Your Series
<S> <C> <C> <C>
Step 1 Class A Investor Class B Investor Class C Investor
Interest Interest Interest
Step 2 1. Class A Interest Payment
2. Class A Servicing Fee 1. Clasws B Interest Payment 1. Class C Servicing Fee
3. Class A Default Amount 2. Class B Servicing Fee
Step 3 Excess Spread Yield Enhancement
Account
1. Class A Interest Payment
2. Class A Servicing Fee
3. Class A Default Amount
4. Reimburse Class A Investor Interest
5. Class B Interest Payment
6. Class B Servicing Fee
7. Class B Default Amount
8. Reimburse Class B Investor Interest
9. Apply Remaining Excess Spread to
Class C Investor Interest and Trust
Interest and Other Items as Described
Above in the Accompanying Text
</TABLE>
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Allocations of Collections of Principal Receivables
The chart on the following page demonstrates the manner in which collections of
Principal Receivables are allocated and applied to your Series. The chart is a
simplified demonstration of certain allocation and payment provisions and is
qualified by the full descriptions of these provisions in this Prospectus
Supplement and the accompanying Prospectus.
Step 1: Collections of Principal Receivables for your Series are allocated,
based on varying percentages, among the Class A Investor Interest, the
Class B Investor Interest and the Class C Investor Interest.
Step 2: Collections of Principal Receivables allocated to the Class C Investor
Interest and the Class B Investor Interest may be reallocated and made
available to pay amounts due to the Class A Notes that have not been paid
by either the Class A Investor Interest's share of collections of Finance
Charge Receivables Excess Spread or amounts withdrawn from the Yield
Enhancement Account. If required Class A amounts are satisfied, the Class C
Investor Interest also provides the same type of protection to the Class B
Investor Interest. Certain collections which are reallocated to pay amounts
usually paid out of Finance Charge Receivables for Class A or Class B will
not be made part of Available Investor Principal Collections.
Step 3: Collections of Principal Receivables allocated to your Series and not
used in Step 2 are combined with shared principal collections from other
Series, to the extent necessary and available, and treated as Available
Investor Principal Collections.
Available Investor Principal Collections may be paid to you as payments of
principal. The amount, priority and timing of your principal payments, if any,
depend on whether your Series is in the Revolving Period, the Controlled
Amortization Period, or a Rapid Amortization Period, as described below.
The Class A Notes will be paid in full before the Class B Notes and the Class C
Notes receive any payments of principal. The Class B Notes will be paid in full
before the Class C Notes receive any payments of principal.
See "Maturity Assumptions" and "Description of Series Provisions--Application of
Collections" in this Prospectus Supplement.
Step 4: Collections of Principal Receivables allocated to your Series and not
used in Steps 2 and 3 above may be paid to other Series to the extent
necessary or to the Trust.
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ALLOCATIONS OF COLLECTIONS OF PRINCIPAL RECEIVABLES
Collections of Principal Receivables
Allocated to Your Series
<TABLE>
<S> <C> <C>
Step 1 Class A Investor Class B Investor Class C
Interest Interest Investor Interest
Step 2 Reallocation for Class A, Reallocation for Class A,
if any & Class B, if any
Step 3 Available Investor Principal Shared Principal Collections
Collections from Other Series
1. Class A Principal Payment
2. Class B Principal Payment
3. Class C Principal Payment
Step 4 Shared Principal Collections
to Other Series
</TABLE>
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Revolving Period: Series [ __ ]-1 will have a period of time, called the
"Revolving Period," when the Trust will not pay, or accumulate, principal for
Noteholders. In general, during the Revolving Period the Trust will pay
available principal to other Series or the Trust. See "Description of Series
Provisions--Principal Payments" and "--Application of Collections" in this
Prospectus Supplement.
The Revolving Period starts on the Closing Date and ends on the earlier to begin
of:
o the Controlled Amortization Period; or
o a Rapid Amortization Period.
Controlled Amortization Period: During the period called the "Controlled
Amortization Period," each month the Servicer will deposit on the Transfer Date
a specified amount in the Principal Account which is applied in the following
priority to cover:
o the principal payment due to Class A Noteholders;
o if the Class A Notes are paid in full, the specified principal payment due
to Class B Noteholders; and
o if the Class B Notes are paid in full, the specified principal payment due
to Class C Noteholders.
Each month, the Servicer will deposit principal not required to be paid as
specified above in the Principal Account to be paid to other Series, to the
extent necessary, or to the Trust. Each month, if the amount actually deposited
in the Principal Account is less than the required deposit, the amount of this
deficiency will be carried forward as a shortfall and included in the next
month's required deposit.
If, at the end of any Monthly Period, the Trust Interest is less than the
Minimum Trust Interest, excess principal collections otherwise payable to the
Trust, will instead be deposited into the Excess Funding Account.
For information about the application of money on deposit in the Principal
Account, including any net investment earnings, see "Description of Series
Provisions--Principal Payments" and "--Application of Collections" in this
Prospectus Supplement.
You should be aware that there may not be sufficient amounts available to pay
principal in full for the Class A Notes, the Class B Notes and the Class C
Notes. In addition, if the money on deposit in the Principal Account is
insufficient to pay these amounts on the Legal Final Maturity Date or if a Trust
Pay Out Event or a Series [ __ ]-1 Pay Out Event occurs, a Rapid Amortization
Period will begin and the timing of your principal payments could change. See
"Maturity Assumptions" in this Prospectus Supplement and in the accompanying
Prospectus.
[The Controlled Amortization Period is scheduled to begin at the close of
business on [ ______ ], 20[ __ ], but in some cases may be delayed to no later
than the close of business on [ ______ ], 20[ __ ]. See "Description of Series
Provisions--Postponement of Controlled Amortization Period" in this Prospectus
Supplement.]
The Controlled Amortization Period will end when any one of the following
occurs:
o the Notes are paid in full;
o a Rapid Amortization Period begins; or
o the Series [ __ ]-1 Termination Date.
Rapid Amortization Period: If a period called the "Rapid Amortization Period"
begins, the Trust will use any available principal collections allocated to your
Series to pay (a) the principal payment due to the Class A Notes, (b) if the
Class A Notes are paid in full, the principal payment due to the Class B Notes,
and (c) if the Class B Notes are paid in full, the principal payment due to the
Class C Notes. These payments will begin on the Payment Date in the month after
the Rapid Amortization Period begins.
The Rapid Amortization Period will begin on the earlier to occur of (a) a Trust
Pay Out Event or (b) a Series [ __ ]-1 Pay Out Event. The Rapid
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Amortization Period will end when any one of the following occurs:
o the Notes are paid in full;
o the Series [ __ ]-1 Termination Date; or
o the Trust Termination Date.
Pay Out Events: Certain adverse events called Pay Out Events might lead to the
start of a Rapid Amortization Period and the end of the Revolving Period or the
Controlled Amortization Period.
A Series [ __ ]-1 Pay Out Event will include the following events:
o any of the Originators or the Seller does not make any required payment or
deposit (within the applicable grace period);
o any of the Originators or the Seller materially violates any other
obligation or agreement causing you to be adversely affected, if (a) the
related Originator or the Seller, as applicable, does not remedy the
violation within 60 days after it has received written notice and (b) you
continue to be materially and adversely affected for the 60-day period;
o any of the Originators or the Seller provides certain representations,
warranties or other information which were materially incorrect at the time
they were provided causing you to be adversely affected, if (a) they
continue to be materially incorrect as of a date 60 days after the related
Originator or the Seller, as applicable, has received written notice and
(b) you continue to be materially and adversely affected for the 60-day
period; provided, however, that a Series [ __ ]-1 Pay Out Event will not be
deemed to have occurred if the Seller has accepted reassignment of any
affected Receivables;
o the Seller fails to transfer additional assets to the Trust when the Trust
Interest is less than the Minimum Trust Interest when required;
o certain defaults by the Servicer that have a material adverse effect on
you;
o if the Financed Premium Percentage exceeds [ __ ]% for three consecutive
Monthly Periods;
o if the Monthly Payment Rate is less than [ __ ]% for three consecutive
Monthly Periods;
o if the Annualized Monthly Excess Spread Amount is less than [ __ ]% for
three consecutive Monthly Periods; or
o if the Unconcentrated 240+ Day Delinquency Percentage is greater than[ __
]% for three consecutive monthly periods.
A Trust Pay Out Event for your Series will include the following events:
o certain events of bankruptcy or insolvency relating to any Originator or
the Seller;
o the Seller is unable to transfer Receivables to the Trust as required under
the Sale and Servicing Agreement;
o the Trust becomes an "investment company" under the Investment Company Act
of 1940; or
o AIG fails to meet its obligations under the AIG Support Agreement.
Upon the occurrence of a Pay Out Event, if more than [ ___ ]% of the principal
balance of the Receivables have a remaining maturity of more than twelve months,
the Seller will purchase from the Trust sufficient Receivables with a remaining
maturity of more than twelve months, at a price equal to the principal amount
thereof plus accrued but unpaid Finance Charges to the date of purchase, so that
the percentage of Receivables having a remaining maturity as of the date of
purchase of more than twelve months shall be no more than [ __ ]% of the
principal balance of Receivables remaining in the Trust after giving effect to
such purchase.
For a more detailed discussion of these Pay Out Events, see "Description of
Series Provisions--Pay Out Events" in this Prospectus Supplement. In addition,
see "Description of the Transfer and Servicing Agreements--Pay Out Events" in
the accompanying Prospectus for a discussion of the
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consequences of an insolvency or receivership of the Seller.
[REFINANCING OF THE NOTES
The Trust may redeem the Notes on any Payment Date following[ _____ ], [ _____
](the "Refinancing Date") in whole (including accrued and unpaid interest),
without premium (a "Refinancing"), upon 5 days' prior written notice to the
Trustee. A Refinancing will be funded solely from the proceeds of a refinancing
of the Receivables. Such proceeds will be used first to redeem all the Class A
Notes, next to redeem all the Class B Notes and finally to redeem all the Class
C Notes.]
SHARED PRINCIPAL COLLECTIONS
This Series is the first Series in a group of Series designated as "Group One".
The Trust may issue additional Series in the future which may be included in
Group One. Each Series identified under the caption "Annex I: Other Series
Issued and Outstanding" included at the end of this Prospectus Supplement is and
other Series in the future may be included in Group One. To the extent that
collections of Principal Receivables allocated to your Series are not needed to
make payments or deposits to the Principal Account for your Series, these
collections, called Shared Principal Collections, will be applied to cover
principal payments for other Series within Group One. Any reallocation for this
purpose will not reduce your Series' Investor Interest. In addition, you may
receive the benefits of collections of Principal Receivables and certain other
amounts allocated to other Series in Group One, to the extent those collections
are not needed for those other Series. See "Description of Series
Provisions--Shared Principal Collections" in this Prospectus Supplement and
"Description of the Transfer and Servicing Agreements--Shared Principal
Collections" in the accompanying Prospectus.
DENOMINATIONS
Beneficial interests in the Notes will be offered in minimum denominations of
$1,000 and integral multiples of that amount.
REGISTRATION, CLEARANCE AND SETTLEMENT
Your Notes will be registered in the name of Cede & Co., as the nominee of the
Depository Trust Company ("DTC"). You will not receive a definitive note
representing your interest, except in limited circumstances described in the
accompanying Prospectus when Notes in fully registered form are issued. See
"Certain Information Regarding the Securities--Definitive Notes" in the
accompanying Prospectus.
You may elect to hold your Notes through DTC, in the United States, or
Cedelbank, societe anonyme ("Cedelbank") or the Euroclear System ("Euroclear"),
in Europe. Transfers within DTC, Cedelbank or Euroclear, as the case may be,
will be made in accordance with the usual rules and operating procedures of
those systems. Cross-market transfers between persons holding directly or
indirectly through DTC and counterparties holding directly or indirectly through
Cedelbank or Euroclear will be made in DTC through the relevant depositaries of
Cedelbank or Euroclear. See "Certain Information Regarding the
Securities--Book-Entry Registration" in the accompanying Prospectus. We expect
that the Notes will be delivered in book-entry form through the facilities of
DTC, Cedelbank and Euroclear on or about the Closing Date.
TAX STATUS
Special Counsel to the Seller is of the opinion that, although there is no
direct authority with respect to notes similar to the Offered Notes, under
existing law the Offered Notes will be characterized as debt for federal income
tax purposes. Under the Indenture, you and the Seller will agree to treat your
Notes as debt for federal, state and local income tax purposes and franchise tax
purposes. See "Certain United States Federal Income Tax Consequences" in the
accompanying Prospectus for additional information concerning the application of
federal income tax laws to an investment in the Offered Notes.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA Considerations" in
this Prospectus Supplement and in the accompanying Prospectus, the Class A Notes
and Class B Notes are eligible for purchase by persons investing assets of
employee benefit plans or individual retirement accounts.
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<PAGE>
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NOTE RATINGS
The Class A Notes are required to be rated in the highest rating category by at
least one nationally recognized rating organization.
The Class B Notes are required to be rated in one of the three highest rating
categories by at least one nationally recognized rating organization. See "Note
Ratings" in the accompanying Prospectus for a discussion of the primary factors
upon which the ratings are based.
[EXCHANGE LISTING
We will apply to list the Offered Notes on the Luxembourg Stock Exchange. We
cannot guaranty that the application for the listing will be accepted. You
should consult with Bankers Trust Luxembourg S.A., the Luxembourg listing agent
for the Notes, 14 Boulevard F.D. Roosevelt, L-2450 Luxembourg, phone number
(352) 46 02 41, to determine whether or not the Offered Notes are listed on the
Luxembourg Stock Exchange.]
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<PAGE>
RISK FACTORS
You should consider the following risk factors and the risk factors
described in the accompanying Prospectus in deciding whether to purchase the
Notes.
Possible Effect of Indirect
Ownership Interest in AIC
Trust Receivables via
Transferor Certificate of
AIC Trust Prior to the AIC Trust Termination Date, the Trust
will own the Transferor Certificate of the AIC
Trust which is generally a pro rata interest in
the AIC Trust Receivables. After the AIC Trust
Termination date, the Trust will directly own the
AIC Trust Receivables. Under periods of high
delinquencies and/or losses on AIC Trust
Receivables and at any date of determination, if
any, when the Transferor's ownership interest is
reduced below its required minimum, the Trust, as
owner of the Transferor Certificate, will receive
less than its otherwise pro rata interest in the
collections of the AIC Trust Receivables. Such
reduction in collections would be the result of a
condition that (a) during periods of high
delinquencies and/or losses on AIC Trust
Receivables, causes a portion of collections
otherwise allocated to the Transferor Certificate
to be made available to support payments due
investors of the AIC Trust in the form of yield
enhancement and (b) at times when the Transferor's
ownership interest falls below its required
minimum for the AIC Trust, causes all losses
related to AIC Trust Receivables to be allocated
to the Transferor Certificate.
Possible Effects of Lack
of Historical Experience
With Deferred Payment
Obligations Since AIGC has only recently begun to originate
Deferred Payment Obligations, there is no
historical information to determine what the loss
experience will be with respect to Deferred
Payment Obligations as compared to the loss
experience of Loans. It is expected that the loss
experience of the Deferred Payment Obligations
will be comparable to that experienced by the
Loans, due to the use of the same underwriting and
collection policies and procedures in originating
Deferred Payment Obligations as is used in
originating Loans. However, there can be no
assurance that the Receivables related to Deferred
Payment Obligations will not perform more poorly
than the Receivables related to Loans.
Possible Effect of
Year 2000 Problems
The Year 2000 issue arises from computer programs
being written using two digits rather than four
digits to define the applicable year. This could
result in a failure of the information technology
systems ("IT systems") and other equipment
containing imbedded technology ("non-IT systems")
in the year 2000, causing disruption of operations
of AIG and its Affiliates (including the
Originators), its lessees, vendors, or business
partners. AIG has developed a plan to address the
year 2000 issue as it affects AIG's and its
Affiliates (including the Originators) internal IT
and non-IT systems, and to assess year 2000 issues
relating to third parties with whom AIG and its
Affiliates (including the Originators) have
critical relationships. The plan for addressing
internal systems includes an assessment of
internal IT and non-IT systems and equipment
affected by the Year 2000 issue; definition of
strategies to address affected systems and
equipment; remediation of identified affected
systems and equipment; and internal certification
that each internal system is Year 2000 compliant.
AIG has remediated, tested and returned to
production substantially all of AIG's and its
Affiliates (including the Originators) internal IT
systems. Internal non-IT systems have been
substantially remediated or replaced and
subsequently tested for compliance. AIG has also
initiated formal communications with respect to
the Year 2000 issue to those third
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<PAGE>
parties which have significant interaction with
AIG and its Affiliates (including the
Originators). Currently, AIG is unable to
ascertain whether all such third parties will
successfully address the Year 2000 issue,
particularly those third parties outside the
United States where it is believed that
remediation efforts relating to the Year 2000
issue may be less advanced. While AIG expects to
have no interruption of operations as a result of
AIG's and its Affiliates (including the
Originators) internal IT and non-IT systems,
significant uncertainties remain about the effect
on AIG and its Affiliates (including the
Originators) of third parties who are not Year
2000 compliant. AIG will continue to monitor third
party Year 2000 issue readiness to determine
whether additional or alternative measures may be
necessary. There can be no assurance that
unresolved Year 2000 issues of third parties will
not have a material adverse impact on AIG's and
its Affiliates (including the Originators) results
of operations, financial condition or liquidity.
AIG is considering the effects of Year 2000
related failures on its business and, as the most
reasonably likely worst case scenarios become more
clearly identified, AIG and its Affiliates
(including the Originators) will develop
appropriate contingency plans.
Possible Effect of
Geographic Concentration
and Adverse Economic
Factors on Origination Significant percentages of Premium Finance
Obligations underlying the Receivables were
originated in California, New York and Texas.
These percentages may increase or decrease as
Receivables are added to the Trust. Economic
factors such as a recession, the rate of
inflation, and relative interest rates, may have
an adverse impact on the performance of the
Receivables and on the ability of the Originators
to generate new Receivables. In particular,
negative economic developments in California, New
York and Texas could have an adverse impact on the
timing and amounts of payments collected by the
Trust in respect of the Receivables and could
cause such Insureds to become bankrupt or
insolvent. Such developments could lead to a Pay
Out Event which could cause the early retirement
of the Offered Notes and result in reinvestment
risk. See "Description of Series Provisions--Pay
Out Events" and "Maturity Assumptions."
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<PAGE>
THE AIGC PREMIUM FINANCE PORTFOLIOS
General
The receivables (the "Receivables") will be purchased from time to time by
ART under a receivables purchase agreement (as amended from time to time, the
"Purchase Agreement") among A.I. Credit Corp. ("AIC"), AICCO, Inc. ("AICCO"),
Imperial Premium Finance Inc., a Delaware corporation ("IP Finance I"), Imperial
Premium Finance, Inc., a California corporation ("IP Finance II") and Imperial
Premium Funding, Inc. ("IP Funding" and together with IP Finance I and IP
Finance II, the "Imperial Originators"), as original sellers (collectively, the
"Originators") and ART. The Receivables will be subsequently conveyed to the
Trust by ART pursuant to the sale and servicing agreement (as amended from time
to time, the "Sale and Servicing Agreement") among ART as seller (the "Seller"),
AIC, AICCO, IP Finance I, IP Finance II and IP Funding, each as a servicer
(collectively, the "Servicer"), AIG Credit Premium Finance Master Trust (the
"Trust"), as purchaser, Chase Manhattan Bank Delaware, as owner trustee (the
"Owner Trustee") and the Indenture Trustee. The Loan Portfolio and the
Obligations Portfolio (together the "AIGC Portfolio") have been or will be
generated from loans to Insureds to finance commercial property and casualty
insurance premiums (the "Loans") (the "Loan Portfolio") and deferred payments to
become due from Insureds to finance commercial casualty and property insurance
premiums (the "Deferred Payment Obligations" and together with Loans, "Premium
Finance Obligations") (the "Obligations Portfolio").
On the Closing Date, the Receivables purchased by ART and transferred to
the Trust will be Receivables originated only by the Imperial Originators).
Prior to the AIC Trust Termination Date, Receivables originated by AIC and AICCO
will be transferred to the AIC Trust. The Trust will own a partial pro rata
portion of the AIC Trust Receivables through its ownership of the transferor's
certificate of the AIC Trust. After the AIC Trust Termination Date, the Trust
will own directly all the AIC Trust Receivables originated by AIC and AICCO; and
thereafter, the Receivables purchased by ART and transferred to the Trust will
include Receivables originated by all the Originators, including AIC and AICCO.
As used in the following discussion of the Originator's commercial premium
finance business is deemed to include each of the Originators' businesses,
without further reference and the term AIGC is deemed to include each of the
Originators.
Premium Finance Obligation Origination; Collection Policy
The Receivables and related Premium Finance Obligations will be originated
by AIGC under its origination procedures described more fully in the Prospectus.
See "Business of A.I. Receivables Transfer Corp. and the Originators--Premium
Finance Loan Origination; Collection Policy" and "--Deferred Payment Obligation
Origination; Collection Policy." AIGC generally locates Insureds through either
independent insurance agents and brokers that are licensed under state laws or
through insurance companies, who offer premium finance programs to enable their
commercial customers to purchase the full amount of insurance coverage needed
and spread out the cost of premium payments over time. Thus, origination is
usually dependent on relationships with insurance brokers, agents and insurance
companies and knowledge of the insurance marketplace. The financing by AIGC of
insurance premiums is commonly commenced by an agent, broker or insurance
company contacting AIGC to initiate the financing process and outlining to AIGC
the proposed transaction, including Insured and insurance company information
and coverage types and amounts. AIGC then reviews the information submitted in
light of its underwriting procedures. See "Business of A.I. Receivables Transfer
Corp. and the Originators--Premium Finance Obligations Underwriting Procedures"
in the accompanying Prospectus. After AIGC approval, (a) in the case of a Loan,
the Insured executes a standard premium finance loan agreement, which contains a
promise to repay the Loan, a limited power of attorney giving AIGC the authority
in the event of default on the Loan to contact the insurance company directly
and cancel coverage, and a collateral assignment to AIGC of the unearned
insurance premium, if any, returnable following such cancellation and may, in
some cases, include an assignment of additional collateral (which may take the
form of a letter of credit or surety bond) to secure the Loan and (b); in the
case of Deferred Payment Obligations, AIGC executes a purchase agreement with
the insurance company, which contains an assignment of the Insured's promise to
pay the premium due in predetermined installments, the obligation of the
insurance company upon notification by
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<PAGE>
AIGC of a non-payment by the Insured to cancel the coverage, and a collateral
assignment to AIGC of the unearned insurance premium, if any, returnable
following such cancellation, and/or a collateral assignment of other collateral,
if any, pledged by the insurance company acceptable to AIGC.
Following receipt and acceptance of the signed agreement, in the case of
Loans, AIGC either sends the proceeds to the insurance company to pay the
premium balance due or releases funds to the insurance agent or broker who then
pays the insurance company and in the case of Deferred Payment Obligations, AIGC
pays the purchase price directly to the insurance company. AIGC bills the
Insured directly on a monthly basis. Each Insured is directed to remit payments
to the appropriate regional lockbox account maintained by AIGC.
In the case of Loans, upon a default of a Loan, AIGC will generally notify
the Insured of the default and cancel the policy as required under the
applicable regulations and its limited power of attorney. See "Business of A.I.
Receivables Transfer Corp. and the Originators--Premium Finance Loan
Origination; Collection Policy" in the Prospectus. Once a policy has been
cancelled (a) in the case of Loans, AIGC will customarily proceed to take steps
to collect any unearned premium available from the insurance company and, if
applicable, realize on any collateral and apply it to the outstanding Loan
balance. If the returned premium and amounts realized from collateral, if any,
do not retire the Loan balance, AIGC will customarily seek payment from the
Insured pursuant to the terms of the loan agreement and (b) in the case of
Deferred Payment Obligations, AIGC will, if the insurance company has agreed to
return unearned premiums upon cancellation, take steps to collect such unearned
premiums from the insurance company and if that fails, is otherwise insufficient
or unavailable, to realize on any collateral securing the insurance company's
repayment obligation.
Generally, the policy cancellation date occurs within one month of the
related payment default. The current policy of AIGC is to charge off as a loss
the unpaid defaulted Premium Finance Obligation one year after the cancellation
or cancellability as applicable, of the related policy. Following such date,
AIGC will process the collection of any unearned premium with the appropriate
insurance company, will realize on any collateral, if any, or, in the case of a
Loan, may pursue collection against the Insured if sufficient unearned premium
is unavailable and amounts realized on any collateral prove insufficient. If
during this period AIGC determines the unpaid Premium Finance Obligation is not
likely to be collected, AIGC may charge off the obligation prior to such first
anniversary. Under the terms of the Indenture, any recoveries with respect to
the Premium Finance Obligations that have been written off will be included in
the assets of the Trust and considered Finance Charge Receivables. See "The
Receivables." See "Business of A.I. Receivables Transfer Corp. and the
Originators--Premium Finance Loan Origination; Collection Policy" in the
Prospectus.
The Originators Premium Finance Portfolio
Certain information regarding the performance and composition of the
portfolio of premium finance obligations of the Originators (the "Originator's
Portfolio") is set forth below. The Imperial Originators will transfer to the
Seller for transfer to the Trust the Eligible Receivables resulting from all
eligible Premium Finance Obligations funded or purchased by them since the
initial Cut-Off Date and prior to the Closing Date, and expect thereafter to
transfer the Eligible Receivables resulting from all eligible Premium Finance
Obligations financed or purchased by them to the Seller for transfer to the
Trust pursuant to the Sale and Servicing Agreement. Upon the AIC Trust
Termination Date, AIC and AICCO will transfer AIC Trust Receivables to the
Seller for transfer to the Trust. There can be no assurance that the performance
experience of the Receivables relating to the Premium Finance Obligations
transferred to the Trust will be comparable to that set forth below. In
addition, there are many legal, economic and competitive factors that could
adversely affect the amount and collectability of the Premium Finance
Obligations related to the Receivables, including Insureds' decisions to use new
sources of credit, which would affect the ability of the Originators to generate
Additional Receivables, and changes in usage of credit, payment patterns and
general economic conditions. Because the impact of these and other factors
(including the composition of the Receivables and the interest rates, fees and
charges assessed on the related Premium Finance Obligations thereon) may change
in the future, the text and tables set forth below are not necessarily
indicative of the future performance of the Receivables that are transferred to
the Trust.
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The following tables set forth certain summary information regarding the
Originator's Portfolio, which comprises all premium finance obligations to
domestic Insureds funded and purchased by the Originators. The Originator's
Portfolio as of June 30, 1999 has consisted exclusively of loans and has never
contained any deferred payment obligations. At [June 30, 1999] in excess of
[30%] of the aggregate outstanding account balance (as defined herein in the
table entitled "Outstanding Premium Finance Account Balances by Size" under "The
Receivables") represented obligations funded by the Originators to finance
premiums on policies issued by insurance affiliates of AIG. As of such date, no
other insurance company group, domestic or foreign, accounted for more than [6%]
of the outstanding obligations funded by the Originators. As of June 30, 1999,
the total premium finance obligation account balance in the Originator's
Portfolio was $1,478,854,758. The average premium finance obligation account
balance was approximately $10,100. The average premium finance obligation
account balance remaining term was approximately 10 months. The Originator's
Portfolio includes obligations originated in all 50 states and the District of
Columbia [and Puerto Rico]. During each of the calendar years 1996, 1997 and
1998 and the six months ended [June 30,] 1999, the average yield on the
Originator's Portfolio has exceeded the monthly average of the daily rates in
the London interbank market for offers of one-month United States dollar
deposits by at least 300 basis points for each monthly period. Due to future
changes in the interest rate environment, competition from other lenders and
other relevant factors, there can be no assurance the average spread between the
yield on the Originator's Portfolio and one-month LIBOR will not be lower in the
future. Also, during each of the calendar years 1996, 1997 and 1998 and the six
months ended June 30, 1999, the average monthly payment rate on premium finance
obligations in the Originator's Portfolio was approximately 18% or higher. There
can be no assurance, however, that the monthly payment rate on the Premium
Finance Obligations will not be less than 18% since the payment rate will vary
depending on a variety of factors, including, maturities, interest rates,
delinquency rates and default rates of the Premium Finance Obligations in the
Trust. Lower payment rates will result in lower yield enhancement amounts. See
"Description of Series Provisions--Yield Enhancement Account."
17
<PAGE>
OUTSTANDING PREMIUM FINANCE OBLIGATION ACCOUNT BALANCES BY SIZE
AS OF JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of
Aggregate
Outstanding
Premium
No. Premium % of Premium Outstanding Finance
Finance Finance Premium Finance Obligation
OUTSTANDING PREMIUM FINANCE Obligation Obligation Obligation Account Account
OBLIGATION ACCOUNT BALANCE(1)(3) Accounts(2) Accounts Balance Balance (4)
- -------------------------------- ----------- -------- ------- -----------
<S> <C> <C> <C> <C>
$5,000 or less.................................... 115,148 78.97% $160,692 10.87%
$5,001 to $10,000................................. 14,030 9.62% 98,420 6.66%
$10,001 to $25,000................................ 9,785 6.71% 150,745 10.19%
$25,001 to $50,000................................ 3,435 2.36% 119,331 8.07%
$50,001 to $75,000................................ 1,208 0.83% 73,109 4.94%
$75,001 to $100,000............................... 552 0.38% 47,765 3.23%
$100,001 to $250,000.............................. 1,015 0.70% 154,673 10.46%
$250,001 to $500,000.............................. 343 0.24% 118,801 8.03%
$500,001 to $1,000,000............................ 160 0.11% 111,684 7.55%
$1,000,001 to $5,000,000.......................... 124 0.09% 234,045 15.83%
$5,000,001 to $10,000,000......................... 9 0.01% 64,239 4.34%
$10,000,001 to 15,000,000......................... 5 0.00% 58,767 3.97%
Greater than $15,000,000.......................... 4 0.00% 86,586 5.85%
------- ------ ---------- ------
Total(3).......................................... 145,818 100.00% $1,478,855 100.00%
======= ====== ========== ======
</TABLE>
- ----------
(1) Account balances include outstanding principal balances (including
committed but unfunded amounts) and unearned finance charges.
(2) A premium finance obligation account is generally a single Insured that may
have premium finance obligations with respect to one or more commercial
insurance policies outstanding at the time of determination.
(3) The average outstanding account balance as of June 30, 1999 was
approximately $10,100.
(4) Dollar amounts and percentages may not sum exactly to the totals because of
rounding.
18
<PAGE>
COMPOSITION OF PREMIUM FINANCE OBLIGATION ACCOUNTS BY REMAINING
INSTALLMENT TERM
AS OF JUNE 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Outstanding
No. Of Premium
Premium Finance % Of Aggregate
Finance Obligation Outstanding Premium
Obligation Account Finance Obligation
REMAINING INSTALLMENT TERM(1) Accounts Balance (1)(2) Account Balance (2)
- ----------------------------- -------- -------------- -------------------
<S> <C> <C> <C>
3 months or less............................. 67,229 $ 228,939 15.48%
4 to 6 months................................ 46,165 380,603 25.74%
7 to 9 months................................ 28,769 381,513 25.80%
10 to 12 months.............................. 2,604 151,694 10.26%
13 to 18 months.............................. 493 89,201 6.03%
More than 18 months.......................... 558 246,905 16.70%
------- ---------- ------
Total.................................... 145,818 $1,478,855 100.00%
======= ========== ======
</TABLE>
- ----------
(1) Terms of the premium finance obligations commonly provide for level
payments of principal and finance charges on a monthly basis, although
certain premium finance obligations do not have a level repayment
requirement.
(2) Dollar amounts and percentages may not sum exactly to the totals due to
rounding.
19
<PAGE>
PREMIUM FINANCE OBLIGATION
GEOGRAPHIC DISTRIBUTION
AS OF JUNE 30, 1999
(DOLLARS IN THOUSANDS)
Outstanding % Of Aggregate
Premium Finance Outstanding Premium
Obligation Finance Obligation
Account Balance Account Balance
(3) (1)(3)
--------------- ---------------
California............................... $ 349,773 23.65%
New York................................. 234,627 15.87%
Texas.................................... 135,287 9.15%
New Jersey............................... 72,541 4.91%
Illinois................................. 50,634 3.42%
Florida.................................. 50,585 3.42%
Pennsylvania............................. 45,787 3.10%
Louisiana................................ 35,507 2.40%
Ohio..................................... 34,262 2.32%
Maryland................................. 29,924 2.02%
Massachusetts............................ 29,867 2.02%
Other (2)................................ 410,060 27.73%
---------- ------
Total............................... $1,478,855 100.00%
========== ======
- ----------
(1) Significant percentages of the premium finance obligations funded by the
Originators are originated in California, New York and Texas, and
accordingly, adverse economic developments in such areas could adversely
affect collections of Receivables related to obligations originated in such
areas.
(2) States with 2% or less of the total premium finance obligation account
balances.
(3) Dollar amounts and percentages may not sum exactly to the totals due to
rounding.
20
<PAGE>
PREMIUM FINANCE OBLIGATION LOSS EXPERIENCE
(DOLLARS IN THOUSANDS)
The following table sets forth loss experience with respect to payments by
Insureds on premium finance obligations for each of the periods shown. This
table does not include deferred payment obligations, because AIGC only recently
began to originate premium finance obligations in this form. There can be no
assurance that the loss experience for the Trust with respect to the Receivables
will be similar to the historical experience set forth below.
<TABLE>
<CAPTION>
Six Months
Ended June 30, Year Ended December 31,
-------------- -----------------------
1999 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average Aggregate Outstanding Principal Balance (1)......... $1,396,841 $1,447,863 $1,428,515 $1,274,309
Gross Charge-Offs (2)....................................... 6,457 19,196 15,308 11,221
Recoveries (3).............................................. 2,818 4,140 3,210 2,716
Net Charge-Offs............................................. 3,638 15,056 12,098 8,505
Net Charge-Offs as Percentage of Average Aggregate
Outstanding Principal Balance, Net (2)................... 0.52% (4) 1.04% 0.85% 0.67%
</TABLE>
- ----------
(1) Calculated as the average of (a) the average monthly beginning receivables
balance and (b) the average monthly ending receivables balance, over the
relevant periods (balances do not include unfunded premium finance
obligations).
(2) A premium finance obligation is generally charged-off one year after
cancellation. The related insurance policy is cancelled generally within
one month following an Insured's failure to make a scheduled installment
payment.
(3) A recovery occurs if, after a premium finance obligation is written off,
the Originator as the case may be, receives additional funds to pay in
whole or in part the outstanding balance due.
(4) Calculated on an annualized basis.
PREMIUM FINANCE OBLIGATION DELINQUENCY EXPERIENCE
FOLLOWING CANCELLATION
The following table sets forth the delinquency experience with respect to
payments by Insureds on premium finance obligations in the Originator's
Portfolio at each of the dates shown. This table does not include deferred
payment obligations, because AIGC only recently began to originate premium
finance obligations in this form. In conformity with state requirements
regarding cancellation notification, insurance policies are generally cancelled
within one month following an Insured's failure to make a related scheduled
obligation installment payment. Cancellation occurs on an automated basis unless
the obligation is carried in the "hold" category by AIGC. The "hold" category
includes primarily obligations that require manual servicing procedures and
obligations where cancellation of the related policy is stayed due to the
Insured's bankruptcy, some of which obligations may be delinquent. At June 30,
1999 "hold" category obligations represented approximately 0.02% of the
aggregate principal balance (excluding unearned finance charges) of the
Originator's Portfolio. The delinquency data presented in the following table
are measured from the date of insurance policy cancellation. The percentages
presented for each aging category reflect the sum of the balance of principal
and unearned finance charges (including the overdue installment(s) as well as
all of the remaining installment payments not yet due) on all cancelled
obligations within each category divided by the aggregate principal balance
(excluding unearned finance charges) of the Originator's Portfolio. Since the
table reflects percentages calculated by including unearned finance charges in
the cancelled obligations but not including such amounts in the aggregate
balances, the resulting percentages may reflect higher percentages of
delinquencies than actually experienced. Variations from one measurement date to
another measurement date within aging categories are primarily a reflection of
the variability of time required to collect the unearned insurance premium from
the insurance carrier or, alternatively, the remaining obligation balance from
the Insured, on a revolving pool of obligations. There
21
<PAGE>
can be no assurance that the delinquency experience with respect to the
Receivables will be similar to the historical experience set forth below.
PREMIUM FINANCE OBLIGATION DELINQUENCY EXPERIENCE FOLLOWING CANCELLATION
Number Of Days A Premium Finance
Obligation Remains Overdue After
Cancellation Of The Related Insurance
Policy: At June 30, At December 31,
----------- -----------------------
1999 1998 1997 1996
---- ---- ---- ----
1-30 days............................... 1.07% 1.47% 1.82% 2.05%
31-60 days.............................. 0.53% 0.74% 0.80% 0.78%
61-90 days.............................. 0.34% 0.47% 0.69% 0.61%
91-120 days............................. 0.32% 0.40% 0.76% 0.43%
121-150 days............................ 0.39% 0.39% 0.31% 0.31%
151 days or greater(1).................. 1.40% 1.11% 0.95% 1.09%
---- ---- ---- ----
Total .............................. 4.05% 4.59% 5.33% 5.26%
==== ==== ==== ====
- ----------
(1) A premium finance obligation is generally charged-off one year after
cancellation of the related insurance policy.
THE RECEIVABLES
The Receivables to be transferred to the Trust will arise from Premium
Finance Obligations selected from the AIGC Portfolio on the basis of criteria
set forth in the Purchase Agreement as applied on [____] (the "Cut-Off Date"
and, with respect to Additional Receivables, as of the related date of their
transfer. The aggregate amount of Principal Receivables as of the Closing Date
will be no less than $[___]. Pursuant to the Sale and Servicing Agreement, the
Seller has the right, subject to certain limitations and conditions set forth
therein, to transfer Additional Receivables to the Trust from time to time. Any
Additional Receivables transferred pursuant to the Sale and Servicing Agreement
must be Eligible Receivables as of the date of the transfer of such Additional
Receivables. In addition, the Seller will be required to transfer Additional
Receivables, to the extent available and subject to limitations and conditions
set forth in the accompanying Prospectus (See "Description of the Transfer and
Servicing Agreements--Addition of Trust Assets") to maintain the Trust Interest
so that as of any date of determination, the Trust Interest is at least equal to
the Minimum Trust Interest as of the immediately preceding Monthly Period. Such
Additional Receivables shall be transferred to the Trust on or before the
Transfer Date immediately following such date of determination. For a definition
of the Minimum Trust Interest and Excess Receivable Amount, see "Description of
Series Provisions--Excess Funding Account; Minimum Trust Interest; Excess
Receivables Amount." Further, pursuant to the Sale and Servicing Agreement, on
each date of determination on which the Trust Interest exceeds the Minimum Trust
Interest, the Trust will have the right (subject to certain limitations and
conditions set forth in the accompanying Prospectus, see "Description of the
Transfer and Servicing Agreements--Removal of Receivables") to designate certain
Receivables from the lien of the Indenture (the "Removed Receivables") and to
require the Indenture Trustee to reconvey all such Removed Receivables to the
Trust for cash. Throughout the term of the Trust, the Receivables will be
Receivables transferred by the Seller on the Cut-Off Date plus any Additional
Receivables minus any Removed Receivables as of the related date.
The assets of the Trust will include (i) the entire beneficial interest in
Receivables from Premium Finance Obligations, which interest will be transferred
to the Trust by the Seller pursuant to the Sale and Servicing Agreement on or
before the Closing Date, (ii) to the extent described under "Description of the
Transfer and Servicing Agreements--Addition of Trust Assets" in the accompanying
22
<PAGE>
Prospectus, the entire beneficial interest in Receivables originated by the
Originators from time to time thereafter other than AIC Trust Receivables until
the AIC Trust Termination Date (including after the Closing Date), including (A)
all amounts due and to become due and all collections and recoveries on such
Premium Finance Obligations and (B) the proceeds of certain collateral security
securing such Premium Finance Obligations and (iii) the ownership interest of A.
I. Receivables Corp. ("AIR") in the AIC Trust. The beneficial interests
described above are herein referred to as the "Receivables." The Trust assets
will not include, as of any date of determination, (a) with respect to any
Receivable arising under a Premium Finance Obligation which is not a Defaulted
Obligation, any collections received by the Servicer on such Premium Finance
Obligation in excess of the sum of (i) the amounts due and payable on such
Premium Finance Obligation during the month in which such date occurs and (ii)
all accrued and unpaid amounts, if any, on such Premium Finance Obligation in
respect of any month or months prior to the month in which such date occurs or
(b) with respect to any Receivable arising under a Defaulted Obligation, any
collections received by the Servicer on such Defaulted Obligation in excess of
all amounts due thereon (each, a "Credit Balance").
Each Premium Finance Obligation has been directly financed by the
Originators or Third Party Originators. Neither the Loans, the Deferred Payment
Obligations nor the Receivables are guaranteed by the Seller, the Originators,
AIGCC, AIG or any affiliate thereof, and the Trust, as holder of the
Receivables, has no recourse against the Seller, the Originators, AIGCC, AIG or
any affiliate thereof for the non-collectability of the Receivables, except
that, under certain limited circumstances, the Seller and the Originators will
be required to repurchase certain Receivables from the Trust. AIC, AICCO, IP
Finance I, IP Finance II and IP Funding will each act as Servicer with respect
to the Receivables relating to the Premium Finance Obligations it sold to ART
for transfer to the Trust. As set forth in the Sale and Servicing Agreement,
each Receivable to be transferred to the Trust must satisfy certain eligibility
criteria. See "Description of the Transfer and Servicing
Agreements--Representations and Warranties" in the accompanying Prospectus.
AIC Trust Interest
The Trust's assets will include a certificate (the "Transferor
Certificate") which represents an ownership interest in AIC Premium Finance Loan
Master Trust (the "AIC Trust"), whose assets are the beneficial interest in a
pool of Loans funded by AIC and AICCO to Insureds to finance premiums on
property and casualty insurance polices governed by the laws of the United
States or the District of Columbia, including the right to receive all amounts
due and to become due and all collections and recoveries on the Loans, together
with the proceeds of collateral securing such Loans (the "AIC Trust
Receivables"). The AIC Trust Receivables, and new receivables to be transferred
to the AIC Trust, were and will be purchased by A.I. Receivables Corp. ("AIR")
from AIC and AICCO. Each of AIC and AICCO owns 50% of AIR. The Transferor
Certificate represents an interest in the AIC Trust Receivables that is
economically similar in many respects to the unencumbered interest in the Trust
assets that is retained by the Trust and is referred to herein as the Trust
Interest.
AIC and AICCO originated the Loans underlying the AIC Trust Receivables
using the same origination policy as described herein with respect to the
Receivables originated by AIGC. AIC and AICCO utilize the collection policy and
procedures with respect to the AIC Trust Receivables as is described herein for
the Receivables. The AIC Trust Receivables are and will be serviced by AIC and
AICCO in the same manner and using the same servicing polices described herein
for the Receivables.
The AIC Trust is a master trust. As of the Cut-Off Date, the outstanding
principal balance of the Receivables in the AIC Trust was [___]. It has issued
three series of floating rate certificates, with various classes, representing
an undivided interest in the assets of the AIC Trust not represented by the
Transferor Certificate. As of the Cut-Off Date, the outstanding principal amount
of the certificates issued by the AIC Trust was [___]. The Transferor
Certificate represents the right to collections with respect to the AIC Trust
Receivables not allocated to any outstanding series of certificates. Collections
on AIC Trust Receivables will be allocated among the holders of each outstanding
series of certificates and the Trust, as holder of the Transferor Certificate,
based generally on their respective ownership interests in
23
<PAGE>
the AIC Trust. As additional AIC Trust Receivables are added to the AIC Trust
and as collections with respect to principal receivables and default amounts, if
any, are allocated to the Transferor's ownership interest in the AIC Trust, the
size of the Transferor's ownership interest will fluctuate. The certificates
issued by the AIC Trust are expected to be fully paid no later than November 15,
2000. At that time, all AIC Trust Receivables will be transferred to the Trust.
Under the terms of the underlying agreements for each series of
certificates issued by the AIC Trust, amounts otherwise allocable to the Trust,
as holder of the Transferor Certificate, are diverted to fund a yield
enhancement account, similar to the Yield Enhancement Account, to support
payments on the outstanding series of certificates of the AIC Trust. In
addition, under certain circumstances, if on any date the Transferor's ownership
interest equals or is less than the minimum Transferor's ownership interest,
funds (to the extent available therefor) otherwise payable to the Trust, as the
holder of the Transferor Certificate, on such date will be deposited into an
account similar to the Excess Funding Account to support principal payments on
the outstanding series of certificates.
As a result of the foregoing obligations, under periods of high
delinquencies and/or losses on AIC Trust Receivables and at any date of
determination, if any, when the Transferor's ownership interest is reduced below
its required minimum, the Trust, as owner of the Transferor Certificate, will
receive less than its otherwise pro rata interest in the collections of the AIC
Trust Receivables. Such reduction in collections would be the result of a
condition that (a) during periods of high delinquencies and/or losses on AIC
Trust Receivables, causes a portion of collections otherwise allocated to the
Transferor Certificate to be made available to support payments due investors of
the AIC Trust in the form of yield enhancement and (b) at times when the
Transferor's ownership interest falls below the required minimum Transferor's
ownership interest for the AIC Trust and results in a Pay Out Event, causes all
losses related to AIC Trust Receivables to be allocated to the Transferor
Certificate.
As a means of protecting the AIC Trust from the effects of the bankruptcy
of AIC, AICCO, AIR and AIG entered into support agreements in which AIG has
agreed to cause each of AIC, AICCO and AIR to have a minimum net worth of at
least $1 and to provide AIC, AICCO and AIR with sufficient funds on a timely
basis to meet when due their respective obligations under the AIC Trust
transaction documents. AIG, AIC, AICCO and AIR have not, however, agreed to
guarantee payment of any outstanding series of certificates issued by the AIC
Trust, the underlying Loans or the AIC Trust Receivables.
In connection with the issuance of the Series 1999-1 Floating Rate Class A
Asset Backed Certificates issued on May 28, 1999 by the AIC Trust, AIG also
provided indemnification to the AIC Trust, in the form of an indemnity
agreement, dated as of June 3, 1999 (the "Indemnity Agreement") to indemnify the
AIC Trust for all losses in respect of defaulted receivables related to
defaulted Loans in excess of certain insurer and Insured concentration limits.
The effect of such indemnification is the exclusion of such excess concentration
amounts from the minimum Transferor's ownership interest. Any future collections
with respect to such concentration amounts so indemnified will be allocated to
the AIC Trust and AIG pro rata to the extent of such indemnification.
MATURITY ASSUMPTIONS
The Indenture provides that the Class A Noteholders will not receive
payments of principal until the first Payment Date of the Class A Controlled
Amortization Period, which is scheduled to be the [ _______ ] Payment Date, or
earlier in the event of a Pay Out Event which results in the commencement of the
Rapid Amortization Period [or in connection with a Refinancing]. [However, the
Trust may elect (upon notice to the Indenture Trustee, given no later than 5
days prior to a Payment Date) to delay the Controlled Amortization Period to a
Payment Date specified by the Trust, but, not later than the [ _____ ] Payment
Date.] Class A Noteholders will receive payments of principal on each Payment
Date during the Rapid Amortization Period, to the extent of funds available
therefor, until the Class A
24
<PAGE>
Notes have been paid in full or the Series [ __ ]-1 Termination Date has
occurred. The Class B Noteholders will not begin to receive payments of
principal until the Class A Notes are paid in full.
Controlled Amortization Period
On each Payment Date during the Controlled Amortization Period, unless the
Class A Notes have been paid in full or the Rapid Amortization Period commences,
the Class A Noteholders will be entitled to receive for each related Monthly
Period an amount equal to the least of (i) Available Investor Principal
Collections on deposit in an account established by the Indenture Trustee (the
"Principal Account"), with respect to the related Transfer Date, (ii) the
Controlled Distribution Amount and (iii) the outstanding principal balance of
the Class A Notes. After payment in full of the Class A Notes, the Class B
Noteholders will be entitled to receive on each Payment Date during the Class B
Controlled Amortization Period the least of (i) the amount of Available Investor
Principal Collections on deposit in the Principal Account with respect to the
related Transfer Date (minus the portion of such Available Investor Principal
Collections applied to the Class A Monthly Principal on such Transfer Date),
(ii) the Controlled Distribution Amount (minus the portion of such Controlled
Distribution Amount applied to the Class A Monthly Principle on such Transfer
Date) and (iii) the outstanding principal balance of the Class B Notes. Although
it is anticipated that collections of Principal Receivables will be available on
each Payment Date during the Controlled Amortization Period to make the
distributions described in the foregoing and that the outstanding principal
balance of the Class A Notes will be paid to the Class A Noteholders, the
outstanding principal balance of the Class B Notes will be paid to the Class B
Noteholders and the outstanding principal balance of the Class C Notes will be
paid to the Class C Noteholders on the Payment Date relating to the expected
maturity, no assurance can be given in this regard.
Rapid Amortization Period
If either (a) a Trust Pay Out Event occurs or (b) a Series [ ]-1 Pay Out
Event occurs, the Rapid Amortization Period will commence.
On each Payment Date during the Rapid Amortization Period, the Class A
Noteholders will be entitled to receive Available Investor Principal Collections
for the related Monthly Period until the earlier of the date the outstanding
principal balance of the Class A Notes is paid in full and the Series [ __ ]-1
Termination Date. After payment in full of the Class A Notes, the Class B
Noteholders will be entitled to receive on each Payment Date during the Rapid
Amortization Period, Available Investor Principal Collections (minus the portion
of such Available Investor Principal Collections applied to the Class A Monthly
Principal on such date) until the earlier of the date the outstanding principal
balance of the Class B Notes is paid in full and the Series [ __ ]-1 Termination
Date. See "--Pay Out Events" below for a discussion of events which might lead
to the commencement of the Rapid Amortization Period.
Pay Out Events
A Series[ __ ]-1 Pay Out Event occurs, either automatically or after
specified notice, upon (a) the failure of the Servicer or the Seller to make
certain payments or transfers of funds for the benefit of the Noteholders within
the time periods stated in the Indenture, (b) certain material breaches of
certain representations, warranties or covenants of either the Servicer or the
Seller, (c) if the Annualized Monthly Excess Spread Amount is less than [ __ ]
basis points for three consecutive Monthly Periods; (d) the Trust Interest as of
the end of the preceding Monthly Period does not at least equal the Minimum
Trust Interest at the end of the preceding Monthly Period and the Seller has
failed to transfer Additional Receivables and/or decrease the outstanding amount
of any variable funding notes to increase the Trust Interest, (e) the occurrence
of a Servicer Default which would have a material adverse effect on the
Noteholders, (f) if the Monthly Payment Rate is less than [ __ ]% for three
consecutive Monthly Periods, (g) a Financed Premium Percentage of more than [ __
]% in respect of Additional Receivables transferred to the Trust for three
consecutive Monthly Periods or (h) the Unconcentrated 240+ Day Delinquency
Percentage is greater than [ __ ]% for three consecutive Monthly Periods. A
Trust Pay Out Event occurs automatically upon (a) certain bankruptcy or
insolvency events involving [either the Servicer or] the Seller, (b) the Trust
becoming an "investment company" within the meaning of the Investment Company
Act of
25
<PAGE>
1940, as amended, or (c) the Seller becoming unable for any reason to transfer
Receivables to the Trust in accordance with the provisions of the Sale and
Servicing Agreement or (d) AIG fails to meet its support obligations under the
AIG Support Agreement or the support obligations are amended, modified or
terminated, other than as permitted under the Indenture. See "Description of
Series Provisions--Pay Out Events" in this Prospectus Supplement and
"Description of the Transfer and Servicing Agreements--Pay Out Events" in the
accompanying Prospectus.
Other Considerations
Because there may be a slowdown in the payment rate of the Receivables
below the payment rates used to determine the Controlled Distribution Amounts,
or a Pay Out Event may occur which would initiate the Rapid Amortization Period,
there can be no assurance that the respective final Payment Dates of the Class A
Notes and the Class B Notes will be as indicated herein. See "Risk
Factors--Possible Effect of Insufficiency of Additional Receivables."
Your ability to receive payments of principal during the Controlled
Amortization Period or any Rapid Amortization Period depends on the amount and
schedule of installments of outstanding Receivables, delinquencies, charge-offs,
the generation and transfer of Additional Receivables and the potential issuance
by the Trust of additional Series. There can be no assurance as to the actual
rate of payment of principal of your Notes. See "Description of Series
Provisions--Principal Payments."
In addition, the amount of outstanding Receivables, as well as
delinquencies, charge-offs and the generation of new Receivables may vary from
month to month due to seasonal variations, regulatory factors, general economic
conditions and conditions in the markets for the services offered by the
Originators. There can be no assurance that collections of Receivables with
respect to the Trust, and thus the rate at which you could expect to receive
payments of principal on your Notes, will be as indicated in this Prospectus
Supplement. In addition, the Trust, as a master trust, may issue additional
Series from time to time, and there can be no assurance that the terms of any
such Series would not have an impact on the timing or amount of payments
received by you. Further, if a Pay Out Event occurs, the average life and
maturity of your Notes could be significantly reduced. No prepayment premium
will be payable on account of any prepayment of the Offered Notes as the result
of the occurrence of the Rapid Amortization Period [or a Refinancing].
If an event of bankruptcy relating to any Originator or the Seller were to
occur, then a Pay Out Event could occur with respect to all Series then
outstanding and, pursuant to the Indenture, the Seller would immediately cease
to transfer Receivables to the Trust. If the Trust becomes the subject of a
bankruptcy proceeding, then the Indenture Trustee may, upon the direction of
holders of more than 50% of the investors' interests of each Series issued and
outstanding, including any notes held by the Seller if no bankruptcy-related
event has occurred as to the Seller (or, with respect to any Series with two or
more classes, more than 50% of each class), declare the Notes to be due and
payable and proceed to sell all the Receivables of the Trust in accordance with
the Indenture in a commercially reasonable manner and on commercially reasonable
terms, which may cause early termination of the Trust. However, in a bankruptcy
proceeding with respect to any Originator or the Seller, neither the Indenture
Trustee nor the Seller may be permitted to suspend transfers of Receivables to
the Trust and the Seller, respectively, and the instructions to sell or not to
sell the Receivables may not be given effect. However, the likelihood of a
bankruptcy proceeding related to the Servicer or Seller is significantly reduced
by the AIG Support Agreement. See "Risk Factors--Possible Effects of Insolvency
or Bankruptcy of the Originators or the Sellers" in the Prospectus. The proceeds
from the sale of the Receivables would be treated as collections on the
Receivables and allocated accordingly among noteholders of each Series. If the
proceeds from such early sale allocable to such Series, if any, and the amounts
available under any Enhancement applicable to such Series were insufficient to
pay noteholders of such Series fully, a loss to noteholders of each such Series,
including your Series, would result.
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THE TRUST, THE SELLER, THE ORIGINATORS AND THE SERVICER
AIG Credit Premium Finance Master Trust ("Trust") was created in Delaware
on [ ______ ] and is wholly owned by A.I. Receivables Transfer Corp. (the
"Seller"). The Seller was formed in Delaware on September 1, 1999 and is wholly
owned by the Originators, each of which owns an equal one fifth equity interest
in the Seller. Receivables relating to Premium Finance Obligations financed or
purchased by the Originators, as described below, will be transferred to the
Seller pursuant to the Purchase Agreement for subsequent transfer to the Trust
pursuant to the Sale and Servicing Agreement The Trust will exist only for the
transactions described herein, including the collection of payments with respect
to the Receivables and holding such Receivables, the issuance of the Notes and
notes representing additional Series and related activities and making payments
thereon. As a consequence, the Trust is not expected to have any additional
capital resources.
A.I. Credit Corp. ("AIC") was incorporated in New Hampshire in 1973 and is
a wholly-owned subsidiary of AIG Credit Corp., a Delaware corporation ("AIGCC")
which in turn is a wholly-owned subsidiary of American International Group,
Inc., a Delaware corporation ("AIG"). AIG is a holding company which through its
subsidiaries is primarily engaged in a broad range of insurance and insurance
related activities in the United States and abroad. The principal business of
AIC consists of financing premium finance obligations to commercial insureds
("Insureds") and insurance companies to finance property and casualty insurance
premiums throughout the United States, other than in California and including
the Commonwealth of Puerto Rico. AICCO, Inc. ("AICCO"), a wholly-owned
subsidiary of AIGCC that was incorporated in California in 1974, conducts such
premium financing activities in California. Imperial Premium Finance, Inc. ("IP
Finance I") was incorporated in Delaware in 1994 and is a wholly-owned
subsidiary of AIGCC. IP Finance I conducts the same premium financing activities
as AIC throughout the United States, other than California. Imperial Premium
Finance, Inc. ("IP Finance II"), a wholly-owned subsidiary of AIGCC that was
incorporated in California in 1994, conducts the same premium financing
activities in California as AICCO. Imperial Premium Funding, Inc. ("IP Funding")
was incorporated in Delaware in 1995 and is a wholly-owned subsidiary of AIGCC
that conducts similar premium financing activities in certain States. IP Finance
I, IP Finance II and IP Funding were until January 1, 1999, subsidiaries of
SunAmerica Corporation which was acquired by AIG in January 1999. AIGC finances
premiums for most lines of property and casualty insurance. AIC believes that it
is one of the largest insurance premium finance companies in the United States.
AIGC financed insurance premiums during each of 1997 and 1998 in excess of $3
billion. The principal executive office of AIC is located at 160 Water Street,
New York, New York 10038, telephone number (212) 428-5400, of AICCO is located
at 777 South Figueroa Street, Los Angeles, California 90017, telephone number
(213) 689-3600, of the IP Finance I is located at 15303 Ventura Blvd., Suite
1600, Sherman Oaks, California 91403, telephone number (818) 906-1200, of IP
Finance II is located 15303 Ventura Blvd., Suite 1600, Sherman Oaks, California
91403, telephone number (818) 906-1200 and of IP Funding is located 15303
Ventura Blvd., Suite 1600, Sherman Oaks, California 91403, telephone number
(818) 906-1200.
DESCRIPTION OF SERIES PROVISIONS
The Offered Notes and the Class C Notes will be issued pursuant to the
Indenture, as supplemented by the supplement relating to the Notes (the "Series
[ ____ ]-1 Supplement"). Pursuant to the Indenture, the Trust and the Indenture
Trustee may execute further Series Supplements in order to issue additional
Series. The following summary of Series [ ____ ]-1 does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Master Trust Agreement, the Sale and Servicing
Agreement, the Indenture and the Series [ ____ ]-1 Supplement. See "Description
of the Notes" in the accompanying Prospectus for additional information
concerning the Offered Notes and the Class C Notes, the Series [ ____ ]-1
Supplement, the Indenture, the Sale and Servicing Agreement and the Master Trust
Agreement.
General
The Class A Notes, the Class B Notes and the Class C Notes will be secured
by the Class A Investor Interest, the Class B Investor Interest and the Class C
Investor Interest, respectively, each a
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partial, undivided interest in the assets of the Trust, including the right to
the applicable allocation percentage of all payments on the Receivables in the
Trust. Each Class A Note represents the right to receive payments of interest at
the Class A Note Rate for the related Interest Period and payments of principal
on each Payment Date with respect to the Controlled Amortization Period or the
Rapid Amortization Period, to the extent of the Class A Investor Interest,
funded from collections of Finance Charge Receivables and Principal Receivables,
allocated to the Class A Investor Interest [and certain other available
amounts]. Each Class B Note represents the right to receive payments of interest
at the Class B Note Rate for the related Interest Period, and payments of
principal on each Payment Date with respect to the Controlled Amortization
Period or the Rapid Amortization Period, after the Class A Notes have been paid
in full, funded from collections of Finance Charge Receivables and Principal
Receivables allocated to the Class B Investor Interest [and certain other
available amounts]. In addition to representing the right to payment from
collections of Finance Charge Receivables and Principal Receivables, each Class
A Note also represents the right to receive payments from Excess Spread, funds
on deposit in the Yield Enhancement Account, funds on deposit in the Excess
Funding Account (in an amount not to exceed the Class A Investor Interest),
Reallocated Principal Collections and Shared Principal Collections and certain
other available amounts. In addition to representing the right to payment from
collections of Finance Charge Receivables and Principal Receivables, each Class
B Note also represents the right to receive payments from Excess Spread, funds
on deposit in the Yield Enhancement Account, funds on deposit in the Excess
Funding Account (to the extent such funds exceed the Class A Investor Interest
and in an amount not to exceed the Class B Investor Interest), Reallocated
Collateral Principal Collections and Shared Principal Collections and certain
other available amounts. Payments of interest and principal will be made on each
Payment Date on which such amounts are due to Noteholders in whose names the
Notes were registered on the last business day of the calendar month preceding
such Payment Date (each, a "Record Date").
The Notes are secured by the Investor Interest. The Notes generally are not
secured by the remaining undivided interest in the assets of the Trust, which is
referred to as the "Trust Interest." The Trust's right to receive the proceeds
of trust assets allocable to the Trust Interest is not subordinate to the
Noteholders' right to receive payment on the Notes from the proceeds of Trust
assets allocable to the Investor Interest, except to the limited extent
described below. The Trust will receive certain payments from the assets of the
Trust, including a percentage (the "Trust Percentage") of all obligors payments
on the Receivables in the Trust equal to 100% minus the sum of the applicable
Investor Percentages for all Series of notes then outstanding. It is anticipated
that amounts paid to the Trust in respect of the Trust Interest will be
distributed to the Seller as holder of the beneficial interest in the Trust and
will not be available to make payments on the Notes. The beneficial interest,
which represents equity ownership of the Trust, may be transferred in whole or
in part subject to certain limitations and conditions set forth in the Master
Trust Agreement. See "Description of the Transfer and Servicing
Agreements--Certain Matters Regarding the Seller and the Servicer" in the
accompanying Prospectus.
[Application will be made to list the Offered Notes on the Luxembourg Stock
Exchange; however, no assurance can be given that such listing will be obtained.
Noteholders should consult with [Bankers Trust Luxembourg S.A., the Luxembourg
listing agent for the Notes, 14 Boulevard F.D. Roosevelt, L-2450 Luxembourg,
phone number (352) 46 02 41], for the status of such listing.]
The Class A Notes and the Class B Notes initially will be represented by
notes registered in the name of Cede, as nominee of DTC. Unless and until
Definitive Notes are issued, all references in this Prospectus Supplement to
actions by Class A Noteholders and/or Class B Noteholders shall refer to actions
taken by DTC upon instructions from its Participants and all references in this
Prospectus Supplement to distributions, notices, reports and statements to Class
A Noteholders and/or Class B Noteholders shall refer to distributions, notices,
reports and statements to DTC or Cede, as the registered holder of the Class A
Notes and the Class B Notes, as the case may be, for distribution to Noteholders
in accordance with DTC procedures. Noteholders may hold their Notes through DTC
(in the United States) or Cedelbank or Euroclear (in Europe) if they are
customers or participants of such systems, or indirectly through organizations
that are customers or participants in such systems. Cede, as nominee for DTC,
will hold the global Notes. Cedelbank and Euroclear will hold omnibus positions
on behalf of the Cedelbank Customers and the Euroclear Participants,
respectively, through customers' securities accounts in Cedelbank's and
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Euroclear's names on the books of their respective Depositaries which in turn
will hold such positions in customers' securities accounts in the Depositaries'
names on the books of DTC. See "Description of the Notes--General," and "Certain
Information Regarding the Securities--Book-Entry Registration" and "--Definitive
Notes" in the accompanying Prospectus.
New Issuances
The Indenture provides that the Trust may issue one or more new Series by
notifying the Owner Trustee and the Indenture Trustee as described under
"Description of the Notes--New Issuances" in the accompanying Prospectus.
Interest Payments
Interest will accrue on the Class A Notes at the Class A Note Rate and on
the Class B Notes at the Class B Note Rate from the Closing Date. Interest will
be paid on [ ________ ]and on the 15th day of each month thereafter (or, if such
15th day is not a business day, the next succeeding business day) (each, a
"Payment Date"). For purposes of this Prospectus Supplement and the accompanying
Prospectus, a "business day" is, unless otherwise indicated, any day other than
a Saturday, a Sunday or a day on which banking institutions in New York, New
York, Los Angeles, California or the city in which the Corporate Trust office is
located, or [ ____ ], Delaware are authorized or obligated by law or executive
order to be closed. Interest payments on the Class A Notes and the Class B Notes
on any Payment Date will be calculated on the outstanding principal balance of
the Class A Notes and the outstanding principal balance of the Class B Notes, as
applicable, as of the preceding Record Date, except that interest for the first
Payment Date will accrue at the applicable Note Rate on the initial outstanding
principal balance of the Class A Notes and the initial outstanding principal
balance of the Class B Notes, as applicable, from the Closing Date. Interest due
on the Notes but not paid on any Payment Date will be payable on the next
succeeding Payment Date together with additional interest (the "Additional
Interest") on such amount at the applicable Note Rate plus 2% per annum (such
amount with respect to the Class A Notes, the "Class A Additional Interest", and
such amount with respect to the Class B Notes, the "Class B Additional
Interest"). Such Additional Interest shall accrue on the same basis as interest
on the Notes, and shall accrue from the Payment Date such overdue interest
became due, to but excluding the Payment Date on which such Additional Interest
is paid. Interest payments on the Class A Notes on any Payment Date will be paid
from Class A Available Funds for the related Monthly Period and, to the extent
such Class A Available Funds are insufficient to pay such interest, from Excess
Spread, funds on deposit in the Yield Enhancement Account and Reallocated
Principal Collections (to the extent available) for such Monthly Period.
Interest payments on the Class B Notes on any Payment Date will be paid from
Class B Available Funds for the related Monthly Period and, to the extent such
Class B Available Funds are insufficient to pay such interest, from Excess
Spread, funds on deposit in the Yield Enhancement Account and Reallocated
Principal Collections (to the extent available) remaining after certain other
payments have been made with respect to the Class A Notes.
"Class A Available Funds" means, with respect to any Monthly Period, an
amount equal to the Class A Floating Allocation of collections of Finance Charge
Receivables and recoveries and the Class A Default Amounts allocated to the
Investor Interest and deposited in the Finance Charge Account with respect to
such Monthly Period.
"Class B Available Funds" means, with respect to any Monthly Period, an
amount equal to the Class B Floating Allocation of collections of Finance Charge
Receivables and recoveries and the Class B Default Amounts allocated to the
Investor Interest and deposited in the Finance Charge Account with respect to
such Monthly Period.
The Class A Notes will accrue interest from the Closing Date through [
________ ], 1999 and with respect to each Interest Period thereafter at a per
annum rate of [ __ ]% above one-month LIBOR prevailing on the related LIBOR
Determination Date with respect to each such period, but in no event in excess
of [ __ ]% (the "Class A Note Rate"). Interest payments on the Class A Notes on
any Payment Date will be an amount equal to the actual number of days in the
related Interest Period divided by 360 times the
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product of the Class A Note Rate and the outstanding principal balance of the
Class A Notes as of the preceding Record Date, except that interest for the
first Payment Date will include accrued interest on the initial outstanding
principal balance of the Class A Notes at the Class A Note Rate from and
including the Closing Date through but excluding [ _____ ].
The Class B Notes will accrue interest from the Closing Date through [
______ __ ] and with respect to each Interest Period thereafter at a per annum
rate of [ __ ]% above one-month LIBOR prevailing on the related LIBOR
Determination Date with respect to each such period, but in no event in excess
of [ __ ]% (the "Class B Note Rate"). Interest payments on the Class B Notes on
any Payment Date will be an amount equal to the actual number of days in the
related Interest Period divided by 360 times the product of the Class B Note
Rate and the outstanding principal balance of the Class B Notes as of the
preceding Record Date, except that interest for the first Payment Date will
include accrued interest on the initial outstanding principal balance of the
Class B Notes at the Class B Note Rate from and including the Closing Date
through but excluding [ _____ ].
"LIBOR" means the annual rate shown on page 3750 of the Telerate screen or
any successor page as the composite London interbank offered rate for one-month
United States dollar deposits, determined on a LIBOR Determination Date.
The Indenture Trustee will determine LIBOR for each Interest Period on the
second business day prior to the Payment Date on which such Interest Period
commences or, in the case of the initial Interest Period, the second business
day prior to the Closing Date (each such business day, a "LIBOR Determination
Date"). For purposes of calculating LIBOR, a business day is any day other than
a day on which banking institutions in London trading in United States dollar
deposits in the London interbank market are authorized or obligated by law or
executive order to be closed. The Indenture Trustee will determine LIBOR in
accordance with the following provisions:
(i) On each LIBOR Determination Date, the Indenture Trustee will
determine LIBOR on the basis of the rate for deposits in United States
dollars for a period equal to one month (commencing on the first day of the
applicable Interest Period) which appears on Telerate Page 3750 as of 11:00
a.m. (London time) on such LIBOR Determination Date (or such other page as
may replace that page on the Dow Jones Telerate Service for the purpose of
displaying London interbank offered rates of major banks).
(ii) If, on any LIBOR Determination Date, such rate does not appear on
Telerate Page 3750 (or such other page), then LIBOR for the applicable
Interest Period shall be determined on the basis of the rates at which
deposits in United States dollars are offered by four major banks in the
London interbank market selected by the Servicer (the "Reference Banks") as
of approximately 11:00 a.m. (London time). LIBOR as determined by the
Indenture Trustee is the arithmetic mean of such quotations (rounded, if
necessary, to the nearest multiple of [ _______ ]%) if at least two such
quotations are provided.
(iii) If, on the LIBOR Determination Date, only one or none of the
Reference Banks provides such offered quotations, LIBOR will be:
(a) the rate per annum (rounded as aforesaid) that the Indenture
Trustee determines to be the arithmetic mean of the offered quotations
that leading banks in The City of New York selected by the Servicer
are quoting at or about 11:00 a.m. (New York time) on the relevant
LIBOR Determination Date to leading European banks for one-month
United States dollar deposits; or
(b) if the banks selected as aforesaid by the Servicer are not
quoting as described in clause (a) above, LIBOR for such Interest
Period will be LIBOR as determined on the previous LIBOR Determination
Date (or [ _____ ]%, in the case of the first LIBOR Determination
Date).
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The Class A Note Rate and Class B Note Rate applicable to the then current
and immediately preceding Interest Period may be obtained by telephoning the
Indenture Trustee at its Corporate Trust Office at (800) 524-9472 or (312)
407-4660.
Principal Payments
During the Revolving Period (which begins on the Closing Date and ends at
the commencement of the earliest to occur of the Controlled Amortization Period
or the Rapid Amortization Period [or the Refinancing Date]), collections of
Principal Receivables allocable to the Investor Interest will not be paid to
Noteholders, but instead will, subject to certain limitations, including the
allocation of any Reallocated Principal Collections with respect to the related
Monthly Period to pay the Class A Required Amount and the Class B Required
Amount, be treated as Shared Principal Collections.
During the Controlled Amortization Period, which is scheduled to begin on
the [ _____ ] Payment Date, and during the Rapid Amortization Period, which will
begin upon the occurrence of a Pay Out Event, and until the Series [ _____ ]-1
Termination Date occurs, principal will be paid first to the Class A Noteholders
until the Class A Notes have been paid in full, then to the Class B Noteholders
until the Class B Notes have been paid in full and then to the Class C
Noteholders until the Class C Notes have been paid in full. The Trust may elect,
at its sole discretion, to begin the Class A Controlled Amortization Period on a
date later than the scheduled starting date, upon notice to the Indenture
Trustee (given not later than 5 days prior to a Payment Date), but not later
than the [ ______ ] Payment Date.
On each Payment Date during the Class A Controlled Amortization Period,
unless the Class A Notes have been paid in full or the Rapid Amortization Period
commences, Class A Noteholders will be entitled to receive for each related
Monthly Period an amount equal to the least of (i) Available Investor Principal
Collections on deposit in the Principal Account with respect to the related
Transfer Date, (ii) the Controlled Distribution Amount and (iii) the Class A
Investor Interest. After payment in full of the Class A Notes, Class B
Noteholders will be entitled to receive on each Payment Date during the Class B
Controlled Amortization Period the least of (i) the amount of Available Investor
Principal Collections on deposit in the Principal Account with respect to the
related Transfer Date (minus the portion of such Available Investor Principal
Collections applied to Class A Monthly Principal on such Transfer Date), (ii)
the Controlled Distribution Amount (minus the portion of such Controlled
Distribution Amount applied to Class A Monthly Principal on such Transfer Date),
and (iii) the Class B Investor Interest. After payment in full of the Class A
Notes and the Class B Notes, the Class C Noteholders will be entitled to receive
on each Payment Date during the Class C Controlled Amortization Period the least
of (i) the amount of Available Investor Principal Collections on deposit in the
Principal Account with respect to the related Transfer Date (minus the portion
of such Available Investor Principal Collections applied to Class A Monthly
Principal and Class B Monthly Principal on such Transfer Date), (ii) the
Controlled Distribution Amount (minus the portion of such Controlled
Distribution Amount applied to Class A Monthly Principal and Class B Monthly
Principal on such Transfer Date) and (iii) the Class C Investor Interest.
"Available Investor Principal Collections" means, with respect to any
Monthly Period, an amount generally equal to the sum of (a)(i) collections of
Principal Receivables received during such Monthly Period allocable to the
Investor Interest minus (ii) the amount of Reallocated Principal Collections
with respect to such Monthly Period used to fund the Class A Required Amount and
the Class B Required Amount as described under "--Reallocation of Cash Flows"
below, plus (iii) any Shared Principal Collections with respect to any other
Series in Group One that are allocated to Series of the Trust represented by the
Notes ("Series [ ____ ]-1"), and (b) amounts withdrawn from the Excess Funding
Account allocable to the Investor Interest (as more fully described under
"--Excess Funding Account; Minimum Trust Interest; Excess Receivables Amount"
below).
"Controlled Distribution Amount" means, for any Payment Date during the
Controlled Amortization Period, an amount equal to the sum of the Controlled
Amortization Amount for such Payment Date and any Deficit Controlled
Amortization Amount for the immediately preceding Payment Date.
"Controlled Amortization Amount" means for any Payment Date during the
Controlled Amortization Period, $[ _____ ].
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"Deficit Controlled Amortization Amount" means (a) on the first Payment
Date during the Class A Controlled Amortization Period, the Class B Controlled
Amortization Period or the Class C Controlled Amortization Period, the excess,
if any, of the Controlled Distribution Amount for such Payment Date over the
amount distributed from the Payment Account as Class A Monthly Principal, Class
B Monthly Principal or Class C Monthly Principal, as the case may be, for such
Payment Date and (b) on each subsequent Payment Date during the Class A
Controlled Amortization Period, the Class B Controlled Amortization Period or
the Class C Controlled Amortization Period, the excess, if any, of the
Controlled Amortization Amount for such subsequent Payment Date plus any Deficit
Controlled Amortization Amount for the prior Payment Date over the amount
distributed from the Payment Account as Class A Monthly Principal, Class B
Monthly Principal or Class C Monthly Principal, as the case may be, for such
subsequent Payment Date.
On each Payment Date during the Rapid Amortization Period, the Class A
Noteholders will be entitled to receive Available Investor Principal Collections
for the related Monthly Period in an amount up to the Class A Investor Interest
until the earliest of the date the Class A Notes are paid in full, the Series [
____ ]-1 Termination Date and the Trust Termination Date. After payment in full
of the Class A Notes, the Class B Noteholders will be entitled to receive, on
each Payment Date during the Rapid Amortization Period, Available Investor
Principal Collections for the related Monthly Period in an amount up to the
Class B Investor Interest until the earliest of the date the Class B Notes are
paid in full, the Series [ ____ ]-1 Termination Date and the Trust Termination
Date. See "--Pay Out Events" below for a discussion of events which might lead
to the commencement of the Rapid Amortization Period.
[Postponement of Controlled Amortization Period
Upon written notice to the Indenture Trustee, the Servicer may elect to
postpone the commencement of the Controlled Amortization Period, and extend the
length of the Revolving Period, subject to certain conditions including those
set forth below. The Servicer may make such election only if the Amortization
Period Length (determined as described below) is less than twelve months. On the
Determination Date immediately preceding the [ ________ ] Payment Date, and each
Determination Date thereafter, until the Controlled Amortization Period begins,
the Servicer will determine the "Amortization Period Length," which is the
number of whole months expected to be required to fully pay the Notes no later
than the Scheduled Payment Date, based on (a) the expected monthly collections
of Principal Receivables expected to be distributable to the noteholders of all
Series (excluding certain other Series), assuming a principal payment rate no
greater than the lowest monthly principal payment rate on the Receivables for
the preceding twelve months and (b) the amount of principal expected to be
distributable to noteholders of all Series (excluding certain other Series)
which are not expected to be in their revolving periods during the Controlled
Amortization Period; provided, however, that the calculation of Amortization
Period Length may be changed at any time if the Rating Agency Condition is
satisfied. If the Amortization Period Length is less than twelve months, the
Servicer may, at its option, postpone the commencement of the Controlled
Amortization Period such that the number of months included in the Controlled
Amortization Period will be equal to or exceed the Amortization Period Length.
The effect of the foregoing calculation is to permit the reduction of the length
of the Controlled Amortization Period based on the investor interest of certain
other Series which are scheduled to be in their revolving periods during the
Controlled Amortization Period and on increases in the principal payment rate
occurring after the Closing Date. The length of the Controlled Amortization
Period will not be determined to be less than one month.
"Rating Agency Condition" means the notification in writing by each Rating
Agency to the Seller, the Servicer and the Indenture Trustee that a proposed
action will not result in any Rating Agency reducing or withdrawing its then
existing rating of the investor Notes of any outstanding Series or Class of a
Series with respect to which it is a Rating Agency.]
Subordination
The Class B Notes and the Class C Notes will be subordinated to the extent
necessary to fund certain payments with respect to the Class A Notes. In
addition, the Class C Notes will be subordinated to the extent necessary to fund
certain payments with respect to the Class B Notes. Certain principal payments
otherwise allocable to the Class B Noteholders may be reallocated to cover
amounts in respect of the Class A Notes and the Class B Investor Interest may be
reduced if the Class C Investor Interest is equal to zero. Similarly, certain
principal payments allocable to the Class C Notes may be reallocated to cover
amounts in
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respect of the Class A Notes and the Class B Notes and the Class C Investor
Interest may be reduced. To the extent the Class B Investor Interest and Class B
Notes are reduced, the percentage of collections of Finance Charge Receivables
allocated to the Class B Notes in subsequent Monthly Periods will be reduced.
Moreover, to the extent the amount of such reduction in the Class B Investor
Interest is not reimbursed, the amount of principal distributable to, and the
amounts available to be distributed with respect to interest on, the Class B
Notes will be reduced. See "--Allocation Percentages," "--Reallocation of Cash
Flows" and "--Application of Collections--Excess Spread" in this Prospectus
Supplement.
Allocation Percentages
Pursuant to the [Sale and Servicing Agreement], with respect to each
Monthly Period the Servicer will allocate among the Investor Interest, the
investor interest for all other Series issued and outstanding and the Trust
Interest, all amounts collected on Finance Charge Receivables, all amounts
collected on Principal Receivables and all Default Amounts with respect to such
Monthly Period. Each "Monthly Period" will be the period from and including the
first day of a calendar month to and including the last day of such calendar
month (other than the initial Monthly Period, which will commence on and include
the Closing Date and end on and include [ _____ ].
Collections of Finance Charge Receivables, which include recoveries with
respect to Premium Finance Obligations that have been written off, and Default
Amounts at any time and collections of Principal Receivables during the
Revolving Period will be allocated to the Investor Interest based on the
Floating Investor Percentage. The "Floating Investor Percentage" means, with
respect to any Monthly Period, the percentage equivalent of a fraction, the
numerator of which is the Investor Interest as of the close of business on the
last day of the preceding Monthly Period (or with respect to the first Monthly
Period, the initial Investor Interest) and the denominator of which is the
greater of (x) the aggregate amount of Principal Receivables as of the close of
business on the last day of the preceding Monthly Period (or with respect to the
first calendar month in the first Monthly Period, the aggregate amount of
Principal Receivables as of the close of business on the day immediately
preceding the Closing Date and with respect to the second calendar month in the
first Monthly Period, the aggregate amount of Principal Receivables as of the
close of business on the last day of the first calendar month in the first
Monthly Period) and (y) the sum of the numerators used to calculate the investor
percentages for allocations with respect to Finance Charge Receivables, Default
Amounts or Principal Receivables, as applicable, for all outstanding Series on
such date of determination. Such amounts so allocated will be further allocated
between the Class A Notes, Class B Notes and the Class C Notes based on the
Class A Floating Allocation, the Class B Floating Allocation and the Class C
Floating Allocation, respectively. The "Class A Floating Allocation" means, with
respect to any Monthly Period, the percentage equivalent (which percentage shall
never exceed 100%) of a fraction, the numerator of which is equal to the Class A
Investor Interest as of the close of business on the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, as of the Closing
Date) and the denominator of which is equal to the Investor Interest as of the
close of business on such day. The "Class B Floating Allocation" means, with
respect to any Monthly Period, the percentage equivalent (which percentage shall
never exceed 100%) of a fraction, the numerator of which is equal to the Class B
Investor Interest as of the close of business on the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, as of the Closing
Date) and the denominator of which is equal to the Investor Interest as of the
close of business on such day. The "Class C Floating Allocation" means, with
respect to any Monthly Period, the percentage equivalent (which percentage shall
never exceed 100%) of a fraction, the numerator of which is equal to the Class C
Investor Interest as of the close of business on the last day of the preceding
Monthly Period (or with respect to the first Monthly Period, as of the Closing
Date) and the denominator of which is equal to the Investor Interest as of the
close of business on such day.
Collections of Principal Receivables during the Controlled Amortization
Period and Rapid Amortization Period will be allocated to the Investor Interest
based on the Fixed Investor Percentage. The "Fixed Investor Percentage" means,
with respect to any Monthly Period, the percentage equivalent of a fraction, the
numerator of which is the Investor Interest as of the close of business on the
last day of the Revolving Period and the denominator of which is the greater of
(x) the aggregate amount of Principal
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Receivables in the Trust as of the close of business on the last day of the
prior Monthly Period and (y) the sum of the numerators used to calculate the
investor percentages for allocations with respect to Principal Receivables for
all outstanding Series for such Monthly Period.
"Class A Investor Interest" for any date means an amount equal to (a) the
aggregate initial principal amount of the Class A Notes [$_____ ] (the "Class A
Initial Investor Interest"), minus (b) the aggregate amount of principal
payments made to Class A Noteholders prior to such date, minus (c) the excess,
if any, of the aggregate amount of Class A Investor Charge-Offs for all Transfer
Dates preceding such date over the aggregate amount of any reimbursements of
Class A Investor Charge-Offs for all Transfer Dates preceding such date], minus
(d) the aggregate amount of Reallocated Principal Collections for all prior
Transfer Data for which the Class B Investor Interest and the Class C Investor
Interest have not been reduced, and plus (e) the aggregate amount of Excess
Spread and funds on deposit in the Yield Enhancement Account allocated on all
prior Transfer Dates for the purpose of reimbursing amounts deducted pursuant to
the foregoing clause (c) and (d); provided, however, that the Class A Investor
Interest may not be reduced below zero.
"Class B Investor Interest" for any date means an amount equal to (a) the
aggregate initial principal amount of the Class B Notes [$_____ ] (the "Class B
Initial Investor Interest"), minus (b) the aggregate amount of principal
payments made to Class B Noteholders prior to such date, minus (c) the aggregate
amount of Class B Investor Charge-Offs for all prior Transfer Dates, minus (d)
the aggregate amount of Reallocated Principal Collections for all prior Transfer
Dates for which the Class C Investor Interest has not been reduced, minus (e) an
amount equal to the aggregate amount by which the Class B Investor Interest has
been reduced to fund the Class A Investor Default Amount on all prior Transfer
Dates as described under "--Defaulted Receivables; Investor Charge-Offs" in this
Prospectus Supplement, and plus (f) the aggregate amount of Excess Spread and
funds on deposit in the Yield Enhancement Account allocated and available on all
prior Transfer Dates for the purpose of reimbursing amounts deducted pursuant to
the foregoing clauses (c), (d) and (e); provided, however, that the Class B
Investor Interest may not be reduced below zero.
"Class C Investor Interest" for any date means an amount equal to (a) $[
_____ ] (the "Class C Initial Investor Interest"), minus (b) the aggregate
amount of principal payments made to Class C Noteholders prior to such date,
minus (c) the aggregate amount of Class C Investor Charge-Offs for all prior
Transfer Dates, minus (d) the aggregate amount of Reallocated Principal
Collections for all prior Transfer Dates for which the Class C Investor Interest
has been reduced, minus (e) an amount equal to the aggregate amount by which the
Class C Investor Interest has been reduced to fund the Class A Investor Default
Amount and the Class B Investor Default Amount on all prior Transfer Dates as
described under "--Defaulted Receivables; Investor Charge-Offs" in this
Prospectus Supplement, and plus (f) the aggregate amount of Excess Spread and
funds on deposit in the Yield Enhancement Account allocated and available on all
prior Transfer Dates for the purpose of reimbursing amounts deducted pursuant to
the foregoing clauses (c), (d) and (e); provided, however, that the Class C
Investor Interest may not be reduced below zero.
"Investor Interest," for any date of determination, means an amount equal
to the sum of (a) the Class A Investor Interest, (b) the Class B Investor
Interest and (c) the Class C Investor Interest.
Reallocation of Cash Flows
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class A Required Amount"), which will be equal to the amount, if any, by
which the sum of (a) Class A Monthly Interest due on the related Payment Date
and overdue Class A Monthly Interest and Class A Additional Interest, if any,
(b) the Class A Servicing Fee, if any, for the related Monthly Period and
overdue Class A Servicing Fee, if any, and (c) the Class A Investor Default
Amount, if any, for the related Monthly Period exceeds the Class A Available
Funds for the related Monthly Period. If the Class A Required Amount is greater
than zero, Excess Spread and funds on deposit in the Yield Enhancement Account
allocated to Series [ __ ] and available for such purpose will be used to fund
the Class A Required Amount with respect to such Transfer Date. If such Excess
Spread and funds on deposit in the Yield Enhancement Account are insufficient to
fund the Class A Required Amount, first, Reallocated Class C Principal
Collections and,
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then, Reallocated Class B Principal Collections will be used to fund the
remaining Class A Required Amount. If Reallocated Principal Collections with
respect to the related Monthly Period, together with Excess Spread and funds on
deposit in the Yield Enhancement Account are insufficient to fund the remaining
Class A Required Amount for such related Monthly Period, then the Class C
Investor Interest (after giving effect to reductions for any Class C Investor
Charge-Offs and Reallocated Principal Collections on such Transfer Date) will be
reduced by the amount of such excess (but not by more than the Class A Investor
Default Amount for such Monthly Period). In the event that such reduction would
cause the Class C Investor Interest to be a negative number, the Class C
Investor Interest will be reduced to zero, and the Class B Investor Interest
(after giving effect to reductions for any Class B Investor Charge-Offs and any
Reallocated Class B Principal Collections for which the Class C Investor
Interest was not reduced on such Transfer Date) will be reduced by the amount by
which the Class C Investor Interest would have been reduced below zero (but not
by more than the excess of the Class A Investor Default Amount, if any, for such
Monthly Period over the amount of such reduction, if any, of the Class C
Investor Interest with respect to such Monthly Period). In the event that such
reduction would cause the Class B Investor Interest to be a negative number, the
Class B Investor Interest will be reduced to zero and the Class A Investor
Interest will be reduced by the amount by which the Class B Investor Interest
would have been reduced below zero (but not by more than the excess, if any, of
the Class A Investor Default Amount for such Monthly Period over the amount of
the reductions, if any, of the Class C Investor Interest and the Class B
Investor Interest with respect to such Monthly Period). Any such reduction in
the Class A Investor Interest will have the effect of slowing or reducing the
return of principal and interest to the Class A Noteholders. In such case, the
Class A Noteholders will bear directly the credit and other risks associated
with their interests in the Trust assets. See "--Defaulted Receivables; Investor
Charge-Offs" in this Prospectus Supplement.
With respect to each Transfer Date, the Servicer will determine the amount
(the "Class B Required Amount"), which will be equal to the sum of (a) the
amount, if any, by which the sum of (i) Class B Monthly Interest due on the
related Payment Date and overdue Class B Monthly Interest and Class B Additional
Interest, if any, and (ii) the Class B Servicing Fee for the related Monthly
Period and overdue Class B Servicing Fee, if any, exceeds the Class B Available
Funds for the related Monthly Period and (b) the Class B Investor Default
Amount, if any, for the related Monthly Period. If the Class B Required Amount
is greater than zero, Excess Spread and funds on deposit in the Yield
Enhancement Account allocated to Series [ ] not required to pay the Class A
Required Amount or reimburse Class A Investor Charge-Offs will be used to fund
the Class B Required Amount with respect to such Transfer Date. If such Excess
Spread and funds on deposit in the Yield Enhancement Account are insufficient to
fund the Class B Required Amount, Reallocated Class C Principal Collections not
required to fund the Class A Required Amount for the related Monthly Period will
be used to fund the remaining Class B Required Amount. If such Reallocated Class
C Principal Collections with respect to the related Monthly Period are
insufficient to fund the remaining Class B Required Amount, then the Class C
Investor Interest (after giving effect to reductions for any Class C Investor
Charge-Offs and Reallocated Principal Collections on such Transfer Date and
after any adjustments made thereto for the benefit of the Class A Noteholders)
will be reduced by the amount of such deficiency (but not by more than the Class
B Investor Default Amount for such Monthly Period). In the event that such a
reduction would cause the Class C Investor Interest to be a negative number, the
Class C Investor Interest will be reduced to zero, and the Class B Investor
Interest will be reduced by the amount by which the Class C Investor Interest
would have been reduced below zero (but not by more than the excess of the Class
B Investor Default Amount for such Monthly Period over the amount of such
reduction of the Class C Investor Interest), and the Class B Noteholders will
bear directly the credit and other risks associated with their interests in the
Trust. See "--Defaulted Receivables; Investor Charge-Offs" in this Prospectus
Supplement.
Reductions of the Class A Investor Interest or Class B Investor Interest
described above shall be reimbursed by, and the Class A Investor Interest or
Class B Investor Interest increased to the extent of, Excess Spread and funds on
deposit in the Yield Enhancement Account available for such purposes on each
Transfer Date. See "--Application of Collections--Excess Spread" in this
Prospectus Supplement. When such reductions of the Class A Investor Interest and
Class B Investor Interest have been fully reimbursed, reductions of the Class C
Investor Interest shall be reimbursed until reimbursed in full in a similar
manner.
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"Required Amount" for any Monthly Period means the sum of (a) the Class A
Required Amount and (b) the Class B Required Amount, each for such Monthly
Period.
"Reallocated Class B Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Class B Investor Interest
for such Monthly Period in an amount not to exceed the amount applied to fund
the Class A Required Amount, if any; provided, however, that such amount will
not exceed the Class B Investor Interest after giving effect to any Class B
Investor Charge-Offs for the related Transfer Date.
"Reallocated Class C Principal Collections" for any Monthly Period means
collections of Principal Receivables allocable to the Class C Investor Interest
for such Monthly Period in an amount not to exceed the amount applied to fund
the Class A Required Amount and the Class B Required Amount, if any; provided,
however, that such amount will not exceed the Class C Investor Interest after
giving effect to any Class C Investor Charge-Offs for the related Transfer Date.
"Reallocated Principal Collections" for any Monthly Period means the sum of
(a) the Reallocated Class B Principal Collections for such Monthly Period, if
any, and (b) the Reallocated Class C Principal Collections for such Monthly
Period, if any.
Application of Collections
Allocations
Except as otherwise provided below, the Servicer will deposit into the
Collection Account, no later than the second business day following the date of
processing, any payment collected by the Servicer on the Receivables. On the
same day as any such deposit is made, the Servicer will make the deposits and
payments to the accounts and parties as indicated below; provided, however, that
for as long as AIC, AICCO, IP Finance I, IP Finance II or IP Funding remains the
Servicer under the Sale and Servicing Agreement and (a)(1) the AIG Support
Agreement remains in effect with respect to the Servicer and is not terminated,
amended or modified other than in accordance with its terms and (2) AIG or AIC
has and maintains a long-term rating of at least Aa3 by Moody's and of at least
AA by Standard & Poor's or (b) AIG or AIC has and maintains a commercial paper
rating of P-1 by Moody's and of at least A-1 by Standard & Poor's, then the
Servicer may make such deposits and payments on the business day immediately
prior to the Payment Date (the "Transfer Date") in an amount equal to the net
amount of such deposits and payments which would have been made had the
conditions of this proviso not applied.
With respect to Series [ __ ]-1, and notwithstanding anything in the Sale
and Servicing Agreement to the contrary, whether the Servicer is required to
make monthly or daily deposits from the Collection Account into the Finance
Charge Account or the Principal Account, with respect to any Monthly Period, (a)
the Servicer will only be required to deposit collections from the Collection
Account into the Finance Charge Account or the Principal Account up to the
required amount to be deposited into any such deposit account or, without
duplication, distributed on or prior to the related Payment Date to the
Noteholders or to the Trust and (b) if at any time prior to such Payment Date
the amount of collections deposited in the Collection Account exceeds the amount
required to be deposited pursuant to clause (a) above, the Servicer, subject to
certain limitations, will be permitted to withdraw the excess from the
Collection Account.
Payment of Interest, Fees and Other Items
On each Transfer Date, the Trustee, acting pursuant to the Servicer's
instructions, will apply the Class A Available Funds, Class B Available Funds
and Class C Available Funds in the Finance Charge Account in the following
priority:
(a) On each Transfer Date, an amount equal to the Class A Available
Funds will be distributed in the following priority:
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(i) an amount equal to Class A Monthly Interest for the related
Payment Date, plus the amount of any overdue Class A Monthly Interest
and Class A Additional Interest thereon, if any, will be deposited
into the Payment Account for payment to Class A Noteholders on such
Payment Date;
(ii) an amount equal to the Class A Servicing Fee, if any, for
the related Monthly Period, plus the amount of any overdue Class A
Servicing Fee, if any, will be paid to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount for
the related Monthly Period will be treated as a portion of Available
Investor Principal Collections and deposited into the Principal
Account for such Transfer Date; and
(iv) the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed as described under "--
Excess Spread" in this Prospectus Supplement.
(b) On each Transfer Date, an amount equal to the Class B Available
Funds will be distributed in the following priority:
(i) an amount equal to Class B Monthly Interest for the related
Payment Date, plus the amount of any overdue Class B Monthly Interest
and Class B Additional Interest thereon, if any, will be deposited
into the Payment Account for payment to Class B Noteholders on such
Payment Date;
(ii) an amount equal to the Class B Servicing Fee for the related
Monthly Period, plus the amount of any overdue Class B Servicing Fee,
if any, will be paid to the Servicer; and
(iii) the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed as described under " -
Excess Spread" in this Prospectus Supplement.
(c) On each Transfer Date, an amount equal to the Class C Available
Funds will be distributed in the following priority:
(i) an amount equal to the Class C Servicing Fee, if any, plus
the amount of any overdue Class C Servicing Fee, if any, for the
related Monthly Period will be paid to the Servicer; and
(ii) the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed as described under "-
Excess Spread" in this Prospectus Supplement.
"Class A Monthly Interest" with respect to any Transfer Date will equal the
product of (i) the Class A Note Rate for the related Interest Period, (ii) the
actual number of days in such Interest Period divided by 360 and (iii) the
outstanding balance of the Class A Notes on the related Record Date; provided,
however, with respect to the first Payment Date, Class A Monthly Interest will
be equal to the interest accrued on the Class A initial Investor Interest at the
applicable Class A Note Rate for the period from and including the Closing Date
through but excluding [ ________ ], 1999.
"Class B Monthly Interest" with respect to any Transfer Date will equal the
product of (i) the Class B Note Rate for the related Interest Period, (ii) the
actual number of days in such Interest Period divided by 360 and (iii) the
outstanding balance of the Class B Notes on the related Record Date; provided,
however, with respect to the first Payment Date, Class B Monthly Interest will
be equal to the interest
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accrued on the Class B initial Investor Interest at the applicable Class B Note
Rate for the period from and including the Closing Date through but excluding [
_________ ], 1999.
"Class C Monthly Interest" with respect to any Transfer Date will equal the
product of (i) the Class C Note Rate for the related Interest Period, (ii) the
actual number of days in such Interest Period divided by 360, and (iii) the
outstanding balance of the Class C Notes on the related Record Date; provided,
however, with respect to the first Payment Date, Class C Monthly Interest will
be equal to the interest accrued on the Class C initial Investor Interest at the
applicable Class C Note Rate for the period from and including the Closing Date
through but excluding [ ___________ ], 1999.
"Class C Available Funds" means, with respect to any Monthly Period, an
amount equal to the Class C Floating Allocation of collections of Finance Charge
Receivables allocated to the Investor Interest with respect to such Monthly
Period.
"Excess Spread" means, with respect to any Transfer Date, an amount equal
to the sum of the amounts described in clause (a)(iv), clause (b)(iii) and
clause (c)(ii) above.
Excess Spread
On each Transfer Date, the Indenture Trustee, acting pursuant to the
Servicer's instructions, will apply Excess Spread and funds on deposit in the
Yield Enhancement Account (including the Available Yield Enhancement Amount)
with respect to the related Monthly Period, to make the following distributions
in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with
respect to such Transfer Date will be used to fund the Class A Required
Amount; provided, however, that in the event the Class A Required Amount
for such Transfer Date exceeds the amount of Excess Spread and funds on
deposit in the Yield Enhancement Account (including the Available Yield
Enhancement Amount), such amounts will be applied first to pay amounts due
with respect to such Transfer Date pursuant to clause (a)(i) above under "-
Payment of Interest, Fees and Other Items," second to pay amounts due with
respect to such Transfer Date pursuant to clause (a)(ii) above under " -
Payment of Interest, Fees and Other Items," third to pay amounts due with
respect to such Transfer Date pursuant to clause (a)(iii) above under " -
Payment of Interest, Fees and Other Items," and fourth to pay amounts due
with respect to such Transfer Date pursuant to clause (a)(iv) above under
"- Payment of Interest, Fees and Other Items;"
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed will be deposited
into the Principal Account and treated as a portion of Available Investor
Principal Collections for such Transfer Date as described under "- Payments
of Principal" below;
(c) an amount equal to the Class B Required Amount, if any, with
respect to such Transfer Date will be used to fund the Class B Required
Amount and will be applied first to pay amounts due with respect to such
Transfer Date pursuant to clause (b)(i) above under "- Payment of Interest,
Fees and Other Items," second to pay amounts due with respect to such
Transfer Date pursuant to clause (b)(ii) above under "- Payment of
Interest, Fees and Other Items" and third, amount remaining, up to the
Class B Investor Default Amount, will be deposited into the Principal
Account and treated as a portion of Available Investor Principal
Collections for such Transfer Date as described under " Payments of
Principal" below;
(d) an amount equal to the aggregate amount by which the Class B
Investor Interest and Class B Notes have been reduced below the initial
Class B Investor Interest for reasons other than the payment of principal
to the Class B Noteholders (but not in excess of the aggregate amount of
such reductions which have not been previously
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reimbursed) will be deposited into the Principal Account and treated as a
portion of Available Investor Principal Collections for such Transfer Date
as described under "- Payments of Principal" below;
(e) an amount equal to the Class C Monthly Interest for such Transfer
Date plus the amount of any overdue Class C Monthly Interest plus Class C
Additional Interest will be deposited into the Payment Account for the
payment to the Class C Noteholders on such Payment Date;
(f) an amount equal to the Class C Servicing Fee, if any, plus the
amount of any overdue Class C Servicing Fee, if any, for the related
Monthly Period will be paid to the Servicer;
(g) an amount equal to the aggregate Class C Default Amount for such
Transfer Date will be deposited into the Principal Account and treated as a
portion of Available Investor Principal Collections for such Transfer Date
as described under "- Payments of Principal" below;
(h) an amount equal to the aggregate amount by which the Class C
Investor Interest and Class C Notes have been reduced for reasons other
than the payment of principal to the Class C Noteholders (but not in excess
of the aggregate amount of such reductions which have not been previously
reimbursed) will be deposited into the Principal Account and treated as a
portion of Available Investor Principal Collections for such Transfer Date
as described under " - Payments of Principal" below; and
(i) the balance, if any, in excess of the 91 Day Delinquency Amount,
after giving effect to the payments made pursuant to subparagraphs (a)
through (h) above, shall be paid to the Trust and will not be available for
any future payment to Noteholders, provided that a Pay Out Event has not
occurred; provided, however, that such amount shall be paid to the Trust
only to the extent that the Trust Interest as of the end of the immediately
preceding Monthly Period is greater than the Minimum Trust Interest as of
the end of the immediately preceding Monthly Period (after giving effect to
the inclusion in the Trust of all Receivables transferred to the Trust on
or prior to such date, the application of collections received and/or any
reduction of any variable funding notes on the related Payment Date) and
otherwise shall be deposited into the Excess Funding Account.
The "91 Day Delinquency Amount" will equal, as of each Transfer Date, the
product of (a) the Floating Investor Percentage and (b) the aggregate
outstanding principal amount as of the end of the preceding Monthly Period of
the Premium Finance Obligations relating to Receivables in the Trust that are
then overdue 91 days or more (i) after cancellation of the related insurance
policies or (ii) if cancellation is delayed, whether due to a stay by reason of
an Insured's bankruptcy or other reason, after the date the policy would have
been cancelled in the absence of such delay. Funds remaining on deposit in the
Yield Enhancement Account under clause (i) above shall be available on the next
Transfer Date for application, together with any additional amounts required to
be deposited therein on such Transfer Date, in accordance with clauses (a)
through (i) above.
Payments of Principal
On each Transfer Date, the Indenture Trustee, acting pursuant to the
Servicer's instructions, will distribute Available Investor Principal
Collections (see "-Principal Payments" above) on deposit in the Principal
Account in the following priority:
(a) on each Transfer Date during the Revolving Period, all such
Available Investor Principal Collections will be treated as Shared
Principal Collections and applied
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as described under "--Shared Principal Collections" below and "Description
of the Transfer and Servicing Agreements--Shared Principal Collections" in
the accompanying Prospectus;
(b) on each Transfer Date during the Controlled Amortization Period or
the Rapid Amortization Period, all such Available Investor Principal
Collections will be distributed or deposited in the following priority:
(i) an amount equal to Class A Monthly Principal will be
deposited in the Payment Account (during the Controlled Amortization
Period or the Rapid Amoritization Period) and paid (on the related
Payment Date) to the Class A Noteholders;
(ii) after an amount equal to the Class A Monthly Principal has
been paid (on the related Payment Date) to the Class A Noteholders
(during the Controlled Amortization Period or Rapid Amortization
Period), an amount equal to Class B Monthly Principal will be
deposited in the Payment Account and paid (on the related Payment
Date) to the Class B Noteholders; and
(iii) after an amount equal to the sum of the Class A Monthly
Principal and the Class B Monthly Principal has been paid to the Class
A Noteholders and Class B Noteholders, respectively (during the
Controlled Amortization Period or Rapid Amortization Period), an
amount equal to Class C Monthly Principal will be deposited in the
Payment Account and paid (on such Payment Date) to the Class C
Noteholder.
(c) on each Transfer Date during the Controlled Amortization Period or
the Rapid Amortization Period, the balance of Available Investor Principal
Collections not applied pursuant to (b) above, if any, will be treated as
Shared Principal Collections and applied as described under "--Shared
Principal Collections" below and "Description of the Transfer and Servicing
Agreements--Shared Principal Collections" in the accompanying Prospectus;
and
(d) upon a Refinancing, proceeds equal to the than outstanding
principal balance of the Notes will be distributed on the related Payment
Date in the following order of priority:
(i) to Class A Noteholders, the outstanding balance of the Class
A Notes (plus any interest accrued thereon);
(ii) to Class B Noteholders, the outstanding balance of the Class
B Notes (plus any interest accrued thereon); and
(iii) to Class C Noteholders, the outstanding balance of the
Class C Notes (plus any interest accrued thereon).
"Class A Monthly Principal" for any Transfer Date during (i) the Class A
Controlled Amortization Period will equal the least of (a) the Available
Investor Principal Collections on deposit in the Principal Account with respect
to such Transfer Date, (b) the Controlled Distribution Amount for the related
Payment Date, and (c) the Class A Investor Interest on such Transfer Date, and
(ii) the Rapid Amortization Period will equal the lesser of (a) Available
Investor Principal Collections on deposit in the Principal Account with respect
to such Transfer Date, and (b) the Class A Investor Interest on such Transfer
Date.
"Class B Monthly Principal" for any Transfer Date during (i) the Class B
Controlled Amortization Period will equal the least of (a) the Available
Investor Principal Collections on deposit in the Principal Account with respect
to such Transfer Date (minus the portion of such Available Investor Principal
Collections applied to Class A Monthly Principal on such Transfer Date), (b) the
Controlled
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Distribution Amount for the related Payment Date (minus the portion of such
Controlled Distribution Amount applied to Class A Monthly Principal on such
Transfer Date), and (c) the Class B Investor Interest for such Transfer Date,
and (ii) the Rapid Amortization Period will equal the lesser of (a) Available
Investor Principal Collections on deposit in the Principal Account with respect
to such Transfer Date (minus the portion of such Available Investor Principal
Collections applied to Class A Monthly Principal on such Transfer Date), and (b)
the Class B Investor Interest on such Transfer Date.
"Class C Monthly Principal" for any Transfer Date during (i) the Class C
Controlled Amortization Period will equal the least of (a) the Available
Investor Principal Collections on deposit in the Principal Account with respect
to such Transfer Date (minus the portion of such Available Investor Principal
Collections applied to Class A Monthly Principal and Class B Monthly Principal
on the related Payment Date), (b) the Controlled Distribution Amount for the
related Payment Date (minus the portion of such Controlled Distribution Amount
applied to Class A Monthly Principal and Class B Monthly Principal on such
Transfer Date), and (c) the Class C Investor Interest for such Transfer Date,
and (ii) the Rapid Amortization Period will equal the lesser of (a) Available
Investor Principal Collections on deposit in the Principal Account with respect
to such Transfer Date (minus the portion of such Available Investor Principal
Collections applied to Class A Monthly Principal and Class B Monthly Principal
on such Payment Date), and (b) the Class C Investor Interest on such Transfer
Date.
Shared Principal Collections
Collections of Principal Receivables for any Monthly Period allocated to
the Investor Interest will first be used to cover (a) with respect to the
Controlled Amortization Period, deposits of the applicable Controlled
Distribution Amount to the Payment Account and (b) with respect to the Rapid
Amortization Period, payments to Noteholders. The Servicer will determine the
amount of collections of Principal Receivables for any Monthly Period allocated
to the Investor Interest remaining after covering required payments to
Noteholders and any similar amount remaining for any other outstanding Series
("Shared Principal Collections"). The Servicer will allocate the Shared
Principal Collections to cover any scheduled or permitted principal
distributions to noteholders and deposits to principal funding accounts, if any,
for any Series in Group One which have not been covered out of the collections
of Principal Receivables allocable to such Series and certain other amounts for
such Series ("Principal Shortfalls"). Shared Principal Collections will not be
used to cover investor charge-offs for any Series. If Principal Shortfalls
exceed Shared Principal Collections for any Monthly Period, Shared Principal
Collections will be allocated pro rata among applicable Series in Group One
based on the relative amounts of Principal Shortfalls. To the extent that Shared
Principal Collections exceed Principal Shortfalls, the balance will, subject to
certain limitations, be paid to the Trust; provided, however, that such amount
shall be paid to the Trust only to the extent that the Trust Interest on such
date is greater than the Minimum Trust Interest as of the immediately preceding
Monthly Period (after giving effect to the inclusion in the Trust of all
Receivables transferred to the Trust on or prior to such date and the
application of collections received and/or any reduction of any variable funding
notes on the related Payment Date) and otherwise shall be deposited in the
Excess Funding Account, provided further, that in no event shall the amount
payable to the Trust be greater than the Trust Interest.
Defaulted Receivables; Investor Charge-Offs
Losses resulting from the charge-off of Receivables in each Monthly Period
("Default Amounts") are generally shared between the investor interests of each
outstanding Series, based on their respective floating investor percentages (see
"-- Allocation Percentages" above with respect to Series [ __ ]), and the Trust
Interest. Certain losses resulting from charge-offs of Receivables in excess of
specified levels will be allocated entirely to the Trust Interest. Accordingly,
such excess losses will not be borne by the Investor Interest and will not be
taken into account in calculating the Investor Default Amount (defined below).
The circumstances under which excess losses will be allocated entirely to the
Trust Interest will occur when there are losses on Receivables relating to Loans
to a single Insured exceeding the Single Insured Concentration Percentage of the
aggregate principal balances of Receivables at the end of any Monthly Period, or
when losses on Receivables resulting from the insolvency of certain insurance
carriers (to the extent not taken into account as a result of the single Insured
excess loss allocation) exceed a specified percentage of the aggregate principal
balances of Receivables at the end of any Monthly Period
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(see the definition of Excess Receivables Amount under "--Excess Funding
Account; Minimum Trust Interest; Excess Receivables Amount" below) under clause
(d) of "--Pay Out Events" below or after the Trust Interest falls below the
Minimum Trust Interest following the occurrence of any other Pay Out Event.
On the fourth business day preceding each Transfer Date (the "Determination
Date"), the Servicer will calculate the Investor Default Amount for the
preceding Monthly Period. The term "Investor Default Amount" means, for any
Monthly Period, and any Receivable under a Premium Finance Obligation that
became a Defaulted Obligation during such Monthly Period, an amount equal to the
product of (a) the unpaid amount (including both principal and unpaid finance
charges) of such Receivable as of the date that such Premium Finance Obligation
became a Defaulted Obligation and (b) the Floating Investor Percentage for such
Monthly Period. The term "Defaulted Obligation" shall mean any Premium Finance
Obligation which (1) remains in default as of the beginning of the month
immediately following the first anniversary of the cancellation or
cancellability of the related insurance policy, which cancellation or
cancellability results from such default or (2) is overdue and which the
Servicer determines, in accordance with the Servicer's policies and procedures
relating to the operation of its business, is incapable of being collected. A
Premium Finance Obligation will be considered to be a Defaulted Obligation upon
the earlier to occur of (1) or (2) above.
A portion of the Series 1999-1 Investor Default Amount will be allocated to
the Class A Noteholders (the "Class A Investor Default Amount") on each Transfer
Date in an amount equal to the product of the Class A Floating Allocation
applicable during the related Monthly Period and the Investor Default Amount for
such Monthly Period. A portion of the Investor Default Amount will be allocated
to the Class B Noteholders (the "Class B Investor Default Amount") on each
Transfer Date in an amount equal to the product of the Class B Floating
Allocation applicable during the related Monthly Period and the Investor Default
Amount for such Monthly Period. A portion of the Investor Default Amount will be
allocated to the Class C Noteholders (the "Class C Investor Default Amount") on
each Transfer Date in an amount equal to the product of the Class C Floating
Allocation applicable during the related Monthly Period and the Investor Default
Amount for such Monthly Period.
On each Transfer Date, if the Class A Investor Default Amount for such
Transfer Date exceeds the amount of Class A Available Funds, Excess Spread,
funds on deposit in the Yield Enhancement Account and Reallocated Class C
Principal Collections available to fund such amount with respect to the Monthly
Period immediately preceding such Transfer Date, as described under
"--Application of Collections--Excess Spread" in this Prospectus Supplement, the
Class C Investor Interest (after giving effect to reductions for any Class C
Investor Charge-Offs and any Reallocated Principal Collections on such Transfer
Date will be reduced by the amount of such excess, but not more than the lesser
of the Class A Investor Default Amount and the Class C Investor Interest (after
giving effect to reductions for any Class C Investor Charge-Offs and any
Reallocated Principal Collections on such Transfer Date for such Transfer Date.
In the event that such reduction would cause the Class C Investor Interest to be
a negative number, the Class C Investor Interest will be reduced to zero, and
the Class B Investor Interest (after giving effect to reductions for any Class B
Investor Charge-Offs and any Reallocated Class B Principal Collections on such
Transfer Date) for which the Class C Investor Interest is not reduced) will be
reduced by the amount by which the Class C Investor Interest would have been
reduced below zero. In the event that such reduction would cause the Class B
Investor Interest to be a negative number, the Class B Investor Interest will be
reduced to zero, and the Class A Investor Interest will be reduced by the amount
by which the Class B Investor Interest would have been reduced below zero, but
not more than the Class A Investor Default Amount for such Transfer Date (a
"Class A Investor Charge-Off"), which will have the effect of slowing or
reducing the return of principal and interest to the Class A Noteholders. If the
Class A Investor Interest has been reduced by the amount of any Class A Investor
Charge-Offs, it will be reimbursed on any Transfer Date (but not by an amount in
excess of aggregate Class A Investor Charge-Offs) by the amount of Excess Spread
and funds on deposit in the Yield Enhancement Account allocated and available
for such purpose as described under "--Application of Collections--Excess
Spread" in this Prospectus Supplement.
On each Transfer Date, if the Class B Investor Default Amount for such
Transfer Date exceeds the amount of Excess Spread and funds on deposit in the
Yield Enhancement Account and
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Reallocated Collateral Principal Collections which are allocated and available
to fund such amount with respect to the Monthly Period preceding such Transfer
Date as described under "--Application of Collections--Excess Spread" in this
Prospectus Supplement, the Class C Investor Interest (after giving effect to
reductions for any Class C Investor Charge-Offs and any Reallocated Principal
Collections on such Transfer Date and after giving effect to any adjustments
with respect thereto as described in the preceding paragraph) will be reduced by
the amount of such excess but not more than the lesser of the Class B Investor
Default Amount and the Class C Investor Interest (after giving effect to
reductions for any Class C Investor Charge-Offs and any Reallocated Principal
Collections on such Transfer Date and after giving effect to any adjustments
with respect thereto as described in the preceding paragraph) for such Transfer
Date. In the event that such reduction would cause the Class C Investor Interest
to be a negative number, the Class C Investor Interest will be reduced to zero
and the Class B Investor Interest will be reduced by the amount by which the
Class C Investor Interest would have been reduced below zero, but not more than
the Class B Investor Default Amount for Transfer Date (a "Class B Investor
Charge-Off"). The Class B Investor Interest will also be reduced by the amount
of Reallocated Class B Principal Collections in excess of the Class C Investor
Interest (after giving effect to reductions for any Class C Investor Charge-Offs
and any Reallocated Class C Investor Principal Collections on such Transfer
Date) and the amount of any portion of the Class B Investor Interest allocated
to the Class A Notes to avoid a reduction in the Class A Investor Interest. The
Class B Investor Interest will thereafter be reimbursed (but not in excess of
the unpaid balance of the Class B Notes) on any Transfer Date by the amount of
Excess Spread and funds on deposit in the Yield Enhancement Account allocated
and available for that purpose as described under "--Application of
Collections--Excess Spread" in this Prospectus Supplement.
On each Transfer Date, if the Class C Investor Default Amount for such
Transfer Date exceeds the amount of Excess Spread and funds on deposit in the
Yield Enhancement Account allocated and available to fund such amount as
described under "--Application of Collections--Excess Spread" in this Prospectus
Supplement, the Class C Investor Interest will be reduced by the amount of such
excess but not more than the lesser of the Class C Investor Default Amount and
the Class C Investor Interest for such Transfer Date (a "Class C Investor
Charge-Off"). The Class C Investor Interest will also be reduced by the amount
of Reallocated Principal Collections and the amount of any portion of the Class
C Investor Interest allocated to the Class A Notes to avoid a reduction in the
Class A Investor Interest or to the Class B Notes to avoid a reduction in the
Class B Investor Interest. The Class C Investor Interest will thereafter be
reimbursed on any Transfer Date by the amount of Excess Spread and funds on
deposit in the Yield Enhancement Account allocated and available for that
purpose as described under "--Application of Collections--Excess Spread" in this
Prospectus Supplement.
Yield Enhancement Account
The Servicer will establish and maintain or cause to be maintained with a
Qualified Institution in the name of the Indenture Trustee, on behalf of the
Trust, a segregated account, the "Yield Enhancement Account," for the benefit of
the Noteholders. Amounts on deposit in the Yield Enhancement Account will be
invested in the manner directed by the Trust in Permitted Investments. Any
earnings (net of losses and investment expenses) on funds in the Yield
Enhancement Account will be paid monthly to the Trust. If losses and investment
expenses exceed earnings on funds in the Yield Enhancement Account during a
Monthly Period, then such excess shall be charged against funds on deposit in
such account. On each Transfer Date, an amount equal to the Available Yield
Enhancement Amount, to the extent available, will be deposited into the Yield
Enhancement Account out of collections otherwise allocable to the Trust for the
Monthly Period immediately preceding such Transfer Date. [Notwithstanding the
preceding sentence, if ART is no longer the Seller or if the AIG Support
Agreement is not in effect, then prior to any payment to the Trust of any
collections with respect to Principal Receivables or Finance Charge Receivables
not allocated to Noteholders, there shall be deposited into the Yield
Enhancement Account on each date amounts allocable to the Notes which would
otherwise be allocable to the Trust until the amount so deposited equals the
Maximum Yield Enhancement Amount for the next Transfer Date. The "Maximum Yield
Enhancement Amount" shall mean, with respect to any Transfer Date, the amount
calculated pursuant to the proviso to the definition of "Available Yield
Enhancement Amount" set forth below, determined on the assumption that the Class
A Note Rate, the Class B Note Rate and the Class C Note Rate used in determining
Class A Monthly Interest, Class B Monthly Interest and Class C Monthly Interest,
respectively, equals in each case [ ____ ]% per annum.]
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On each Transfer Date the Servicer will calculate the "Available Yield
Enhancement Amount," which, with respect to any Transfer Date, means the product
of (i) [ __ ]% and (ii) the product of (A) the Receivable collections for the
related Monthly Period and (B) the Floating Investor Percentage; provided that,
in no event shall the Available Yield Enhancement Amount for any Transfer Date
exceed the lesser of (i) the sum of Class A Monthly Interest, Class A Additional
Interest, Class B Monthly Interest, Class B Additional Interest, Class C Monthly
Interest and Class C Additional Interest for such Transfer Date and (ii) the
aggregate of all amounts payable to the Trust on the current Transfer Date.
During each of the calendar years 1996, 1997 and 1998 and the six months
ended [June 30], 1999, the average monthly payment rate on commercial premium
finance loans in the Originator's Portfolio was approximately 18% or higher.
Assuming (i) a 18% payment rate each month, (ii) twelve equal 30-day monthly
periods, and (iii) ownership by the Trust during each Monthly Period of at least
the Minimum Trust Interest, the amount available during the Revolving Period for
yield enhancement would be 864 basis points on the outstanding principal of the
Notes on an annualized basis and may be greater during an amortization period
(unless the amount of interest due on the outstanding principal of the Notes
during such Monthly Period is less than 864 basis points on an annualized basis,
in which case the amount available for yield enhancement would be such lesser
amount). There can be no assurance, however, that the monthly payment rate on
the Receivables will not be less than 18% since the payment rate will vary
depending on a variety of factors, including maturities, interest rates and
delinquency rates and default rates of the Premium Finance Obligations. Lower
payment rates will result in lower yield enhancement amounts.
On each Transfer Date, the Indenture Trustee, acting pursuant to the
Servicer's instructions, will apply funds on deposit in the Yield Enhancement
Account with respect to the related Monthly Period as set forth under
"--Application of Collections - Excess Spread."
Excess Funding Account; Minimum Trust Interest; Excess Receivables Amount
The Servicer has established and will maintain or cause to be maintained
with a Qualified Institution in the name of the Indenture Trustee, on behalf of
the Trust, a segregated account, the "Excess Funding Account," for the benefit
of the noteholders of all outstanding Series, including the Noteholders. If, as
of the end of the immediately preceding Monthly Periods, the Trust Interest
equals or is less than the Minimum Trust Interest as of the end of the
immediately preceding Monthly Period, funds (to the extent available therefor as
described herein) otherwise payable to the Trust on such date will be deposited
in the Excess Funding Account. Funds on deposit in the Excess Funding Account
will be withdrawn and paid to the Trust to the extent that as of any date of
determination the Trust Interest exceeds the Minimum Trust Interest as of the
end of the immediately preceding Monthly Period as a result of the transfer of
Additional Receivables to the Trust and/or the reduction of any variable funding
notes on the related Payment Date. Such deposits to and withdrawals from the
Excess Funding Account may be made on a daily basis (except, if AIC is the
Servicer, under the circumstances described under "--Application of
Collections--Excess Spread").
The allocable portion of funds on deposit in the Excess Funding Account at
the beginning of the Rapid Amortization Period will be paid to the Noteholders
as a payment of principal, and during the Controlled Amortization Period will be
paid to Noteholders as a payment of principal to the extent that monthly
collections received of Principal Receivables and Shared Principal Collections
allocable to the Investor Interest are insufficient to pay the Controlled
Distribution Amount. Funds on deposit in the Excess Funding Account will be
allocated, if necessary, among the investor interests of each outstanding Series
of notes on a pro rata basis in accordance with each such Series' fixed investor
percentage.
Funds on deposit in the Excess Funding Account will be invested by the
Indenture Trustee at the direction of the Servicer in Permitted Investments. All
net investment income earned on amounts in the Excess Funding Account will be
retained in the Excess Funding Account to the extent that the Trust Interest is
less than the Minimum Trust Interest. If losses and investment expenses exceed
earnings on funds in the Excess Funding Account during a Monthly Period, then
such excess shall be treated in the same manner as Default Amounts are treated.
The Servicer is not required to reimburse the Trust with respect to such excess.
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The "Minimum Trust Interest" for any date of determination will be equal to
the sum of (a) (1) [ __ ]% times the greater of (x) the maximum Amortization
Commencement Aggregate Funded Amount of any Series then outstanding, and (y) the
outstanding balance of all Series as of the end of the preceding Monthly Period
and (b) the Excess Receivables Amount for such date; provided, however, that the
Minimum Trust Interest shall be calculated without reference to the Excess
Receivables Amount if (i) prior to such date there shall have been delivered to
the Indenture Trustee (a) a written agreement, in form and substance
satisfactory to the Rating Agencies, executed by a person having a long-term
unsecured debt rating of AAA from Standard & Poor's and Aaa from Moody's
pursuant to which such person shall have unconditionally agreed to indemnify the
Trust for all losses in respect of the Excess Receivables Amount at any time and
(b) written confirmation from each of the Rating Agencies to the effect that
such substitution will not result in such Rating Agency reducing or withdrawing
its rating on the then outstanding class of notes of any Series, and (ii) the
agreement and the rating referred to in clause (a) above remain in effect on
such date of determination.
The "Amortization Commencement Aggregate Funded Amount" for a given Series
is equal to the sum of the investor interests of all outstanding Series as of
the earliest end of a Revolving Period for any Class in that Series.
"Excess Receivables Amount" as of any date of determination is the sum of:
(i) the aggregate unpaid principal balance of all Receivables in the Trust
as of the end of the immediately preceding Monthly Period having the same
Insured but only to the extent such aggregate balance is in excess of such
Insured's Single Insured Concentration Percentage times the aggregate unpaid
principal balance of all Receivables in the Trust as of the end of such Monthly
Period (the "Excess Insured Concentration Amounts"); and
(ii) the greater of:
(a) the sum, for each Moody's Non-Investment Grade Insurer (including
for this purpose any affiliated Moody's Non-Investment Grade Insurer) of,
if more than [ ]% of the aggregate unpaid principal balance of all
Receivables in the Trust as of the end of such Monthly Period arise from
Premium Finance Obligations made to finance premiums due to such insurer
(including any such affiliated insurer), the aggregate unpaid principal
balance of such Receivables but only to the extent in excess of such
percentage; and
(b) the sum, for each insurer (including any affiliated insurer)
referred to below, of the greater of:
(I) if more than [ __ ]% of the aggregate unpaid principal
balance of all Receivables in the Trust as of the end of such
Monthly Period arise from Premium Finance Obligations made to
finance premiums due to the same S&P Non-Investment Grade Insurer
(including for this purpose any affiliated S&P Non-Investment
Grade Insurer), the aggregate unpaid principal balance of such
Receivables but only to the extent in excess of such percentage;
and
(II) if more than [ __ ]% of the aggregate unpaid principal
balance of all Receivables in the Trust as of the end of such
Monthly Period arise from Premium Finance Obligations made to
finance premiums due to the same S&P Non-AAA Insurer (including
for this purpose any affiliated S&P Non-AAA Insurer), the
aggregate unpaid principal balance of such Receivables but only
to the extent in excess of such percentage.
For purposes of making any calculation: (x) pursuant to clause (ii) above, an
amount that would be part of the Excess Receivables Amount under such clause
shall be taken into account only to the extent not already taken into account
under clause (i) above and (y) pursuant to clause (i) or clause (ii) above, the
aggregate of
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the losses, if any, previously realized in respect of any Insured subject to
clause (i) above or any insurer referred to in subclauses (a), (b)(I) and/or
(b)(II) of clause (ii) above (to the extent relating to insurer insolvency)
shall reduce the percentage levels used in calculating the excess amounts set
forth or referred to in such clause or subclauses with respect to any single
Insured or insurer.
The "Single Insured Concentration Percentage" for a given Insured is the
percentage calculated by taking the lesser of (i) 3.00% and (ii) the greater of
(a) 1.00% and (b) the weighted average remaining installment term of the
Receivables to such Insured, in months, divided by 1200.
"Moody's Non-Investment Grade Insurer" means, on any date of determination,
an insurer that as of the end of the immediately preceding Monthly Period did
not have an insurance financial strength rating of at least investment grade
(i.e., in one of the top four generic rating categories, irrespective of any
plus or minus) by Moody's (other than AIG or any wholly owned subsidiary of
AIG), unless Moody's shall have previously notified the [Seller] in writing that
such insurer is not to be deemed a "Moody's Non-Investment Grade Insurer" (and
shall not have revoked such notification).
"S&P Non-AAA Insurer" means, on any date of determination, an insurer that
as of the end of the immediately preceding Monthly Period did not have a
claims-paying ability rating at least as high as the then applicable rating
assigned by Standard & Poor's to the Class A Notes, unless Standard & Poor's
shall have previously notified the [Seller] in writing that such insurer is not
to be deemed an "S&P Non-AAA Insurer" (and shall not have revoked such
notification).
"S&P Non-Investment Grade Insurer" means, on any date of determination, an
insurer that as of the end of the immediately preceding Monthly Period did not
have a claims-paying ability rating of at least investment grade (i.e., in one
of the top four generic rating categories, irrespective of any plus or minus) by
Standard & Poor's (other than any affiliate of AIG with a Standard & Poor's
qualified solvency rating of BBBq) unless Standard & Poor's shall have
previously notified the [Seller] in writing that such insurer is not to be
deemed an "S&P Non-Investment Grade Insurer" (and shall not have revoked such
notification).
Pay Out Events
As described above, the Revolving Period will continue through [ _____ ], [
____ ] (unless such date is postponed as described under "--Postponement of
Controlled Amortization Period" in this Prospectus Supplement), unless either a
Series [ __ ]-1 Pay Out Event or Trust Pay Out Event (jointly, a "Pay Out
Event") occurs prior to such date. A "Series [ __ ]-1 Pay Out Event" refers to
any of the following events:
(a) failure on the part of any of the Originators or the Seller (i) to
make any payment or deposit on the date required under the Sale and
Servicing Agreement, the Indenture or the Series [ __ ]-1 Supplement (or
within the applicable grace period which shall not exceed five days) or
(ii) to observe or perform in any material respect any other covenants or
agreements of any of the Originators or the Seller set forth in the Sale
and Servicing Agreement, the Indenture or the Series [ __ ]-1 Supplement,
which failure has a material adverse effect on the Noteholders [(which
determination shall be made without reference to whether any funds are
available under the [Yield Enhancement Account]) and which continues
unremedied for a period of [60] days after written notice of such failure,
requiring the same to be remedied, and continues to materially and
adversely affect the interests of the Noteholders (which determination
shall be made without reference to whether any funds are available under
the [Yield Enhancement Account]) for such period;
(b) any representation or warranty made by any of the Originators or
the Seller in the Sale and Servicing Agreement, the Indenture or the Series
[ __ ]-1 Supplement, or any information required to be given by any of the
Originators or the Seller to the Indenture Trustee to identify the
Receivables proves to have been incorrect in any
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material respect when made or delivered and which continues to be incorrect
in any material respect for a period of [60] days after written notice of
such failure, requiring the same to be remedied, and as a result of which
the interests of the Noteholders are materially and adversely affected
(which determination shall be made without reference to whether any funds
are available under the [Yield Enhancement Account]) and continue to be
materially and adversely affected for such period; provided, however, that
a Pay Out Event pursuant to this subparagraph (b) shall not be deemed to
occur thereunder if the Seller has accepted reassignment of the related
Receivable or all such Receivables, if applicable, during such period (or
such longer period as the Indenture Trustee may specify) in accordance with
the provisions of the Sale and Servicing Agreement;
(c) the Trust Interest as of the end of the immediately preceding
Monthly Period does not equal the Minimum Trust Interest as of the end of
the immediately preceding Monthly Period and/or on the immediately
following Transfer Date the Seller fails to transfer Additional Receivables
to the Trust when required by the Sale and Servicing Agreement, and/or on
the immediately following Payment Date, the Seller fails to cause a
reduction in any outstanding variable funding note to increase the Trust
Interest to equal or exceed the Minimum Trust Interest;
(d) any Servicer Default occurs which would have a material adverse
effect on the Noteholders;
(e) if the Monthly Payment Rate is less than [ __ ]% for three
consecutive Monthly Periods;
(f) a Financed Premium Percentage of more than [ __ ]% in respect of
Additional Receivables transferred to the Trust for three consecutive
Monthly Periods; or
(g) if the Annualized Monthly Excess Spread Amount is less than [__]%
for three consecutive Monthly Periods;
(h) if the Unconcentrated 240+ Day Delinquency Percentage is more than
[ __ ]% for three consecutive Monthly Periods.
A "Trust Pay Out Event" refers to any of the following events:
(a) certain events of bankruptcy or insolvency, relating to any of the
Originators or the Seller;
(b) the Seller becomes unable for any reason to transfer Receivables
to the Trust in accordance with the provisions of the Sale and Servicing
Agreement;
(c) the Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended; or
(d) AIG shall fail to meet its obligations under the AIG Support
Agreement in any respect or such support obligations are modified, amended
or terminated, except as provided in the Indenture.
In the case of any event described in clause (a), (b) or (d) of the
definition of Series [ __ ]-1 Pay Out Event, a Series [ __ ]-1 Pay Out Event
will be deemed to have occurred with respect to the Notes on the tenth business
day thereafter unless prior to such day the Noteholders evidencing interests
aggregating not less than [50]% of the Investor Interest, by written notice to
the Indenture Trustee, the Seller and the Servicer declare that a Pay Out Event
should not occur with respect to the Notes. In the case of any event described
in clause (a), (b) (c) or (d) of the definition of Trust Pay Out Event, a Trust
Pay Out Event with respect to all Series then outstanding, and in the case of
any event described in clause (c), (d),
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(e), (f), (g) or (h) of the definition of Series [ __ ]-1 Pay Out Event, a Pay
Out Event with respect to only the Notes, will be deemed to have occurred
without any notice or other action on the part of the Indenture Trustee or the
Noteholders or all noteholders, as appropriate, immediately upon the occurrence
of such event. On the date on which a Series [ __ ]-1 Pay Out Event or a Trust
Pay Out Event is deemed to have occurred, the Rapid Amortization Period will
commence.
In the event the Rapid Amortization Period commences, distributions of
principal to the Noteholders will begin on the first Payment Date following the
month in which such Rapid Amortization Period commenced. The amount on deposit
in the Principal Account, if any, will be distributed to the Class A
Noteholders, the Class B Noteholders and the Class C Noteholders to the extent
allocable to each, on the first Payment Date with respect to the Rapid
Amortization Period. If, because of the occurrence of either (a) a Trust Pay Out
Event, or (b) a Series [ __ ]-1 Pay Out Event, the Rapid Amortization Period
begins on or prior to [ _____, __ ], Noteholders may begin receiving
distributions of principal earlier than they otherwise would have, which may
shorten the average life of the Notes.
"Annualized Monthly Excess Spread Amount" for any Monthly Period is the
number of basis points calculated by dividing (i) the sum of (A) the amount of
collections in respect of Finance Charge Receivables allocable to Noteholders
for such Monthly Period, plus (B) the Available Yield Enhancement Amount for the
immediately succeeding Transfer Date, minus (C) the aggregate Investor Default
Amount for such Monthly Period minus (D) the Investor Servicing Fee payable on
such Transfer Date minus (E) the aggregate amount payable to Noteholders in
respect of interest on the immediately succeeding Payment Date by (ii) the
Investor Interest as of the end of such Monthly Period and multiplying the
resulting quotient by 12.
"Financed Premium Percentage" for any Monthly Period is the ratio
(expressed as a percentage) of the aggregate of the portions of premiums
financed or committed to be financed, as of the respective dates of origination
of the related Premium Finance Obligations, of all Additional Receivables
transferred to the Trust during such Monthly Period to the aggregate of the
premiums paid or committed to be paid with respect to such Premium Finance
Obligations.
"Monthly Payment Rate" for any Monthly Period is a fraction (expressed as a
percentage), the numerator of which is the aggregate of all collections received
by the Trust from the Receivables during such Monthly Period and the denominator
of which is the aggregate amount of Principal Receivables in the Trust at the
end of the preceding Monthly Period.
The "Unconcentrated 240+ Day Delinquency Percentage" for any Monthly Period
is the percentage calculated by dividing (a) the sum of the Unconcentrated
Insured Amount for each Receivable relating to an obligation that is 240 days or
more past cancellation or cancellability of the related insurance policy, by (b)
the aggregate unpaid principal balance of all Receivables in the Trust.
The "Unconcentrated Insured Amount" for a given Insured is the product of
(i) the difference between such Insured's Single Insured Concentration
Percentage and 1.00% (but such difference cannot be less than zero) and (ii) the
aggregate unpaid principal balance of all Receivables in the Trust.
Upon the occurrence of a Pay Out Event, if more than [ __ ]% of the
principal balance of the Receivables have a remaining maturity of more than
twelve months, the Seller will purchase from the Trust sufficient Receivables
with a remaining maturity of more than twelve months, at a price equal to the
principal amount thereof plus accrued but unpaid Finance Charges to the date of
purchase, so that the percentage of Receivables having a remaining maturity as
of the date of purchase of more than twelve months shall be no more than [ __ ]%
of the principal balance of Receivables remaining in the Trust after giving
effect to such purchase.
See "Description of the Transfer and Servicing Agreements--Pay Out Events"
in the accompanying Prospectus for an additional discussion of the consequences
of a bankruptcy or insolvency of the Seller.
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Servicing Compensation and Payment of Expenses
The share of the Investor Servicing Fee allocable to the Class A
Noteholders with respect to any Transfer Date in which the Originators are not
the Servicer (the "Class A Servicing Fee") shall be equal to one-twelfth of the
product of (a) the Class A Floating Allocation, (b) [ ]% (the "Net Servicing Fee
Rate") and (c) the Investor Interest as of the last day of the Monthly Period
preceding such Transfer Date. The share of the Investor Servicing Fee allocable
to the Class B Noteholders with respect to any Transfer Date in which the
Originators are not the Servicer (the "Class B Servicing Fee") shall be equal to
one-twelfth of the product of (a) the Class B Floating Allocation, (b) the Net
Servicing Fee Rate and (c) the Investor Interest as of the last day of the
Monthly Period preceding such Transfer Date. The share of the Investor Servicing
Fee allocable to the Class C Investor Interest with respect to any Transfer Date
(the "Class C Servicing Fee") shall be equal to one-twelfth of the product of
(a) the Class C Floating Allocation, (b) the Net Servicing Fee Rate and (c) the
Investor Interest as of the last day of the Monthly Period preceding such
Transfer Date. The Class A Servicing Fee, Class B Servicing Fee and Class C
Servicing Fee shall be payable to the Servicer solely to the extent amounts are
available for distribution in respect thereof.
[Refinancing
The Trust may redeem the Notes (a "Refinancing") from funds deposited into
the Payment Account representing the proceeds of the refinancing of the
Receivables on any Payment Date following [ __________ ], 20__ (the Payment Date
on which the Notes are to be refinanced, the "Refinancing Date"), in whole
(without premium) from funds deposited into the Payment Account equal to the
Refinancing Price (as defined below), upon notice to the Trustee of such
election given not less than 5 days prior to the Refinancing Date.
The "Refinancing Price" is an amount equal to the sum of the unpaid
Investor Interest and accrued and unpaid interest on the Notes at the respective
Note Rates through the day preceding the Refinancing Date, less amounts, if any,
on deposit on the Refinancing Date in the Payment Account for the payment of
accrued and unpaid principal and interest on the Notes.
The Refinancing Price will be deposited in the Payment Account by no later
than 1:00 p.m. New York City time on the Refinancing Date. Amounts on deposit in
the Payment Account for any such Refinancing will be paid to the Noteholders,
first to redeem all the Class A Notes, next to redeem all the Class B Notes, and
finally to redeem all the Class C Notes.]
Reports to Noteholders
On each Transfer Date, the Trustee will forward to each Noteholder of
record, a statement prepared by the Servicer setting forth the items described
in "Description of the Notes--Reports to Noteholders" in the accompanying
Prospectus. In addition, such statement will include certain information
regarding the Principal Account and the Class C Notes, if any, for such Transfer
Date.
Amendments
In addition to being subject to amendment pursuant to any other provisions
relating to amendments in either the Indenture or the Series [ ]-1 Supplement,
the Series [ ]-1 Supplement may be amended by the Seller without the consent of
the Servicer, any Noteholder or the Trustee if the Seller provides the Trustee
with (a) an opinion of counsel to the effect that such amendment or modification
would reduce the risk that the Trust would be treated as taxable as a publicly
traded partnership pursuant to section 7704 of the Internal Revenue Code of
1986, as amended (the "Code") and (b) a certificate that such amendment or
modification would not materially and adversely affect any Noteholder, provided,
however, that no such amendment shall be deemed effective without the Trustee's
consent, if the Trustee's rights, duties and obligations under the Series [ ]-1
Supplement are thereby modified. Promptly after the effectiveness of any such
amendment, the Seller shall deliver a copy of such amendment to each of the
Servicer, the Trustee and each Rating Agency described in the Series [ ]-1
Supplement and such amendment complies with the requirements of the Trust
Indenture Act.
49
<PAGE>
ERISA CONSIDERATIONS
Subject to the discussion below, the Seller believes that the Class A Notes
and the Class B Notes should constitute indebtedness lacking substantial equity
features for purposes of the prohibited transaction rules of Section 406 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or Section
4975 of the Code, and accordingly may be purchased with the assets of employee
benefit plans or other plans (including individual retirement accounts) subject
to such sections or of persons which are deemed to be using assets of such plans
(collectively, "Plans"). A non-exempt violation of these "prohibited
transaction" rules may generate excise tax and other liabilities under ERISA and
Section 4975 of the Code for Parties in Interest or other persons. Plans that
are governmental plans (as defined in Section 3(32) of ERISA) and certain church
plans (as defined in Section 3(33) of ERISA) are not subject to ERISA
requirements.
The prohibited transaction rules may restrict certain transactions directly
and indirectly involving the assets of Plans and persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code (collectively,
"Parties in Interest") to such Plans, unless an exemption applies. In
particular, a sale or exchange of property or an extension of credit between a
Plan and a Party in Interest to the Plan are transactions, among others,
prohibited under the prohibited transaction rules, unless an exemption applies.
If the Class A Notes and Class B Notes are treated as indebtedness for purposes
of the prohibited transaction rules and the Trust is a Party in Interest to a
Plan holding any such Note, then such extension of credit might constitute a
prohibited transaction unless an exemption applies. If 50% or more of the
beneficial interest in the Trust is owned by a Party in Interest to a Plan, the
Trust might also be treated as a Party in Interest to those same Plans. The
Trust Interest initially will be owned by ART, which is indirectly owned by AIG.
AIG might be a Party in Interest with respect to many Plans, and accordingly the
Trust might be a Party in Interest to those same Plans. Further, there are no
assurances that the Trust Interest represents the sole beneficial interest in
the Trust.
Class A Notes
Under a regulation (the "Plan Asset Regulation") issued by the Department
of Labor ("DOL"), the assets of an entity in which a Plan holds an equity
interest are treated under certain circumstances as "plan assets" of such Plan.
The Plan Asset Regulation defines the term "equity interest" as excluding any
instrument that is treated as indebtedness under applicable local law and lacks
substantial equity features. Because of the traditional debt features of the
Class A Notes, the absence of rights to payment other than principal and
interest on the Class A Notes, the likelihood of the payment of principal and
interest on the Class A Notes (as reflected in its rating in the highest
category by a nationally recognized rating organization) and the subordination
of the Class B Notes and Class C Notes to provide credit enhancement for the
Class A Notes, the Seller believes that the Class A Notes should initially be
treated as indebtedness lacking substantial equity features for purposes of the
prohibited transaction rules and therefore can be purchased by Plans. See "ERISA
Considerations" in the accompanying Prospectus.
Class B Notes
The Seller also believes that the Class B Notes should initially qualify as
indebtedness lacking substantial equity features for purposes of the prohibited
transaction rules by reason of the traditional debt features of the Class B
Notes, the likelihood of payment of principal and interest on the Class B Notes
(as reflected, among other things, by a rating in one of the three highest
categories by a nationally recognized rating agency), and the availability of
the Class C Notes and the Trust Interest to provide credit enhancement to the
Class B Notes. However, credit enhancement for the Class B Notes is less than
the degree of credit enhancement available to the Class A Notes. A number of
exemptions might apply to the purchase and holding of a Class A or Class B Note
by a Plan, including PTEs 84-14, 90-1, 91-38, 95-60 and 96-23.
The Class A Notes and Class B Notes will be issued by the Trust and
acquired by the Underwriter for sale to others. The Underwriter is a
broker-dealer registered under the Securities Exchange Act of 1934 and
customarily purchases and sells securities for its own account in the ordinary
course of its business as a broker-dealer, and is likely to be a Party in
Interest to many Plans. A sale of Class A Notes or
50
<PAGE>
Class B Notes by a registered broker-dealer, acting as a principal, may be
exempt from the prohibited transaction restrictions of Section 406(a) of ERISA
and Sections 4975(c)(1)(A) through (D) of the Code by reason of Prohibited
Transaction Class Exemption 75-1 ("PTE 75-1"). That exemption, however, does not
extend to violations of Section 406(b) of ERISA or Section 4975(c)(1)(E) of the
Code.
PTE 75-1. PTE 75-1 permits the purchase or sale of securities between a
Plan and a broker-dealer, acting as a principal, if the following conditions are
satisfied:
(1) the broker-dealer is registered under the Securities Exchange Act of
1934 and customarily purchases and sells securities for its own
account in the ordinary course of its business as a broker-dealer;
(2) the transaction is at least as favorable to the Plan as an
arm's-length transaction with an unrelated party and, at the time of
the transaction, was not a prohibited transaction within the meaning
of Section 503(b) of the Code;
(3) the broker-dealer is not a fiduciary with respect to the Plan and is a
Restricted Person to the Plan solely because it or an affiliate
provides services (other than securities custodial services) to the
Plan;
(4) for a period of six years from the date of the transaction, the Plan
maintains or causes to be maintained such records as are necessary to
determine whether the foregoing conditions have been met, and such
records are unconditionally available for examination during normal
business hours by the Department of Labor and certain other persons.
Consultation With Counsel
In light of the foregoing, fiduciaries or other persons contemplating
purchasing the Class A Notes or Class B Notes on behalf of or with "plan assets"
of any Plan should consult their own counsel regarding whether the acquisition
or holding of such Notes might result in a prohibited transaction, the
consequences that would apply if the Trust's assets were considered "plan
assets," and the possibility of exemptive relief from the prohibited transaction
rules.
Finally, Plan fiduciaries and other Plan investors should consider the
fiduciary standards under ERISA or other applicable law in the context of the
Plan's particular circumstances before authorizing an investment of a portion of
the Plan's assets in the Class A Notes or Class B Notes. Accordingly, among
other factors, Plan fiduciaries and other Plan investors should consider whether
the investment (i) satisfies the diversification requirement of ERISA or other
applicable law, (ii) is in accordance with the Plan's governing instruments, and
(iii) is prudent in light of the "Risk Factors" and other factors discussed in
this Prospectus Supplement and the accompanying Prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
as supplemented by a terms agreement relating to the Class A Notes (together,
the "Class A Underwriting Agreement") between the Trust and the Class A
Underwriters named below (the "Class A Underwriters"), and the terms and
conditions set forth in an underwriting agreement as supplemented by a terms
agreement relating to the Class B Notes (together, the "Class B Underwriting
Agreement," and together with the Class A Underwriting Agreement, the
"Underwriting Agreement") between the Trust and the Class B Underwriter named
below (the "Class B Underwriter," and together with the Class A Underwriters,
the "Underwriters"), the Trust has agreed to sell to the Underwriters, and each
of the Underwriters has agreed to purchase, the principal amount of the Notes
set forth opposite its name:
51
<PAGE>
Class A Underwriters Principal Amount of
Class A Notes
$
-------------------
$
Total ===================
Class B Underwriters Principal Amount of
Class B Notes
$
-------------------
$
Total ===================
In the Class A Underwriting Agreement, the Class A Underwriters have
agreed, subject to the terms and conditions set forth therein, to purchase all
of the Class A Notes offered hereby if any of the Class A Notes are purchased.
In the Class B Underwriting Agreement, the Class B Underwriter has agreed,
subject to the terms and conditions set forth therein, to purchase all of the
Class B Notes offered hereby if any of the Class B Notes are purchased.
The Class A Underwriters propose initially to offer the Class A Notes to
the public at [ _______ ]% of their principal amount and to certain dealers at
such price less concessions not in excess of [ _____ ]% of the principal amount
of the Class A Notes. The Class A Underwriters may allow, and such dealers may
reallow, concessions not in excess of [ ______ ]% of the principal amount of the
Class A Notes to certain brokers and dealers. After the initial public offering,
the public offering price and other selling terms may be changed by the Class A
Underwriters.
The Class B Underwriter proposes initially to offer the Class B Notes to
the public at [ _____ ]% of their principal amount and to certain dealers at
such price less concessions not in excess of [ _____ ]% of the principal amount
of the Class B Notes. The Class B Underwriter may allow, and such dealers may
reallow, concessions not in excess of [ _____ ]% of the principal amount of the
Class B Notes to certain brokers and dealers. After the initial public offering,
the public offering price and other selling terms may be changed by the Class B
Underwriter.
We will receive proceeds of approximately $[ _____ ] from the sale of the
Notes (representing [ _____ ]% of the principal amount of each Class A Note and
[ _____ ]% of the principal amount of each Class B Note) after paying the
underwriting discount of $[ _____ ] (representing [ _____ ]% of the principal
amount of each Class A Note and [ _____ ]% of the principal amount of each Class
B Note). Additional offering expenses are estimated to be $[ _____ ].
The Seller will indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
Underwriters may be required to make in respect thereof. AIG has agreed to
guarantee payment in respect of such indemnification and contribution
obligations of the Seller.
The Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Notes in accordance with Regulation M under the Exchange Act. Over-allotment
transactions involve syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the Notes so long as the stabilizing bids do not exceed a specified
maximum. Syndicate covering transactions involve purchases of the Notes in the
open market after the distribution has been completed in order to cover
syndicate short positions. Penalty bids permit the Underwriters to reclaim a
selling concession from a syndicate member when the Notes originally sold by
such syndicate member are purchased in a syndicate covering transaction. Such
over-allotment transactions, stabilizing transactions,
52
<PAGE>
syndicate covering transactions and penalty bids may cause the prices of the
Notes to be higher than they would otherwise be in the absence of such
transactions. Neither the Seller nor any of the Underwriters represents that the
Underwriters will engage in any such transactions or that such transactions,
once commenced, will not be discontinued without notice at any time.
53
<PAGE>
ANNEX I
OTHER SERIES ISSUED AND OUTSTANDING
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
"Originator's Portfolio........................16
91 Day Delinquency Amount......................39
Additional Interest............................29
AIC........................................15, 27
AIC Trust...................................4, 23
AIC Trust Receivables.......................4, 23
AIC Trust Termination Date......................4
AICCO......................................15, 27
AIG............................................27
AIGC Portfolio.................................15
AIGCC..........................................27
AIR.........................................4, 23
Amortization Commencement Aggregate
Funded Amount................................45
Amortization Period Length.....................32
Annualized Monthly Excess Spread Amount........48
Available Investor Principal Collections.......31
Available Yield Enhancement A mount.............2
Available Yield Enhancement Amount.............44
business day...................................29
Cedelbank......................................11
Class A Additional Interest....................29
Class A Available Funds........................29
Class A Controlled Amortization Period..........1
Class A Floating Allocation....................33
Class A Initial Investor Interest..............34
Class A Investor Charge-Off....................42
Class A Investor Default Amount................42
Class A Investor Interest......................34
Class A Monthly Interest.......................37
Class A Monthly Principal......................40
Class A Note Rate...........................1, 29
Class A Notes...................................1
Class A Required Amount........................34
Class A Servicing Fee..........................49
Class A Underwriters...........................51
Class A Underwriting Agreement.................51
Class B Additional Interest....................29
Class B Available Funds........................29
Class B Controlled Amortization Period..........1
Class B Controlled Distribution Amount..........1
Class B Floating Allocation....................33
Class B Initial Investor Interest..............34
Class B Investor Charge-Off....................43
Class B Investor Default Amount................42
Class B Investor Interest......................34
Class B Monthly Interest.......................37
Class B Monthly Principal......................40
Class B Note Rate...........................1, 30
Class B Notes...................................1
Class B Required Amount........................35
Class B Servicing Fee..........................49
Class B Underwriter............................51
Class B Underwriting Agreement.................51
Class C Available Funds........................38
Class C Floating Allocation....................33
Class C Initial Investor Interest..............34
Class C Investor Charge-Off....................43
Class C Investor Default Amount................42
Class C Investor Interest......................34
Class C Monthly Interest.......................38
Class C Monthly Principal......................41
Class C Notes...................................1
Class C Servicing Fee..........................49
Closing Date....................................1
Code...........................................49
Controlled Amortization Amount.................31
Controlled Amortization Period..................9
Controlled Distribution Amount..............1, 31
Credit Balance.................................23
Cut-Off Date...................................22
Default Amount..................................4
Default Amounts................................41
Defaulted Obligation...........................42
Deferred Payment Obligations................3, 15
Deficit Controlled Amortization Amount.........32
Determination Date.............................42
DOL............................................50
DTC............................................11
ERISA..........................................50
Euroclear......................................11
Excess Funding Account.........................44
Excess Insured Concentration Amounts...........45
Excess Receivables Amount......................45
Excess Spread..................................38
Finance Charge Receivables......................3
Financed Premium Percentage....................48
Fixed Investor Percentage......................33
Floating Investor Percentage...................33
Group One......................................11
Imperial Originators...........................15
Indemnity Agreement............................24
Insureds.......................................27
Interest Period.................................1
Investor Default Amount........................42
54
<PAGE>
Investor Interest...........................2, 34
IP Finance I...............................15, 27
IP Finance II..............................15, 27
IP Funding.................................15, 27
Legal Final Maturity............................1
LIBOR..........................................30
LIBOR Determination Date.......................30
Loan Portfolio.................................15
Loans.......................................3, 15
Maximum Yield Enhancement Amount...............43
Minimum Trust Interest.........................45
Monthly Payment Rate...........................48
Monthly Period.................................33
Moody's Non-Investment Grade Insurer...........46
Net Servicing Fee Rate.........................49
Notes...........................................1
Obligations Portfolio..........................15
Offered Notes...................................1
Originators.................................3, 15
Owner Trustee..................................15
Parties in Interest............................50
Pay Out Event..................................46
Payment Date................................1, 29
Plan Asset Regulation..........................50
Plans..........................................50
Premium Finance Obligations.................3, 15
Principal Account..............................25
Principal Receivables...........................3
Principal Shortfalls...........................41
PTE 75-1.......................................51
Purchase Agreement.............................15
Rapid Amortization Period.......................9
Rating Agency Condition........................32
Reallocated Class B Principal
Collections....................................36
Reallocated Class C Principal Collections......36
Reallocated Principal Collections..............36
Receivables.............................3, 15, 23
Record Date....................................28
Reference Banks................................30
Refinancing................................11, 49
Refinancing Date...........................11, 49
Refinancing Price..............................49
Removed Receivables............................22
Required Amount................................36
Revolving Period................................9
S&P Non-AAA Insurer............................46
S&P Non-Investment Grade Insurer...............46
Sale and Servicing Agreement...................15
Seller..................................3, 15, 27
Series [ ]-1 Termination Date................1
Series [ __ ]-1 Pay Out Event..................46
Series [ ____ ]-1..............................31
Series [ ____ ]-1 Supplement...................27
Servicer.......................................15
Shared Principal Collections...................41
Single Insured Concentration Percentage........46
Transfer Date..................................36
Transferor Certificate.........................23
Trust...................................1, 15, 27
Trust Interest...........................2, 3, 28
Trust Pay Out Event............................47
Trust Percentage...............................28
Unconcentrated 240+ Day Delinquency
Percentage...................................48
Unconcentrated Insured Amount..................48
Underwriters...................................51
Underwriting Agreement.........................51
Yield Enhancement Account...................2, 43
55
<PAGE>
AIG CREDIT PREMIUM FINANCE MASTER TRUST
Issuer
A.I. RECEIVABLES TRANSFER CORP.
Seller
SERIES [ ]-1
$[ ----- ]
CLASS A FLOATING RATE ASSET BACKED NOTES
$[ ----- ]
CLASS B FLOATING RATE ASSET BACKED NOTES
----------------
PROSPECTUS SUPPLEMENT
----------------
Underwriters of the Class A Notes and Class B Notes
GOLDMAN, SACHS & CO.
You should rely only on the information contained or incorporated by reference
in this Prospectus Supplement and the accompanying Prospectus We have not
authorized anyone to provide you with different information
We are not offering the notes in any state where the offer is not permitted
We do not claim the accuracy of the information in this Prospectus Supplement
and the accompanying Prospectus as of any date other than the dates stated on
their respective covers
Dealers will deliver a Prospectus Supplement and Prospectus when acting as
underwriters of the notes and with respect to their unsold allotments or
subscriptions In addition, all dealers selling the notes will deliver a
Prospectus Supplement and Prospectus until [ ______ ], [_______ ].
<PAGE>
- --------------------------------------------------------------------------------
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
- --------------------------------------------------------------------------------
Subject to Completion, Dated [__], 1999
Prospectus
AIG Credit Premium Finance Master Trust
Issuer
A.I. Receivables Transfer Corp.
Seller
Asset Backed Notes
- --------------------------------------------------------------------------------
Consider carefully the Risk Factors beginning on page [__] in this prospectus.
Neither the notes nor the underlying loans, deferred payment obligations nor
receivables are insured or guaranteed by any governmental agency.
The notes will represent interests in the trust only and will not represent
interests in or obligations of the Issuer, Seller or any affiliate of either.
This prospectus may be used to offer and sell any series of notes only if
accompanied by the prospectus supplement for that series.
- --------------------------------------------------------------------------------
The Trust--
o may periodically issue asset backed term notes in one or more series with
one or more classes; and
o may also issue one or more series of asset backed variable funding notes,
which will not be sold under this prospectus will own--
o the entire beneficial interest in loans to insureds to finance
commercial
property and casualty insurance premiums;
o if specified in an accompanying prospectus supplement, the rights to
receive deferred payments to become due from insureds of premiums for
commercial property and casualty insurance;
o payments due and to become due, and collections and recoveries on
those loans and deferred payment obligations, if any;
o proceeds of certain collateral security securing the loans and
deferred payment obligations, if any;
o other property described in this prospectus and in the accompanying
prospectus supplement; and
o if specified in an accompanying prospectus supplement, the ownership
interest in one or more trusts whose assets will be substantially
similar to the loans and/or deferred payment obligations.
The Notes--
o will represent obligations of the trust and will be secured by and paid
only from a partial, undivided interest in the trust assets;
o offered by this prospectus will be rated in one of the four highest rating
categories by at least one nationally recognized rating organization;
o may have one or more forms of enhancement; and
o will be issued as part of a designated series which may include one or more
classes of notes and enhancement.
The Noteholders--
o will receive interest and principal payments from a varying percentage of
collections on receivables related to loans and deferred payment
obligations.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these notes or determined that this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is
[_____ __], 1999
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the Notes in two separate documents
that progressively provide more detail: (a) this Prospectus, which provides
general information, some of which may not apply to a particular Series of
Notes, including your Series, and (b) the accompanying Prospectus Supplement,
which will describe the specific terms of your Series of Notes, including:
o the timing of interest and principal payments;
o financial and other information about the Receivables;
o information about enhancement for each Class;
o the ratings for each Class;
o the method for selling the Notes; and
o if they are redeemable.
If the terms of a particular Series of Notes vary between this Prospectus
and the Prospectus Supplement, you should rely on the information in the
Prospectus Supplement.
You should rely only on the information provided in this Prospectus and the
accompanying Prospectus Supplement including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the Notes in any state where the offer is not
permitted. We do not claim the accuracy of the information in this Prospectus or
the accompanying Prospectus Supplement as of any date other than the dates
stated on their respective covers.
We include cross-references in this Prospectus and in the accompanying
Prospectus Supplement to captions in these materials where you can find further
related discussions. The following Table of Contents and the Table of Contents
included in the accompanying Prospectus Supplement provide the pages on which
these captions are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus are defined under the caption "Index of Terms for Prospectus"
beginning on page [__] in this Prospectus.
---------------
<PAGE>
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY ......................................................... 1
THE TRUST AND THE TRUSTEE .................................................. 1
OFFERED AND OTHER SECURITIES ............................................... 1
THE INDENTURE AND INDENTURE TRUSTEE ........................................ 1
TRUST ASSETS ............................................................... 1
INFORMATION ABOUT THE RECEIVABLES .......................................... 2
COLLECTIONS BY THE SERVICER ................................................ 2
ALLOCATION OF TRUST ASSETS AND SECURITY FOR THE NOTES ...................... 2
INTEREST PAYMENTS ON THE NOTES ............................................. 3
PRINCIPAL PAYMENTS ON THE NOTES ............................................ 3
Revolving Period ........................................................... 3
Controlled Accumulation Period ............................................. 4
Controlled Amortization Period ............................................. 4
Principal Amortization Period .............................................. 4
Rapid Accumulation Period .................................................. 4
Rapid Amortization Period .................................................. 4
Pay Out Events ............................................................. 5
SHARED EXCESS FINANCE CHARGE COLLECTIONS ................................... 5
SHARED PRINCIPAL COLLECTIONS ............................................... 5
CREDIT ENHANCEMENT ......................................................... 5
OPTIONAL REFINANCING ....................................................... 5
OPTIONAL PREPAYMENT ........................................................ 6
TAX STATUS ................................................................. 6
NOTE RATINGS ............................................................... 6
INDEMNIFICATION FOR RECEIVABLE CONCENTRATIONS .............................. 6
RISK FACTORS ............................................................... 7
Limited Ability to Resell Notes ............................................ 7
Potential Priority of Certain Liens ........................................ 7
Credit and Related Risks of Premium Finance Loan ........................... 7
Credit and Related Risks of Deferred Payment Obligations ................... 7
Possible Effects of Bankruptcy or Insolvency of Insureds ................... 8
Possible Effect of Retention of Legal Title of Premium Finance
Loans by the Originators ............................................. 8
Possible Effects of Insolvency or Bankruptcy of the
Originators or the Sellers ........................................... 9
Effects of State Regulation of Premium Finance Lending and
Deferred Payment Obligations on Noteholders .......................... 10
Effect of Dependence on the Originators' Business ......................... 11
Effect of Subordination on Subordinated Noteholders ....................... 12
Risks Relating to Defaulted Obligations ................................... 12
Effects on Noteholders of Issuance of Additional Series by the Trust ...... 12
Possible Effect of Noteholder Control Limitations.13
Possible Effect of Decline in Quality of Additional Receivables ........... 13
Possible Effect of Insufficiency of Additional Receivables ................ 13
Possible Effect of Limitations on Note Rating, Risk of Downgrade .......... 14
THE TRUST ................................................................. 15
Trust Assets .............................................................. 15
The Owner Trustee ......................................................... 15
BUSINESS OF A.I. RECEIVABLES TRANSFER CORP. AND THE ORIGINATORS ........... 16
General ................................................................... 16
Premium Finance Obligations ............................................... 17
Loans ..................................................................... 17
Deferred Payment Obligations .............................................. 18
Premium Finance Loan Origination; Collection Policy ....................... 18
Deferred Payment Obligation Origination; Collection Policy ................ 19
Premium Finance Loan Purchase Policies .................................... 20
Premium Finance Obligations Underwriting Procedures ....................... 20
State Regulation of Premium Finance Lending Activities .................... 21
As Servicer ............................................................... 21
THE RECEIVABLES ........................................................... 23
MATURITY ASSUMPTIONS ...................................................... 24
USE OF PROCEEDS ........................................................... 25
DESCRIPTION OF THE NOTES .................................................. 25
General ................................................................... 25
Interest Payments ......................................................... 26
Principal Payments ........................................................ 27
Variable Funding Notes .................................................... 27
The Indenture ............................................................. 27
Modification of Indenture without Noteholder Consent ...................... 27
Modification of Indenture with Noteholder Consent ......................... 28
i
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
Events of Default; Rights Upon Event of Default ........................... 29
Certain Covenants ......................................................... 31
New Issuances ............................................................. 32
Annual Compliance Statement ............................................... 33
Indenture Trustee's Annual Report ......................................... 33
Satisfaction and Discharge of Indenture ................................... 34
Trust Indenture Act ....................................................... 34
The Indenture Trustee ..................................................... 34
Reports to Noteholders .................................................... 34
CERTAIN INFORMATION REGARDING THE SECURITIES .............................. 35
Book-Entry Registration ................................................... 35
Definitive Notes .......................................................... 38
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS ...................... 39
Transfer and Assignment of Receivables .................................... 39
Representations and Warranties ............................................ 40
Addition of Trust Assets .................................................. 42
Removal of Receivables .................................................... 43
Collection and Other Servicing Procedures ................................. 44
Discount Option ........................................................... 44
Trust Accounts ............................................................ 44
Funding Period ............................................................ 45
Investor Percentage and Trust Percentage .................................. 46
Application of Collections ................................................ 46
Shared Excess Finance Charge Collections .................................. 48
Shared Principal Collections .............................................. 48
Defaulted Receivables; Investor Charge-Offs ............................... 48
Defeasance ................................................................ 49
Refinancing ............................................................... 49
Final Payment of Principal; Termination ................................... 50
Pay Out Events ............................................................ 50
Servicing Compensation and Payment of Expenses ............................ 51
Certain Matters Regarding the Seller and the Servicer ..................... 52
Support Agreement ......................................................... 53
Servicer Default .......................................................... 54
Evidence as to Compliance ................................................. 55
Amendments ................................................................ 56
List of Noteholders ....................................................... 56
The Indenture Trustee ..................................................... 56
Noteholders Have Limited Control of Actions ............................... 57
CREDIT ENHANCEMENT ........................................................ 57
General ................................................................... 57
Subordination ............................................................. 57
Letter of Credit .......................................................... 58
Cash Collateral Guaranty or Account ....................................... 58
Collateral Interest ....................................................... 58
Insurance Policy or Surety Bond ........................................... 59
Spread Account ............................................................ 59
Reserve Account ........................................................... 59
Yield Enhancement Account ................................................. 59
NOTE RATINGS .............................................................. 60
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES .................................. 60
Transfer of Receivables ................................................... 60
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES ..................... 61
Treatment of the Notes as Debt ............................................ 61
Possible Alternative Characterization ..................................... 62
Interest Income to Noteholders ............................................ 63
Sale or Exchange of Notes ................................................. 63
Non-U.S. Note Owners ...................................................... 63
Information Reporting and Backup Withholding .............................. 64
State and Local Taxation .................................................. 65
ERISA CONSIDERATIONS ...................................................... 65
PLAN OF DISTRIBUTION ...................................................... 67
LEGAL MATTERS ............................................................. 67
REPORTS TO NOTEHOLDERS .................................................... 67
WHERE YOU CAN FIND MORE INFORMATION ....................................... 68
ANNEX I GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES .... 69
INDEX OF TERMS FOR PROSPECTUS ............................................. 73
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PROSPECTUS SUMMARY
o This summary highlights selected information from this document and does
not contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of an offering of the
Notes, read carefully this entire document and the accompanying Prospectus
Supplement.
o This summary provides an overview of certain calculations, cash flows and
other information to aid your understanding and is qualified by the full
description of these calculations, cash flows and other information in this
Prospectus and the accompanying Prospectus Supplement.
THE TRUST AND THE TRUSTEE
AIG Credit Premium Finance Master Trust (the "Trust") was formed on [_____],
1999 under an agreement between A.I. Receivables Transfer Corp. ("ART"), as
seller (the "Seller") and Chase Manhattan Bank Delaware, as "Owner Trustee" (the
"Trust Agreement"). The Trust may engage only in the following activities:
o acquiring and holding specified assets;
o issuing and making payments on the Asset Backed Notes (the "Notes") and
other securities and interests in the Trust; and
o engaging in related activities.
OFFERED AND OTHER SECURITIES
The Trust may issue one or more series of asset-backed term notes with a fixed
principal amount (the "Term Notes") and one or more series of notes with a
fluctuating principal amount (the "Variable Funding Notes", together with the
Term Notes, the "Notes"), each with one or more classes (the "Classes"). The
Variable Funding Notes will not be offered or sold under this Prospectus. Any
Class or Series of Term Notes may be offered other than by this Prospectus; for
example, they may be offered in a private placement.
THE INDENTURE AND INDENTURE TRUSTEE
The Trust is a master trust which will issue each Series of Notes through a
Supplement (each a "Series Supplement") to an Indenture (the "Indenture")
between the Trust and The First National Bank of Chicago (the "Indenture
Trustee").
TRUST ASSETS
One or more of A.I. Credit Corp. ("AIC"), AICCO, Inc. ("AICCO"), Imperial
Premium Finance, Inc. ("IP Finance I"), a Delaware corporation, Imperial Premium
Finance, Inc. ("IP Finance II"), a California corporation and Imperial Premium
Funding, Inc. ("IP Funding") (collectively, the "Originators") will transfer to
ART, which in turn will transfer to the Trust,
o their entire beneficial interest in certain loans to insureds to finance
the premiums on property and casualty insurance polices, funded, or with a
firm commitment for funding by the Originators (the "Loans"),
o if so specified in the accompanying Prospectus Supplement, all their
interest in certain deferred payments of premiums to become due from
insureds for commercial property and casualty insurance policies funded, or
with a firm commitment for funding ("Deferred Payment Obligations", and
together with the Loans, "Premium Finance Obligations"), and
o all amounts due and to become due in respect of such Loans and Deferred
Payment Obligations, including recoveries of amounts thereon
(the interest described above are referred to as the "Receivables") under an
agreement among the Originators and ART (the "Purchase Agreement").
ART will subsequently transfer the Receivables to the Trust under an agreement
among AIC, AICCO, IP Finance I, IP Finance II and IP Funding, each as servicer,
the Trust, the Indenture Trustee and ART (the "Sale and Servicing Agreement").
It is expected that new Receivables generated by the Originators will be
transferred to ART, which in turn will transfer them to the Trust. The total
amount of
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Receivables in the Trust will fluctuate daily as new Receivables are generated
and payments are received on existing Premium Finance Obligations. See "The
Receivables" and "Description of the Transfer and Servicing Agreements--Addition
of Trust Assets" in this Prospectus.
The Trust assets also include payments due on the Receivables and other proceeds
of the Receivables.
The Trust assets will not include amounts collected on Receivables in excess of
the amounts currently due and owing and previously accrued and unpaid (the
"Credit Balances").
Additional Trust assets may include:
o Participations in Premium Finance Obligations;
o interest in other trusts (including the ownership interest of A.I.
Receivables Corp. in AIC Premium Finance Loan Master Trust);
o monies deposited in certain of the Trust's bank accounts and investments of
those monies; and
o "Enhancements," including any Credit Enhancement, guaranteed rate
agreement, maturity liquidity facility, interest rate cap agreement,
interest rate swap agreement, currency swap agreement, or other similar
arrangement.
The Seller may remove, subject to certain limitations and conditions,
Receivables that it transferred to the Trust. See "Description of the Transfer
and Servicing Agreements--Removal of Receivables" in this Prospectus.
INFORMATION ABOUT THE RECEIVABLES
The Receivables arise from Premium Finance Obligations that satisfy the
eligibility criteria established in the Purchase Agreement and applied on the
date of their selection.
The Receivables consist of both Principal Receivables and Finance Charge
Receivables.
"Principal Receivables" are, generally, (a) with respect to Loans, amounts
borrowed by insureds to pay premiums for property and casualty insurance and (b)
with respect to Deferred Payment Obligations, the portion of the deferred
payments equal to the purchase price paid by the Originators for the rights to
receive such deferred payments.
"Finance Charge Receivables" are, generally, (a) with respect to Loans, the
related finance charges and certain fees and (b) with respect to Deferred
Payment Obligations, the portion of the deferred payments in excess of the
purchase price of the payments, which excess is deemed finance charges and fees.
See "Business of A. I. Receivables Transfer Corp. and the Originators" in this
Prospectus.
COLLECTIONS BY THE SERVICER
AIC, AICCO, IP Finance I, IP Finance II and IP Funding, each service the
Receivables that they originate in accordance with servicing standards
established by AIC under the Sale and Servicing Agreement. In limited cases, any
one or all of the servicers may resign or be removed and either the Indenture
Trustee or a third party may be appointed as the new servicer. AIC, AICCO, IP
Finance I, IP Finance II and IP Funding, or any new servicer, is called the
"Servicer." The Servicer may receive a servicing fee from the Trust for each
Series. See "Business of A.I. Receivables Transfer Corp. and the Originators" in
this Prospectus.
The Servicer receives collections on the Receivables, deposits those collections
in an account and keeps track of those collections for Finance Charge
Receivables and Principal Receivables. The Servicer then allocates those
collections as summarized below.
ALLOCATION OF TRUST ASSETS AND SECURITY FOR THE NOTES
The Notes of each Series will be secured by and paid only from a partial,
undivided interest in the assets of the Trust (the "Investor Interest").
Collections on the Trust assets will be allocated to the holders of Notes and
other interests of each Series and to the Trust Interest. The "Trust Interest"
represents the remaining undivided interest in the assets of the Trust not
securing the Notes or any other obligations of the Trust. The Trust Interest
will not be pledged to secure the Notes and, on any date, is equal to the
aggregate amount of Principal Receivables in the Trust not
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allocated to each outstanding Series of Notes and any other obligations of the
Trust.
The Servicer will allocate (a) collections of Finance Charge Receivables and
Principal Receivables and (b) certain defaulted Receivables to each Series based
on a varying percentage, called the "Investor Percentage," as described in the
accompanying Prospectus Supplement. To the extent described in the accompanying
Prospectus Supplement, the allocation of defaulted Receivables to a Series may
result in the write-down of the outstanding principal balance of one or more
Classes of Notes of such Series.
If so specified in an accompanying Prospectus Supplement for any Series, certain
defaulted Receivables, representing specified concentrations related to
specified Receivable characteristics may not be allocated to the Investor
Interest of such Series.
The aggregate amount of Principal Receivables and amounts in any Principal
[Funding] Account (as defined in any Series Supplement) allocated to a Series
establishes that Series' "Investor Interest."
Noteholders are only entitled to amounts allocated to their Series equal to the
interest and principal payments on their Notes. See "Description of the
Notes--General" and "Description of the Transfer and Servicing
Agreements--Investor Percentage and Trust Percentage" in this Prospectus.
INTEREST PAYMENTS ON THE NOTES
Each Note of a Series will represent the right to receive payments of interest
as described in the accompanying Prospectus Supplement. If a Series of Notes
consists of one or more Classes, each Class may differ in, among other things,
priority of payments, payment dates, interest rates, method for computing
interest, method for computing outstanding balance and rights to Enhancement.
Each Class of Notes will have the interest rate specified in the accompanying
Prospectus Supplement which may be fixed, floating or any other type of interest
rate specified. Generally, interest will be paid monthly, quarterly,
semi-annually or on other scheduled dates over the life of the Notes, each
called a "Payment Date."
Under certain conditions described in the accompanying Prospectus Supplement,
collections of Finance Charge Receivables may be deposited monthly in one or
more trust accounts and invested under guidelines established by the Rating
Agencies until paid to Noteholders. Interest payments for any Series of Notes
will be funded from collections of Finance Charge Receivables allocated to the
Series, any applicable Enhancement and, if and to the extent specified in the
accompanying Prospectus Supplement, monies earned while collections were
invested pending payment to Noteholders. See "Description of the Transfer and
Servicing Agreements" "--Shared Excess Finance Charge Collections" and "Credit
Enhancement" in this Prospectus.
PRINCIPAL PAYMENTS ON THE NOTES
Each Note of a Series will represent the right to receive payments of principal
as described in the accompanying Prospectus Supplement. If a Series of Notes
consists of one or more Classes, each Class may differ in, among other things,
the amounts allocated for principal payments, priority of payments, payment
dates, principal balance, maturity and rights to Enhancement.
Revolving Period
Each Class of Notes will begin with a period called a "Revolving Period" during
which the Trust will not pay, or accumulate, principal for the related
Noteholders. Available principal collections will be released to the Trust but
may pay amounts due to holders of Notes of other Series. The Revolving Period
for a Class starts on the date that Class is issued and ends at the start of an
amortization period or an accumulation period. Following the Revolving Period,
each Class of Notes will have one or a combination of the following periods in
which:
o principal is accumulated in specified amounts and paid on a scheduled date
(a "Controlled Accumulation Period");
o principal is paid in fixed amounts at scheduled intervals (a "Controlled
Amortization Period");
o principal is paid in varying amounts at scheduled intervals (a "Principal
Amortization Period");
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o principal is accumulated in varying amounts following certain adverse
events and paid on a scheduled date (a "Rapid Accumulation Period");
o principal is paid in varying amounts each month following certain adverse
events (a "Rapid Amortization Period"); or
o The commencement of each of the foregoing periods may be modified as in the
accompanying Prospectus Supplements.
Controlled Accumulation Period
If a Class of Notes has a Controlled Accumulation Period, the Trust is expected
to pay available principal to those Noteholders on a specific date specified in
the accompanying Prospectus Supplement called the "Scheduled Payment Date." If
the Series has more than one Class, each Class may have a different priority for
payment. For a period of time prior to the Scheduled Payment Date, the Trust is
scheduled to deposit available principal in a trust account in specified amounts
plus any specified amounts not previously deposited. If amounts sufficient to
pay the outstanding principal balance for a Class have not been accumulated by
the Scheduled Payment Date for that Class, a Pay Out Event will occur and the
Rapid Amortization Period will begin. The Controlled Accumulation Period for a
Class starts on a date specified in the accompanying Prospectus Supplement and
ends when any one of the following occurs:
o on the Scheduled Payment Date; when the outstanding principal balance for
the Class is paid in full;
o a Rapid Amortization Period or, if it applies, a Rapid Accumulation Period
starts; or
o the latest date by which principal and interest for the Series of Notes can
be paid, called the "Series Termination Date".
Controlled Amortization Period
If a Class of Notes has a Controlled Amortization Period, the Trust will pay
available principal to those Noteholders on each Payment Date during the
Controlled Amortization Period in a fixed amount plus any amounts not previously
paid. If the Series has more than one Class, each Class may have a different
priority for payment. The Controlled Amortization Period for a Class starts on
the date specified in the accompanying Prospectus Supplement and ends when any
one of the following occurs:
o the outstanding principal balance for the Class is paid in full;
o a Rapid Amortization Period starts; or
o the Series Termination Date.
Principal Amortization Period
If a Class of Notes has a Principal Amortization Period, the Trust will pay
available principal to those Noteholders on each Payment Date during the
Principal Amortization Period. If a Series has more than one Class, each Class
may have a different priority for payment. The Principal Amortization Period for
a Class starts on the date specified in the accompanying Prospectus Supplement
and ends when any one of the following occurs:
o the outstanding principal balance for the Class is paid in full;
o a Rapid Amortization Period starts; or
o the Series Termination Date.
Rapid Accumulation Period
If a Class of Notes has a Controlled Accumulation Period, it may also have a
Rapid Accumulation Period. During a Rapid Accumulation Period, the Trust will
periodically deposit available principal in a trust account prior to the
Scheduled Payment Date. The Rapid Accumulation Period for a Class starts as
specified in the accompanying Prospectus Supplement on a day on or after a
designated Pay Out Event has occurred, but in no event later than the Scheduled
Payment Date, and ends when any one of the following occurs:
o the outstanding principal balance for the Class is paid in full;
o a Rapid Amortization Period starts; or
o the Scheduled Payment Date.
Rapid Amortization Period
If a Class of Notes is in a Rapid Amortization Period, the Trust will pay
available principal to those Noteholders on each Payment Date. If the Series has
more than one Class, each Class may
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have a different priority for payment. For a Class without a Rapid Accumulation
Period, the Rapid Amortization Period starts on the day a Pay Out Event occurs.
For a Class with a Rapid Accumulation Period, the Rapid Amortization Period
starts as specified in the accompanying Prospectus Supplement on a day on or
after a Pay Out Event occurs, but in no event later than the Scheduled Payment
Date for that Class. The Rapid Amortization Period ends when any of the
following occurs:
o the outstanding principal balance for the Class is paid in full;
o the Series Termination Date; or
o the Trust Termination Date.
Pay Out Events
A "Pay Out Event" for any Series of Notes will include certain adverse events
described in the accompanying Prospectus Supplement, including the following:
o Certain events of insolvency or bankruptcy relating to any Originator or
the Seller;
o The Seller is unable to transfer Receivables to the Trust as required under
the Sale and Servicing Agreement; o The Trust becomes an "investment
company" under the Investment Company Act of 1940; or o AIG fails to meet
its obligations under the AIG Support Agreement or the AIG Support
Agreement is amended other than as permitted in the AIG Support Agreement.
See "Description of the Transfer and Servicing Agreements--Pay Out Events" in
this Prospectus.
SHARED EXCESS FINANCE CHARGE COLLECTIONS
Any Series may be included in a Group of Series. If specified in the
accompanying Prospectus Supplement, to the extent that collections of Finance
Charge Receivables allocated to any Series are not needed for that Series, those
collections may be applied to certain shortfalls of another Series in the same
Group. See "Description of the Transfer and Servicing Agreements--Shared Excess
Finance Charge Collections," "--Applications of Collections" and"--Defaulted
Receivables; Investor Charge-Offs" in this Prospectus.
SHARED PRINCIPAL COLLECTIONS
If specified in the accompanying Prospectus Supplement, to the extent that
collections of Principal Receivables and certain other amounts that are
allocated to the Investor Interest for any Series are not needed for that
Series, those collections may be applied to cover principal payments for another
Series in the same Group. Any reallocation for this purpose will not reduce the
Investor Interest for the Series to which those collections were initially
allocated. See "Description of the Transfer and Servicing Agreements--Shared
Principal Collections" in this Prospectus.
CREDIT ENHANCEMENT
Each Class of a Series may be entitled to Credit Enhancement. Credit Enhancement
provides additional payment protection to investors in each Class of Notes that
has Credit Enhancement.
"Credit Enhancement" for the Notes of any Class may take the form of one or more
of the following:
o subordination o letter of credit
o over-collateralization o surety bond
o insurance policy o spread account
o cash collateral guaranty or account o reserve account
o yield enhancement account
The type, characteristics and amount of any Credit Enhancement will be:
o based on several factors, including the characteristics of the Receivables
and the Premium Finance Obligations at the time a Series of Notes is
issued, and
o established based on the requirements of each Rating Agency rating one or
more Classes of the Notes of that Series.
See "Credit Enhancement" and "Note Ratings" in this Prospectus.
OPTIONAL REFINANCING
If specified in the Prospectus Supplement, the [Seller] may have the option to
cause the
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refinancing and redemption of any Series on such additional terms specified in
the Prospectus Supplement. See "Description of the Transfer and Servicing
Agreements--Final Payment of Principal; Termination" and "-- Refinancing" in
this Prospectus.
OPTIONAL PREPAYMENT
The Seller has the option to prepay any Series of Notes once the Investor
Interest for the Series is reduced to 10% or less of the initial Investor
Interest. See "Description of the Transfer and Servicing Agreements--Final
Payment of Principal; Termination" in this Prospectus.
TAX STATUS
For information concerning the application of the federal income tax laws to the
Trust and an investment in the Notes, including whether the Notes will be
characterized as debt for federal income tax purposes, see "Certain United
States Federal Income Tax Consequences" in this Prospectus and "Summary of
Terms--Tax Status" in the accompanying Prospectus Supplement.
NOTE RATINGS
Any Note offered under this Prospectus and the accompanying Prospectus
Supplement will be rated in one of the four highest rating categories by at
least one nationally recognized rating organization. Any nationally recognized
rating organization selected by the Seller to rate any Series is a "Rating
Agency."
A rating is not a recommendation to buy, sell or hold securities and may be
revised or withdrawn at any time by the assigning Rating Agency. Each rating
should be evaluated independently of any other rating. See "Note Ratings" in
this Prospectus.
INDEMNIFICATION FOR RECEIVABLE CONCENTRATIONS
If so specified in the accompanying Prospectus Supplement, AIG or another
highly-rated entity may agree to indemnify the Trust against all losses related
to certain concentrations of Receivables. See "AIC Trust Interest in the
Prospectus Supplement."
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RISK FACTORS
You should consider the following risk factors in deciding whether to
purchase the Notes.
Limited Ability to
Resell Notes The underwriters may assist in resales of the
Notes but they are not required to do so. A
secondary market for any Notes may not develop. If
a secondary market does develop, it might not
continue or it might not be sufficiently liquid to
allow you to resell any of your Notes.
Potential Priority of
Certain Liens The Originators have transferred their entire
beneficial interest in the Receivables to the
Seller, who in turn has transferred its entire
beneficial interest in the Receivables to the
Trust. However, a court could conclude that either
the Originators or the Seller still owns the
Receivables subject to a security interest in
favor of the Trust in the Receivables. Each of the
Originators and the Seller has taken steps to give
the Trustee a "first priority perfected security
interest" in the beneficial interest in the
Receivables in the event a court concludes either
the Originators or the Seller still owns the
Receivables. If a court concludes that the
transfer to the Trust is only a grant by either
the Originators or the Seller of a security
interest in the beneficial interest in the
Receivables, a tax or government lien (or other
lien imposed under applicable state or federal law
without the consent of either the Originators or
the Seller) on either the Originators' or the
Seller's property arising before new Receivables
come into existence may be senior to the Trust's
interest in the beneficial interest in the
Receivables. Also, if either the Originators or
the Seller becomes insolvent, the cost of the
appointment of a bankruptcy trustee of either the
Originators or the Seller might be paid from the
Receivables before the Trust received any payments
on the Receivables. See "Certain Legal Aspects of
the Receivables--Transfer of Receivables" and
"Description of the Transfer and Servicing
Agreements--Representations and Warranties" in
this Prospectus.
Credit and Related Risks of
Premium Finance Loans Commercial premium finance loans involve several
potential credit and related risks. These risks
include:
o the creditworthiness of the insured (the
"Insured");
o the creditworthiness of the insurance company
issuing the policy, and its ability to honor
its obligation to return the unearned
premiums, to the extent available, that serve
as collateral for the Loan; and
o the capabilities and operating procedures of
the insurance agent or broker that sells the
insurance policy, provides significant
information about the loan and may be
responsible for paying out loan proceeds and
collecting unearned premiums.
Credit and Related Risks of
Deferred Payment Obligations Deferred Payment Obligations entail several
potential credit and related Deferred Payment
Obligations risks. These risks include:
o the creditworthiness of the Insured and the
recourse to the Insured, the extent of which
may be limited in the case of early
cancellation of the policy to the value of
insurance coverage actually provided to the
Insured rather than the value of insurance
coverage initially purchased; and
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o the sufficiency and realization of the
collateral, which depends upon the
creditworthiness of the insurance company,
and the sufficiency and realization of any
alternative collateral provided in addition
to or in lieu of the right to receive a
return of unearned premiums.
Possible Effects of
Bankruptcy or Insolvency
of Insureds If federal and state bankruptcy, or insolvency
laws were applied to an insolvent Insured,
insurance company or insurance agent debtor relief
or broker involved with a Receivable it could
affect the Noteholders' security interest in the
beneficial interest in the related Receivables.
The application of such laws would affect
Noteholders if it resulted in any Receivable being
written off as uncollectible or prevented the
cancellation of the Insureds' insurance or the
collection of the related unearned premium, if
any, which serves as collateral for the Insureds'
Premium Finance Obligations.
Possible Effects of Insolvency
of Insurer With Respect to
Deferred Payment
Obligations In the event of an insolvency of an insurer that
transferred to an Deferred Originator the premium
payment rights underlying a Payment Obligations,
it is possible that the receiver or liquidator of
such insurer might argue that the Trust as holder
of the Deferred Payment Obligations should be
viewed as a creditor of the insurer, secured by a
lien on the right to receive the related premium
payments. In such event, the Trust might suffer
delays or losses in collecting amounts due from
the insured with respect to the related Deferred
Payment Obligations. In the event of cancellation
of a policy underlying a Deferred Payment
Obligation related to an insolvent insurer, any
right of the Trust to a return of the unamortized
purchase price of the Deferred Payment Obligation
might be (i) unsecured and (ii) subordinated to
the rights of insureds against such insurer. In
such cases delays and losses may be substantial.
In addition, the fact that the insurer has sold
its rights to premiums may reduce the likelihood
that other, solvent insurers would assume the
related policies. Policies that are not acquired
by solvent insurers may be more likely to be
cancelled by the insureds.
Possible Effect of Retention
of Legal Title of Premium
Finance Loans by the
Originators The Seller will transfer to the Trust the entire
beneficial interest in the Loans underwritten by
the Originators to Insureds to finance premiums on
property and casualty insurance policies,
including the right to receive payments on the
Loans and proceeds of related collateral security.
Only the beneficial interest in the Loans will be
transferred to the Trust. It is our intention that
each Originator will hold legal title to the Loans
that they each originate for state regulatory
purposes and in order to service and collect the
Loans, but that otherwise the Originators will be
acting as nominal title holder only. The Trust's
rights to the Loans will therefore be derivative
through the Seller and the Originators. Neither
the Seller nor the Trust will have direct contact
with the Insureds and will not:
o make Loans directly to any Insured;
o directly purchase any Loans from Third Party
Originators;
o have any direct contractual relationship with
any Insured; or
o have any direct security interest in, or
rights to, any assets or rights pledged by
the Insureds as collateral for the Loans.
This means that the Trust may not have the ability
to exercise remedies against the Insureds directly
and may need the assistance or cooperation of the
Originators or the Seller.
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The Seller represents and warrants in the Sale and
Servicing Agreement that the Receivables will be
validly transferred to the Trust. The Seller also
warrants and covenants that each Receivable will
be transferred free and clear of any adverse claim
and that, except for transfers permitted under the
Sale and Servicing Agreement, it will not sell,
pledge, assign, transfer or grant any adverse
claim on any Receivable, any interest in a
Receivable or any other Trust asset. The
Originators will each make similar
representations, warranties and covenants with
respect to the Receivables transferred under the
Purchase Agreement.
Possible Effects of Insolvency
or Bankruptcy of the Originators
or the Sellers Under Section 541(d) of the United States
Bankruptcy Code (the "Bankruptcy Code"), in a
bankruptcy proceeding where a debtor has retained
only legal title to property to service the
property, but has not retained an equitable
interest in such property, a debtor's bankruptcy
estate will be limited to that legal title
interest only. Since there is uncertainty as to
the application of Section 541(d) to the Loans and
since ART will be retaining an equitable interest
in the Receivables through the Trust Interest and
through the possible ownership of Notes issued by
the Trust, a court could find that the Receivables
had not been sold and removed from the estate of
the Originators or ART, but remained part of any
such entity's estate in the case of bankruptcy.
In light of the preceding paragraph, a creditor or
trustee-in-bankruptcy of any Originator or ART
could attempt to take the position that the
transfer of the beneficial interest under either
the Purchase Agreement or the Sale and Servicing
Agreement was not a sale. Such transfers could be
recharacterized as an assignment of collateral as
security for the benefit of the Seller or the
Noteholders. If the transfer to the Seller or the
Trust were deemed to be a grant to the Seller or
the Trust of a security interest in the
Receivables, the Trustee may have an unperfected
security interest in the Receivables that would
not have priority over other unsecured creditors
and would be subordinate to secured creditors of
the Originators or the Seller.
In addition, if it were determined that the Trust
or the Seller had only a security interest in the
Receivables, payments to the Trust made within one
year of a bankruptcy proceeding of the Originators
or the Seller could be subject to recapture as an
asset of the affected entity's bankruptcy estate
pursuant to the power of a bankruptcy trustee to
recover preferential transfers. If the Originators
or the Seller were to be involved in a bankruptcy
proceeding, and the foregoing recharacterization
and recapture occurred, Noteholders could
experience delays in payment of principal and
interest, or possible losses on their investment.
American International Group, Inc. ("AIG") has
agreed for the benefit of the Trust and the
Noteholders of all outstanding Series in the AIG
Support Agreement described in this Prospectus to
cause each of ART, AIC, AICCO, IP Finance I, IP
Finance II and IP Funding to have a minimum net
worth of at least $1 and, if any of ART, AIC,
AICCO, IP Finance I, IP Finance II and IP Funding
has insufficient funds, to:
o meet any of its obligations under the
Purchase Agreement and the Sale and Servicing
Agreement [other];
o pay any of its obligations when due (except
obligations subject to a bona fide dispute),
which if not paid could be the basis of
filing of an involuntary case against either
ART, AIC, AICCO, IP Finance I, IP Finance II
or IP Funding; or
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o to provide ART, AIC, AICCO, IP Finance I, IP
Finance II or IP Funding, as the case may be,
funds on a timely basis to cause such
obligations to be satisfied when due.
The AIG Support Agreement reduces the chances that
the Originators or the Seller might be subject to
a bankruptcy proceeding or have unpaid creditors
who might take the position that the transfer of
the Receivable was not a sale.
If a bankruptcy proceeding were commenced with
respect to any of the Originators or the Seller or
the certificates of beneficial interest of the
Trust are transferred other than as specified in
the Master Trust Agreement, then a Pay Out Event
could occur on all outstanding Series. Under the
terms of the Sale and Servicing Agreement, new
Receivables would not be transferred to the Trust
and the Trustee would sell the Receivables unless
holders of more than 50% of the outstanding
principal balance of each Class of each
outstanding Series of Notes (voting together), and
anyone else authorized to vote on those matters in
a Series Supplement, gave the Trustee other
instructions. The Trust would then terminate
earlier than was planned and you could have a loss
if the sale of the Receivables and amounts
available from certain Credit Enhancement produced
insufficient net proceeds to pay you in full.
However, the bankruptcy trustee may have the
power--
o regardless of the terms of the Indenture, (a)
to prevent the beginning of a Rapid
Amortization Period (or, if applicable, Rapid
Accumulation Period), (b) to prevent the
early sale of the Receivables and termination
of the Trust or (c) to require new Principal
Receivables to continue being transferred to
the Trust; or
o regardless of the instructions of those
authorized to direct the Indenture Trustee's
actions under the Indenture, (a) to require
the early sale of the Receivables, (b) to
require termination of the Trust and
retirement of the Notes, (c) to prohibit the
continued transfer of new Receivables to the
Trust or (d) the early retirement of any
Series.
If there should be an early retirement of any
Series, Noteholders of such Series are likely to
be paid principal earlier than anticipated, which
would affect the anticipated average life of such
Series and would affect their yield if their Notes
were purchased at a premium and could result in
reinvestment risk with respect to such earlier
payments.
In addition, if a bankruptcy proceeding were
commenced with respect to the Servicer, the
bankruptcy trustee might have the power to prevent
either the Indenture Trustee or the Noteholders
from appointing a new Servicer under the Sale and
Servicing Agreement. See "Description of the
Transfer and Servicing Agreements--Servicer
Default" in this Prospectus.
Effects of State Regulation
of Premium Finance Lending
and Deferred Payment
Obligations on Noteholders Numerous state laws regulate the creation,
purchasing, transfer, servicing and enforcement of
insurance premium loans. The states could further
regulate the insurance premium finance industry in
ways that make it more difficult for the Servicer
to collect payments on the Receivables or that
reduce the finance charges and other fees that the
Originators can charge on insurance premium
finance obligations. Such laws, including any new
laws or rulings which may be adopted, may
adversely effect the Servicer's ability to
maintain the required level of
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finance charges and other fees and charges as well
as the ability of the Trust to retain a successor
Servicer in the event that any of the Originators
cease to continue as Servicer. For example, if the
Originators were required to reduce their finance
charges and other fees, resulting in a
corresponding decrease in the obligations'
effective yield, this could lead to a Pay Out
Event, resulting in the payment of principal
sooner than expected. See "Description of the
Transfer and Servicing Agreements--Pay Out Events"
in this Prospectus. The Originators believe that
neither the Trust nor the Seller is required to be
licensed under any state premium finance licensing
laws, since neither the Trust nor the Seller makes
or services premium finance loans and has not
acquired title to any such loans and there is no
licensing requirement for deferred payment
obligation financing.
Subject to certain conditions described under
"Description of the Transfer and Servicing
Agreements--Representations and Warranties," the
Originators under the Purchase Agreement and the
Seller under the Sale and Servicing Agreement must
accept reassignment of each Receivable that does
not comply with certain representations and
warranties, including representations concerning
compliance with applicable state laws and
regulations, if as a result of such noncompliance,
the related Premium Finance Obligation becomes a
Defaulted Obligation. However, we do not
anticipate that the Indenture Trustee will make
any examination of the Receivables or the related
records for the purpose of determining the
presence or absence of defects, compliance with
representations and warranties, or for any other
purpose. The only remedy if any such
representation or warranty is violated, and the
violation continues beyond the period of time the
related Originator or the Seller has to correct
the violation and the related Premium Finance
Obligation becomes a Defaulted Obligation due to
such breach, is that the Seller must accept
reassignment of the Receivables affected by the
violation and, in turn, the Seller will reassign
the affected Receivables to the applicable
Originator of the Receivables, who must accept
reassignment of the affected Receivables (subject
to certain conditions described under "Description
of the Transfer and Servicing
Agreements--Representations and Warranties" in
this Prospectus).
The business of acquiring deferred payment
obligations from insurance companies at present is
subject to less regulation than the business of
originating insurance premium loans. However,
there can be no assurance that acquisition of
deferred payment obligations will not be subject
to regulation in the future or that such
regulation would not make it more difficult for
the Originators to acquire deferred payment
obligations at prices that they find attractive or
prohibit the acquisition of deferred payment
obligations altogether.
Effect of Dependence on the
Originators' Business The premium finance industry is very competitive.
The Originators compete with banks, insurance
companies and other premium finance lending
companies on the basis of loan pricing and terms,
underwriting criteria and servicing quality. If
commercial insurance consumers choose to use
competing sources of credit, the amount of Premium
Finance Obligations underwritten by the
Originators could be reduced. This is more likely
with respect to the financing of Deferred Payment
Obligations where the lack of licensing
requirements makes entrance into the market
easier. We cannot assure the creation of
Additional Receivables in the Premium Finance
Obligations. The commencement and continuation of
a Revolving Period, a Controlled Amortization
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Period, a Principal Amortization Period or a
Controlled Accumulation Period for a Series or
Class of that Series depend upon the continued
generation of new Receivables to be conveyed to
the Trust. A significant decline in the amount of
Receivables generated by the Originators could
result in the reduction of the sale of Additional
Receivables to the Trust. If the amount of
Additional Receivables generated declines to such
an extent that the Seller is unable to maintain
the Minimum Trust Interest, a Pay Out Event would
occur for one or more Series and the Rapid
Amortization Period would commence or, if
applicable, the Rapid Accumulation Period for each
of those Series would commence. If a Pay Out Event
occurs, you could receive payment of principal
sooner than expected. The Originators' ability to
compete in the current industry environment will
affect their ability to generate new Receivables.
See "Maturity Assumptions" in this Prospectus.
Effect of Subordination on
Subordinated Noteholders Where one or more Classes in a Series are
subordinated, principal payments on the
subordinated Class or Classes generally will not
begin until the senior Class or Classes are
repaid. Additionally, if collections of Finance
Charge Receivables allocated to a Series are
insufficient to cover amounts due for that Series'
senior Notes, the Investor Interest for the
subordinated Notes might be reduced and in such
event the outstanding principal balance of such
subordinated Notes might be written off to the
extent of such reduction. This would reduce the
amount of the collections of Finance Charge
Receivables available to the subordinated Notes in
future periods and could cause a possible delay or
reduction in principal and interest payments on
the subordinated Notes. If Receivables had to be
sold, the net proceeds of that sale to the extent
of the Investor Percentage available to pay
principal would be paid first to senior
Noteholders and any remaining net proceeds would
be paid to the subordinated Noteholders.
Risks Relating to Defaulted
Obligations Each Class of Notes will be allocated a portion of
the Receivables written off as uncollectible,
except in certain circumstances related to certain
concentrated receivables. See "Description of
Series Provisions--Allocation Percentages" and
"--Defaulted Receivables; Investor Charge-Offs" in
the accompanying Prospectus Supplement. If the
written off amounts allocated to any Notes exceed
the amounts available to cover them, which could
occur if the limited amount of Credit Enhancement
is reduced to zero, the outstanding principal
balance of those Notes may be written down, and
those Noteholders may not receive the full amount
of principal and interest due to them. See
"Description of Series Provisions-- Reallocation
of Cash Flows," "--Application of Collections" and
"--Defaulted Receivables; Investor Charge-Offs" in
the accompanying Prospectus Supplement.
Effects on Noteholders of
Issuance of Additional
Series by the Trust The Trust, as a master trust, is expected to issue
additional Series of Notes from time to time. The
Trust may issue additional Series of Notes with
terms that are different from your Series without
the prior review or consent of any Noteholders. It
is a condition to the issuance of each new Series
that either:
o each Rating Agency that has rated an
outstanding Series confirm in writing that
the issuance of the new Series will not
result in a reduction or withdrawal of its
rating; or
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o if at the time of issuance of a new Series
there is no outstanding rated Series, a
nationally recognized investment bank or
commercial bank delivers a certificate
confirming that the new issuance will not
adversely affect the payments to other
Series.
However, the terms of a new Series could affect
the timing and amounts of payments on any other
outstanding Series.
Possible Effect of Noteholder
Control Limitations The consent or approval of a specified percentage
of the aggregate outstanding principal balance of
all outstanding Notes of all Series and all
classes within a Series voting together will be
required to take or direct certain actions,
including requiring the appointment of a successor
Servicer following a Servicer Default, amending
the Indenture in certain circumstances and
directing a repurchase by the Seller of some or
all outstanding Receivables upon the breach of
certain representations and warranties. In such
instances, your interests may not be aligned with
the interests of the holders of Notes of other
Series or of the holders of Notes of other Classes
of your Series.
Possible Effect of Decline in
Quality of Additional
Receivables The Originators will be obligated to transfer to
ART the Additional Receivables that ART elects or
is obligated to transfer to the Trust. Such
Additional Receivables may have been originated
using criteria different from those which were
applied to the Receivables in the Trust on the
initial Closing Date. Consequently, there can be
no assurance that Additional Receivables will be
of the same credit quality as previously
designated Receivables. Except for those criteria
described under "The Receivables," there are no
required characteristics of Additional
Receivables. Following the transfer of Additional
Receivables to the Trust, the aggregate
characteristics of the pool of Receivables in the
Trust may vary from those of the Receivables in
the Trust on the initial Closing Date. See "The
Receivables."
Possible Effect of
Insufficiency of
Additional Receivables There is no assurance that there will be at any
time after the initial Closing Date sufficient
Additional Receivables available for transfer to
the Trust to avoid a Pay Out Event. A significant
decline in the amount of Receivables generated
could lead to a Pay Out Event which would cause
the early retirement of your Notes and result in
reinvestment risks. See "Maturity Assumptions" and
"Description of the Transfer and Servicing
Agreements Provisions--Pay Out Events."
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Possible Effect of Limitations
on Note Rating, Risk of
Downgrade Any rating assigned to your class of Notes by
Standard & Poor's or Moody's (individually, a
"Rating Agency" and collectively, the "Rating
Agencies") will reflect such Rating Agency's
assessment of the likelihood that you will receive
the payments of interest and principal required to
be made under the Indenture and will be based on
the collectability of the Receivables in the
Trust, the terms, including the subordination
terms, of other classes, the availability of
amounts from any other credit enhancements, the
loss allocation method and the terms of the AIG
Support Agreement. The rating addresses the
likelihood of full payment of principal and
interest of your Notes by such Series termination
date. Any such rating will not address the
possibility of the occurrence of a Pay Out Event
or the possibility of the imposition of United
States withholding tax with respect to non-U.S.
Holders of the Offered Notes. A rating is not a
recommendation to purchase, hold or sell notes of
such class, and such rating will not comment as to
the marketability of such Offered Notes, any
market price or suitability for a particular
investor. There is no assurance that any rating
will remain for any given period of time or that
any rating will not be lowered or withdrawn
entirely by a Rating Agency if in such Rating
Agency's judgment future circumstances relating to
the basis of the rating, such as adverse changes
in the collectability of the Receivables or a
lowering of AIG's long-term debt rating, so
warrant.
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THE TRUST
AIG Credit Premium Finance Master Trust (the "Trust") has been formed in
accordance with the laws of the State of Delaware on [_______], 1999, pursuant
to the master trust agreement (as amended from time to time, the "Master Trust
Agreement") among ART and the Owner Trustee. The Trust is wholly owned by ART.
Prior to its formation the Trust had no assets or obligations. The Trust was
created for the sole and limited purpose of purchasing Receivables relating to
Premium Finance Obligations underwritten in compliance with AIC's underwriting
criteria by the Originators. The Trust will not engage in any business activity
other than acquiring and holding Receivables, issuing Series (each, a "Series")
of Notes supported by the payments on those Receivables and making payments
thereon and engaging in related activities (including, with respect to any
Series, obtaining any Enhancement and entering into related Enhancement
agreements). As a consequence, the Trust is not expected to have any need for
additional capital resources other than the assets of the Trust. The principal
executive offices of the Trust are located at [_______], [_______], Delaware,
[_______], telephone number [(___)] [______]-[______].
Trust Assets
Each Note will represent an obligation of the Trust.
The property of the Trust may include:
o the beneficial interest in loans to Insureds to finance premiums for
commercial property and casualty insurance policies;
o if specified in an accompanying Prospectus Supplement, the rights to
receive deferred payments to become due from Insureds to pay premiums
for property and casualty insurance policies;
o payments due and to become due, and collections and recoveries on
those Loans and Deferred Payment Obligations, if any;
o any other property transferred to the Trust described in this
Prospectus and any accompanying Prospectus Supplement; and
o an ownership interest in one or more other finance trusts whose assets
will be substantially similar to the Loans and Deferred Payment
Obligations of the Trust.
As specified in the prospectus supplement, in addition to the Receivables,
the assets of the Trust may also include (a) all monies on deposit in certain
bank accounts of the Trust, (b) all monies on deposit in certain bank accounts
established and maintained for the benefit of Noteholders of any Series and (c)
any Enhancement issued with respect to any Series.
The Owner Trustee
The trustee for the Trust will be Chase Manhattan Bank Delaware (the "Owner
Trustee"). The Owner Trustee's liability in connection with the issuance and
sale of the Notes will be limited solely to the express obligations of the Owner
Trustee set forth in the Master Trust Agreement. The Owner Trustee may resign at
any time, in which event the Seller or its successors will be obligated to
appoint a successor trustee which is eligible under the related Master Trust
Agreement. The Seller also may remove the Owner Trustee if the Owner Trustee
ceases to be eligible to continue as Owner Trustee under the Master Trust
Agreement or if the Owner Trustee becomes insolvent. In such circumstances, the
Seller will be obligated to appoint a successor, trustee eligible under the
Master Trust Agreement. Any resignation or removal of the Owner Trustee and
appointment of a successor trustee will be subject to any conditions or
approvals specified in this Prospectus and will not become effective until
acceptance of the appointment by the successor trustee.
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BUSINESS OF A.I. RECEIVABLES TRANSFER CORP. AND THE ORIGINATORS
General
With respect to each Series of Notes, the Receivables conveyed or to be
conveyed to ART by the Originators and subsequently transferred to the Trust by
ART pursuant to a sale and servicing agreement as amended from time to time (the
"Sale and Servicing Agreement"), among ART, as seller (the "Seller") and AIC,
AICCO, IP Finance I, IP Finance II and AP Funding, each as servicer
(collectively, the "Servicer"), the Indenture Trustee and the Trust, have been
or will be generated or purchased by the Originators:
o from Loans to Insureds to finance commercial property and casualty
insurance premiums funded (or with a firm commitment to be funded
within 30 days of transfer to the Trust) (the "Loan Portfolio"); and
o from installments of premium payments to become due from Insureds for
property and casualty insurance premiums (the "Deferred Payment
Obligations") to be purchased in the future from insurance companies
by the Originators.
The Servicer currently services the Loan Portfolio and will service any
future portfolio of Deferred Payment Obligations in the manner described in an
accompanying Prospectus Supplement.
A.I. Credit Corp. was incorporated in New Hampshire in 1973 and is a
wholly-owned subsidiary of AIG Credit Corp., a Delaware corporation ("AIGCC"),
which in turn is a wholly-owned subsidiary of American International Group,
Inc., a Delaware corporation ("AIG"). AIG is a holding company which through its
subsidiaries is primarily engaged in a broad range of insurance and insurance
related activities in the United States and abroad. The principal business of
A.I. Credit Corp. consists primarily of the financing of loans and deferred
payment obligations to commercial insureds ("Insureds") to finance property and
casualty insurance premiums throughout the United States, other than in
California, and including the Commonwealth of Puerto Rico. AICCO, Inc.
("AICCO"), which is a wholly-owned subsidiary of AIGCC that was incorporated in
California in 1974, conducts the same premium finance lending activities in
California. Imperial Premium Finance, Inc. ("IP Finance I") was incorporated in
Delaware in 1994 and is a wholly-owned subsidiary of AIGCC. IP Finance I
conducts the same premium finance lending activities as AIC throughout the
United States, other than California. Imperial Premium Finance, Inc. ("IP
Finance II"), presently a wholly-owned subsidiary of AIGCC that was incorporated
in California in 1994, conducts the same premium finance lending activities in
California as AICCO. Imperial Premium Funding, Inc. ("IP Funding") was
incorporated in Delaware in 1995 and is a wholly-owned subsidiary of AIGCC that
conducts similar premium financing lending activities in certain States. IP
Finance I, IP Finance II and IP Funding were until January 1999, subsidiaries of
Sun America Corp. which was acquired by AIG in January 1999.
As used in this "Business of A.I. Receivables Transfer Corp. and the
Originators" section (unless otherwise indicated), "AIGC" refers to AIC, AICCO,
IP Finance I, IP Finance II and IP Funding, collectively. AIGC finances premiums
for most lines of property and casualty insurance. AIGC believes that it is the
largest insurance premium finance company in the United States. The principal
executive office of AIC is located at 160 Water Street, New York, New York
10038, telephone number (212) 428-5400, of AICCO is located at 777 South
Figueroa Street, Los Angeles, California 90017, telephone number (213) 689-3600,
of IP Finance I, is located at 15303 Ventura Blvd., Suite 1600, Sherman Oaks,
California 91403, telephone number (818) 906-1200, of IP Finance II is located
at 15303 Ventura Blvd., Suite 1600, Sherman Oaks, California 91403, telephone
number (818) 906-1200 and of IP Funding is located at 15303 Ventura Blvd., Suite
1600, Sherman Oaks, California 91403, telephone number (818) 906-1200. In
addition to loans funded and deferred payment obligation underwritten by AIGC,
AIGC also purchases loans funded by Third Party Originators.
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Premium Finance Obligations
Loans
A commercial premium finance loan typically is an installment loan made to
a commercial insurance buyer, the proceeds of which pay premiums that are due to
the insurance company. Financed commercial insurance policies commonly (a) are
for a term of one year or less, (b) require the full premium to be paid at
inception and (c) provide upon early cancellation for a return of unearned
premium to the insured. Insureds generally make fixed scheduled payments on the
loans which include a finance charge based on a spread over the estimated yield
at the date of origination of the loan of money market investments with a
maturity comparable to the loan. The finance charges on premium finance loans
funded by AIGC may vary considerably, depending on the term and amount of the
loan, the insured's credit payment history, [the size of the premium down
payment], other collateral securing the loan and other considerations.
AIGC utilizes standardized premium finance loan agreements for Loans that
give AIGC a limited power of attorney, allowing it to cancel the insurance
coverage upon non-payment of a loan installment by the Insured and to collect
from the insurance company any unearned premium that may secure the loan.
Depending on the terms of the loan and of the related insurance policy, the
return of premium may or may not be sufficient to pay off the outstanding
balance of the loan, after the cancellation of the related policy. AIGC also has
a right to recover any unpaid loan balance directly from the Insured.
A common premium finance loan structure may include a 20% down payment on
the premium paid by the Insured with the remaining 80% funded by a loan from the
insurance premium finance company to be repaid to AIGC by the Insured in nine
equal monthly installments. AIGC's premium finance loans generally have terms
that range from 6 to 12 monthly installments with higher or lower down payment
percentages depending upon AIGC's applicable credit and underwriting policies.
Certain loans do not have level repayment requirements, usually to accommodate
an Insured's cash flow. Given the relatively short duration of most premium
finance loans, such loans are generally not prepaid prior to the scheduled
payment dates although the loan terms do not prohibit prepayments or provide for
penalties in the event of prepayment.
Financed commercial insurance policies usually require that the full
insurance premium be paid at the commencement of the policy period. The
insurance company customarily earns the right to the full premium over the
course of the policy period. If the insured cancels the policy prior to the end
of the policy period, the insured is commonly entitled to a repayment of the
portion of premium payment that is unearned by the insurance company at the time
of cancellation. Depending on the type of insurance coverage and the terms of
the particular insurance policy, the amount of unearned premium available upon
cancellation will vary in light of relevant factors such as (a) the applicable
method for measuring unearned premium which may be by proration over the policy
term or, as required by some states, by an accelerated method under which more
premium is earned in the earlier portion of the policy period, (b) the extent of
the policy period that has expired at the time of cancellation, (c) the loss
experience under the policy prior to cancellation and (d) variations after the
commencement of the policy period in the scope of the risks covered. The
insurance company may, depending on the terms of the policy, be entitled to
retroactively review and evaluate factors (c) and (d) above after cancellation
which may result in a reduction of the amount, and affect the timing, of
repayment of any unearned premiums. Also, in certain cases the insurance company
may earn the entire premium at inception of the policy or upon the occurrence of
an insured loss under the policy, in either of which cases there would be no
unearned premium to be returned.
Premium finance lending activities are regulated by most states. Among
other matters, many states regulate various terms of the premium finance loans
such as refund policies and rates of interest and late charges that may be
charged an insured. Premium finance loans are funded by AIGC on standardized
loan forms, the provisions and format of which are also usually subject to state
regulation or approval.
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Deferred Payment Obligations
AIGC also provides premium financing by acquiring from insurance companies
rights to receive payments that become due from Insureds of premiums for
commercial property and casualty insurance. AIGC intends to execute a purchase
agreement with each insurance company from whom it purchases Deferred Payment
Obligations. With respect to Deferred Payment Obligations, the commercial
insurance policy does not require that the full insurance premium be paid at the
commencement of the policy period. Instead, the Insured pays regular
installments of premiums to the insurance company during the term of the
insurance policy. In the event of a default by the Insured, the insurance
company generally has the right to cancel the policy coverage. In the event of a
cancellation, the remaining amount the Insured is obligated to pay is typically
reduced to reflect the shortened policy period. AIGC's right to recover from the
Insured any unpaid Deferred Payment Obligation balance is limited to the amount
the Insured is obligated to pay under the insurance policy and is likely to be
less than the remaining unamortized balance on the Deferred Payment Obligation.
AIGC expects that in the purchase agreement the insurance company will agree to
return to AIGC the unearned premium and/or provide alternative collateral
consistent with AIGC's underwriting policies, which AIGC will be entitled to
receive upon default by the Insured.
AIGC generally will purchase from insurance companies the Insured's
obligation at a discount based on a spread over the estimated yield of the
Deferred Payment Obligation of money market investments with a maturity
comparable to the Deferred Payment Obligation. The amount of the discount on a
Deferred Payment Obligation represents the finance charge and the purchase price
represents the principal balance. The finance charges on Deferred Payment
Obligations funded by AIGC may vary considerably, depending on the term and the
amount of the Deferred Payment Obligation, the Insured's credit payment history,
the size of the premium down payment other collateral securing the Deferred
Payment Obligation and other considerations.
The insurance policies related to Deferred Payment Obligations are
regulated by most states; however, assignments of Deferred Payment Obligations
generally are not regulated. AIGC intends to use standardized assignment
agreements for its purchase of Deferred Payment Obligations.
Premium Finance Loan Origination; Collection Policy
AIGC generally locates Insureds for premium finance loan transactions
through independent insurance agents and brokers that are licensed under state
laws, who offer premium loan programs to enable their commercial customers to
purchase the full amount of insurance coverage needed and spread out the cost of
premium payments over time. Thus, loan origination is usually dependent on
relationships with insurance brokers and agents and knowledge of the insurance
marketplace. The funding by AIGC of insurance premium finance loans is commonly
commenced by an agent or broker contacting AIGC to initiate the premium loan
process and outlining to AIGC the proposed loan transaction, including Insured
and insurance company information and coverage types and amounts. AIGC then
reviews the information submitted by such agent or broker in light of its
underwriting procedures. See "--Premium Finance Obligations Underwriting
Procedures" below. After AIGC approval, the Insured executes a standard premium
finance loan agreement, which contains a promise to repay the loan, a limited
power of attorney giving AIGC the authority in the event of default on the loan
to contact the insurance company directly and cancel coverage, and a collateral
assignment to AIGC of the unearned insurance premium, if any, returnable
following such cancellation and may, in some cases, include an assignment of
additional collateral (for example, a letter of credit or a surety bond) to
secure the loan.
Following receipt and acceptance of the signed premium finance loan
agreement, AIGC either sends the loan proceeds to the insurance company to pay
the premium balance due or releases funds to the insurance agent or broker who
then pays the insurance company. AIGC bills the Insured directly on a monthly
basis. Each Insured is directed to remit payments to the appropriate regional
lockbox account maintained by AIGC.
Since the insurance company generally earns a portion of the premium each
day, thereby reducing unearned premium amounts for loans secured by such
collateral, prompt action on loan defaults is
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important. On defaulted loans, most states allow premium finance companies such
as AIGC to issue a notice of "intent to cancel" the related insurance policy
within five or ten days after the premium loan installment due date on which the
Insured defaulted. A "notice of cancellation" can then be issued generally ten
days after an "intent to cancel" notice has been mailed. Once a cancellation
notice has been issued, AIGC will customarily proceed to take steps to collect
any unearned premium available from the insurance company and, if applicable,
realize on any collateral and apply it to the loan balance. If the returned
premium and amounts realized from collateral, if any, do not retire the loan
balance due, AIGC will customarily seek payment from the Insured pursuant to the
terms of the premium finance loan agreement. AIGC's policy is to (a) seek to
collect past due loan payments prior to policy cancellation and (b) if a
cancellation occurs, attempt to both collect the delinquent loan payments and
obtain reinstatement of the insurance coverage. Since Insureds usually need to
maintain insurance (and to reinstate cancelled policies) to meet their business
objectives, collections often continue even after policy cancellation and
cancelled policies are often reinstated.
Generally, the policy cancellation date occurs within one month of the
related loan payment default. The current policy of AIGC is to charge off as a
loss the unpaid defaulted loan balance one year after the cancellation of the
related policy. Following cancellation, AIGC will process the collection of any
unearned premium with the appropriate insurance company, will realize on any
additional collateral, if any, or may pursue collection against the Insured if
sufficient unearned premium is unavailable and amounts realized on any
additional collateral prove insufficient. If during this period AIGC determines
the unpaid loan is not likely to be collected, AIGC may charge off the loan
prior to such first anniversary. Under the terms of the Sale and Servicing
Agreement, any recoveries with respect to Loans that have been written off will
be included in the assets of the Trust and considered Finance Charge
Receivables. See "The Receivables."
Deferred Payment Obligation Origination; Collection Policy
AIGC expects to locate deferred premium obligations through its contacts
with insurance companies and thereby develop a relationship to obtain access to
portfolios of deferred payment obligations originated by insurance companies
affiliated with AIG or unaffiliated third party insurance companies. AIGC
expects to use its credit underwriting procedures now used in evaluating the
credit risk of Loan Insureds to evaluate the credit risk of Insureds relating to
Deferred Payment Obligations it intends to purchase. AIGC will also evaluate the
credit risk with respect to the insurance company that issued the underlying
policy and that will be selling the obligations to AIGC. See "The Originators
Premium Finance Portfolios--Premium Finance Obligation Origination; Collection
Policy" in the accompanying Prospectus Supplement.
After AIGC's approval of an insurance company as a seller of deferred
payment obligations, the insurance company will execute an assignment agreement.
Rather than a power of attorney allowing AIGC to cancel the policy, the
assignment will contain either an obligation by the insurance company to cancel
the insurance policy on AIGC's request and/or require the insurer to provide
AIGC with additional collateral. Following approval of each particular
transaction, AIGC will send the purchase price to the insurance company. AIGC
will either bill each Insured directly for the premiums on the scheduled basis
or the insurer will continue to collect the premiums and will be required under
the assignment agreement to remit them to AIGC. Each Insured or the insurer, as
the case may be, will be directed to remit payments to the appropriate lockbox
account maintained by AIGC.
In cases where the insurer has agreed to return the unamortized purchase
price representing unearned premiums following cancellation of a policy, it is
important that AIGC immediately notify the insurance company upon a non-payment
of premiums.
Upon a receipt of notice from AIGC of non payment of premiums, the
insurance company may be required by the assignment agreement to send out the
equivalent of an "intent to cancel" notice to the Insured regarding the related
insurance policy in accordance with state law, generally, within five or ten
days after the due date for a premium payment. The equivalent of a "notice of
cancellation" can then be issued, generally, ten days thereafter. In cases where
the insurance company has agreed to return unearned premiums upon cancellation,
AIGC will then take steps to collect unearned
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premiums from the insurance company from which it purchased the Deferred Payment
Obligations and, if that fails or is otherwise insufficient or unavailable, to
realize on any collateral securing the insurance company's repayment obligation.
Depending on the terms of the Deferred Payment Obligation and the related
insurance policy, the return of premium may or may not be sufficient to pay off
outstanding balance of the Deferred Payment Obligation after cancellation of the
related insurance policy.
Generally, the policy cancellation date occurs within one month of the
related payment default. The current policy of AIGC is to charge off as a loss
the unpaid defaulted deferred payment balance one year after cancellability of
the related policy. Following such date, AIGC will process the collection of any
unearned premium with the appropriate insurance company and/or will realize on
any additional collateral, if any. If during this period AIGC determines the
unpaid deferred payment obligation is not likely to be collected, AIGC may
charge off the obligation prior to such first anniversary. Under the terms of
the Sale and Servicing Agreement, any recoveries with respect to Deferred
Payment Obligations that have been written off will be included in the assets of
the Trust and considered Finance Charge Receivables. See "The Receivables."
AIGC believes that any amounts owing to it by an insolvent insurance
company in respect of the unamortized purchase price of a Deferred Payment
Obligation would not be covered by state insurance guarantee funds.
Premium Finance Loan Purchase Policies
In addition to directly originating premium finance loans, AIGC has entered
into purchase agreements whereby AIGC purchases premium finance loans
("Purchased Loans") from third party premium finance loan originators ("Third
Party Originators") immediately upon their origination by such Third Party
Originators. The terms "fund," "funded" and "funding," when used herein with
respect to Loans, refer both to the making of such Loans directly by the
Originators to Insureds and to the purchase of such Loans by the Originators
from Third Party Originators immediately upon the origination of such Loans by
Third Party Originators, unless the context otherwise requires. Third Party
Originators are commonly affiliated with insurance agents and/or brokers.
Purchased Loans are originated on substantially similar terms as, and pursuant
to the same credit standards, policies and procedures applied to, loans directly
originated by AIGC. The beneficial interest and rights in and to the Purchased
Loans acquired by AIGC as purchaser are substantially similar to those in loans
which are directly originated by AIGC, including, but not limited to, the
limited power of attorney allowing it to cancel the insurance coverage upon
non-payment of a loan installment by the Insured and to collect from the
insurance company any unearned premium that may secure the loan. AIGC has made
identical representations and warranties with respect to Receivables sold to the
Seller pursuant to the Purchase Agreement relating to Purchased Loans, as are
made with respect to Receivables relating to Loans directly originated by AIGC.
Premium Finance Obligations Underwriting Procedures
AIGC considers and evaluates a variety of risks in evaluating each instance
of funding an insurance Premium Finance Obligation. These include (a) the
transaction structure (term, the amount of down payment and the availability of
unearned premium as collateral), (b) the creditworthiness of the Insured, (c)
the creditworthiness of the insurance company, in those cases where reliance is
placed on the right to unearned premiums, (d) in the case of Loans, the
capabilities and operating procedures of the insurance agent or broker that (i)
places the insurance policy, (ii) serves as a source of significant information
regarding the Loan transaction, and (iii) may disburse the Loan proceeds or
collect unearned premium funds for AIGC, (e) in the case of Deferred Payment
Obligations, the creditworthiness and operating capabilities of the insurance
company that serve as a source of Insured information and (f) the availability
of any additional collateral. These factors may be given different weight in the
case of any particular obligation. If there is any question as to the financial
responsibility of any Insured, it is the policy of AIGC to ensure that any
obligation of any such Insured is properly collateralized.
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All applications from Insureds for obligations to be funded by AIGC are
reviewed for completeness and creditworthiness based on the obligation
underwriting criteria established by AIGC. Under AIGC's current underwriting
policies, obligation applications are first reviewed by a branch office and a
determination is made as to whether the obligation may be approved by the branch
office, or be subject to further evaluation and approval by the corporate credit
department of AIGC's head office. Such determination is based primarily upon the
size of the premium (and corresponding obligation) to be financed and the
associated risk related to the amount of any unsecured credit exposure. A
prospective obligation with a risk assessment exceeding a certain threshold
receives a formal credit review performed by the credit department of AIGC's
head office. Such risk threshold can vary depending upon the amount of
downpayment made by the prospective Insured, the amount of unearned premium
collateral, the related insurance carrier, the agent/broker involved in the
transaction, if any, and the availability of any additional collateral. In
making obligation decisions, the corporate credit department uses Dun &
Bradstreet reports, financial statements, payment histories, agent/broker and
AIGC local office input, and its extensive experience. For prospective
obligations with risk assessments below an applicable threshold, AIGC relies
primarily on the inherent diversification of risk, and approval is granted by
the branch office without additional action. Premium Finance Obligations that
have special factors, such as large principal amounts, low down payments or the
absence of unearned premium collateral, are also subject to evaluation and
approval by the head office.
AIGC's general guideline for approval of an insurance company is a rating
of at least B+ by A.M. Best Company. Based upon AIGC's own credit determination,
it may finance insurance premiums on policies issued by insurance companies that
have a lower rating or, in the case of foreign insurers and certain domestic
insurers that meet AIGC credit requirements, that are unrated. While Receivables
may relate to Premium Finance Obligations made to finance premiums payable to
such unrated or lower rated foreign or domestic insurers, AIGC believes that
each of such insurers is subject to state insurance law requirements relating to
the repayment of unearned insurance premiums upon cancellation of the related
policy. With respect to agents and brokers, AIGC monitors loans in its portfolio
originated by particular agents and brokers to assist in assessing their
capabilities and performance as agents or brokers. The accompanying Prospectus
Supplement will describe the percentage of obligations in the Trust Portfolio
that represent obligations to finance insurance policies issued by affiliates of
AIG.
State Regulation of Premium Finance Lending Activities
The making, purchasing, enforcement and collection of insurance premium
loans is subject to extensive regulation by many states' laws. Such laws vary
widely by state, but often (i) require that premium finance lenders be licensed
by the state, (ii) restrict the content of premium finance loan agreements, and
impose certain disclosure requirements on such agreements, (iii) limit the
amount of finance charges that may be lawfully imposed, (iv) regulate the amount
of refunds due an Insured who prepays the premium finance loan prior to
maturity, (v) regulate the amount of late fees, if any, and finance charges that
may be charged upon a premium finance loan becoming overdue, (vi) regulate the
manner and method of canceling an insurance policy upon non-payment of the
premium finance loan, including a requirement that the premium finance lender
provide the Insured with appropriate notice prior to such cancellation, and
(vii) allow imposition of penalties, which may be significant, upon premium
finance lenders for violations of the state's premium finance laws. See "Risk
Factors--Effects of State Regulation of Premium Finance Lending and Deferred
Payment Obligations on Noteholders."
Assignments of deferred payment obligations are not subject to state
regulations. However, there can be no guarantee that deferred payment
obligations may not be subject to state regulation in the future.
As Servicer
AIC, AICCO, IP Finance I, IP Finance II and IP Funding will act as the
Servicer for the Premium Finance Obligations giving rise to Receivables in
accordance with the Sale and Servicing Agreement and each supplement thereto. In
certain limited circumstances, AIC, AICCO, IP Finance I, IP Finance II and IP
Funding may resign or be removed as Servicer, in which case a third party may be
appointed as its successor. See "Risk Factors--Effects of State Regulation of
Premium Finance Lending and Deferred
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Payment Obligations on Noteholders," "Description of the Transfer and Servicing
Agreements--Collection and Other Servicing Procedures," "--Certain Matters
Regarding the Seller and the Servicer," and "--Servicer Default."
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THE RECEIVABLES
The assets conveyed to the Trust (a) will include the entire beneficial
interest in certain Loans to be transferred to the Trust after [_________], 1999
(the "Initial Cut-Off Date") including (1) all amounts due and to become due and
all collections and recoveries on the Loans and (2) the proceeds of certain
collateral securing the Loans, (b) may include the entire interest in certain
Deferred Payment Obligations to be transferred to the Trust, including (1) all
amounts due and to become due and all collections and recoveries on the Deferred
Payment Obligations and (2) the proceeds of any collateral securing the Deferred
Payment Obligations, (c) the ownership interest in one or more trusts whose
assets are substantially similar to the Loans in the Trust, (d) certain
[Participations in Premium Finance Obligations] and (e) any other related
property described in an accompanying Prospectus Supplement. The interests
described above are referred to as "Receivables". The Trust assets will not
include, as of any date of determination, (a) with respect to any Receivable
arising under a Premium Finance Obligation which is not a Defaulted Obligation,
any collections received by the Servicer on such Premium Finance Obligation in
excess of the sum of (1) the amounts due and payable on such Premium Finance
Obligation during the month in which such date occurs and (2) all accrued and
unpaid amounts, if any, on such Premium Finance Obligation in respect of any
month or months prior to the month in which such date occurs or (b) with respect
to any Receivable arising under a Defaulted Obligation, any collections received
by the Servicer on such Defaulted Obligation in excess of all amounts due
thereon (each, a "Credit Balance").
Each Loan will have been funded and each Deferred Payment Obligation will
be financed by the Originators to finance commercial insurance premiums. Neither
the Premium Finance Obligations nor the Receivables are guaranteed by ART, AIC,
AICCO, AIGCC, AIG, IP Finance I, IP Finance II, IP Funding or any affiliate
thereof, and the Trust, as holder of the Receivables, has no recourse against
ART, AIC, AICCO, AIGCC, AIG, IP Finance I, IP Finance II, IP Funding or any
affiliate thereof for the non-collectability of the Receivables, except that,
under certain limited circumstances, the Seller will be required to repurchase
certain Receivables from the Trust in certain cases and AIG may provide
indemnification to the Trust under certain circumstances. See "Description of
the Transfer and Servicing Agreements--Certain Matters Regarding the Seller and
the Servicer." Each Originator will act as Servicer with respect to the
Receivables relating to Premium Finance Obligations it financed and which it
transferred to the ART for transfer to the Trust in accordance with the
servicing procedures established by AIC. As set forth in the Sale and Servicing
Agreement, each Receivable to be transferred to the Trust must satisfy certain
eligibility criteria. See "Description of the Transfer and Servicing
Agreements--Representations and Warranties."
The Receivables conveyed to the Trust (the "Trust Portfolio") will arise
from Premium Finance Obligations selected from the Loan Portfolio and any future
portfolio of Deferred Payment Obligations on the basis of criteria set forth in
the Sale and Servicing Agreement specified in the accompanying Prospectus
Supplement and, with respect to Additional Receivables, as of the date of their
conveyance. The Seller will have the right (subject to certain limitations and
conditions set forth therein), and in some circumstances will be obligated, to
convey from time to time additional eligible Premium Finance Obligations to be
included as Receivables (the "Additional Receivables") and to transfer to the
Trust the entire interest in all such Additional Receivables, whether such
Receivables are then existing or thereafter created. Any Additional Receivables
conveyed pursuant to the Sale and Servicing Agreement must be Eligible
Receivables as of the date of their conveyance. Furthermore, pursuant to the
Sale and Servicing Agreement, the Seller has the right (subject to certain
limitations and conditions), and in some circumstances the obligation, to
designate certain Receivables and to require the Trustee to reconvey those
Receivables (the "Removed Receivables") to the Seller, whether such Receivables
are then existing or thereafter created. Throughout the term of the Trust, the
Trust Portfolio will be comprised of Receivables designated by the Seller on the
Initial Cut-Off Date plus any Additional Receivables minus any Removed
Receivables. With respect to each Series of Notes, the Seller will represent and
warrant to the Trust that, as of the date of issuance of the related Series (the
"Closing Date") and the date Receivables are conveyed to the Trust (each a
"Cut-Off Date"), such Receivables meet certain eligibility requirements. See
"Description of the Transfer and Servicing Agreements--Representations and
Warranties" in this Prospectus.
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Certain information regarding the performance and composition of the Trust
Portfolio will be described in the accompanying Prospectus Supplement as of a
date specified in the supplement. The Originators will transfer and expect
hereafter to transfer to ART the Eligible Receivables resulting from all Premium
Finance Obligations financed by them from the Initial Cut-Off Date pursuant to
the Purchase Agreement for transfer to the Trust pursuant to the Sale and
Servicing Agreement (other than loans and related receivables transferred and
required to be transferred by AIC and AICCO to AIC Premium Finance Loan Master
Trust).
There can be no assurance that the performance experience of the
Receivables transferred to the Trust will be comparable to that set forth in the
accompanying Prospectus Supplement. In addition, there are many legal, economic
and competitive factors that could adversely affect the amount and
collectability of the Premium Finance Obligation related to the Receivables,
including insureds' or insurance companies' decisions to use new sources of
credit, which would affect the ability of the Originators to generate Additional
Receivables, and changes in usage of credit, payment patterns and general
economic conditions. Because the impact of these and other factors (including
the composition of the Receivables and the interest rates, fees and charges
assessed thereon) may change in the future.
The Prospectus Supplement relating to each Series of Notes will provide
certain information about the Trust Portfolio as of the date specified. Such
information will include, but will not be limited to, the premium finance
obligation account balance, (total, average and range thereof), remaining term
(average and range thereof), geographic distribution and the historical
delinquency and loss statistics relating to the premium finance obligations.
MATURITY ASSUMPTIONS
Unless otherwise specified in the accompanying Prospectus Supplement, for
each Series, following the Revolving Period, collections of Principal
Receivables are expected to be distributed to holders of each Class of Notes
(the "Noteholders") of such Series or any specified class (each a "Class")
thereof on each specified Payment Date during the Controlled Amortization Period
or the Principal Amortization Period, or are expected to be accumulated for
payment to Noteholders of such Series or any specified Class thereof during a
Controlled Accumulation Period and, under certain limited circumstances if so
specified in the accompanying Prospectus Supplement, a Rapid Accumulation Period
(each, an "Accumulation Period") and distributed on a Scheduled Payment Date;
provided, however, that, if the Rapid Amortization Period commences, collections
of Principal Receivables will be paid to Noteholders in the manner described in
this Prospectus and in the accompanying Prospectus Supplement. The accompanying
Prospectus Supplement will specify when the Controlled Amortization Period, the
Principal Amortization Period or an Accumulation Period, as applicable, will
commence, the principal payments expected or available to be received or
accumulated during such Controlled Amortization Period, Principal Amortization
Period or Accumulation Period, or on the Scheduled Payment Date, as applicable,
the manner and priority of principal accumulations and payments among the
Classes of a Series of Notes, the payment rate assumptions on which such
expected principal accumulations and payments are based and the Pay Out Events
which, if any were to occur, would lead to the commencement of a Rapid
Amortization Period or, if so specified in the accompanying Prospectus
Supplement, a Rapid Accumulation Period.
No assurance can be given, however, that the Principal Receivables
allocated to be paid to Noteholders or the holders of any specified Class
thereof will be available for distribution or accumulation for payment to
Noteholders on each Payment Date during the Controlled Amortization Period, the
Principal Amortization Period or an Accumulation Period, or on the Scheduled
Payment Date, as applicable. In addition, the Seller can give no assurance that
the payment rate assumptions for any Series will prove to be correct. The
accompanying Prospectus Supplement will provide certain historical data relating
to payments by Insureds, charge-offs and other related information relating to
the Trust Portfolio. There can be no assurance that future events will be
consistent with such historical data.
There can be no assurance that collections of Principal Receivables with
respect to the Trust Portfolio, and thus the rate at which the related
Noteholders could expect to receive or accumulate payments of principal on their
Notes during an Amortization Period or Accumulation Period, or on any Scheduled
Payment Date, as applicable, will be similar to any historical experience set
forth in the
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accompanying Prospectus Supplement. If a Pay Out Event occurs and the Rapid
Amortization Period commences, the average life and maturity of such Series of
Notes could be significantly reduced.
Because, for any Series of Notes, there may be a slowdown in the payment
rate below the payment rate used to determine the amount of collections of
Principal Receivables scheduled or available to be distributed or accumulated
for later payment to Noteholders or any specified Class thereof during a
Controlled Amortization Period, a Principal Amortization Period or a Rapid
Amortization Period (each, an "Amortization Period") or an Accumulation Period
or on any Scheduled Payment Date, as applicable, or a Pay Out Event may occur
which could initiate the Rapid Amortization Period, there can be no assurance
that the actual number of months elapsed from the date of issuance of such
Series of Notes to the final Payment Date with respect to the Notes will equal
the expected number of months.
USE OF PROCEEDS
The net proceeds from the sale of each Series of Notes offered hereby will
be paid to the Seller. The Seller will use such proceeds for its general
corporate purposes.
DESCRIPTION OF THE NOTES
The Notes will be issued in Series. Each Series will represent a debt
obligation of the Trust secured by a partial, undivided interest in the assets
of the Trust. Each Series will be issued pursuant to an indenture (the
"Indenture") entered into between the Trust and The First National Bank of
Chicago, as indenture trustee (the "Indenture Trustee") and a series supplement
to the Indenture (a "Series Supplement"), a copy of the form of which is filed
as an exhibit to the Registration Statement of which this Prospectus is a part.
The Prospectus Supplement for each Series will describe any provisions of the
Series Supplement relating to such Series which may differ materially from the
Series Supplement filed as an exhibit to the Registration Statement. The
following summaries describe certain provisions common to each Series of Notes.
The summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
Indenture and the related Series Supplement.
General
The Notes of each Series will be secured by a partial, undivided interest
in the assets of the Trust (the "Investor Interest"), including the right to the
applicable Investor Percentage of all payments on the Receivables in the Trust.
For each Series of Notes, unless otherwise specified in the accompanying
Prospectus Supplement, the Investor Interest on any date will be equal to the
initial Investor Interest as of the related Closing Date for such Series
(increased by the principal balance of any Notes of such Series issued after the
Closing Date for such Series or increases in principal balance related to
funding of Variable Funding Notes) minus the amount of principal paid to the
related Noteholders prior to such date. If so specified in the Prospectus
Supplement relating to any Series of Notes, under certain circumstances the
Investor Interest may be further adjusted by the amount of principal allocated
to Noteholders, the funds on deposit in any specified account, and any other
amounts specified in the accompanying Prospectus Supplement.
Each Series of Notes may consist of one or more Classes, one or more of
which may be Senior Notes ("Senior Notes") and one or more of which may be
Subordinated Notes ("Subordinated Notes"). Each Class of a Series will evidence
the right to receive a percentage of each distribution of principal or interest
or both. The Investor Interest with respect to a Series with more than one Class
will be allocated among the Classes as described in the accompanying Prospectus
Supplement. The Notes of a Class may differ from Notes of other Classes of the
same Series in, among other things, the percentage amounts allocated to
principal payments, maturity date, annual interest rate (the "Note Rate") and
the availability of Enhancement.
For each Series of Notes, payments and deposits of interest and principal
will be made on Payment Dates to Noteholders in whose names the Notes were
registered on the record dates specified in the
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accompanying Prospectus Supplement. Interest will be distributed to Noteholders
in the amounts, for the periods and on the dates specified in the accompanying
Prospectus Supplement.
Unless otherwise specified in the accompanying Prospectus Supplement, with
respect to each Series of Term Notes, during the Revolving Period, the amount of
the Investor Interest in the Trust will remain constant except under certain
limited circumstances, except in the case of Variable Funding Notes. See
"Description of the Transfer and Servicing Agreements--Defaulted Receivables;
Investor Charge-Offs" in this Prospectus. With respect to each Series of
Variable Funding Notes, the amount of Investor Interest securing such notes may
increase or decrease along with the principal balance of such notes, subject to
certain limitations as the amount of Principal Receivables in the Trust may vary
from time to time as new Principal Receivables are added and others are paid.
When a Series is amortizing, the Investor Interest of such Series will decline
as payments of Principal Receivables are collected and distributed to or
accumulated for distribution to the Noteholders. See "--New Issuances" in this
Prospectus.
Unless otherwise specified in the accompanying Prospectus Supplement, Notes
of each Series initially will be represented by notes registered in the name of
the nominee of DTC (together with any successor depository selected by the
Seller, the "Depository") except as set forth below. Unless otherwise specified
in the accompanying Prospectus Supplement, with respect to each Series of Notes,
beneficial interests in the Notes will be available for purchase in minimum
denominations of $1,000 and integral multiples thereof in book-entry form only.
The Seller 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 each
Series of Notes. No owner of beneficial interests in the Notes (a "Note Owner")
acquiring an interest in the Notes will be entitled to receive a note
representing such person's interest in the Notes. Unless and until Definitive
Notes are issued for any Series under the limited circumstances described in
this Prospectus, all references in this Prospectus to actions by Noteholders
shall refer to actions taken by DTC upon instructions from its Participants (as
defined below). In addition, unless and until Notes in fully registered,
certificate form ("Definitive Notes") are issued for any Series, the Trustee
will not consider a Note Owner to be a Noteholder (as that term is used in the
Indenture) and all references in this Prospectus to distributions, notices,
reports and statements to Noteholders shall refer to distributions, notices,
reports and statements to DTC or Cede, as the registered holder of the Notes, as
the case may be, for distribution to Note Owners in accordance with DTC
procedures. Therefore, until such time, a Note Owner will only be able to
exercise its rights as Noteholders indirectly through DTC, Cedelbank, societe
anonyme ("Cedelbank") or the Euroclear System and their participating
organizations. See "Certain Information Regarding the Securities--Book-Entry
Registration" and "-- Definitive Notes" in this Prospectus.
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Notes of such Series, or all or a portion
of any Class thereof, on the Luxembourg Stock Exchange or any other specified
exchange.
Interest Payments
For each Series of Notes and Class thereof, interest will accrue from the
relevant Closing Date on the applicable Investor Interest at the applicable Note
Rate, which may be a fixed, floating or other type of rate as specified in the
accompanying Prospectus Supplement. Interest will be distributed or deposited
with respect to Noteholders on the Payment Dates. Interest payments or deposits
on any Payment Date will be funded from collections of Finance Charge
Receivables allocated to the Investor Interest during the preceding monthly
period or periods (each, a "Monthly Period") and may be funded from certain
investment earnings on funds held in accounts of the Trust and, from any
applicable Credit Enhancement, if necessary, or certain other amounts as
specified in the accompanying Prospectus Supplement. The Prospectus Supplement
relating to each Series of Notes and each Class thereof will describe the
amounts and sources of interest payments to be made, the Note Rate, and, for a
Series or Class thereof bearing interest at a floating Note Rate, the initial
Note Rate, the dates and the manner for determining subsequent Note Rates, and
the formula, index or other method by which such Note Rates are determined.
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Principal Payments
Unless otherwise specified in the accompanying Prospectus Supplement,
during the Revolving Period for each Series of Notes (which begins on the
Closing Date relating to such Series and ends on the day before an Amortization
Period or Accumulation Period begins), no principal payments will be made to the
Noteholders of such Series (except with respect to Variable Funding Notes).
During the Controlled Amortization Period or Principal Amortization Period, as
applicable, which will be scheduled to begin on the date specified in, or
determined in the manner specified in, the accompanying Prospectus Supplement,
and during the Rapid Amortization Period, which will begin upon the occurrence
of a Pay Out Event or, if so specified in the accompanying Prospectus
Supplement, the Rapid Accumulation Period, principal will be paid to the
Noteholders in the amounts and on the dates specified in the accompanying
Prospectus Supplement. During an Accumulation Period, principal will be
accumulated in a trust account established for the benefit of such Noteholders
(a "Principal Funding Account") for later distribution to Noteholders on the
Scheduled Payment Date in the amounts specified in the accompanying Prospectus
Supplement. Principal payments for any Series or Class thereof will be funded
from collections of Principal Receivables received during the related Monthly
Period or Periods as specified in the accompanying Prospectus Supplement and
allocated to such Series or Class and from certain other sources specified in
the accompanying Prospectus Supplement. In the case of a Series with more than
one Class of Notes, the Noteholders of one or more Classes may receive payments
of principal at different times. The accompanying Prospectus Supplement will
describe the manner, timing and priority of payments of principal to Noteholders
of each Class.
Funds on deposit in any Principal Funding Account applicable to a Series
may be subject to a guaranteed rate agreement or guaranteed investment contract
or other arrangement specified in the accompanying Prospectus Supplement
intended to assure a minimum rate of return on the investment of such funds. In
order to enhance the likelihood of the payment in full of the principal amount
of a Series of Notes or Class thereof at the end of an Accumulation Period, such
Series of Notes or Class thereof may be subject to a principal guaranty or other
similar arrangement specified in the accompanying Prospectus Supplement.
Variable Funding Notes
The Trust may issue a Series of Notes ("Variable Funding Notes") that bear
a fixed or floating rate of interest and have an outstanding principal amount
which may be increased or decreased during the Revolving Period for such Series.
Variable Funding Notes will not be offered under this Prospectus. See "Summary
of Terms--Other Interests in the Trust--Other Series of Notes" in the
accompanying Prospectus Supplement.
The Indenture
A form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The Seller will provide a copy
of the final Indenture and the related Series Supplement upon request of any
Noteholder.
Modification of Indenture without Noteholder Consent
The Indenture and any Series Supplement may be amended in writing by the
Owner Trustee (on behalf of the Trust) and the Indenture Trustee, without the
consent of the Noteholders and, if provided in the Prospectus Supplement, with
the consent of any third party Credit Enhancement Provider, if any (provided no
Credit Enhancement Provider Default (as defined in the related Prospectus
Supplement) has occurred and is continuing), unless otherwise provided in the
Prospectus Supplement for the following purposes:
(1) to correct or amplify the description of the collateral or add
additional collateral;
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(2) to evidence and provide for the assumption of the Notes and the
Indenture obligations by a permitted successor to the Trust;
(3) to add additional covenants for the benefit of the related Noteholders,
or to surrender any rights or power conferred upon the Trust;
(4) to convey, transfer, assign, mortgage or pledge any property to or with
the Indenture Trustee;
(5) to cure any ambiguity or correct or supplement any provision in the
Indenture or in any supplemental indenture which may be inconsistent with any
other provision of the Indenture or any supplemental indenture and any Series
Supplement;
(6) to evidence and provide for the acceptance of the appointment of a
successor Indenture Trustee or to add to or change any of the provisions of the
Indenture as shall be necessary and permitted to facilitate the administration
by more than one trustee;
(7) to modify, eliminate or add to the provisions of the Indenture in order
to comply with the Trust Indenture Act of 1939, as amended; and
(8) to add any provisions to, change in any manner, or eliminate any of the
provisions of, the Indenture or Series Supplement or modify in any manner the
rights of Noteholders under such Indenture or Series Supplement; provided that
any action specified in this clause (8) shall not adversely affect in any
material respect the interests of any related Noteholder, unless the
Noteholders' consent is obtained as described below; provided further that no
amendment will be permitted if it would result in a taxable event to any
Noteholder unless such Noteholder's consent is obtained as described below. An
amendment described in clause (8) shall be deemed not to adversely affect the
interests of any Noteholder if each Rating Agency rating such Notes confirms in
writing that such amendment will not result in a reduction or withdrawal of the
then current ratings of such Notes or the applicable Rating Agencies rating such
Notes, within 10 days after receipt of notice of such amendment, shall not have
notified the Seller, the Servicer or the Trust in writing that such amendment
will result in a reduction or withdrawal of the current ratings of the Notes.
Modification of Indenture with Noteholder Consent
The Indenture and any Series Supplement may be amended in writing by the
Owner Trustee (on behalf of the Trust) and the Indenture Trustee, and if
provided in the Prospectus Supplement with the consent of any third party Credit
Enhancement Provider, if any (provided no Credit Enhancement Provider Default
(as defined in the related Prospectus Supplement) has occurred and is
continuing), unless otherwise specified in the accompanying Prospectus
Supplement, with the consent of the Noteholders evidencing not less than 50% of
the outstanding principal balance of all Series of Notes materially and
adversely affected, voting collectively, for the purpose of adding any provision
to, change in any manner or eliminating any of the provisions of the Indenture
or any Series Supplement or modifying in any manner the rights of the
Noteholders of any Series.
Unless the related Prospectus Supplement provides otherwise, without the
consent of the third party Credit Enhancement Provider, if any (so long as no
Credit Enhancement Default (as defined in the related Prospectus Supplement) has
occurred and is continuing), and the holder of each outstanding related Note
affected thereby, however, no amendment to the Indenture or any Series
Supplement may:
(1) change the due date of any installment or principal of or interest on,
or any premium payable upon the redemption of, any Note or reduce the principal
amount thereof, the interest rate thereon or the redemption price with respect
thereto, modify the provisions of the Indenture or any Series Supplement
relating to the application of collections on or the proceeds of the sale of,
the collateral for the Notes to payment of principal of or interest on the Notes
or change any place of payment where or the coin or currency in which any Note
or any interest thereon is payable,
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(2) change the definition of or the manner of calculating the Investor
Interest, the aggregate default amount or the Investor Percentage of such
Series,
(3) reduce the aforesaid percentage of undivided interests, the holders of
which are required to consent to any such amendment, in each case without the
consent of all Noteholders of all Series adversely affected,
(4) modify AIG's support obligations with respect to ART, AIC, AICCO, IP
Finance I, IP Finance II and IP Funding, without the consent of the holders of
Notes of all Series,
(5) impair the right to institute suit for the enforcement of certain
provisions of the Indenture or any Series Supplement regarding payment,
(6) reduce the percentage of the aggregate principal amount of the
outstanding Notes, the consent of the holders of which is required for any
waiver of compliance with certain provisions of the Indenture or any Series
Supplement or of certain defaults thereunder and their consequences as provided
for in the Indenture or any Series Supplement,
(7) modify or alter the provisions of the Indenture or any Series
Supplement regarding the voting of Notes held by the Trust, the Seller, an
affiliate of either of them or any Insured on the Notes,
(8) reduce the percentage of the aggregate outstanding amount of the Notes,
the consent of the holders of which is required to direct the Indenture Trustee
to sell or liquidate the assets of the Trust if the proceeds of such sale would
be insufficient to pay the principal amount and accrued but unpaid interest on
the outstanding Notes,
(9) decrease the percentage of the aggregate principal amount of the Notes
required to amend the sections of the Indenture or any Series Supplement which
specify the applicable percentage of aggregate outstanding principal amount of
the Notes necessary to amend the Indenture or any Series Supplement or certain
other related agreements,
(10) modify any of the provisions of the Indenture or any Series Supplement
in such manner as to affect the calculation of the amount of any payment of
interest on a Payment Date or principal due on any Note on any Payment Date
(including the calculation of any of the individual components of such
calculation) or to affect the rights of the Noteholders to the benefit of any
provisions for the mandatory redemption of the Notes contained in the Indenture
or any Series Supplement or
(11) permit the creation of any lien ranking prior to or on a parity with
the lien of the Indenture with respect to any part of the collateral for the
Notes or, except as otherwise permitted or contemplated in the Indenture or any
Series Supplement, terminate the lien of the Indenture on any such collateral or
deprive the holder of any Note of the security provided by the lien of the
Indenture or any Series Supplement provided further, that no amendment will be
permitted if it would result in a taxable event to any Noteholder unless such
Noteholder's consent is obtained as described above. Promptly following the
execution of any amendment to the Indenture or any Series Supplement, the
Indenture Trustee will furnish written notice of the substance of such amendment
to each Noteholder of all Series (or with respect to an amendment of a Series
Supplement, to the applicable Series).
Events of Default; Rights Upon Event of Default
Unless otherwise specified in the related Prospectus Supplement, "Events of
Default" under the Indenture will consist of: (a) a default for five days or
more in the payment of any interest on any Note after the same becomes due and
payable; (b) a default in the payment of the principal or of any installment of
the principal of any Note when the same becomes due and payable; or (c) certain
events of bankruptcy, insolvency or liquidation of the Trust. However, the
amount of principal due and payable on any class of Notes on any Payment Date,
or any Scheduled Payment Date, if applicable, (prior to the final scheduled
Payment Date, if any, for such class) will generally be determined by the amount
available to be deposited
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in the Payment Account for such Payment Date. Therefore, the failure to pay
principal on a class of Notes generally will not result in the occurrence of an
Event of Default unless such class of Notes has a final scheduled Payment Date,
and then not until such scheduled Payment Date for such class of Notes.
If an Event of Default should occur and be continuing with respect to the
Notes of any Series, the Indenture Trustee or the holders of a majority in
principal amount of all Notes of all Series outstanding voting together as a
single class (a "Note Majority") may declare the principal of all the Notes to
be immediately due and payable. Such declaration may be rescinded by a Note
Majority if: (a) the Trust has paid to the Indenture Trustee a sum sufficient to
pay all amounts then due with respect to the Notes (without giving effect to
such acceleration) and certain amounts payable to the Indenture Trustee and (b)
all Events of Default (other than nonpayment of the principal of the Notes due
solely as a result of such acceleration) have been cured or waived.
If the Notes of any Series have been declared due and payable following an
Event of Default with respect thereto, the Indenture Trustee may institute
proceedings to collect amounts due or foreclose on the Trust assets, exercise
remedies as a secured party, sell the related Receivables or elect to have the
Trust maintain possession of such Receivables and continue to apply collections
on such Receivables as if there had been no declaration of acceleration
(although the Rapid Amortization Period commenced by such declaration will
continue unless such declaration is rescinded). The Indenture Trustee, however,
will be prohibited from selling the Receivables held by the Trust following an
Event of Default, unless (a) the holders of all the outstanding Notes of all
outstanding Series consent to such sale; (b) the Investor Percentage of the
proceeds of such sale are sufficient to pay in full the principal of and the
accrued interest on all outstanding Notes of all outstanding Series at the date
of such sale; or (c) the Indenture Trustee determines that the Investor
Percentage of the proceeds of the Receivables would not be sufficient on an
ongoing basis to make all payments on the outstanding Notes of all outstanding
Series as such payments would have become due if such obligations had not been
declared due and payable, and the Indenture Trustee obtains the consent of the
holders representing [662/3%] of the aggregate principal balance of all
outstanding Notes of all outstanding Series. In the event the Notes are
accelerated and the Receivables are sold, the funds, if any, on deposit in any
reserve account or received from another source of credit support will be
available to first pay interest on and principal of the Notes.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with respect
to any Series of Notes, the Indenture Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of the Note Majority, if the Indenture Trustee reasonably believes it
will not be adequately indemnified against the costs, expenses and liabilities
which might be incurred by it in complying with such request. Subject to the
provisions for indemnification and certain limitations contained in the
Indenture, a Note Majority will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Indenture
Trustee with respect to the Notes [or exercising any trust or power conferred on
the Indenture Trustee] and a Note Majority may, in certain cases, waive any
default with respect thereto, except a default in the payment of principal (or
premium, if any) or interest or a default in respect of a covenant or provision
of the Indenture that cannot be modified without the waiver or consent of` all
of the holders of all outstanding Notes of all outstanding Series.
No holder of a Note of any Series will have the right to institute any
proceeding with respect to the Indenture and related Series Supplement unless:
(1) such holder previously has given to the Indenture Trustee written
notice of a continuing Event of Default,
(2) the holders of not less than 25% in principal amount of the outstanding
Notes of all Series have made written request of the Indenture Trustee to
institute such proceeding in its own name as Indenture Trustee,
(3) such holder or holders have offered the Indenture Trustee reasonable
indemnity,
(4) the Indenture Trustee has for 60 days failed to institute such
proceeding and
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(5) no direction inconsistent with such written request has been given to
the Indenture Trustee during such 60-day period by a Note Majority.
If an Event of Default occurs and is continuing and if it is known to the
Indenture Trustee, the Indenture Trustee will mail to each Noteholder notice of
the Event of Default within 90 days after it occurs. Except in the case of a
failure to pay principal of or interest on any Note, the Indenture Trustee may
withhold the notice beyond such 90 day period if and so long as it determines in
good faith that withholding the notice is in the interests of the Noteholders.
In addition, the Indenture Trustee and each Noteholder and Note Owner, by
accepting the Notes, will covenant that they will not at any time institute
against the Trust and the Seller any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
No recourse may be taken, directly or indirectly, with respect to the
obligations of the Trust, the Seller, the Servicer, the Owner Trustee or the
Indenture Trustee on the related Notes or under the Indenture or any certificate
or other writing delivered in connection therewith, against (a) the Seller, the
Servicer, the Indenture Trustee or the Owner Trustee in its individual capacity
or (b) any partner, owner, beneficiary, agent, officer, director, employee or
agent of the Seller, the Servicer, the Trust, the Owner Trustee or the Indenture
Trustee or of any successor or assignee of the Seller, the Servicer, the
Indenture Trustee or the Owner Trustee in its individual capacity, except as any
such person may have expressly agreed (it being understood that the Indenture
Trustee and the Owner Trustee will have no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity.
Certain Covenants
The Indenture will provide that the Trust may not consolidate with or merge
into any other entity, unless: (a) the entity formed by or surviving such
consolidation or merger is organized under the laws of the United States, any
state or the District of Columbia, (b) such entity expressly assumes the Trust's
obligation to make due and punctual payments upon the Notes and the performance
or observance of every agreement and covenant of the Trust under the Indenture,
(c) no default or Event of Default shall have occurred and be continuing
immediately after such merger or consolidation, (d) none of the applicable
Rating Agencies, after 10 days' prior notice, shall have notified the Seller,
the Servicer, the Indenture Trustee or the Trust in writing that such
transaction will result in a reduction or withdrawal of the then current ratings
of any Notes, (e) unless the related Prospectus Supplement provides otherwise,
the third party Credit Enhancement Provider, if any, has consented to such
merger or consolidation except that no such consent shall be required if a
Credit Enhancement Provider Default (as defined in the related Prospectus
Supplement) has occurred and is continuing, (f) the Trust has received an
opinion of counsel to the effect that such transaction would have no material
adverse federal tax consequence to the Trust or to any Noteholder, (g) any
action necessary to maintain the lien and security interest created by the
Indenture has been taken and (h) the Trust has delivered to the Indenture
Trustee an officers' certificate of the Trust and an opinion of counsel each
stating that such transaction and the supplemental indenture executed in
connection with such transaction comply with the Indenture and that all
conditions precedent relating to the transaction have been complied with
(including any filing required by the Exchange Act).
Also, the Trust may not convey or transfer all or substantially all of its
properties or assets to any other entity, unless: (a) the entity that acquires
the assets of the Trust (1) agrees that all right, title and interest conveyed
or transferred shall be subject and subordinate to the rights of Noteholders,
(2) unless otherwise agreed, expressly agrees to indemnify, defend and hold
harmless the Trust against and from any loss, liability or expense arising under
or related to the Indenture, the related Series Supplement and the Notes, (3)
expressly agrees to make all filings with the SEC (and any other appropriate
entity) required by the Exchange Act in connection with the Notes and (4) is
organized under the laws of the United States or any state; and (b) the criteria
specified in clauses [(b) through (g)] of the preceding paragraph have been
complied with.
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The Trust will not, among other things, (a) except as expressly permitted
by the Indenture, the Sale and Servicing Agreement, the Master Trust Agreement
or certain related documents for such Trust (collectively, the "Related
Documents"), sell, transfer, exchange or otherwise dispose of any of the assets
of the Trust, (b) claim any credit on or make any deduction from the principal
and interest payable in respect of the related Notes (other than amounts
withheld under the Internal Revenue Code of 1986, as amended, or applicable
state law) or assert any claim against any present or former holder of such
Notes because of the payment of taxes levied or assessed upon the collateral for
the Notes, (c) except as contemplated by the Related Documents, dissolve or
liquidate in whole or in part, (d) permit the validity or effectiveness of the
Indenture or any Series Supplement to be impaired or permit any person to be
released from any covenants or obligations with respect to the related Notes
under such Indenture or any Series Supplement except as may be expressly
permitted thereby, (e) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance to be created on or extend to or
otherwise arise upon or burden the collateral for the Notes or any part thereof,
or any interest therein or proceeds thereof except as expressly permitted by the
Related Documents, or (f) permit the lien of the Indenture or any Series
Supplement not to constitute a valid first priority security interest in the
Receivables.
The Trust may not engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust, The Seller,
The Originators and The Servicer." The Trust will not incur, assume or guarantee
any indebtedness other than indebtedness incurred pursuant to the Notes and the
Indenture or otherwise in accordance with the Related Documents.
New Issuances
The Indenture provides for the Indenture Trustee to issue two types of
notes; (a) one or more Series of Term Notes which may be issued in more than one
Class and varying rights and priorities and are transferable and have the
characteristics described below and (b) one or more series of Variable Funding
Notes that bear a fixed or floating rate of interest and have an outstanding
principal amount which may be increased or decreased and having the
characteristics described in the Prospectus Supplement. The accompanying
Prospectus Supplement may also provide that, pursuant to any one or more Series
Supplements, the Trust may issue one or more new Series (which may include
Series offered pursuant to this Prospectus) by notifying the Indenture Trustee
(each such issuance, a "New Issuance"). If specified in a Prospectus Supplement,
the Noteholders may tender Notes representing any outstanding Series of Notes to
the Indenture Trustee (an "Investor Exchange"). Pursuant to the Indenture, the
Trust may define, with respect to any newly issued Series, all principal terms
of such Series (the "Principal Terms"). Upon the issuance of an additional
Series of Notes, none of the Seller, the Servicer, the Indenture Trustee or the
Trust will be required or will intend to obtain the consent of any Noteholder of
any other Series previously issued by the Trust. However, as a condition of a
New Issuance, the Trust will deliver to the Indenture Trustee written
confirmation that the New Issuance will not result in the reduction or
withdrawal by any Rating Agency of its rating of any outstanding Series. The
Trust may offer any Series under a prospectus or other disclosure document (a
"Disclosure Document") in offerings pursuant to this Prospectus or in
transactions either registered under the Securities Act of 1933, as amended (the
"Securities Act") or exempt from registration thereunder directly, through one
or more other underwriters or placement agents, in fixed-price offerings or in
negotiated transactions or otherwise.
Unless otherwise specified in the accompanying Prospectus Supplement, the
Trust may perform New Issuances and define Principal Terms such that each Series
issued under the Indenture has a period during which amortization or
accumulation of the principal amount thereof is intended to occur which may have
a different length and begin on a different date than such period for any other
Series. Further, one or more Series may be in their amortization or accumulation
periods while other Series are not. Moreover, each Series may have the benefit
of a Credit Enhancement which is available only to such Series. Under the
Indenture, the Indenture Trustee shall hold any such form of Credit Enhancement
only on behalf of the Series with respect to which it relates. Likewise, with
respect to each such form of Credit Enhancement, the Trust may deliver a
different form of Credit Enhancement agreement. The Trust may specify different
Note Rates and monthly servicing fees with respect to each Series (or a
particular Class within such Series). The Trust will also have the option under
the Indenture to vary between Series the terms upon which a Series (or a
particular Class within such Series) may be repurchased or refinanced by the
Seller or
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remarketed to other investors. Additionally, certain Series may be
subordinated to other Series, or Classes within a Series may have different
priorities. There will be no limit to the number of New Issuances that may be
performed under the Indenture.
Unless otherwise specified in the accompanying Prospectus Supplement, a New
Issuance may only occur upon the satisfaction of certain conditions provided in
the Indenture. Under the Indenture, the Trust may perform a New Issuance by
notifying the Indenture Trustee at least three days in advance of the date upon
which the New Issuance is to occur. Under the Indenture, the notice will state
the designation of any Series to be issued on the date of the New Issuance and,
with respect to each such Series: (a) its initial principal amount (or method
for calculating such amount) which amount may not be greater than the current
principal amount of the Trust Interest plus, in the case of an Investor
Exchange, the Investor Interest of the notes to be exchanged, (b) its note rate
(or method of calculating such rate) and (c) the provider of Credit Enhancement,
if any, which is expected to provide support with respect to it. The Indenture
provides that on the date of the New Issuance, the Indenture Trustee will
authenticate any such Series only upon delivery to it of the following, among
others, (a) a Series Supplement in a form satisfactory to the Indenture Trustee
and signed by the Trust and specifying the Principal Terms of such Series, (b)
(1) an opinion of counsel to the effect that, unless otherwise stated in the
related Series Supplement, the Notes of such Series will be characterized as
indebtedness for federal income tax purposes and for income and/or franchise tax
purposes of the states (or of appropriate localities) in which the Servicer
maintains its principal place of business and any additional states (or, if
appropriate localities) in which the Servicer, after the date of the Indenture,
conducts substantial servicing activities in respect of the Receivables and (2)
an opinion of counsel to the effect that, for federal income tax purposes, (A)
such issuance will not adversely affect the tax characterization as debt of
Notes of any outstanding Series or Class that were characterized as debt at the
time of their issuance, (B) following such issuance the Trust will not be deemed
to be an association (or publicly traded partnership) taxable as a corporation
and (C) such issuance will not cause or constitute an event in which gain or
loss would be recognized by any Noteholder or the Trust (an opinion of counsel
with respect to any matter to the effect referred to in clause (b) with respect
to any action is referred to in this Prospectus as a "Tax Opinion"), (D) if
required by the related Series Supplement, the form of Credit Enhancement, (E)
if Credit Enhancement is required by the Series Supplement, an appropriate
Credit Enhancement agreement with respect thereto executed by the [Seller] and
the Credit Enhancement Provider, (F) written confirmation from each Rating
Agency that the New Issuance will not result in such Rating Agency's reducing or
withdrawing its rating on any then outstanding Series rated by it, (G) in the
case of an Investor Exchange, the existing Notes of the Series to be exchanged,
and (H) an officer's certificate of the Seller to the effect that after giving
effect to the New Issuance the Seller would not be required to add Additional
Receivables pursuant to the Sale and Servicing Agreement and the Trust Interest
would be at least equal to a specified minimum level (the "Minimum Trust
Interest"). Upon satisfaction of such conditions, the Indenture Trustee will
authenticate the new Series (and, in the case of an Investor Exchange, cancel
the notes of the exchanged Series).
Annual Compliance Statement
The Trust will be required to file annually with the Indenture Trustee a
written statement as to the fulfillment of its obligations under the Indenture.
Indenture Trustee's Annual Report
The Indenture Trustee will be required to mail each year to all related
Noteholders a brief report relating to, among other things, its eligibility and
qualification to continue as Indenture Trustee under the Indenture, any amounts
advanced by it under the Indenture, the amount, interest rate and maturity date
of certain indebtedness owing by the Trust to the Indenture Trustee in its
individual capacity, the property and funds physically held by the Indenture
Trustee as such and any action taken by it that materially affects the Notes and
that has not been previously reported.
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Satisfaction and Discharge of Indenture
The Indenture will be discharged with respect to the collateral securing
the related Notes upon the delivery to the related Indenture Trustee for
cancellation of all such Notes or, with certain limitations, upon deposit with
the Indenture Trustee of funds sufficient for the payment in full of all of such
Notes.
Trust Indenture Act
The Indenture will comply with applicable provisions of the Trust Indenture
Act of 1939, as amended.
The Indenture Trustee
The Indenture Trustee may resign at any time, in which event the Trust will
be obligated to appoint a successor trustee eligible under the Indenture which,
unless the Prospectus Supplement provides otherwise, shall be acceptable to the
third party Credit Enhancement Provider, if any, so long as no Credit
Enhancement Provider Default (as defined in the Prospectus Supplement) has
occurred and is continuing. The Trust may also remove the Indenture Trustee,
with the consent of the third party Credit Enhancement Provider, if any, if the
Indenture Trustee ceases to be eligible to continue as such under the Indenture
or if the Indenture Trustee becomes insolvent or otherwise becomes incapable of
performing its duties or acting as Indenture Trustee. In such circumstances, the
Trust will be obligated to appoint a successor trustee eligible under the
Indenture which, unless the Prospectus Supplement provides otherwise, shall be
acceptable to the third party Credit Enhancement Provider, if any, so long as no
Credit Enhancement Provider Default (as defined in the Prospectus Supplement)
has occurred and is continuing. Any resignation or removal of the Indenture
Trustee and appointment of a successor trustee will be subject to any conditions
or approvals, including the approval of the provider of any credit enhancement,
if any, specified in the related Prospectus Supplement and will not become
effective until acceptance of the appointment by a successor trustee.
Reports to Noteholders
Unless otherwise specified in the accompanying Prospectus Supplement, for
each Series of Notes, on each Payment Date, or as soon thereafter as is
practicable, as specified in the accompanying Prospectus Supplement, the
Indenture Trustee will forward to each Noteholder of record a statement prepared
by the Servicer setting forth, among other things:
(a) the total amount paid to each Noteholder,
(b) the amount of the payment on such Payment Date allocable to principal
on the Notes,
(c) the amount of such payment allocable to interest on the Notes,
(d) the amount of collections of Principal Receivables received during the
preceding Monthly Period or Periods since the last Payment Date and allocated in
respect of the Notes,
(e) the aggregate amount of Principal Receivables, the Investor Interest
and the Investor Interest as a percentage of the aggregate amount of the
Principal Receivables in the Trust as of the end of the last day of the
preceding Monthly Period or Periods since the last Payment Date,
(f) the aggregate outstanding balance of Receivables which are delinquent,
broken down by period of delinquency as provided in the Sale and Servicing
Agreement, in accordance with the Servicer's then existing premium finance
obligation guidelines as of the end of the last day of the preceding Monthly
Period or Periods since the last Payment Date,
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(g) the aggregate Investor Default Amount for the preceding Monthly Period
or Periods since the last Payment Date,
(h) the aggregate amount of Investor Charge-Offs for the preceding Monthly
Period or Periods since the last Payment Date and the amount of reimbursements
of previous Investor Charge-Offs for the preceding Monthly Period or Periods
since the last Payment Date,
(i) the amount of the Investor Servicing Fee for the preceding Monthly
Period or Periods since the last Payment Date,
(j) the amount to be withdrawn and/or available under any Enhancement and
Credit Enhancement, if any, as of the close of business on such Payment Date,
(k) the "pool factor" as of the close of business on the last day of the
preceding Monthly Period (consisting of a [seven-digit] decimal expressing the
ratio of such Series Investor Interest to such Series initial Investor
Interest),
(l) the aggregate amount of collections on Finance Charge Receivables
allocable to the Investor Interest during the preceding Monthly Period or
Periods since the last Payment Date, and
(m) certain information relating to the floating or variable Note Rates, if
applicable, for the Monthly Period or Periods ending on immediately preceding
Transfer Date.
In the case of a Series of Notes having more than one Class, the statements
forwarded to Noteholders will provide information as to each Class of Notes, as
appropriate. The Servicer will not be required to calculate the Minimum Trust
Interest for any Monthly Period if the Servicer certifies in the [Monthly
Servicer Report] for such Monthly Period that the Trust Interest as of the date
thereof equals or exceeds 50% of the Trust assets as of the close of business on
the last business day of the preceding Monthly Period and that such Trust
Interest exceeds the Minimum Trust Interest as of the end of such Monthly
Period.
On or before January 31 of each calendar year or such other date as
specified in the accompanying Prospectus Supplement, the Indenture Trustee will
furnish to each person who at any time during the preceding calendar year was a
Noteholder of record, a statement prepared by the Indenture Trustee containing
the information required to be contained in the regular monthly report to
Noteholders, as set forth in clauses (a), (b) and (c) above aggregated for such
calendar year or the applicable portion thereof during which such person was a
Noteholder, together with such other customary information (consistent with the
treatment of the Notes as debt) as the Indenture Trustee deems necessary or
desirable to enable the Noteholders to prepare their United States tax returns.
CERTAIN INFORMATION REGARDING THE SECURITIES
Book-Entry Registration
Unless otherwise specified in the accompanying Prospectus Supplement, with
respect to each Series of Notes, Noteholders may hold their Notes through DTC
(in the United States) or Cedelbank or Euroclear (in Europe) if they are
participants of such systems, or indirectly through organizations that are
participants in such systems.
Cede, as nominee for DTC, will hold the global Notes. Cedelbank and
Euroclear will hold omnibus positions on behalf of the Cedelbank Customers and
the Euroclear Participants, respectively, through customers' securities accounts
in Cedelbank'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.
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DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). 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 Participants,
thereby eliminating the need for physical movement of securities. Participants
include securities brokers and dealers (who may include the underwriters of any
Series), 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 (the "Indirect Participants").
DTC management is aware that some computer applications and systems used
for processing data were written using two digits rather than four to define the
applicable year, and therefore may not recognize a date using "00" as the Year
2000. This could result in the inability of these systems to properly process
transactions with dates in the Year 2000 and thereafter. DTC has developed and
is implementing a program to address this problem so that its applications and
systems relating to the payment of distributions (including principal and
interest payments) to securityholders, book-entry deliveries and settlement of
trades within DTC continue to function properly. This program includes a
technical assessment and a remediation plan, each of which is complete. DTC
plans to implement a testing phase of this program which is expected to be
completed within appropriate time frames.
In addition, DTC is contacting (and will continue to contact) third party
vendors that provide services to DTC to determine the extent of their Year 2000
compliance, and DTC will develop contingency plans as it deems appropriate to
address failures in Year 2000 compliance on the part of third party vendors.
However, there can be no assurance that the systems of third party vendors will
be timely converted and will not adversely affect the proper functioning of
DTC's services.
The information set forth in the preceding two paragraphs has been provided
by DTC for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind. The Seller makes
no representations as to the accuracy or completeness of such information.
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedelbank Customers and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedelbank
Customers or Euroclear Participants, on the other, 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. Cedelbank Customers and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedelbank or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Cedelbank Customer or Euroclear Participant on such business day. Cash received
in Cedelbank or Euroclear as a result of sales of securities by or through a
Cedelbank 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 Cedelbank or Euroclear cash account only as of the business day
following settlement in DTC.
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Note Owners that are not Participants or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interest in,
Notes may do so only through Participants and Indirect Participants. In
addition, Note Owners will receive all distributions of principal of, and
interest on, the Notes from the Indenture Trustee through the Participants who
in turn will receive them from DTC. Under a book-entry format, Note Owners may
experience some delay in their receipt of payments, since such payments will be
forwarded by the Indenture Trustee to Cede, as nominee for DTC. DTC will forward
such payments to its Participants which thereafter will forward them to Indirect
Participants or Note Owners. It is anticipated that the only "Noteholder" will
be Cede, as nominee of DTC. Note Owners will not be recognized by the Indenture
Trustee as Noteholders, as such term is used in the Indenture, and Note Owners
will only be permitted to exercise the rights of Noteholders indirectly through
the Participants who in turn will exercise the rights of Noteholders through
DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Notes and is required to receive and
transmit distributions of principal and interest on the Notes. Participants and
Indirect Participants with which Note Owners have accounts with respect to the
Notes similarly are required to make book-entry transfers and receive and
transmit such payments on behalf of their respective Note Owners. Accordingly,
although Note Owners will not possess Notes, Note Owners will receive payments
and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Note Owner
to pledge Notes to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such Notes, may be limited due
to the lack of a physical note for such Notes.
DTC has advised the Seller that it will take any action permitted to be
taken by a Noteholder under the Indenture and any Series Supplement only at the
direction of one or more Participants to whose account with DTC the Notes are
credited. Additionally, DTC has advised the Seller that it will take such
actions with respect to specified percentages of the Investor Interest only at
the direction of and on behalf of Participants whose holdings include interests
that satisfy such specified percentages. DTC may take conflicting actions with
respect to other interests to the extent that such actions are taken on behalf
of Participants whose holdings include such interests.
Cedelbank is incorporated under the laws of Luxembourg as a professional
depository. Cedelbank holds securities for its customers ("Cedelbank Customers")
and facilitates the clearance and settlement of securities transactions between
Cedelbank Customers through electronic book-entry changes in accounts of
Cedelbank Customers, thereby eliminating the need for physical movement of
securities. Transactions may be settled in Cedelbank in any of 28 currencies,
including United States dollars. Cedelbank provides to its Cedelbank Customers,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Cedelbank interfaces with domestic markets in several countries. As a
registered bank in Luxembourg, Cedelbank is subject to regulation by the
Luxembourg Commission for the Supervision of the Financial Sector. Cedelbank
Customers are world-wide financial institutions, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the underwriters of any Series
of Notes. Indirect access to Cedelbank is also available to other institutions,
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Cedelbank Customer, either directly or
indirectly.
Euroclear 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
securities and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 27 currencies, including United
States dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described above. The Euroclear System is operated by Morgan Guaranty Trust
Company of New York, Brussels, Belgium office (the "Euroclear Operator" or
"Euroclear"), under contract with Euroclear
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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 of
any Series of Notes. Indirect access to the Euroclear System is also available
to other firms that clear through or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(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 notes 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 Notes held through Cedelbank or Euroclear
will be credited to the cash accounts of Cedelbank 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 "Certain United States Federal Income Tax Consequences" in this Prospectus.
Cedelbank or the Euroclear Operator, as the case may be, will take any other
action permitted to be taken by a Noteholder under the Indenture and any Series
Supplement on behalf of a Cedelbank 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, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Notes among participants of DTC,
Cedelbank 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 Notes
Unless otherwise specified in the accompanying Prospectus Supplement, the
Notes of each Series will be issued as Definitive Notes in fully registered,
certificated form to Note Owners or their nominees rather than to DTC or its
nominee, only if (a) the Trust advises the Indenture Trustee in writing that DTC
is no longer willing or able to discharge properly its responsibilities as
Depository with respect to such Series of Notes, and the Indenture Trustee or
the Trust is unable to locate a qualified successor, (b) the Trust, at its
option, advises the Indenture Trustee in writing that it elects to terminate the
book-entry system through DTC or (c) after the occurrence of a Servicer Default,
Note Owners representing not less than 50% (or such other percentage specified
in the accompanying Prospectus Supplement) of the Investor Interest advise the
Indenture Trustee and DTC through Participants in writing that the continuation
of a book-entry system through DTC (or a successor thereto) is no longer in the
best interest of the Note Owners.
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 Notes. Upon surrender by DTC of the
definitive certificate representing the Notes and instructions for
re-registration, the Indenture
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Trustee will issue the Notes as Definitive Notes, and thereafter the Indenture
Trustee will recognize the holders of such Definitive Notes as holders under the
Indenture ("Holders").
Distribution of principal and interest on the Notes will be made by the
Indenture Trustee directly to Holders of Definitive Notes in accordance with the
procedures set forth in this Prospectus and in the Indenture. Interest payments
and any principal payments on each Payment Date will be made to Holders in whose
names the Definitive Notes were registered at the close of business on the
related Record Date. Distributions will be made by check mailed to the address
of such Holder as it appears on the register maintained by the Indenture
Trustee. The final payment on any Note (whether Definitive Notes or the Notes
registered in the name of Cede representing the Notes), however, will be made
only upon presentation and surrender of such Note at the office or agency
specified in the notice of final distribution to Noteholders. The Trustee will
provide such notice to registered Noteholders not later than the fifth day of
the month of such final distributions.
Definitive Notes will be transferable and exchangeable at the offices of
the "Transfer Agent and Registrar", which shall initially be the Indenture
Trustee. No service charge will be imposed for any registration of transfer or
exchange, but the Transfer Agent and Registrar may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith. The Transfer Agent and Registrar shall not be required to register
the transfer or exchange of Definitive Notes for a period of five business days
preceding the due date for any payment with respect to such Definitive Notes.
DESCRIPTION OF THE TRANSFER AND SERVICING AGREEMENTS
Except as otherwise specified in the accompanying Prospectus Supplement,
the following summary describes certain terms of: (a) the Purchase Agreement
pursuant to which the Seller will purchase Eligible Receivables from the
Originators, (b) the Sale and Servicing Agreement, pursuant to which the Trust
will acquire those Receivables from the Seller and agrees to the servicing of
the Receivables by the Servicer; and (c) the Master Trust Agreement pursuant to
which the Trust will be created and the Owner Trustee will undertake certain
administrative duties with respect to the Trust (collectively, such agreements
are referred to as the "Transfer and Servicing Agreements").
Transfer and Assignment of Receivables
In connection with the initial transfer of the Receivables to the Trust,
the Originators are required to indicate, and in connection with each subsequent
transfer of Receivables to the Trust[, the Originators are required to indicate,
in their computer files that the Receivables have been conveyed to the Trust].
In addition, the Seller will cause the Originators to provide to the Indenture
Trustee computer files or microfiche lists, containing a true and complete list
showing each Premium Finance Obligation, identified by account number and by
total outstanding balance as of the end of the Monthly Period during which such
Receivables are transferred. The Seller will not deliver or cause to be
delivered to the Trustee any other records or agreements relating to the Premium
Finance Obligations or the Receivables, except in connection with additions or
removals of Receivables. Except as stated above, the records and agreements
relating to the Premium Finance Obligations and the Receivables maintained by
the Originators, the Seller or the Servicer are not and will not be segregated
by the Originators, the Seller or the Servicer from other documents and
agreements relating to other commercial premium finance obligations and
receivables and are not and will not be stamped or marked to reflect the
transfer of the Receivables to the Trust, but the computer records of the
Originators and the Sellers are and will be required to be marked to evidence
such transfer. None of the Originators or the Seller have taken or will be
obligated to take any actions in order to protect for the benefit of the Seller
or the Trust, respectively, a security interest in the Receivables, other than
the Uniform Commercial Code financing statements filed with respect to the
Receivables meeting the requirements of New York, California and Delaware state
law. See "Risk Factors--Potential Priority of Certain Liens" and "Certain Legal
Aspects of the Receivables" in this Prospectus.
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Representations and Warranties
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Notes, upon execution of each Series Supplement, each Originator will
make under the Purchase Agreement certain representations and warranties to the
Seller and the Seller will make under the Sale and Servicing Agreement as
applicable, certain representations and warranties to the Trust, to the effect
that, among other things, as of the Closing Date of the related Series, it is
duly incorporated and in good standing and that it has the authority to
consummate the transactions contemplated by the Purchase Agreement and the Sale
and Servicing Agreement, as applicable. If so provided in the accompanying
Prospectus Supplement, if (a) any of these representations and warranties proves
to have been incorrect in any material respect when made, and continues to be
materially incorrect for 60 days after notice to the related Originator or the
Seller, as applicable, by the Indenture Trustee or to the related Originator,
the Seller and the Indenture Trustee by the Noteholders holding more than 50% of
the Investor Interest of each Series, and (b) as a result the interests of the
Noteholders are materially and adversely affected, and continue to be materially
and adversely affected during such period, then the Indenture Trustee or
Noteholders holding more than 50% of the Investor Interest of each Series may
give notice to the Trust (and to the Indenture Trustee in the latter instance)
declaring that a Pay Out Event has occurred, thereby commencing the Rapid
Amortization Period or, if so specified in the accompanying Prospectus
Supplement, the Rapid Accumulation Period.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Notes, the Seller will make with respect to the Receivables, upon the
execution of each Series Supplement, representations and warranties to the Trust
to the effect, among other things, that, as of the date of transfer of each such
Receivable to the Trust (a) such Receivable is an Eligible Receivable (as
defined below), and (b) all material consents, licenses, approvals or
authorizations of or registrations or declarations with any governmental
authority required to be obtained, effected or given in connection with the
origination and/or servicing of the related Premium Finance Obligation and the
conveyance of each such Receivable to the Trust have been duly effected or given
and are in full force and effect. In the event of a breach of any representation
and warranty set forth in this paragraph as a result of which the Premium
Finance Obligation relating to a Receivable becomes a Defaulted Obligation,
within 60 days, or such longer period as may be agreed to by the Indenture
Trustee (but no longer than 120 days), of receipt by the Seller of written
notice of such breach given by the Indenture Trustee, the Seller will accept
reassignment of each Receivable as to which such breach relates if such breach
continues throughout the aforementioned applicable period (an "Ineligible
Receivable") on the terms and conditions referred to below. The Seller will
accept reassignment of each such Ineligible Receivable by (a) depositing into
the Collection Account an amount equal to the Finance Charge Receivables due but
not collected with respect to such Ineligible Receivable, and (b) directing the
Servicer to deduct the unpaid principal amount of each such Ineligible
Receivable from the aggregate amount of Principal Receivables used to calculate
the Trust Interest, provided, however, that if the exclusion of an Ineligible
Receivable from the calculation of the Trust Interest would cause the Trust
Interest to be less than the Minimum Trust Interest or would otherwise not be
permitted by law, then such Ineligible Receivable shall be removed upon the
Seller depositing in the Principal Account (for allocation as a Principal
Receivable) in immediately available funds an amount equal to the amount by
which the Trust Interest would be reduced below the Minimum Trust Interest. Upon
any such reassignment of a Receivable to the Seller, the Seller will reassign
such Receivable to the applicable Originator, pursuant to the terms of the
Purchase Agreement. The obligation of the Seller or the related Originator, as
applicable, to accept reassignment of any Ineligible Receivable is the sole
remedy respecting any breach of the representations and warranties referred to
in this paragraph with respect to such Receivable available to the Noteholders
or the Indenture Trustee on behalf of the Noteholders.
Upon the execution of each Series Supplement, the Servicer and the Seller
with respect to (a) below, and the Seller with respect to (b) below, will make
representations and warranties to the Trust to the effect, among other things,
that as of the closing date of the issuance by the Trust of the related Series
of Notes (including the initial Closing Date) (a) the Sale and Servicing
Agreement, including the related supplement, constitutes a valid and legally
binding obligation of it, and (b) the transfer of Receivables to the Trust under
the Sale and Servicing Agreement constitutes a valid transfer to the Trust of
the entire right, title and interest in and to the Receivables and the proceeds
thereof (including amounts in any of the accounts established for the benefit of
the related Noteholders), and recoveries thereon. The Servicer and the Seller
will make upon the execution of each Series Supplement, representations and
warranties to the
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Trust to the effect, among other things, that as of the closing date of the
issuance by the Trust of the related Series of Notes (including the initial
Closing Date) (x) all information previously furnished by it or to be furnished
by it in writing to the Indenture Trustee in connection with the Sale and
Servicing Agreement and the transactions contemplated thereby is and will be
true and accurate in all material respects, and (y) all approvals,
authorizations, consents, orders or other actions of any person or of any
governmental body or official required in connection with the execution and
delivery of the Sale and Servicing Agreement and the Notes and the performance
of the transactions contemplated by the Sale and Servicing Agreement have been
obtained. The Seller will make with respect to the Receivables, representations
and warranties to the Trust similar to those described in the two foregoing
sentences in connection with each assignment of Receivables added to the Trust
from time to time in accordance with the terms and conditions of the Sale and
Servicing Agreement. In the event of a breach of any of the representations and
warranties described in clause (a) or (b) above, if such breach has a material
adverse effect on the Trust, the Indenture Trustee, by written notice to the
Seller, or the Holders of Notes evidencing interest in the Trust aggregating
more than 50% of the aggregate Investor Interest of all Series outstanding under
the Trust may direct the Seller to accept reassignment of all of the Receivables
in the Trust Portfolio within 60 days of such notice, or within such longer
period specified in such notice (but no longer than 120 days). Such reassignment
will not be required to be made, however, if at any time during such applicable
period, or such longer period, the representations and warranties described in
(a) above shall be true and correct in all respects and the representations and
warranties described in (b) above shall be true and correct in all material
respects. The deposit amount for such reassignment with respect to each Series
of Notes required to be repurchased following such notice, will generally be
equal to the Investor Interest of such Series on the last day of the Monthly
Period preceding the date on which the reassignment is scheduled to be made plus
an amount equal to all interest accrued but unpaid on such Notes at the
applicable Note Rate (less the amounts previously allocated for payment of
interest and principal with respect to each such Series of Notes) through the
end of the interest accrual period in which such reassignment occurs of each
such Series. The reassignment deposit amount will equal the sum of the
reassignment deposits with respect to each Series then issued and outstanding
which is required to be repurchased following such notice. The allocable portion
of such reassignment deposit amount will be paid in full to the Noteholders of
such Series upon presentation and surrender of their Notes. If the Indenture
Trustee or the holders of the outstanding Notes give notice directing the Seller
to accept reassignment as provided in the Sale and Servicing Agreement, the
obligation of the Seller to accept reassignment of the Receivables and to pay
the reassignment deposit amount will constitute the sole remedy respecting a
breach of the representations and warranties described in (a) or (b) above.
Unless otherwise specified in the accompanying Prospectus Supplement, with
respect to each Series of Notes, an "Eligible Receivable" is defined to mean
each Receivable (a) which has arisen from a Loan or a Deferred Payment
Obligation, having a stated maturity, that was in material compliance with all
requirements of law applicable to AIC, AICCO, IP Finance I, IP Finance II, IP
Funding, or any Third Party Originator that originated the same (each, an
"Originator") and the Servicer and which, at the time of the transfer of such
Receivable to the Trust, complies in all material respects with all requirements
of law applicable to AIC, AICCO, IP Finance I, IP Finance II, IP Funding, or any
Third Party Originator and the Servicer, (b) with respect to which all material
consents, licenses, approvals or authorizations of, or registrations or
declarations with, each governmental authority required to be obtained, effected
or given in connection with the creation of such Receivable or the execution,
delivery and performance by AIC, AICCO, IP Finance I, IP Finance II, IP Funding
or any Third Party Originator of the Premium Finance Obligation relating to such
Receivable, have been duly obtained, effected or given and are in full force and
effect as of the date of transfer to the Trust, (c) which, at the time of
transfer of such Receivable to the Trust, represents a beneficial interest in a
Loan or interest in a Deferred Payment Obligation that has been originated in
accordance with AIC's underwriting guidelines and has not been waived or
modified except for waivers or modifications that were made by the Servicer in
accordance with its customary servicing standards, (d) with respect to Loans, as
to which the related Loan is not subject to any right of rescission, setoff,
counterclaim, defense arising out of violations of usury laws, or any other
defenses of any Insured at the time of the transfer of such Receivable to the
Trust, other than defenses that may arise after the time of transfer out of
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights in general and general equity
principles, (e) as to which all obligations of AIC, AICCO, IP Finance I, IP
Finance II, IP Funding or any Third Party Originator with respect to such
Receivable required to be fulfilled pursuant to the related premium finance loan
agreement or assignment
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agreement and the Purchase Agreement, [including the funding of the related Loan
or financing of the Deferred Payment Obligation], are satisfied, (f) as to
which, at the time of transfer of such Receivable to the Trust, none of AIC,
AICCO, IP Finance I, IP Finance II, IP Funding and any Third Party Originator
has taken any action which would impair, or failed to take any action necessary
to avoid impairing, the rights of the Trust or the Noteholders therein, (g) with
respect to which, the Insured under the related Receivable is not the direct
Insured under any Defaulted Obligation (other than a Defaulted Obligation
resulting solely from an event of bankruptcy of an entity other than such direct
Insured), (h) which, in the case of Additional Receivables only, does not relate
to a Defaulted Obligation or a Deferred Payment Obligation which is overdue, (i)
as to which the related Premium Finance Obligation and all amounts due thereon
are denominated and payable only in United States dollars, (j) which has either
arisen from a Loan whereby the related premium finance agreement provides the
related Originator and, in the case of a Third Party Originator, its
transferees, a limited power of attorney allowing it to cancel the related
insurance policy, if cancelable, in accordance with state law upon non-payment
of a Loan installment by the Insured thereunder or arisen from a Deferred
Payment Obligation whereby the related assignment agreement provides the related
Originator, and in the case of a Third Party Originator, its transferees, a
right to instruct the insurer to cancel the related insurance policy, if
cancelable, upon non-payment of any premium by the insured, and (k) which has
either arisen from a Premium Finance Obligation whereby the related premium
finance agreement or assignment agreement, as applicable, allows the related
Originator and, in the case of a Third Party Originator, its transferees, to
direct the insurance company to pay to such party any unearned premium under the
related insurance policy calculated as of the time of cancellation of the
insurance policy, if cancelable, and/or proceeds from the collateral securing
such Premium Finance Obligation.
It will not be required or anticipated that the Indenture Trustee will
make, any general examination of the Receivables or any records relating to the
Receivables for the purpose of establishing the presence or absence of defects,
compliance with an Originator's or the Seller's representations and warranties
or for any other purpose.
Addition of Trust Assets
As described above under "The Receivables," the Seller will have the right
and, in some circumstance, is obligated to convey to the Trust, from time to
time, Additional Receivables. In addition, the Seller will be required to convey
Additional Receivables to maintain the Minimum Trust Interest under the
circumstances and in the amounts specified in the accompanying Prospectus
Supplement. The Seller currently expects to convey to the Trust its interest in
all Receivables generated and transferred to the Seller by Originators from time
to time.
Each Additional Receivable must be an Eligible Receivable at the time of
its conveyance. However, Additional Receivables may not arise from Premium
Finance Obligations of the same credit quality as the initial Premium Finance
Obligations. Additional Receivables may have been originated by the Originators
using criteria different from those which were applied by the Originators to the
initial Premium Finance Obligations or may have been acquired by the Originators
from an institution which may have had different credit criteria.
If so specified in the Prospectus Supplement relating to a Series, in
addition to or in lieu of Additional Receivables, the Seller under the Sale and
Servicing Agreement is permitted to add to the Trust participations representing
interests in a pool of assets primarily consisting of receivables arising under
commercial Premium Finance Obligations owned by the Seller or its affiliates and
collections thereon ("Participations"). Participations may be evidenced by one
or more certificates of ownership issued under a separate pooling and servicing
agreement or similar agreement (a "Participation Agreement") entered into by the
Seller, or its affiliates, which entitles the holder to receive percentages of
collections generated by the pool of assets subject to such Participation
Agreement from time to time and to certain other rights and remedies specified
therein. Participations may have their own credit enhancement, pay out events,
servicing obligations and servicer defaults, all of which are likely to be
enforceable by a separate trustee under the Participation Agreement and may be
different from those specified in this Prospectus. The rights and remedies of
the Trust as the holder of a Participation (and therefore the Noteholders) will
be subject to all the terms and provisions of the related Participation
Agreement. The Sale and Servicing Agreement
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may be amended to permit the addition of a Participation in the Trust without
the consent of the related Noteholders if (a) the Seller delivers to the
Indenture Trustee a certificate of an authorized officer to the effect that, in
the reasonable belief of the Seller, such amendment will not as of the date of
such amendment adversely affect in any material respect the interest of such
Noteholders, and (b) such amendment will not result in a withdrawal or reduction
of the rating of any outstanding Series under the Trust.
A conveyance by the Seller to the Trust of Additional Receivables or
Participations is subject to the following conditions, among others: (a) no
selection procedures materially adverse to the interests of the holders of any
Series of Notes were used in selecting the Additional Receivables, (b) the
Seller will deliver, on or prior to the Determination Date following a Monthly
Period during which Additional Receivables or Participations are conveyed to the
Trust, a written assignment (the "Assignment") to the Trust of the Additional
Receivables or Participations and a computer file or microfiche list containing
a true and complete list of all Receivables, including Additional Receivables or
Participations, as of the end of such Monthly Period and (c) the transfer of
Additional Receivables or Participations by the Seller to the Trust constitutes
a valid transfer and sale of the entire right and interest in and to the
Additional Receivables or Participations. The Seller is not required to give
notice to either Rating Agency of their intention to convey Additional
Receivables or Participations to the Trust.
The Indenture Trustee will file the periodic reports otherwise required to
be filed by the Indenture Trustee with the Securities and Exchange Commission
(the "SEC") pursuant to the Exchange Act, including on behalf of the Trust, a
Report on Form 8-K with respect to [the Monthly Noteholders' Statement (as
defined in the Indenture)].
Removal of Receivables
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Notes and subject to the conditions set forth in the next succeeding
sentence, on each Determination Date on which the Trust Interest exceeds the
Minimum Trust Interest on such Determination Date, the Seller may, but shall not
be obligated to, not more than once during the Monthly Period during which such
Determination Date occurs, designate Receivables for deletion and removal from
the Trust with five business days' prior written notice to the Indenture Trustee
and Servicer but without notice to Noteholders (the "Removed Receivables"). The
Seller is permitted to designate and require reassignment of Removed Receivables
only upon satisfaction of the following conditions among other things: (a) on or
prior to the reassignment date, the Seller will have delivered to the Indenture
Trustee for execution a written reassignment and, within five business days
after the reassignment date, the Seller shall have delivered or cause to be
delivered to the Indenture Trustee a computer file or microfiche list containing
a true and complete list of all Removed Receivables, the Removed Receivables to
be identified by, among other things, account number and their aggregate amount
of Principal Receivables as of the date of their removal (the "Removal Date");
(b) the Seller will represent and warrant that no selection procedure used by
the Seller which is materially adverse to the interests of the holders of any
Notes issued by the Trust was utilized in selecting the Removed Receivables; (c)
the removal of any Removed Receivables shall not, in the reasonable belief of
the Seller (1) cause a Pay Out Event to occur, (2) cause the Trust Interest to
be less than the Minimum Trust Interest on such Removal Date or (3) result in
the failure to make any payment with respect to any Series; (d) the Seller will
have delivered prior written notice of the removal to the Rating Agencies and
prior to the date on which such Receivables are to be removed, the Seller will
not have received notice from either Rating Agency that such removal will result
in the reduction or withdrawal of the then-existing rating of any Series of
Notes; (e) the Seller will have delivered to the Indenture Trustee an officer's
certificate confirming the items set forth in clauses (a) through (d) above; and
(f) the Seller, the Indenture Trustee and each Rating Agency will have received
an opinion of counsel that the proposed removal will not adversely affect the
federal income tax characterization of the Trust. If such removal would be
subject to the independent valuation requirements of the Trust Indenture Act of
1939, as amended, then the removal of Receivables will be subject to the further
condition that the Trust deliver the requisite opinion or certification. The
Seller does not presently expect to remove Receivables from the Trust.
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Collection and Other Servicing Procedures
For each Series of Notes, the Servicer will be responsible for servicing
and administering the Receivables in accordance with the Servicer's policies and
procedures for servicing commercial premium finance receivables comparable to
the Receivables (the "Guidelines").
Discount Option
The Sale and Servicing Agreement provides that the Seller may, at its sole
discretion, at any time designate a specified fixed or variable percentage (the
"Discount Percentage") of the amount of Receivables arising in the Premium
Finance Obligations with respect to the Trust on and after the date such option
is exercised that otherwise would have been treated as Principal Receivables to
be treated as Finance Charge Receivables. In effect, if such option is exercised
by the Seller, the Principal Receivables are treated as having been transferred
to the Trust at a discount. The result of such discounting treatment is to
increase the yield to the Trust beyond the actual income performance of the
Premium Finance Obligations. Such designation will become effective upon
satisfaction of the requirements set forth in the Sale and Servicing Agreement,
including written confirmation by each Rating Agency of its then-current rating
on each outstanding Series of the Trust. After such designation is effective, on
the date of processing of any collections, the product of the Discount
Percentage and collections of Receivables that arise in the Premium Finance
Obligations on such day on or after the date such option is exercised that
otherwise would be Principal Receivables will be deemed collections of Finance
Charge Receivables and will be applied accordingly, unless otherwise provided in
the accompanying Prospectus Supplement.
Trust Accounts
Unless otherwise specified in a Prospectus Supplement, the Indenture
Trustee will establish and maintain with the Indenture Trustee in the name of
the Trust two separate accounts in a segregated trust account (which need not be
a deposit account), a "Finance Charge Account" and a "Principal Account," for
the benefit of the Noteholders of all related Series, including any Series
offered pursuant to this Prospectus. The Indenture will provide that the
Indenture Trustee will have the power to establish Series accounts in Series
Supplements, including a Principal Funding Account, a Pre-Funding Account or
such other account specified in the Series Supplement, each of which series
accounts shall be held for the benefit of the Noteholders of the related Series
and for the purposes set forth in the accompanying Prospectus Supplement. The
Indenture Trustee will also establish a "Payment Account" (a non-interest
bearing segregated demand deposit account established with a Qualified
Institution). The Servicer will establish and maintain with the Indenture
Trustee, in the name of the Trust, for the benefit of Noteholders of all Series
issued thereby including any Series offered pursuant to this Prospectus, an
account established for the purpose of holding collections of Receivables (the
"Collection Account"), which will be a non-interest bearing segregated account
established and maintained with a "Qualified Institution," defined as a
depository institution or trust company, which may include the Indenture
Trustee, organized under the laws of the United States or any one of the states
thereof or the District of Columbia, which either (a) has corporate trust powers
and at all times has a certificate of deposit rating of P-1 by Moody's Investors
Service, Inc. ("Moody's") and of A-1 by Standard & Poor's Corporation ("Standard
& Poor's") or a long-term unsecured debt obligation rating of at least A3 by
Moody's and at least A- by Standard & Poor's and deposit insurance provided by
either the Bank Insurance Fund ("BIF") or the Savings Association Insurance Fund
("SAIF"), each administered by the FDIC, or (b) at all times has a certificate
of deposit rating of at least P-1 by Moody's and A-1+ by Standard & Poor's or a
long term unsecured debt obligation rating of at least Aa3 by Moody's and of at
least AA- by Standard & Poor's and deposit insurance as required by the FDIC or
(c) a depository institution, which may include the Indenture Trustee, which is
acceptable to the Rating Agency. In addition, the Series Supplement for any
Series may require the Indenture Trustee to establish and maintain a subaccount
of the Collection Account for such series (each such subaccount, a "Collection
Subaccount"). Unless otherwise specified in the accompanying Prospectus
Supplement, funds in the Collection Account or any Collection Subaccount, that
are not both deposited and to be withdrawn on the same day for the Trust may be
invested to the extent provided in the Series Supplement, at the direction of
the Servicer, in (a) obligations of or fully guaranteed by the United States of
America, (b) demand deposits; time deposits or certificates of deposit of (A)
depositary institutions or trust
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powers, the certificates of deposit of which have ratings from Moody's and
Standard & Poor's of P-1 and A-1, respectively, and long-term unsecured debt
obligations of which have a rating from Moody's and Standard & Poor's of at A3
and A- respectively or (B) depository institutions, the certificates of deposit
of which have ratings from Moody's and Standard & Poor's of P-1 and A-1+
respectively, and long-term unsecured debt obligations of which have a rating
from Moody's and Standard & Poor's of at least Aa3 and AA- respectively, (c)
commercial paper having, at the time of the Trust's investment or contractual
commitment to invest therein, a rating of P-1 and A-1+ respectively, from
Moody's and Standard & Poor's, (d) demand deposits, time deposits and
certificates of deposit which are fully insured to the limits as required by law
and by the FDIC (e) bankers' acceptances issued by any depositary institution or
trust company described in clause (b) above, (f) money market and common trust
funds rated AAA M or AAA MG by Standard & Poor's and P-1 by Moody's, (g) certain
open end diversified investment companies which each Rating Agency designates in
writing will not result in a withdrawal or downgrade of its then current rating
of any Series it rates, and (h) any other investment if each Rating Agency
confirms in writing that such investment will not adversely affect its
then-current rating or ratings of the Notes (such investments, "Permitted
Investments"). Any such investment must mature and such funds be available for
withdrawal on or prior to the Transfer Date related to the Monthly Period in
which such funds were received or deposited. Unless otherwise specified in the
accompanying Prospectus Supplement, any earnings (net of losses and investment
expenses) on funds in the Collection Account or any Collection Subaccount will
be paid to the Trust. If such losses and investment expenses exceed earnings on
funds in the Collection Account or any Collection Subaccount during a Monthly
Period, then such excess will be treated in the same manner as Default Amounts.
Neither the Servicer nor the Trust is required to deposit additional amounts in
any such account in respect of such losses or expenses. See "--Defaulted
Receivables; Investor Charge-Offs." Funds in any other Series account
established by a Series Supplement may be invested in Permitted Investments or
otherwise as provided in the accompanying Prospectus Supplement.
The Servicer will have the revocable power to withdraw funds from the
Collection Account and to instruct the Indenture Trustee to make withdrawals and
payments from the Finance Charge Account and the Principal Account for the
purpose of carrying out the Servicer's duties under the [Sale and Servicing
Agreement]. Unless otherwise specified in the accompanying Prospectus
Supplement, the Indenture Trustee will initially be the paying agent and will
have the revocable power to withdraw funds from the Payment Account for the
purpose of making payments to the Noteholders.
Funding Period
For any Series of Notes, the accompanying Prospectus Supplement may specify
that for a period beginning on a Closing Date and ending on a specified date
before the commencement of an Amortization Period or Accumulation Period with
respect to such Series (the "Funding Period"), the aggregate amount of Principal
Receivables in the Trust allocable to such Series may be less than the aggregate
principal amount of the Notes of such Series and that the amount of deficiency
(the "Pre-Funding Amount") will be held in a trust account established with the
Indenture Trustee for the benefit of Noteholders of such Series (the
"Pre-Funding Account") pending the transfer of additional Receivables to the
Trust or pending the reduction of the Investor Interests of other Series issued
by the Trust. The accompanying Prospectus Supplement will specify the initial
Investor Interest with respect to such Series, the full Investor Interest and
the date by which the Investor Interest is expected to equal the full Investor
Interest. The Investor Interest will increase as Receivables are delivered to
the Trust or as the Investor Interests of other Series of the Trust are reduced.
The Investor Interest may also decrease due to Investor Charge-Offs or the
occurrence of a Pay Out Event with respect to such Series as provided in the
accompanying Prospectus Supplement.
During the Funding Period, funds on deposit in the Pre-Funding Account for
a Series of Notes will be withdrawn and paid to the Trust to the extent of any
increases in the Investor Interest. In the event that the Investor Interest does
not for any reason equal the full Investor Interest by the end of the Funding
Period, any amount remaining in the Pre-Funding Account and any additional
amounts specified in the accompanying Prospectus Supplement will be payable to
the Noteholders of such Series in the manner and at such time as set forth in
the accompanying Prospectus Supplement.
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If so specified in the accompanying Prospectus Supplement, monies in the
Pre-Funding Account will be invested by the Indenture Trustee in Permitted
Investments or will be subject to a guaranteed rate or investment agreement or
other similar arrangement, and, in connection with each Payment Date during the
Funding Period, investment earnings on funds in the Pre-Funding Account during
the related Monthly Period will be withdrawn from the Pre-Funding Account and
deposited, together with any applicable payment under a guaranteed rate or
investment agreement or other similar arrangement, into the Finance Charge
Account for distribution in respect of interest on the Notes of the related
Series in the manner specified in the accompanying Prospectus Supplement.
Investor Percentage and Trust Percentage
The Servicer will allocate between the Investor Interest of each Series
issued and outstanding (and between each Class of each Series) and the Trust
Interest, and, in certain circumstances, the interest of certain Credit
Enhancement Providers, all amounts collected on Finance Charge Receivables, all
amounts collected on Principal Receivables and all Receivables which either (i)
remained in default one year after the cancellation of the related insurance
policy or (ii) were written off as uncollectible by the Servicer ("Defaulted
Obligations"). The Servicer will make each allocation by reference to the
applicable Investor Percentage of each Series and the Trust Percentage, and, in
certain circumstances, the percentage interest of certain Credit Enhancement
Providers (the "Credit Enhancement Percentage") with respect to such Series. The
Prospectus Supplement relating to a Series will specify the Investor Percentage
and, if applicable, the Credit Enhancement Percentage with respect to the
allocations of collections of Principal Receivables, Finance Charge Receivables
and Receivables in Defaulted Obligations during the Revolving Period, any
Amortization Period and any Accumulation Period, as applicable. In addition, for
each Series of Notes having more than one Class, the accompanying Prospectus
Supplement will specify the method of allocation between each Class.
The Trust Percentage will, in all cases with respect to Receivables, be
equal to 100% minus the aggregate Investor Percentage and, if applicable, the
aggregate Credit Enhancement Percentages, for all Series then outstanding.
Application of Collections
Unless otherwise specified in the accompanying Prospectus Supplement and,
except as otherwise provided below, the Servicer will deposit into the
Collection Account for the Trust, no later than the second business day (or such
other day specified in the accompanying Prospectus Supplement) following the
date of receipt, any payment collected by the Servicer on the Receivables. On
the same day as any such deposit is made, the Servicer will make the deposits
and payments to the accounts and parties as indicated below; provided, however,
that for as long as AIC remains a Servicer under the Sale and Servicing
Agreement, and either (a) the AIG Support Agreement remains in effect with
respect to the Servicer and is not terminated, amended or modified other than in
accordance with its terms, and AIG has and maintains a senior unsecured
long-term rating of at least Aa3 by Moody's and of at least AA- by Standard &
Poor's or (b) AIC has and maintains a commercial paper rating of P-1 by Moody's
and of A-1 by Standard & Poor's, then the Servicer may make such deposits and
payments on a monthly or other periodic basis on the business day immediately
prior to each Payment Date or other business day specified in the accompanying
Prospectus Supplement (each, a "Transfer Date") in an amount equal to the lesser
of (1) collections received in the immediately preceding Monthly Period
allocable to the Investor Interests of all outstanding Series and (2) the amount
required to be deposited into the Finance Charge Account, the Principal Account
or any other Series account or, without duplication, distributed on or prior to
the related Payment Date to Noteholders of all outstanding Series. On the same
date as any deposit is made to the Collection Account, the Servicer will (a)
transfer funds from the Collection Account to the Finance Charge Account and
Principal Account to the extent required under "--Application of Collections,"
and (b) make such further distributions and payments as required thereunder.
Deposits required to be made by AIC as Servicer into the Finance Charge Account,
Principal Account, and any other account established for the benefit of the
holders of any Series of Notes may also be made on a monthly basis rather than
on a more frequent basis if the conditions referred to in the second sentence of
this paragraph are met.
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Unless otherwise specified in the accompanying Prospectus Supplement,
notwithstanding anything in the Sale and Servicing Agreement to the contrary,
whether the Servicer is required to make monthly or daily deposits from the
Collection Account into the Finance Charge Account or the Principal Account or
any other Series account, with respect to any Monthly Period, (a) the Servicer
will only be required to deposit collections from the Collection Account into
the Finance Charge Account, the Principal Account or any Series account
established by a related Series Supplement up to the required amount to be
deposited into any such deposit account or, without duplication, distributed or
deposited on or prior to the related Payment Date to Noteholders or to the
provider of Enhancement and (b) if at any time prior to such Payment Date the
amount of collections deposited in the Collection Account exceeds the amount
required to be deposited pursuant to clause (a) above, the Servicer, subject to
certain limitations, will be permitted to withdraw the excess from the
Collection Account and pay such excess to the Trust.
Unless otherwise specified in the accompanying Prospectus Supplement, the
Servicer will withdraw the following amounts from the Collection Account for
application as indicated:
(a) an amount equal to the Trust Percentage of the aggregate amount of
such deposits in respect of Principal Receivables and Finance Charge
Receivables, respectively, will be paid or held for payment to the Trust,
provided that any collections of Principal Receivables allocable to the
Trust will be (1) paid to the Trust if, and only to the extent that, the
Trust Interest is greater than the Minimum Trust Interest or (2) deposited
in the Principal Account and treated as Unallocated Principal Collections;
(b) an amount equal to the applicable Investor Percentage of the
aggregate amount of such deposits in respect of Finance Charge Receivables
will be deposited into the Finance Charge Account for allocation and
distribution as described in the accompanying Prospectus Supplement;
(c) during the Revolving Period, an amount equal to the applicable
Investor Percentage of the aggregate amount of such deposits in respect of
Principal Receivables will be paid or held for payment to the Trust,
subject to the limitations described in paragraph (a) above;
(d) during the Controlled Amortization Period, Controlled Accumulation
Period or Rapid Accumulation Period, as applicable, an amount equal to the
applicable Investor Percentage of such deposits in respect of Principal
Receivables up to the amount, if any, as specified in the accompanying
Prospectus Supplement will be deposited in the Principal Account or
Principal Funding Account, as applicable, for allocation and payment to
Noteholders as described in the accompanying Prospectus Supplement,
provided that if collections of Principal Receivables exceed the principal
payments which may be allocated or distributed to Noteholders, the amount
of such excess will be paid to the Trust, subject to the limitations
described in paragraph (a) above; and
(e) during the Principal Amortization Period, if applicable, and the
Rapid Amortization Period, an amount equal to the applicable Investor
Percentage of such deposits in respect of Principal Receivables will be
deposited into the Principal Account for application and distribution as
provided in the accompanying Prospectus Supplement.
In the case of a Series of Notes having more than one Class, the amounts in
the Collection Account will be allocated and applied to each Class in the manner
and order of priority described in the accompanying Prospectus Supplement.
Any amounts collected in respect of Principal Receivables and not paid to
the Trust because the Trust Interest is less than the Minimum Trust Interest as
described in paragraph (a) above (with respect to each Series, "Unallocated
Principal Collections"), together with any adjustment payments as described
below, will be paid to and held in the Principal Account and paid to the Trust
if, and only to the extent that, the Trust Interest is greater than the Minimum
Trust Interest. If an Amortization Period or Accumulation Period has commenced,
Unallocated Principal Collections will be held for distribution to the
Noteholders on the dates specified in the accompanying Prospectus Supplement or
accumulated for distribution on the Scheduled Payment Date, as applicable, and
distributed to the Noteholders of each Class or held for and
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distributed to the Noteholders of other Series of Notes issued by the Trust in
the manner and order of priority specified in the accompanying Prospectus
Supplement.
Shared Excess Finance Charge Collections
Any Series offered hereby may be included in a group of Series (a "Group"). If
so specified in the accompanying Prospectus Supplement, the Noteholders of a
Series within a Group or any Class thereof may be entitled to receive all or a
portion of Excess Finance Charge Collections with respect to another Series
within such Group or Class thereof to cover any shortfalls with respect to
amounts payable from collections of Finance Charge Receivables allocable to such
Series or Class. Unless otherwise provided in the accompanying Prospectus
Supplement, with respect to any Series, "Excess Finance Charge Collections" for
any Monthly Period will equal the excess of collections of Finance Charge
Receivables and certain other amounts allocated to the Investor Interest of such
Series or Class over the sum of (a) interest accrued for the current month
("Monthly Interest") and overdue Monthly Interest on the Notes of such Series or
Class (together with, if applicable, interest on overdue Monthly Interest at the
rate specified in the accompanying Prospectus Supplement ("Additional
Interest")), (b) accrued and unpaid Investor Servicing Fees with respect to such
Series or Class payable from collections of Finance Charge Receivables, (c) the
Investor Default Amount with respect to such Series or Class, (d) unreimbursed
Investor Charge-Offs with respect to such Series or Class and (e) other amounts
specified in the accompanying Prospectus Supplement. The term "Investor
Servicing Fee" for any Series of Notes or Class thereof means the servicing fee
allocable to the Investor Interest with respect to such Series or Class, as
specified in the accompanying Prospectus Supplement. The term "Investor Default
Amount" means, for any Monthly Period and for any Series or Class thereof, the
aggregate amount of the Investor Percentage of Principal Receivables (and
accrued unpaid finance charges) in Defaulted Obligations; provided, however,
that the calculation of Investor Default Amount will in no event give effect to
losses in respect of certain concentrated Receivables as described in the
accompanying Prospectus Supplement. The term "Investor Charge-Off means, for any
Monthly Period, and for any Series or Class thereof, the amount by which (a) the
related Monthly Interest and overdue Monthly Interest (together with, if
applicable, Additional Interest), the accrued and unpaid Investor Servicing Fees
payable from collections of Finance Charge receivables, the Investor Default
Amount and any other required fees exceeds (b) amounts available to pay amounts
out of collections of Finance Charge Receivables, available Credit Enhancement
amounts, if any and other sources specified in the accompanying Prospectus
Supplement, but not more than such Investor Default Amount. See "--Application
of Collections," "--Shared Excess Finance Charge Collections," "--Defaulted
Receivables; Investor Charge-Offs" and "Credit Enhancement" in this Prospectus.
Shared Principal Collections
If so specified in the accompanying Prospectus Supplement, to the extent
that collections of Principal Receivables and certain other amounts that are
allocated to the Investor Interest of any Series are not needed to make payments
or deposits with respect to such Series, such collections ("Shared Principal
Collections") will be applied to cover any scheduled or permitted principal
payments due to or for the benefit of Noteholders of other Series. If so
specified in the accompanying Prospectus Supplement, the allocation of Shared
Principal Collections may be among Series within a Group. Any such reallocation
will not result in a reduction in the Investor Interest of the Series to which
such collections were initially allocated.
Defaulted Receivables; Investor Charge-Offs
Unless otherwise specified in the accompanying Prospectus Supplement, for
each Series of Notes, on the fourth business day preceding each Transfer Date
(the "Determination Date"), the Servicer will calculate the aggregate Investor
Default Amount for the preceding Monthly Period, which will be equal to the
aggregate amount of the Investor Percentage of Principal Receivables (and
accrued unpaid finance charges) in Defaulted Obligations. Defaulted Obligations
are Premium Finance Obligations which in such Monthly Period were (a) in default
for more than one year after the cancellation of the related insurance policy,
which cancellation was the result of such default, or (b) written off as
uncollectible in accordance with the Servicer's policies and procedures for
servicing commercial premium finance obligation
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receivables, comparable to the Receivables. In the case of a Series of Notes
having more than one Class, the Investor Default Amount will be allocated among
the Classes in the manner described in the accompanying Prospectus Supplement.
If so provided in the accompanying Prospectus Supplement, an amount equal to the
Investor Default Amount for any Monthly Period may be paid from other amounts,
including collections in the Finance Charge Account or from Credit Enhancement,
and applied to pay principal to Noteholders or, subject to certain limitations,
the Trust, as appropriate. In the case of a Series of Notes having one or more
Classes of Subordinated Notes, the accompanying Prospectus Supplement may
provide that all or a portion of amounts otherwise allocable to such
Subordinated Notes may be paid to the holders of the Senior Notes to make up any
Investor Default Amount allocable to such holders of Senior Notes.
With respect to each Series of Notes, the Investor Interest with respect to
such Series will be reduced by the amount of Investor Charge-Offs for any
Monthly Period. Investor Charge-Offs will be reimbursed on any Payment Date to
the extent amounts on deposit in the Finance Charge Account and any Credit
Enhancement account designated for such purpose and otherwise available therefor
exceed such interest, fees and any aggregate Investor Default Amount payable on
such date. Such reimbursement of Investor Charge-Offs will result in an increase
in the Investor Interest with respect to such Series. In the case of a Series of
Notes having more than one Class, the accompanying Prospectus Supplement will
describe the manner and priority of allocating Investor Charge-Offs and
reimbursements thereof among the Investor Interests of the several Classes.
Losses resulting from Default Amounts are generally shared between the
Investor Interest of each outstanding Series, based on their respective Floating
Investor Percentages, and the Trust Interest. Certain losses resulting from
charge-offs of Receivables in excess of specified levels will be allocated
entirely to the Trust Interest. Accordingly, such excess losses will not be
borne by the Investor Interests and will not be taken into account in Investor
Default Amount of any Series. The circumstances under which excess losses will
be allocated entirely to the Trust are related to certain concentrated
Receivables in the Trust Portfolio as specified in each Series Prospectus
Supplement.
State laws impose limitations on the amount of finance charges that may
accrue upon the unpaid balance of a Loan after its scheduled maturity and the
late fees that may be imposed upon an Insured's default in payment of any
installments due under a Loan. Such laws vary widely by state, but often provide
for the recovery of only minimal additional interest and fees, if any.
Defeasance
If so specified in the Prospectus Supplement relating to a Series, the
Trust may terminate its substantive obligations in respect of such Series by
depositing, or causing to be deposited, with the Indenture Trustee, from amounts
representing, or acquired with, collections of Receivables, money or Permitted
Investments sufficient to make all remaining scheduled interest and principal
payments on such Series or all outstanding Series of Notes of the Trust, as the
case may be, on the dates scheduled for such payments and to pay all amounts
owing to any Credit Enhancement Provider with respect to such Series or all
outstanding Series, as the case may be, if such action would not result in a Pay
Out Event for any Series. Prior to its first exercise of its right to substitute
money or Permitted Investments for Receivables, the Trust will deliver, or cause
to be delivered, to the Indenture Trustee (a) an opinion of counsel to the
effect that such deposit and termination of obligations will not result in the
Trust being required to register as an "investment company" within the meaning
of the Investment Company Act of 1940, as amended and (b) a Tax Opinion.
Refinancing
If so specified in the Prospectus Supplement relating to a Series, the
Trust may redeem such Series of Notes (a "Refinancing") from funds deposited
into the related Series Payment Account representing the proceeds of the
refinancing of the Receivables on any Payment Date specified in the Prospectus
Supplement (the Payment Date on which any Series of Notes are to be refinanced,
the "Refinancing Date"), in whole or in part, with or without premium on the
terms specified in the Prospectus Supplement from
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funds deposited into the Series Payment Account equal to the price specified in
the Prospectus Supplement necessary for redemption of the Notes (the
"Refinancing Price")
Unless otherwise specified in the accompanying Prospectus Supplement, the
Refinancing Price will be equal to the sum of the unpaid Series Investor
Interest and accrued and unpaid interest on the Series Notes at the respective
Series Note Rates through the day preceding the Refinancing Date, less amounts,
if any, on deposit on the Refinancing Date in the Series Payment Account for the
payment of accrued and unpaid principal and interest on the Series Notes.
Final Payment of Principal; Termination
With respect to each Series, the related Notes will be subject to optional
repurchase by the [Trust] [Seller] on any Payment Date after the total Investor
Interest of such Series and the Enhancement Invested Amount, if any, with
respect to such Series, is reduced to an amount less than or equal to 10% of the
initial Investor Interest (or such other amount specified in the accompanying
Prospectus Supplement), if certain conditions set forth in the [Indenture] are
met. Unless otherwise specified in the accompanying Prospectus Supplement, the
repurchase price will be equal to the total Investor Interest of such Series
(less the amount, if any, on deposit in any Payment Account with respect to such
Series), plus the Enhancement Invested Amount, if any, with respect to such
Series, plus accrued and unpaid interest on the Notes and interest or other
amounts payable on the Enhancement Invested Amount or the Collateral Interest,
if any, through the day preceding the Payment Date on which the repurchase
occurs.
The Notes of each Series will be retired on the day following the date on
which the final payment of principal is scheduled to be made to the Noteholders,
whether as a result of optional reassignment to the Trust or otherwise. Each
Prospectus Supplement will specify the Series Termination Date with respect to
the related Series of Notes; provided, however, that the Notes may be subject to
prior termination as provided above. If the Investor Interest is greater than
zero on the Series Termination Date, the Indenture Trustee or Servicer may be
required to sell or cause to be sold certain Receivables in the manner provided
in the [Sale and Servicing] Agreement and Series Supplement and to pay the net
proceeds of such sale and any collections on the Receivables, in an amount at
least equal to the sum of the Investor Interest and the Enhancement Invested
Amount, if any, with respect to such Series plus accrued interest due thereon.
Unless the Servicer instructs the Indenture Trustee otherwise, the Trust
will terminate on the earlier of (a) the day after the Payment Date on which the
aggregate Investor Interest and Enhancement Invested Amount or Collateral
Interest, if any, with respect to each Series outstanding is zero, (b) December
31, [___,] or (c) if the Receivables are sold, disposed of or liquidated
following the occurrence of an Insolvency Event (as defined in the Indenture),
immediately following such sale, disposition or liquidation (such date, the
"Trust Termination Date"). Upon the payment of all amounts due under the
Indenture, the Indenture Trustee will release the security interest in the
Receivables and other assets of the Trust.
Pay Out Events
Unless otherwise specified in the accompanying Prospectus Supplement, as
described above, the Revolving Period will continue through the date specified
in the accompanying Prospectus Supplement unless a Pay Out Event occurs prior to
such date. A Pay Out Event occurs with respect to all Series issued by the Trust
upon the occurrence of either of the following events:
(a) certain events of insolvency or bankruptcy relating to the Seller;
(b) the Seller is unable for any reason to transfer Receivables to the
Trust in accordance with the provisions of the Sale and Servicing
Agreement;
(c) the Trust becomes an "investment company" within the meaning of
the Investment Company Act of 1940, as amended; or
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(d) AIG fails to meet its obligations under the AIG Support Agreement
or any of the Originators fails to meet its support obligations under the
Sale and Servicing Agreement or such support obligations are modified,
amended or terminated in manner prohibited by AIG Support Agreement or the
Sale and Servicing Agreement.
In addition, a Pay Out Event may occur with respect to any Series upon the
occurrence of any other event specified in the accompanying Prospectus
Supplement. On the date on which a Pay Out Event is deemed to have occurred, the
Rapid Amortization Period or, if so specified in the accompanying Prospectus
Supplement, the Rapid Accumulation Period will commence. If, because of the
occurrence of a Pay Out Event, the Rapid Amortization Period begins earlier than
the scheduled commencement of an Amortization Period or prior to a Scheduled
Payment Date, Noteholders will begin receiving distributions of principal
earlier than they otherwise would have, which may shorten the average life of
the Notes.
In addition to the consequences of a Pay Out Event discussed above, unless
otherwise specified in the accompanying Prospectus Supplement, if the Seller
becomes the subject of a bankruptcy proceeding, on the day of such event the
Seller will immediately cease to transfer Principal Receivables to the Trust and
promptly give notice to the Indenture Trustee of such event. Within 15 days, the
Indenture Trustee will publish a notice of the liquidation or the appointment
stating that the Indenture Trustee intends to sell, dispose of, or otherwise
liquidate the Receivables in a commercially reasonable manner. Unless otherwise
instructed within a specified period by Noteholders representing a Note Majority
and any other Person specified in the [Sale and Servicing Agreement] [Indenture]
or a [Series Supplement]) issued and outstanding, the Trustee will sell, dispose
of, or otherwise liquidate the Receivables in a commercially reasonable manner
and on commercially reasonable terms. Such a sale may cause a loss to
Noteholders of each such Series if the proceeds from such early sale allocable
to such Series, if any, and the amount available under any Enhancement
applicable to such Series were insufficient to pay Noteholders of such Series in
full. The proceeds from the sale, disposition or liquidation of the Receivables
will be treated as collections of the Receivables and applied as specified above
in "--Application of Collections" and in the accompanying Prospectus Supplement.
If the only Pay Out Event to occur is the commencement of bankruptcy
proceedings with respect to the Seller, the bankruptcy court or trustee may have
the power to prevent the early sale, liquidation or disposition of the
Receivables and the commencement of a Rapid Amortization Period or, if
applicable with respect to a Series as specified in the accompanying Prospectus
Supplement, a Rapid Accumulation Period. In addition, a bankruptcy court or
trustee may have the power to cause the early sale of the Receivables and the
early retirement of the Notes, to prohibit the continued transfer of Additional
Receivables to the Trust, and to repudiate the servicing obligations of either
AIC, AICCO, IP Finance I, IP Finance II or IP Funding. See "Risk
Factors--Possible Effects of Insolvency or Bankruptcy of the Originators or the
Sellers" in this Prospectus and see "--Servicer Default" below.
Servicing Compensation and Payment of Expenses
Unless otherwise specified in the accompanying Prospectus Supplement, for
each Series of Notes, the Servicer's compensation for its servicing activities
and reimbursement for its expenses will take the form of the payment to it of
the servicing fee payable at the times and in the amounts specified in the
accompanying Prospectus Supplement. The Investor Servicing Fee will be funded
from collections of Finance Charge Receivables allocated to the Investor
Interest and will be paid each month, or on such other specified periodic basis,
from amounts so allocated and on deposit in the Finance Charge Account or, in
certain limited circumstances, from amounts available from Enhancement and other
sources, if any. The remainder of the servicing fee for the Trust will be
allocable to the Trust Interest, the Investor Interests of any other Series
issued by the Trust and the interest represented by the Enhancement Invested
Amount or the Collateral Interest, if any, with respect to such Series, as
described in the accompanying Prospectus Supplement. Neither the Trust nor the
Noteholders will have any obligation to pay the portion of the servicing fee
allocable to the Trust Interest.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the
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Trustee and independent certified public accountants and other fees which are
not expressly stated in the Sale and Servicing Agreement to be payable by the
Trust or the Noteholders other than any tax imposed on or measured by income,
including any federal, state and local income and franchise taxes, if any, of
the Trust or the Noteholders.
Certain Matters Regarding the Seller and the Servicer
With respect to each Series of Notes, the Servicer may not resign from its
obligations and duties under the Sale and Servicing Agreement, except upon
determination that performance of its duties is no longer permissible under
applicable law. No such resignation will become effective until the Indenture
Trustee or a successor to the Servicer has assumed the Servicer's
responsibilities and obligations under the Sale and Servicing Agreement.
Notwithstanding the above, each of AIC, AICCO, IP Finance I, IP Finance II and
IP Funding may transfer its servicing obligations to any of its affiliates (who
meet certain eligibility or terms set forth in the Sale and Servicing
Agreement). In addition, each of AIC, AICCO, IP Finance I, IP Finance II and IP
Funding may transfer its servicing obligation to any other entity, if each
Rating Agency confirm that any such transfer will not result in the reduction or
withdrawal of its then existing rating on any outstanding Notes.
The Sale and Servicing Agreement provides that the Servicer will indemnify
the Trust and the Indenture Trustee from and against any loss, liability,
expense, damage or injury suffered or sustained by reason of any acts or
omissions or alleged acts or omissions of the Servicer with respect to the
activities of the Trust or the Indenture Trustee; provided, however, that the
Servicer will not indemnify (a) the Indenture Trustee for liabilities imposed by
or resulting from or by reason of fraud, negligence, breach of fiduciary duty,
or willful misconduct by the Indenture Trustee in the performance of its duties
under the Indenture, (b) the Trust, the Noteholders or the Note Owners for
liabilities arising from actions taken by the Indenture Trustee at the request
of Noteholders, (c) the Trust, the Noteholders or the Note Owners for any
losses, claims, damages or liabilities incurred by any of them in their
capacities as investors, including without limitation, losses incurred as a
result of Defaulted Obligations or (d) the Trust, the Noteholders or the Note
Owners for any liabilities, costs or expenses of the Trust, the Noteholders or
the Note Owners arising under any tax law, including without limitation, any
federal, state or local or foreign income or franchise tax or any other tax
imposed on or measured by income (or any interest or penalties with respect
thereto or arising from a failure to comply therewith) required to be paid by
the Trust, the Noteholders or the Note Owners in connection with the Indenture
or any Series Supplement to any taxing authority.
The Sale and Servicing Agreement provides that the Seller will indemnify
the Trust, and the Indenture Trustee from and against any loss, liability,
expense, damage or injury suffered or sustained by reason of any violation by
the Trust, the Indenture Trustee or the Servicer of any state premium finance
licensing laws with respect to any Receivable; provided, however, that the
Seller shall not indemnify (a) the Indenture Trustee for liabilities imposed by
reason of fraud, negligence, or willful misconduct by the Indenture Trustee in
the performance of its duties under the Indenture or any Series Supplement or
(b) the Trust, Noteholders or the Note Owners for liabilities, costs or expenses
of the Trust arising from actions taken by the Indenture Trustee at the request
of Noteholders. Any such indemnification will not be payable from the assets of
the Trust.
The Sale and Servicing Agreement provides that neither the Seller nor the
Servicer nor any of their respective directors, officers, employees or agents
will be under any other liability to the Trust, Indenture Trustee, Noteholders
or any other person for any action taken, or for refraining from taking any
action, in good faith pursuant to the Sale and Servicing Agreement. Neither the
Seller, the Servicer, nor any of their respective directors, officers, employees
or agents will be protected against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or gross negligence of the
Seller, the Servicer or any such person in the performance of its duties or by
reason of reckless disregard of obligations and duties thereunder. In addition,
the Sale and Servicing Agreement provides that the Servicer is not under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its servicing responsibilities under the Sale and Servicing
Agreement and which in its opinion may expose it to any expense or liability.
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Any person into which, in accordance with the Sale and Servicing Agreement,
the Seller or the Servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which the Seller or the Servicer is a party,
or any person succeeding to the business of the Seller or the Servicer, upon
execution of a supplement to the Sale and Servicing Agreement, and delivery of
an officer's certificate with respect to compliance of the transaction with the
terms of the Sale and Servicing Agreement and delivery of an opinion of counsel
with respect to the compliance of the transaction with the applicable provisions
of the Sale and Servicing Agreement, will be the successor to the Seller or the
Servicer, as the case may be, under the Sale and Servicing Agreement.
The Seller or the Servicer may effect any merger, consolidation or
assumption which is in accordance with the provisions of the preceding sentence
so long as, among other conditions set forth in the Sale and Servicing
Agreement: (a) if the Seller or the Servicer, as the case may be, is not the
surviving entity, such person certifies in writing to the Indenture Trustee that
all of the applicable representations and warranties are true and correct with
respect to such person; (b) each Rating Agency indicates that such event will
not adversely affect the then-existing rating of certificates of any Series
outstanding; (c) the successor entity executes a supplemental agreement whereby
such entity agrees to assume all the obligations and covenants of the Seller or
the Servicer, as the case may be; and (d) in the case of merger or consolidation
of the Seller when the Seller is not the surviving entity, the AIG Support
Agreement remains in effect with respect to the successor entity if so provided
in the accompanying Prospectus Supplement.
Under the Sale and Servicing Agreement and Indenture, as applicable, each
of the Seller, the Servicer and the Indenture Trustee has agreed that it will
not at any time institute against the Trust, or join in any institution against
the Trust of, any bankruptcy proceedings under any United States federal or
state bankruptcy or similar law in connection with any obligations relating to
the Noteholders of any Series or the Sale and Servicing Agreement, Indenture and
any Series Supplement.
Support Agreement
ART, AIC, AICCO, IP Finance I, IP Finance II, IP Funding and AIG will enter
into an support agreement dated as of [____________], 1999 (the "AIG Support
Agreement"). Under the AIG Support Agreement, AIG has agreed to be the ultimate
beneficial owner of all of the voting capital stock of ART, AIC, AICCO, IP
Finance I, IP Finance II and IP Funding.
The AIG Support Agreement further provides that AIG will cause each of ART,
AIC, AICCO, IP Finance I, IP Finance II and IP Funding to maintain a net worth
of not less than one dollar, and that if (a) ART, AIC, AICCO, IP Finance I, IP
Finance II or IP Funding needs funds to meet any of its obligations as Seller or
a Servicer under the Sale and Servicing Agreement or Originator under the
Purchase Agreement, or (b) ART, AIC, AICCO, IP Finance I, IP Finance II or IP
Funding has insufficient funds to pay any of its obligations when due (except
for any such obligations which are the subject of a bona fide dispute) the
non-payment of which could constitute a basis for the filing of an involuntary
case against ART, AIC, AICCO, IP Finance I, IP Finance II or IP Funding under
the Bankruptcy Code, AIG will provide ART, AIC, AICCO, IP Finance I, IP Finance
II or IP Funding, as the case may be, funds on a timely basis to cause such
obligations to be satisfied when due. The AIG Support Agreement is not a direct
or indirect guarantee by AIG to any person of the payment of the principal of or
interest on any indebtedness, liability or obligation of ART, AIC, AICCO, IP
Finance I, IP Finance II or IP Funding. The Indenture allows the AIG Support
Agreement to be amended or terminated; provided, however, that no amendment or
termination will be effective unless each Rating Agency confirms in writing that
such termination or amendment will not adversely affect the then-existing rating
of any outstanding Series or Class for which it is a Rating Agency. AIG may
terminate its support agreement by assuming the obligations of ART, AIC, AICCO,
IP Finance I, IP Finance II and IP Funding, under the Sale and Servicing and
Agreement, the Purchase Agreement and the Indenture, as the case may be. See
"--Pay Out Events" above.
In connection with the AIG Support Agreement, AIG has entered into a letter
agreement with the Indenture Trustee (the "AIG Letter Agreement") for the
benefit of the Noteholders of all outstanding Series pursuant to which AIG has
agreed that it will not default under the AIG Support Agreement and it will not
amend or terminate the AIG Support Agreement other than in accordance with its
terms; provided,
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however, that the AIG Letter Agreement may be amended with the prior written
consent of each such Noteholder and prior written confirmation of each Rating
Agency that such amendment will not have an adverse effect on the then-existing
ratings of the Notes of any outstanding Series. The AIG Letter Agreement
provides that if AIG fails to perform any of the covenants or agreements
contained in the AIG Letter Agreement, the Indenture Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Noteholders by appropriate judicial proceedings or by any other proper remedy.
For purposes of determining whether a Pay Out Event occurs by reason of any
default by AIG under the AIG Support Agreement, the Letter Agreement will be
deemed to be part of the AIG Support Agreement.
Servicer Default
Unless otherwise specified in the accompanying Prospectus Supplement, in
the event of any Servicer Default (as defined below), which is not remedied or
otherwise cured either the Indenture Trustee or Noteholders representing a Note
Majority by written notice to the Servicer (and to the Indenture Trustee if
given by the Noteholders), may terminate all of the rights and obligations of
the Servicer as servicer under the Sale and Servicing Agreement and in and to
the Receivables and the proceeds thereof and the Indenture Trustee may appoint a
new Servicer (a "Service Transfer"). The rights and obligations of the Seller
under the Sale and Servicing Agreement and in the Trust will not be affected by
such termination. The Indenture Trustee will as promptly as possible appoint a
successor Servicer. If no such Servicer has been appointed and has accepted such
appointment by the time the Servicer ceases to act as Servicer, all authority,
power and obligations of the Servicer under the Sale and Servicing Agreement
shall pass to and be vested in the Indenture Trustee. If the Indenture Trustee
is unable to obtain any bids from eligible servicers and the Servicer delivers
an officer's certificate to the effect that it cannot in good faith cure the
Servicer Default which gave rise to a transfer of servicing, and if the
Indenture Trustee is legally unable to act as successor Servicer, then the
Indenture Trustee shall give the Seller the right of first refusal to purchase
the Receivables on terms equivalent to the best purchase offer as determined by
the Indenture Trustee.
Unless otherwise specified in the accompanying Prospectus Supplement,
"Servicer Default" under the Sale and Servicing Agreement refers to any of the
following events:
(a) failure by the Servicer to make any payment, transfer or deposit
(other than with respect to Credit Balances), or to give instructions to
the Indenture Trustee to make certain payments, transfers or deposits, on
the date the Servicer is required to do so under the Sale and Servicing
Agreement or [Indenture] any Series Supplement (or within the applicable
grace period, which shall not exceed five business days);
(b) failure on the part of the Servicer duly to observe or perform in
any respect any other covenants or agreements of the Servicer which has a
material adverse effect on the Noteholders of any Series issued and
outstanding under the Trust (which determination will be made without
taking into consideration any Enhancement) and which continues unremedied
for a period of 60 days after written notice of such failure and continues
to have a material adverse effect on such Noteholders; or the delegation or
assignment by the Servicer of its duties under the Sale and Servicing
Agreement, except as specifically permitted thereunder; provided, however,
that failure on the part of the Servicer duly to observe or perform in any
respect certain specified covenants or agreements of the Servicer set forth
in the Sale and Servicing Agreement, which has a material adverse effect on
the Noteholders of any outstanding Series (which determination shall be
made without taking into account any Enhancement) and which continues
after, and notwithstanding the removal by the Servicer of the related
Receivable, will be a Servicer Default unless the Servicer shall have,
within 60 days after the date (following such removal) on which written
notice of such continuing material adverse effect shall have been given to
the Servicer, remedied such failure;
(c) any representation, warranty or certification made by the Servicer
in the Sale and Servicing Agreement (including any supplement thereto), or
in any certificate delivered pursuant
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to the Sale and Servicing Agreement, proves to have been incorrect when
made which has a material adverse effect on the Noteholders of any Series
issued and outstanding under the Trust (which determination will be made
without taking into consideration any Enhancement), and which continues to
be incorrect in any material respect for a period of 60 days after written
notice and continues to have a material adverse effect on such Noteholders;
(d) the occurrence of certain events of bankruptcy or insolvency of
the Servicer; or
(e) such other event specified in the accompanying Prospectus
Supplement.
Unless otherwise stated in the accompanying Prospectus Supplement,
notwithstanding the foregoing, a delay in or failure of performance referred to
in clause (a) above for a period of ten business days, or referred to under
clause (b) or (c) for a period of 60 business days, shall not constitute a
Servicer Default if such delay or failure could not be prevented by the exercise
of reasonable diligence by the Servicer and such delay or failure was caused by
an act of God or other similar occurrence. Upon the occurrence of any such
event, the Servicer will not be relieved from using its best efforts to perform
its obligations in a timely manner in accordance with the terms of the Sale and
Servicing Agreement, and the Servicer will provide the Indenture Trustee, any
provider of Enhancement and/or any issuer of any third-party Credit Enhancement
(a "Credit Enhancement Provider"), the holders of the Trust Interest and the
holders of Notes of each Series issued and outstanding under the Trust prompt
notice of such failure or delay by it, together with a description of the cause
of such failure or delay and its efforts to perform its obligations.
In the event of a Servicer Default, if bankruptcy proceedings are commenced
in respect of the Servicer and no Servicer Default other than such bankruptcy of
the Servicer exists, the bankruptcy trustee or court may have the power to
prevent either the Indenture Trustee or the majority of the Noteholders from
effecting a Service Transfer.
Evidence as to Compliance
The Sale and Servicing Agreement provides that on or before April 30 of
each calendar year, or such other date as specified in the accompanying
Prospectus Supplement, the Servicer will cause a firm of nationally recognized
independent accountants (who may also render other services to the Servicer or
Seller) to furnish a report to the effect that such firm has examined the
assertion by an officer of the Servicer, made pursuant to the Sale and Servicing
Agreement, that the Servicer has complied with the terms of the Sale and
Servicing Agreement relating to the servicing of Receivables, which examination
includes a review of certain documents and records relating to the servicing of
the Receivables and has compared the information contained in the Servicer's
certificates delivered under the Sale and Servicing Agreement during the period
covered by the report with such documents and records and that, on the basis of
such examination, such firm is of the opinion that the assertion by the
Servicer's officer is fairly stated in all material respects except for such
exceptions as such firm shall believe to be immaterial and such other exceptions
as shall be set forth in such report. In addition, on or before April 30 of each
calendar year, the Servicer will also cause a firm of nationally recognized
independent accountants (who may also render other services to the Servicer or
the Seller) to furnish a report to the effect that such firm has compared the
mathematical calculations of each amount set forth in the Servicer's
certificates delivered under the Sale and Servicing Agreement during the period
covered by the report with the Servicer's computer reports which were the source
of such amounts and that, based on such comparison, such amounts are in
agreement except for such exceptions as such firm believes to be immaterial and
such other exceptions as set forth in such firms' report.
The Sale and Servicing Agreement provides for delivery to the Indenture
Trustee on or before April 30 of each calendar year or such other date as
specified in the accompanying Prospectus Supplement, of an annual statement
signed by an officer of the Servicer to the effect that, to the best of such
officer's knowledge, the Servicer has fully performed, or has caused to be
performed, all its obligations under the Sale and Servicing Agreement throughout
the preceding year in all material respects, or, if there has been a
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default in the performance of any such obligation in any material respects,
specifying the nature and status of the default.
Amendments
The Sale and Servicing Agreement and any supplement may be amended in
writing by the Seller, the Servicer and the Trustee, without Noteholder consent,
to cure any ambiguity, to correct or supplement any provision therein which may
be inconsistent with any other provision therein, and to add any other
provisions with respect to matters or questions arising under the Sale and
Servicing Agreement and any supplement which are not inconsistent with the
provisions of the Sale and Servicing Agreement and any supplement; provided,
that such action does not adversely affect in any material respect the interests
of any Noteholder.
[The Sale and Servicing Agreement may be amended in writing by the Seller,
the Servicer and the Trustee with the consent of the holders of Notes evidencing
undivided interests aggregating not less than 66 2/3% of the principal amount of
all Series adversely affected, for the purpose of adding any provisions to,
changing in any manner or eliminating any of the provisions of the Sale and
Servicing Agreement or any supplement or of modifying in any manner the rights
of Noteholders of any Series. No such amendment however, may (a) reduce in any
manner the amount of, or delay the timing of, distributions required to be made
on such Series, (b) change the definition of or the manner of calculating the
Noteholders investor interests, the aggregate default amount or the investor
percentage of such Series, (c) reduce the aforesaid percentage of undivided
interests, the holders of which are required to consent to any such amendment,
in each case without the consent of all Noteholders of all Series adversely
affected or (d) modify AIG's support obligations with respect to the Originators
and ART, without the consent of the holders of Notes of all Series. Promptly
following the execution of any amendment to the Sale and Servicing Agreement or
any supplement, the Trustee will furnish written notice of the substance of such
amendment to each Noteholder of all Series (or with respect to an amendment of a
supplement, to the applicable Series).]
List of Noteholders
With respect to each Series of Notes, upon written request of Noteholders
of record representing interests in the Trust aggregating not less than [20]%
(or such other percentage specified in the accompanying Prospectus Supplement)
of the Investor Interest of such Series, the Indenture Trustee after having been
adequately indemnified by such Noteholders for its costs and expenses, and
having given the Servicer notice that such request has been made, will afford
such Noteholders access during business hours to the current list of Noteholders
of the Trust for purposes of communicating with other Noteholders with respect
to their rights under the Indenture or the related Notes. See "Certain
Information Regarding the Securities--Book-Entry Registration" and "--Definitive
Notes" above.
The Indenture Trustee
The Seller, the Servicer and their respective affiliates may from time to
time enter into normal banking and trustee relationships with the Indenture
Trustee and its affiliates. The Indenture Trustee, the Seller, the Servicer and
any of their respective affiliates may hold Notes in their own names. In
addition, for purposes of meeting the legal requirements of certain local
jurisdictions, the Indenture Trustee shall have the power to appoint a
co-trustee or separate trustees of all or any part of the Trust. In the event of
such appointment, all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee by the Indenture will be conferred or imposed
upon the Indenture Trustee and such separate trustee or co-trustee jointly, or,
in any jurisdiction in which the Indenture Trustee shall be incompetent or
unqualified to perform certain acts, singly upon such separate trustee or
co-trustee who shall exercise and perform such rights, powers, duties and
obligations solely at the direction of the Indenture Trustee.
The Indenture Trustee may resign at any time, in which event the Seller
will be obligated to appoint a successor Indenture Trustee. The Seller may also
remove the Indenture Trustee if the Indenture Trustee ceases to be eligible to
continue as such under the Indenture or if the Indenture Trustee becomes
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insolvent. In such circumstances, the Seller will be obligated to appoint a
successor Indenture Trustee. Any resignation or removal of the Indenture Trustee
and appointment of a successor Indenture Trustee does not become effective until
acceptance of the appointment by the successor Indenture Trustee.
Noteholders Have Limited Control of Actions
Noteholders of any Series or Class within a Series will need the consent or
approval of a specified percentage of the Noteholders of all Series of
outstanding Notes, all voting together without regard to Series, to take or
direct certain actions, including to require the appointment of a successor
Servicer after a Servicer Default, to amend the Sale and Servicing Agreement or
Indenture in some cases, and to direct a repurchase of all outstanding Series
after certain violations of the Seller's representations and warranties. The
interests of the Noteholders of other Series may not coincide with yours, making
it more difficult for any particular Noteholder to achieve the desired results
from such vote.
CREDIT ENHANCEMENT
General
For any Series, Credit Enhancement may be provided with respect to one or
more Classes thereof. Credit Enhancement may be in the form of the subordination
of one or more Classes of the Notes of such Series, a letter of credit, the
establishment of a cash collateral guaranty or account, a collateral interest, a
surety bond, an insurance policy, a spread account, a reserve account, a yield
enhancement account, the use of cross support features or another method of
Credit Enhancement described in the accompanying Prospectus Supplement, or any
combination of the foregoing. If so specified in the accompanying Prospectus
Supplement, any form of Credit Enhancement may be structured so as to be drawn
upon by more than one Class to the extent described in that accompanying
Prospectus Supplement.
Unless otherwise specified in the accompanying Prospectus Supplement for a
Series, the Credit Enhancement will not provide protection against all risks of
loss and will not guarantee repayment of the entire principal balance of the
Notes and interest thereon. If losses occur which exceed the amount covered by
the Credit Enhancement or which are not covered by the Credit Enhancement,
Noteholders will bear their allocable share of deficiencies.
If Credit Enhancement is provided with respect to a Series, the
accompanying Prospectus Supplement will include a description of (a) the amount
payable under such Credit Enhancement, (b) any conditions to payment thereunder
not otherwise described herein, (c) the conditions (if any) under which the
amount payable under such Credit Enhancement may be reduced and under which such
Credit Enhancement may be terminated or replaced and (d) any material provision
of any agreement relating to such Credit Enhancement. Additionally, the
accompanying Prospectus Supplement may set forth certain information with
respect to any Credit Enhancement Provider, including (1) a brief description of
its principal business activities, (2) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed to do
business, (3) if applicable, the identity of regulatory agencies which exercise
primary jurisdiction over the conduct of its business and (4) its total assets,
and its stockholders' or policy holders' surplus, if applicable, and other
appropriate financial information as of the date specified in the Prospectus
Supplement. If so specified in the accompanying Prospectus Supplement, Credit
Enhancement with respect to a Series may be available to pay principal of the
Notes of such Series following the occurrence of certain Pay Out Events with
respect to such Series. In such event, the Credit Enhancement Provider will have
an interest in certain cash flows in respect of the Receivables to the extent
described in such Prospectus Supplement (the "Enhancement Invested Amount").
Subordination
If so specified in the accompanying Prospectus Supplement, one or more
Classes of Notes of any Series will be subordinated as described in the
accompanying Prospectus Supplement to the extent necessary to fund payments with
respect to the Senior Notes. The rights of the holders of any such
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Subordinated Notes to receive distributions of principal and/or interest on any
Payment Date for such Series will be subordinate in right and priority to the
rights of the holders of Senior Notes, but only to the extent set forth in the
accompanying Prospectus Supplement. If so specified in the accompanying
Prospectus Supplement, subordination may apply only in the event of certain
types of losses not covered by another Credit Enhancement. The accompanying
Prospectus Supplement will also set forth information concerning the amount of
subordination of a Class or Classes of Subordinated Notes in a Series, the
circumstances in which such subordination will be applicable, the manner, if
any, in which the amount of subordination will decrease over time, and the
conditions under which amounts available from payments that would otherwise be
made to holders of such Subordinated Notes will be distributed to holders of
Senior Notes. If collections of Receivables otherwise distributable to holders
of a Subordinated Class of a Series will be used as support for a Class of
another Series, the accompanying Prospectus Supplement will specify the manner
and conditions for applying such a cross-support feature.
Letter of Credit
If so specified in the accompanying Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided by one or more letters of
credit. A letter of credit may provide limited protection against certain losses
in addition to or in lieu of other Credit Enhancement. The issuer of the letter
of credit (the "L/C Bank") will be obligated to honor demands with respect to
such letter of credit, to the extent of the amount available thereunder, to
provide funds under the circumstances and subject to such conditions as are
specified in the accompanying Prospectus Supplement.
The maximum liability of an L/C Bank under its letter of credit will
generally be an amount equal to a percentage specified in the accompanying
Prospectus Supplement of the initial Investor Interest of a Series or a Class of
such Series. The maximum amount available at any time to be paid under a letter
of credit will be determined in the manner specified therein and in the
accompanying Prospectus Supplement.
Cash Collateral Guaranty or Account
If so specified in the accompanying Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided by a guaranty (the "Cash
Collateral Guaranty") secured by the deposit of cash or certain permitted
investments in an account (the "Cash Collateral Account") reserved for the
beneficiaries of the Cash Collateral Guaranty or by a Cash Collateral Account
alone. The amount available pursuant to the Cash Collateral Guaranty or the Cash
Collateral Account will be the lesser of amounts on deposit in the Cash
Collateral Account and an amount specified in the accompanying Prospectus
Supplement. The accompanying Prospectus Supplement will set forth the
circumstances under which payments are made to beneficiaries of the Cash
Collateral Guaranty from the Cash Collateral Account or from the Cash Collateral
Account directly.
Collateral Interest
If so specified in the accompanying Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided initially by an interest
in the Trust (the "Collateral Interest") in an amount specified in the
Prospectus Supplement. Such Series may also have the benefit of a Cash
Collateral Guaranty or Cash Collateral Account with an initial amount on deposit
therein, if any, as specified in the Prospectus Supplement which will be
increased (i) to the extent the Seller elects, subject to certain conditions
specified in the accompanying Prospectus Supplement, to apply collections of
Principal Receivables allocable to the Collateral Interest to decrease the
Collateral Interest, (ii) to the extent collections of Principal Receivables
allocable to the Collateral Interest are required to be deposited into the Cash
Collateral Account as specified in the accompanying Prospectus Supplement and
(iii) to the extent excess collections of Finance Charge Receivables are
required to be deposited into the Cash Collateral Account as specified in the
accompanying Prospectus Supplement. The total amount of the Credit Enhancement
available pursuant to the Collateral Interest and, if applicable, the Cash
Collateral Guaranty or Cash Collateral Account will be the lesser of the sum of
the Collateral Interest and the amount on deposit in the Cash Collateral Account
and an amount specified in the accompanying Prospectus Supplement. The
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accompanying Prospectus Supplement will set forth the circumstances under which
payments which otherwise would be made to holders of the Collateral Interest
will be distributed to holders of Notes and, if applicable, the circumstances
under which payment will be made under the Cash Collateral Guaranty or under the
Cash Collateral Account.
Insurance Policy or Surety Bond
If so specified in the accompanying Prospectus Supplement, insurance with
respect to a Series or one or more Classes thereof will be provided by one or
more insurance companies. Such insurance will guarantee, with respect to one or
more Classes of the related Series, distributions of interest or principal in
the manner and amount specified in the accompanying Prospectus Supplement.
If so specified in the accompanying Prospectus Supplement, a surety bond
will be purchased for the benefit of the holders of any Series or Class or such
Series to assure distributions of interest or principal with respect to such
Series or Class of Notes in the manner and amount specified in the accompanying
Prospectus Supplement.
Spread Account
If so specified in the accompanying Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided by the periodic deposit
of certain available excess cash flow from the Trust assets into an account (the
"Spread Account") intended to assist with subsequent distribution of interest
and principal on the Notes of such Class or Series in the manner specified in
the accompanying Prospectus Supplement.
Reserve Account
If so specified in the accompanying Prospectus Supplement, support for a
Series or one or more Classes thereof or any Enhancement related thereto will be
provided by the establishment of a reserve account (the "Reserve Account"). The
Reserve Account may be funded, to the extent provided in the accompanying
Prospectus Supplement, by an initial cash deposit, the retention of certain
periodic distributions of principal or interest or both otherwise payable to one
or more Classes of Notes, including the Subordinated Notes, or the provision of
a letter of credit, guarantee, insurance policy or other form of credit or any
combination thereof. The Reserve Account will be established to assist with the
subsequent distribution of principal or interest on the Notes of such Series or
Class thereof or such other amount owing on any Enhancement thereto in the
manner provided in the accompanying Prospectus Supplement.
Yield Enhancement Account
If so specified in the accompanying Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided by periodic deposit of
certain available cash flows otherwise allocable to the Trust, excess Finance
Charges and other amounts specified in the accompanying Prospectus Supplement
into an account (the "Yield Enhancement Account") intended to cover all or any
one of the following: interest payments, servicing fees, to avoid reduction of
Investor Interest due to Default Amounts and to reimburse such reductions, in
the manner specified in the accompanying Prospectus Supplement.
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NOTE RATINGS
Any rating of the Notes by a Rating Agency will indicate:
o its view on the likelihood that Noteholders will receive required
interest and principal payments; and
o its evaluation of the Receivables and the availability of any Credit
Enhancement for the Notes.
Among the things a rating will not indicate are:
o the likelihood that principal payments will be paid on a scheduled
date;
o the likelihood that a Pay Out Event will occur;
o the likelihood that a United States withholding tax will be imposed on
non-U.S. Noteholders;
o the marketability of the Notes;
o the market price of the Notes; or
o whether the Notes are an appropriate investment for any purchaser.
A rating will not be a recommendation to buy, sell or hold the Notes. A
rating may be lowered or withdrawn at any time by a Rating Agency.
The Seller will request a rating of the Notes offered by this Prospectus
and the accompanying Prospectus Supplement from at least one Rating Agency.
Rating agencies other than those requested could assign a rating to the Notes
and such a rating could be lower than any rating assigned by a Rating Agency
chosen by the Seller.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
The Seller has represented and warranted in the Sale and Servicing
Agreement that the transfer of Receivables by it to the Trust is either an
absolute transfer and assignment to the Trust of all beneficial interest of the
Seller in and to the related Receivables, except for the interest of the Seller
as holder of the beneficial interest in the Trust, or the grant to the Trust of
a security interest in such Receivables. The Seller also has represented and
warranted in the Sale and Servicing Agreement that, in the event the transfer of
Receivables by the Seller to the Trust is deemed to create a security interest
under the Uniform Commercial Code, as in effect in the [State of Delaware] (the
"UCC"), there will exist an enforceable first priority perfected security
interest in the Receivables in favor of the Trust, except for certain tax and
other governmental liens and other nonconsensual liens. For a discussion of the
Trust's rights arising from a breach of these warranties, see "Description of
the Transfer and Servicing Agreements--Representations and Warranties" in this
Prospectus.
[The Seller will represent as to Receivables to be conveyed, that the
Receivables are "accounts" or "general intangibles" for purposes of the UCC.]
There are certain limited circumstances in which a prior or subsequent
transferee of Receivables coming into existence after the Closing Date could
have an interest in such Receivables with priority over the Trust's interest.
Under the Sale and Servicing Agreement, however, the Seller has represented and
warranted that it transferred the Seller's beneficial interest in the
Receivables to the Trust free and clear of the lien of any third party. In
addition, the Seller has covenanted and will covenant that it will not sell,
pledge, assign, transfer or grant any lien on any Receivable (or any interest
therein) other than to the Trust. A tax or government lien or other
nonconsensual lien on property of the Seller arising prior to the time a
Receivable comes into existence may also have [Under Review of Tax Counsel]
priority over the interest of the Trust in such Receivable.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences of the ownership and disposition of the Notes and is based on the
Internal Revenue Code of 1986, as amended (the "Code"), the Treasury Regulations
promulgated and proposed thereunder (the "Regulations"), judicial decisions and
published administrative rulings and pronouncements of the Internal Revenue
Service (the "Service"), all as in effect on the date hereof. Legislative,
judicial or administrative changes or interpretations hereafter enacted or
promulgated could alter or modify the analysis and conclusions set forth below,
possibly on a retroactive basis. This summary does not purport to address the
federal income tax consequences either to special classes of taxpayers (such as
S corporations, banks, thrifts, other financial institutions, insurance
companies, mutual funds, small business investment companies, real estate
investment trusts, regulated investment companies, broker-dealers, tax-exempt
organizations and persons that hold the securities described herein as part of a
straddle, hedging or conversion transaction) or to a person or entity holding an
interest in a holder (e.g., as a stockholder, partner, or holder of an interest
as a beneficiary). This summary (a) assumes that the Notes will be held by the
holders thereof as capital assets as defined in the Code and (b) except as
indicated (and other than for purposes of the discussion under "--Treatment of
the Notes as Debt" and "--Possible Alternative Characterization" below),
describes the consequences of Notes that are properly characterized as debt for
federal income tax purposes. No information is provided herein with respect to
any foreign, state or local tax consequences of the ownership and disposition of
the Notes or any federal alternative minimum tax or estate and gift tax
considerations. Except for "--Non-U.S. Note Owners" and "--Information Reporting
and Backup Withholding" below, the following discussion applies only to a U.S.
Note Owner (defined below).
Prospective Investors are therefore urged to consult their own tax advisors
with regard to United States federal income tax consequences of purchasing,
holding and disposing of the Notes in their own particular circumstances, as
well as the tax consequences arising under the laws of any state, foreign
country or other jurisdiction to which they may be subject.
For purposes of the discussion set forth below, a "Noteholder" means a
beneficial owner of a Note.
For purposes of this discussion, "U.S. Person" means a citizen or resident
of the United States, a corporation or partnership organized in or under the
laws of the United States, any state thereof, or any political subdivision of
either (including the District of Columbia), an estate, the income of which is
includible in gross income for U.S. federal income tax purposes regardless of
its source or a trust with respect to which a court in the U.S. is able to
exercise primary authority over its administration and one or more U.S. persons
have the authority to control all of its substantial decisions. The term "U.S.
Note Owner" means any U.S. Person and any other person to the extent that the
income attributable to its interest in a Note is effectively connected with that
person's conduct of a U.S. trade or business. A "Non-U.S. Note Owner" means a
person other than a U.S. Note Owner and persons subject to rules applicable to
former citizens and residents of the United States.
Treatment of the Notes as Debt
The Trust and Noteholders express in the Indenture the intent that, for
United States federal, state and local income, franchise and other tax purposes,
the Notes will be indebtedness of the Trust secured by the Receivables. The
Trust, by entering into the Indenture, and each Noteholder, by the acceptance of
a Note, agree to treat the Notes as indebtedness of the Trust for all such tax
purposes. Because different criteria are used in determining the financial and
regulatory accounting treatment of the transaction, however, the Trust will
treat the Agreement, for certain non-tax accounting purposes, as effecting a
transfer of ownership interests in the Receivables and not as creating debt
obligations of the Trust.
A basic premise of federal income tax law is that the economic substance of
a transaction generally determines its tax consequences. The form of a
transaction, while a relevant factor, is not conclusive evidence of its economic
substance. In appropriate circumstances, the courts have allowed taxpayers as
well as the Service to treat a transaction in accordance with its economic
substance as
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determined under federal income tax principles, even though the participants in
the transaction have characterized it differently for non-tax purposes.
The determination of whether the economic substance of a transfer of an
interest in property is instead a loan secured by the transferred property has
been made by the Service and the courts on the basis of numerous factors
designed to determine whether the transferor has relinquished (and the
transferee has obtained) substantial incidents of ownership in the property. The
primary factors examined are whether the transferee has the opportunity to gain
if the property increases in value, and has the risk of loss if the property
decreases in value. Based upon an analysis of such factors and although no
transaction closely comparable to that contemplated herein has been the subject
of any Regulations, revenue ruling or judicial decision, it is the opinion of
Weil, Gotshal & Manges LLP ("Counsel") that, under current law, assuming due
execution of and compliance with the Indenture, and subject to the assumptions
set forth herein for federal income tax purposes the Notes when issued will not
constitute an ownership interest in the Receivables, but properly will be
characterized as debt secured by the Receivables. In the further opinion of
Counsel, the Trust will not be an association or publicly-traded partnership
taxable as a corporation.
Possible Alternative Characterization
Although as described above, it is the opinion of Counsel that the Notes
properly will be characterized as debt for federal income tax purposes, none of
the Seller, any Originator or the Trust will seek a ruling from the Service on
the characterization of the Notes for federal income tax purposes and the
opinion of Counsel will not be binding on the Service. Thus, no assurance can be
given that such a characterization will prevail. Were the Service to contend
successfully that the Notes were not debt obligations for federal income tax
purposes, the Trust would be classified for federal income tax purposes as a
partnership.
If some or all of the Notes were treated as equity interests in a
partnership, the partnership would likely be treated as a "publicly traded
partnership." A publicly traded partnership is taxed in the same manner as a
corporation unless at least 90% of its gross income consists of specified types
of "qualifying income." Such qualifying income includes, among other things,
"interest income" that is "not derived in the conduct of a financial or
insurance business." It is unclear whether, were the Trust treated as a
partnership, interest received by it in respect of the Receivables would be
considered to be derived from the conduct of a financial or insurance business
by the Trust.
If a deemed partnership between the Trust and the Noteholders were to
qualify for the foregoing exception from taxation as a corporation, the deemed
partnership would not be subject to federal income tax, but each item of income,
gain, loss and deduction generated as a result of the ownership of the
Receivables by the partnership would be passed through to the partners in such a
partnership (including any Noteholders that are treated as holding equity
interests in the partnership) according to their respective interests therein.
The amount of income reportable by the Noteholders as partners in such a
partnership could differ from that reportable by the Noteholders as holders of
debt. [A cash] basis Noteholder treated as a partner, for example, might be
required to report income when it accrues to the partnership rather than when it
is received by the Noteholder. Moreover, an individual Noteholder's share of
expenses of the partnership would constitute miscellaneous itemized deductions,
which in the aggregate (a) are allowed as deductions only to the extent they
exceed two percent of the Noteholder's adjusted gross income and (b) are subject
to reduction in the hands of a Noteholder whose adjusted gross income exceeds a
certain amount. As a result, the Noteholder might be taxed on an amount of
income greater than the amount of interest received on the Noteholder's Note. In
addition, partnership characterization may have adverse state or local tax
consequences for Noteholders.
If, alternatively, some or all of the Notes were treated as equity
interests in a publicly traded partnership taxable as a corporation, the Trust
(or other deemed entity) would be subject to United States federal income taxes
(and state and local taxes) at corporate tax rates on its income from the
Receivables. Distributions on the Notes might not be deductible in computing the
Trust's (or other deemed entity's) taxable income, and distributions to the
Noteholders would probably be treated as dividends to the extent
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paid out of after-tax earnings. Such an entity-level tax could result in reduced
distributions to Noteholders, or the Noteholders could be liable for a share of
such tax.
Because the Trust will treat the Notes as indebtedness for federal income
tax purposes, the Servicer and the Paying Agent (and Participants and Indirect
Participants) will not comply with the tax reporting requirements applicable to
the possible alternative characterizations of the Notes discussed above.
Except where indicated to the contrary, the following discussion assumes
that the Notes are debt for federal income tax purposes.
Interest Income to Noteholders
Interest on a Note should be taxable to a U.S. Noteholder as ordinary
income at the time it accrues or is received in accordance with such
Noteholder's method of accounting for federal income tax purposes.
It is anticipated that the Notes will be issued at par value (or at an
insubstantial discount from par value) and that, except as indicated, no
original issue discount ("OID") will arise with respect to the Notes. Under the
OID regulations, a holder of Note issued with more than a de minimis amount of
OID must include such OID in income on a constant yield basis. It is possible,
moreover, that under the Regulations, interest payable on the Notes, as well as
any discount from par value, will constitute OID because late payment or
nonpayment of interest would not be regarded as subject to penalties or to
reasonable remedies to compel payment. Were the Notes treated as being issued
with OID, the principal consequence would be that Noteholders using the cash
basis method of accounting would be required to report interest income from the
Notes on an accrual basis. In any event, a purchaser who buys a Note for more or
less than its issue price will generally be subject, respectively, to the
premium amortization or market discount rules of the Code.
Sale or Exchange of Notes
If a Note is sold or exchanged, the seller will recognize gain or loss
equal to the difference between the amount realized upon the sale or exchange
and its adjusted basis in the Note. The adjusted basis of a Note will equal its
cost, increased by any unpaid OID and market discount includable in income with
respect to the Note prior to its sale, and reduced by any principal payments
previously received with respect to the Note and any bond premium amortization
previously applied to offset interest income. Except to the extent of any
accrued market discount not previously included in income, the gain or loss
recognized on the sale or exchange of a Note will generally be capital gain or
loss if the Note was held as a capital asset and will be long-term capital gain
loss if the Note was held by the Noteholder for the requisite holding periods at
the time of the disposition.
Non-U.S. Note Owners
As described above, Counsel will render its opinion that the Notes will
properly be classified as debt for federal income tax purposes. If the Notes are
so treated:
(a) Interest paid to a nonresident alien or foreign corporation or
partnership would be exempt from U.S. withholding taxes (including backup
withholding taxes), provided the holder complies with applicable
identification requirements (and neither actually or constructively owns
10% or more of the voting stock of AIG nor is a controlled foreign
corporation with respect to AIG nor is an individual who ceased being a
U.S. citizen or long-term resident for tax avoidance purposes). Applicable
indemnification requirements will be satisfied if there is delivered to a
securities clearing organization (or bank or other financial institution
that holds Notes on behalf of the customer in the ordinary course of its
trade or business), (i) IRS Form W-8 BEN signed under penalties of perjury
by the beneficial owner of the Notes stating that the holder is not a U.S.
person and providing such holder's name and address, (ii) IRS Form 1001
signed by the beneficial owner of the Notes or such owner's agent claiming
exemption from withholding under an
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applicable tax treaty or (iii) IRS Form 4224 signed by the beneficial owner
of the Notes or such owner's agent claiming exception from withholding of
tax on income connected with the conduct of a trade or business in the
United States; provided that in any such case (x) the applicable form is
delivered pursuant to applicable procedures and is properly transmitted to
the United States entity otherwise required to withhold tax and (y) none of
the entities receiving the form has actual knowledge that the holder is a
U.S. person or that any certification on the form is false;
(b) a holder of a Note who is a nonresident alien or foreign
corporation will not be subject to United States federal income tax on gain
realized on the sale, exchange or redemption of such Note provided that (i)
such gain is not effectively connected to a trade or business carried on by
the holder in the United States, (ii) in the case of a holder that is an
individual, such holder neither is present in the United States for 183
days or more during the taxable year in which such sale, exchange or
redemption occurs, nor ceased being a U.S. citizen or long-term resident
for tax avoidance purposes and (iii) in the case of gain representing
accrued interest, the conditions described in clause (a) are satisfied; and
(c) a Note held by an individual who at the time of death is a
nonresident alien will not be subject to United States federal estate tax
as a result of such individual's death if, immediately before his death (i)
the individual did not actually or constructively own 10% or more of the
voting stock of AIG, (ii) the holding of such Note was not effectively
connected with the conduct by the decedent of a trade or business in the
United States and (iii) the individual did not cease being a U.S. citizen
or long-term resident for tax avoidance purposes.
The Service recently issued final regulations (the "New Regulations") which
would provide alternative methods of satisfying the certification requirement
described above. The New Regulations would require, in the case of Notes held by
a foreign partnership, that (x) the certification described in clause (a) above
be provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information. A look-through rule would apply in the
case of tiered partnerships. Non-U.S. Noteholders are urged to consult their own
tax advisors concerning the application of the certification requirements in the
New Regulations.
If the Service were to contend successfully that some or all of the Notes
were equity interests in a partnership (not taxable as a corporation), a holder
of such a Note that is a nonresident alien or foreign corporation might be
required to file a U.S. individual or corporate income tax return and pay tax on
its share of partnership income at regular U.S. rates, including in the case of
a corporation the branch profits tax (and would be subject to withholding tax on
its share of partnership income). In addition, if the Notes are equity interests
in a partnership, an individual holder that is a nonresident alien at death may
be required to include the value of the Notes in such holder's gross estate
(unless otherwise provided in an applicable treaty). If some or all of the Notes
are recharacterized as equity interests in a "publicly traded partnership"
taxable as a corporation, to the extent distributions of such Notes were treated
as dividends, a nonresident alien individual or foreign corporation generally
would be taxed on the gross amount of such dividends (and subject to
withholding) at a rate of 30% unless such rate were reduced by an applicable
treaty. In addition, an individual holder that is a nonresident alien at death
would be required to include the value of such Note in such holder's gross
estate (unless otherwise provided in an applicable treaty).
Information Reporting and Backup Withholding
Backup withholding of U.S. federal income tax at a rate of 31 percent may
apply to payments made in respect of a Note to a registered owner who is not an
"exempt recipient" and who fails to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the manner
required. Generally, individuals are not exempt recipients whereas corporations
and certain other entities are exempt recipients. Payments made in respect of a
U.S. Note Owner must be reported to the IRS, unless the U.S. Note Owner is an
exempt recipient or otherwise establishes an exemption. Compliance with the
identification procedures (described in the preceding section) would establish
an exemption from backup withholding for a non-U.S. Note Owner who is not an
exempt recipient.
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In addition, upon the sale of a Note to (or through) a "broker," the broker
must withhold 31 percent of the entire purchase price, unless either (i) the
broker determines that the seller is a corporation or other exempt recipient or
(ii) the seller provides certain identifying information in the required manner,
and in the case of a non-U.S. Note Owner certifies that the seller is a non-U.S.
Note Owner (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines that
the seller is an exempt recipient or (ii) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status normally would be made on Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence. As defined by Treasury regulations, the term "broker"
includes all persons who stand ready to effect sales made by others in the
ordinary course of a trade or business, as well as brokers and dealers
registered as such under the laws of the United States or a state. These
requirements generally will apply to a U.S. office of a broker, and the
information reporting requirements generally will apply to a foreign office of a
U.S. broker as well as to a foreign office of a foreign broker (i) that is a
controlled foreign corporation within the meaning of section 957(a) of the Code
or (ii) 50 percent or more of whose gross income from all sources for the three
year period ending with the close of its taxable year preceding the payment (or
for such part of the period that the foreign broker has been in existence) was
effectively connected with the conduct of a trade or business within the United
States.
Any amounts withheld under the backup withholding rules from a payment to a
Note Owner would be allowed as a refund or a credit against such Note Owner's
U.S. federal income tax, provided that the required information is furnished to
the IRS.
Recently issued final Treasury regulations will revise some of the
foregoing information reporting and backup withholding procedures generally
beginning January 1, 2000; Note Owners should consult their tax advisers
concerning the impact to them, if any, of such revised procedures.
State and Local Taxation
The discussion above does not address the taxation of the Trust or the tax
consequences of the purchase, ownership or disposition of an interest in the
Notes under any state or local tax law. Each investor should consult its own tax
adviser regarding state and local tax consequences.
ERISA CONSIDERATIONS
Any fiduciary with respect to an employee benefit plan subject to the
fiduciary standards under the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), should determine before authorizing an investment of a
portion of such plan's assets in the Notes whether, among other factors, the
investment (i) is permitted under such plan's governing instruments, and (ii) is
appropriate in light of such plan's overall investment policy and (iii) is
prudent considering the composition and diversification of such plan's
portfolio, and the "Risk Factors" and other factors discussed in this Prospectus
and in the accompanying Prospectus Supplement.
The prohibited transaction rules of Section 406 of ERISA or Section 4975 of
the Code may restrict certain transactions directly or indirectly involving the
assets of employee benefit plans or other plans subject to such sections,
including individual retirement accounts and persons which are deemed to be
using assets of such plans (collectively, "Plans"), and persons that are
"parties in interest" under ERISA or "disqualified persons" under the Code
(collectively, "Parties in Interest") with respect to such Plans, unless an
exemption applies. A non-exempt violation of these prohibited transaction rules
may generate excise tax and other liabilities under ERISA and Section 4975 of
the Code for Parties in Interest or other persons. Plans that are governmental
plans (as defined in Section 3(32) of ERISA) and certain church plans (as
defined in Section 3(33) of ERISA) are not subject to ERISA requirements.
Some transactions involving the operation of the Trust could give rise to a
prohibited transaction under ERISA or Section 4975 of the Code if the underlying
assets of the Trust were deemed to be "plan assets" by reason of any Plan
acquiring or holding an equity interest in the Trust. The term "equity interest"
as defined in the "plan assets" regulation issued by the Department of Labor
(the "DOL"),
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excludes securities which are treated as indebtedness under applicable local law
and lack substantial equity features. The designation of the Notes as debt
instruments is not controlling, and the terms and characteristics of the Notes
should be carefully evaluated. Although there is little published authority, the
Seller believes that the following factors, among others, are indicative of a
Note being treated as indebtedness lacking substantial equity features:
the form of the Note being in the traditional form of an obligation to pay
principal and interest;
the probability of payment of principal and interest, as may be reflected
by a rating of the Note in one of the three highest categories by a
nationally recognized rating agency;
the absence of any express or implied rights of the holder of a Note to
payments which do not constitute principal or interest, and to exercise
rights normally associated with the ownership of equity in the absence of a
default under the Note;
the availability of credit enhancement, if any;
the availability of an amount of equity to support payment of the Note, and
a difference between the expected rate of return on the Note and an equity
interest in the Trust.
Many, if not all, of the foregoing factors are expected to apply to one or
more classes of Notes to be offered under a Prospectus Supplement. Each investor
considering an investment in Notes with the assets of a Plan is expected to
review the Prospectus Supplement with respect to the Notes and to consult with
its counsel.
In the event any Notes acquired or held by a Plan are not treated as equity
interests, the Notes may constitute an extension of credit between the Plan and
the Trust to which the prohibited transaction rules could apply. The stated
equity interests of the Trust are expected to be directly owned by the [Trust]
and indirectly owned by the Seller. The Seller may be a Party in Interest with
respect to many Plans. Before purchasing Notes, a Plan fiduciary or other Plan
investor should consider whether a prohibited transaction might arise by reason
of the relationship between the Plan and the Seller, the Indenture Trustee, any
underwriters of such Series or any of their affiliates and consult their counsel
regarding the purchase in light of the considerations described below. The DOL
has issued five class exemptions that may apply to otherwise prohibited
transactions arising from the purchase or holding of the Notes: DOL Prohibited
Transaction Class Exemptions ("PTCE") 96-23 (Class Exemption for Plan Asset
Transactions Determined by In-House Asset Managers), 95-60 (Class Exemption for
Certain Transactions Involving Insurance Company General Accounts), 91-38 (Class
Exemption for Certain Transactions Involving Bank Collective Investment Funds),
90-1 (Class Exemption for Certain Transactions Involving Insurance Company
Pooled Separate Accounts) and 84-14 (Class Exemption for Plan Asset Transactions
Determined by Independent Qualified Professional Asset Managers).
The Notes of any Series may not be purchased with "plan assets" of a Plan
if the Seller, the Servicer, the Trustee or any of their affiliates (a) has
investment or administrative discretion with respect to such Plan assets; (b)
has authority or responsibility to give, or regularly gives, investment advice
with respect to such Plan assets, for a fee and pursuant to an agreement or
understanding that such advice (i) will serve as a primary basis for investment
decisions with respect to such Plan assets, and (ii) will be based on the
particular investment needs of such Plan; or (c) unless PTCE 95-60, 91-38 or
90-1 applies, is an employer maintaining or contributing to such Plan.
In light of the foregoing, fiduciaries or other persons contemplating
purchasing the Notes on behalf or with "plan assets" of any Plan should consult
their own counsel regarding whether the Trust assets represented by the Notes
would be considered "plan assets," the consequences that would apply if the
Trust's assets were considered "plan assets," and the availability of exemptive
relief from the prohibited
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transaction rules under the Exemption or otherwise. In light of the foregoing,
by acceptance of a Note, each holder of such Note shall be deemed to have
(1) represented and warranted either that the holder is not acquiring or
considered to be acquiring the Note with assets of a Plan or that the
acquisition and holding of the Note will not give rise to a non-exempt
prohibited transaction; and
(2) agreed that the holder will not sell or otherwise transfer the Note
without obtaining from the purchaser or other transferee a similar
representation, warranty and agreement as set forth in this sentence.
PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in an underwriting agreement
(an "Underwriting Agreement") to be entered into with respect to each Series of
Notes, the Trust will agree to sell to each of the underwriters named therein
and in the accompanying Prospectus Supplement, and each of such underwriters
will severally agree to purchase from the Trust, the principal amount of Notes
set forth therein and in the accompanying Prospectus Supplement (subject to
proportional adjustment on the terms and conditions set forth in the related
Underwriting Agreement in the event of an increase or decrease in the aggregate
amount of Notes offered hereby and by the accompanying Prospectus Supplement).
In each Underwriting Agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the Notes
offered hereby and by the accompanying Prospectus Supplement if any of such
Notes are purchased. In the event of a default by any underwriter, each
Underwriting Agreement will provide that, in certain circumstances, purchase
commitments of the nondefaulting underwriters may be increased or the
Underwriting Agreement may be terminated.
Each Prospectus Supplement will set forth the price at which each Series of
Notes or Class being offered thereby initially will be offered to the public and
any concessions that may be offered to certain dealers participating in the
offering of such Notes. After the initial public offering, the public offering
price and such concessions may be changed.
Each Underwriting Agreement will provide that the Trust will indemnify the
related underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
The place and time of delivery for any Series of Notes in respect of which
this Prospectus is delivered will be set forth in the accompanying Prospectus
Supplement.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Notes will be passed
upon for the Trust, the Seller and the Originators by Kenneth V. Harkins,
Associate General Counsel of AIG, and by Weil, Gotshal & Manges LLP, New York
special counsel to the Seller. Certain legal matters relating to the issuance of
the Notes under the laws of the State of Delaware will be passed upon for the
Trust by [_______________]. Certain legal matters relating to the federal tax
consequences of the issuance of the Notes will be passed upon for the Seller by
Weil, Gotshal & Manges LLP.
REPORTS TO NOTEHOLDERS
The Servicer will prepare monthly and annual reports that will contain
information about the Trust. The financial information contained in the reports
will not be prepared in accordance with generally accepted accounting
principles. Unless and until Definitive Notes are issued, the reports will be
sent to Cede & Co. which is the nominee of The Depository Trust Company and the
registered holder of the Notes. No financial reports will be sent to you. See
"Certain Information Regarding the Securities--Book-Entry Registration,"
"Description of the Notes--Reports to Noteholders" and "--Annual Compliance
Statement" in this Prospectus.
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WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the Notes with the SEC. This
Prospectus is part of the registration statement, but the registration statement
includes additional information.
The Servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the Trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings are also available to the public
on the SEC Internet site (http://www.sec.gov.).
The SEC allows us to "incorporate by reference" information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this Prospectus. Information that we file later with the SEC will
automatically update the information in this Prospectus. In all cases, you
should rely on the later information over different information included in this
Prospectus or the accompanying Prospectus Supplement. We incorporate by
reference any future annual, monthly and special SEC reports and proxy materials
filed by or on behalf of the Trust until we terminate our offering of the Notes.
As a recipient of this Prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents (unless the
exhibits are specifically incorporated by reference), at no cost, by writing or
calling us at: Investor Relations; [_____________________], [____________],
[__________] [__________]; (800) [________].
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered AIG Credit
Premium Finance Master Trust Asset Backed Notes (the "Global Securities") to be
issued in Series from time to time (each, a "Series") 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"), Cedelbank or
Euroclear The Global Securities will be tradable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds
Secondary market trading between investors holding Global Securities
through Cedelbank and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., seven calendar day settlement)
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations
Secondary cross-market trading between Cedelbank or Euroclear and DTC
Participants holding Notes will be effected on a delivery-against- payment basis
through the respective Depositaries of Cedelbank 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, Cedelbank 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 (other than
through accounts at Cedelbank or Euroclear) will follow the settlement practices
applicable to U.S. corporate debt obligations. Investor securities custody
accounts will be credited with their holdings against payment in same- day funds
on the settlement date.
Investors electing to hold their Global Securities through Cedelbank or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds in registered form. Global Securities will be credited to
the securities custody accounts on the settlement date against payment for value
on the settlement date
Secondary Market Trading
Because the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and 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 (other than Citibank, NA ("Citibank") and Morgan Guaranty Trust
Company of New York ("Morgan") as
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depositories for Cedelbank and Euroclear, respectively) will be settled using
the procedures applicable to U.S. corporate debt obligations in same-day funds.
Trading between Cedelbank Customers and/or Euroclear Participants.
Secondary market trading between Cedelbank Customers or Euroclear Participants
will be settled using the procedures applicable to conventional eurobonds in
same-day funds.
Trading between DTC seller and Cedelbank or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC Participant
(other than Citibank and Morgan as depositories for Cedelbank and Euroclear,
respectively) to the account of a Cedelbank Customer or a Euroclear Participant,
the purchaser must send instructions to Cedelbank prior to settlement date
12:30. Cedelbank or Euroclear, as the case may be, will instruct Citibank or
Morgan, respectively, to receive the Global Securities for payment. Payment will
then be made by Citibank or Morgan, as the case may be, to the DTC Participant's
account against delivery of the Global Securities. After settlement has been
completed, the Global Securities will be credited to the respective clearing
system and by the clearing system, in accordance with its usual procedures, to
the Cedelbank Customer's or Euroclear Participant's account. Credit for the
Global Securities will appear the next day (European time) and the cash debit
will be back-valued to, and the interest on the Global Securities will accrue
from, the value date (which would be the preceding day when settlement occurred
in New York). If settlement is not completed on the intended value date (i.e.,
the trade fails), the Cedelbank or Euroclear cash debit will be valued instead
as of the actual settlement date.
Cedelbank 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 Cedelbank or Euroclear. Under this approach,
they may take on credit exposure to Cedelbank or Euroclear until the Global
Securities are credited to their accounts one day later
As an alternative, if Cedelbank or Euroclear has extended a line of credit
to them, Cedelbank Customers or Euroclear Participants can elect not to
pre-position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Cedelbank 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 Cedelbank
Customer's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
Citibank or Morgan for the benefit of Cedelbank Customers or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently from a trade between two DTC Participants.
Trading between Cedelbank or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Cedelbank Customers and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through Citibank or Morgan, to another DTC Participant. The seller will send
instructions to Cedelbank before settlement date 12:30. In these cases,
Cedelbank or Euroclear will instruct Citibank or Morgan, as appropriate, to
credit the Global Securities to the DTC Participant's account against payment.
The payment will then be reflected in the account of the Cedelbank Customer or
Euroclear Participant the following day, and receipt of the cash proceeds in the
Cedelbank Customer's or Euroclear Participant's account would be back-valued to
the value date (which would be the preceding day, when settlement
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occurred in New York). If the Cedelbank Customer or Euroclear Participant has a
line of credit with its respective clearing system and elects to draw on such
line of credit in anticipation of receipt of the sale proceeds in its account,
the back-valuation may substantially reduce or offset any overdraft charges
incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in the
Cedelbank Customer's or Euroclear Participant's account would instead be valued
as of the actual settlement date.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner of Global Securities holding securities through
Cedelbank or Euroclear (or through DTC if the holder has an address outside the
U.S.) will be subject to the 30% U.S. withholding tax that generally applies to
payments of interest (including original issue discount) on registered debt
issued by U.S. Persons, unless, under currently applicable law, (a) 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 (b) such
beneficial owner takes one of the following steps to obtain an exemption or
reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Notes that
are non-U.S. Persons generally can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (or successor form, including
W-8BEN). If the information shown on Form W-8 changes, a new Form W-8 must be
filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, 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 or successor form including form W-8EC1.
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Note 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 Note) or successor form, including form W-8BEN. 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 Note
Owner or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Note Owner of a Global
Security or, in the case of a Form 1001 or a Form 4224 filer, his 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). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year. Effective January 1, 2001,
Forms W-8 and Form 1001 will be replaced by Form W-8 BEN. Form 4224 will be
replaced by Form W-8ECI. The new forms can be used currently in place of Forms
W-8, 1000 and 4224.
The term "U.S. Person" 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, any state thereof, or any political subdivision of either
(including the District of Columbia), (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 with respect to which a United States Court has primary
jurisdiction and which has one or more United States persons controlling its
substantial decisions. This summary does not deal with all aspects of U.S.
Federal income tax
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withholding that may be relevant to foreign 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. Further, the
U.S. Treasury Department has recently finalized new regulations that will revise
some aspects of the current system for withholding on amounts paid to foreign
persons. Under these regulations, interest or OID paid to a nonresident alien
would continue to be exempt from U.S. withholding taxes (including backup
withholding) provided that the holder complies with the new certification
procedures.
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INDEX OF TERMS FOR PROSPECTUS
Term Page
- ---- ----
Accumulation Period............................24
Additional Interest............................48
Additional Receivables.........................23
AIC.............................................1
AICCO.......................................1, 16
AIG.........................................9, 16
AIG Letter Agreement...........................53
AIG Support Agreement..........................53
AIGC...........................................16
AIGCC..........................................16
Amortization Period............................25
ART.............................................1
Assignment.....................................43
Bankruptcy Code.................................9
BIF............................................44
Cash Collateral Account........................58
Cash Collateral Guaranty.......................58
Cede...........................................26
Cedelbank......................................26
Cedelbank Customers............................37
Class..........................................24
Classes.........................................1
Closing Date...................................23
Code...........................................61
Collateral Interest............................58
Collection Account.............................44
Collection Subaccount..........................44
Controlled Accumulation Period..................3
Controlled Amortization Period..................3
Cooperative....................................38
Counsel........................................62
Credit Balance.................................23
Credit Balances.................................2
Credit Enhancement..............................5
Credit Enhancement Percentage..................46
Credit Enhancement Provider....................55
Cut-Off Date...................................23
Defaulted Obligations..........................46
Deferred Payment Obligations................1, 16
Definitive Notes...............................26
Depositaries...................................35
Depository.....................................26
Determination Date.............................48
Disclosure Document............................32
Discount Percentage............................44
DOL............................................65
Eligible Receivable............................41
Enhancement Invested Amount....................57
Enhancements....................................2
ERISA..........................................65
Euroclear......................................37
Euroclear Operator.............................37
Euroclear Participants.........................37
Events of Default..............................29
Excess Finance Charge Collections..............48
Exchange Act...................................36
Finance Charge Account.........................44
Finance Charge Receivables......................2
fund...........................................20
funded.........................................20
funding........................................20
Funding Period.................................45
Group..........................................48
Guidelines.....................................44
Holders........................................39
Indenture...................................1, 25
Indenture Trustee...........................1, 25
Indirect Participants..........................36
Ineligible Receivable..........................40
Initial Cut-Off Date...........................23
Insured.........................................7
Insureds.......................................16
Investor Default Amount........................48
Investor Exchange..............................32
Investor Interest........................2, 3, 25
Investor Percentage.............................3
Investor Servicing Fee.........................48
IP Finance I................................1, 16
IP Finance II...............................1, 16
IP Funding..................................1, 16
L/C Bank.......................................58
Loan Portfolio.................................16
Loans...........................................1
Master Trust Agreement.........................15
Minimum Trust Interest.........................33
Monthly Interest...............................48
Monthly Period.................................26
Moody's........................................44
New Issuance...................................32
New Regulations................................64
Non-U.S. Note Owner............................61
Note Majority..................................30
Note Owner.....................................26
Note Rate......................................25
Noteholder.................................37, 61
Noteholders....................................24
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<PAGE>
INDEX OF TERMS FOR PROSPECTUS
(continued)
Term Page
- ---- ----
Notes...........................................1
OID............................................63
Originator.....................................41
Originators.....................................1
Owner Trustee...............................1, 15
Participants...................................36
Participation Agreement........................42
Participations.................................42
Parties in Interest............................65
Pay Out Event...................................5
Payment Account................................44
Payment Date....................................3
Permitted Investments..........................45
Plans..........................................65
Pre-Funding Account............................45
Pre-Funding Amount.............................45
Premium Finance Obligations.....................1
Principal Account..............................44
Principal Amortization Period...................3
Principal Funding Account......................27
Principal Receivables...........................2
Principal Terms................................32
PTCE...........................................66
Purchase Agreement..............................1
Purchased Loans................................20
Qualified Institution..........................44
Rapid Accumulation Period.......................4
Rapid Amortization Period.......................4
Rating Agencies................................14
Rating Agency...............................6, 14
Receivables.................................1, 23
Refinancing....................................49
Refinancing Date...............................49
Refinancing Price..............................50
Regulations....................................61
Related Documents..............................32
Removal Date...................................43
Removed Receivables........................23, 43
Reserve Account................................59
Revolving Period................................3
SAIF...........................................44
Sale and Servicing Agreement................1, 16
Scheduled Payment Date..........................4
SEC............................................43
Securities Act.................................32
Seller......................................1, 16
Senior Notes...................................25
Series.........................................15
Series Supplement...........................1, 25
Series Termination Date.........................4
Service........................................61
Service Transfer...............................54
Servicer....................................2, 16
Servicer Default...............................54
Shared Principal Collections...................48
Spread Account.................................59
Standard & Poor's..............................44
Subordinated Notes.............................25
Tax Opinion....................................33
Term Notes......................................1
Terms and Conditions...........................38
Third Party Originators........................20
Transfer Agent and Registrar...................39
Transfer and Servicing Agreements..............39
Transfer Date..................................46
Trust.......................................1, 15
Trust Agreement.................................1
Trust Interest..................................2
Trust Portfolio................................23
Trust Termination Date.........................50
U.S. Note Owner...............................61
U.S. Person....................................61
UCC............................................60
Unallocated Principal Collections..............47
Underwriting Agreement.........................67
Variable Funding Notes......................1, 27
Yield Enhancement Account......................59
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Part II
Item 14. Other Expenses of Issuance and Distribution
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
SEC Registration Fee.............................. $278.00
Legal Fees and Expenses........................... $*
Accounting Fees and Expenses...................... $*
Trustee's Fees and Expenses....................... $*
Blue Sky Qualification Fees
and Expenses.................................... $*
Printing and Engraving Fees....................... $*
Rating Agency Fees................................ $*
Miscellaneous..................................... $*
-------
Total........................................ $278.00
=======
*To be provided by amendment.
Item 15. Indemnification of Directors and Officers
Set forth below are certain provisions of law and a brief summary of the
relevant provisions of the Certificate of Incorporation and By-Laws of A.I.
Receivables Transfer Corp. (the "Company"). The general effect of such
provisions is to provide indemnification to officers and directors of the
Company for actions taken in good faith on behalf of the Company.
Section 145 of the General Corporation Law of Delaware empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise.
Depending on the character of the proceeding, a corporation may indemnify
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person indemnified acted in good faith
and in a manner the person reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the person's conduct was
unlawful. If the person indemnified is not wholly successful in such action,
suit or proceeding, but is successful, on the merits or otherwise, in one or
more but less than all claims, issues or matters in such proceeding, such person
may be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with each successfully resolved
claim, issue or matter. In the case of an action or suit by or in the right of
the corporation, no indemnification may be made in respect to any claim, issue
or mater as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that despite the adjudication of liability but in the view of all the
circumstances of the case such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. Section 145
provides that to the extent a present or former director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to above or in the defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
The Certificate of Incorporation of the Company provides that a director of the
Company will not be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except
<PAGE>
for liability (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involved intentional misconduct or a knowing violation of the law, (iii)
under Section 174 of the General Corporation Law of the State of Delaware or
(iv) for any transaction from which the director derived an improper personal
benefit.
The By-laws of the Company provide that each person who was or is made a party
or is threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative ("proceeding"), by reason of
the fact that he or she is or was a director, officer, agent or other employee
of the Company (which term includes any predecessor corporation of the Company)
or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, will be indemnified by the Company to the fullest
extent authorized by the General Corporation Law of the State of Delaware, as
the same exists or may hereafter be amended against all expenses, reasonably
incurred in connection therewith and such indemnification will inure to the
benefit of the indemnity's heirs, executors and administrators.
Reference is made to the form of Underwriting Agreement filed as Exhibit 1.1
hereto for provisions relating to the indemnification of directors, officers and
controlling persons against certain liabilities including liabilities under the
Securities Act of 1933, as amended.
Item 16. Exhibits
(a) Exhibits
1.1-- Form of Underwriting Agreement.*
3.1-- Certificate of Incorporation of A.I. Receivables Transfer Corp.,
as currently in effect.
3.2-- Bylaws of A.I. Receivables Transfer Corp., as currently in effect.
4.1-- Form of Trust Agreement of AIG Credit Premium Finance Master Trust
between the Trust and the Owner Trustee.*
4.2-- Form of Indenture between the Trust and the Indenture Trustee
(including forms of Notes).*
4.3-- Form of Sale and Servicing Agreement, among the Seller, the
Servicer and the Trust.*
4.4-- Form of Purchase Agreement, among the Originators and the Seller.*
5.1-- Form Opinion of Weil Gotshal & Manges LLP (as to legality).
8.1-- Form Opinion of Weil Gotshal & Manges LLP (as to tax matters).
23.1-- Form Consent of Weil Gotshal & Manges LLP (contained in Exhibit
5.1 and 8.1).
24.1-- Power of Attorney (included on signature page).
25.1-- Form T-1 of Indenture Trustee.*
*To be filed by amendment.
(b) Financial Statements
All financial Statements, schedules and historical financial information
have been omitted as they are not applicable.
Item 17. Undertakings
A. Undertaking Pursuant to Rule 415.
The undersigned Registrant hereby undertakes as follows:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
<PAGE>
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that (a)(i) and (a)(ii) will not apply if the
information required to be included in a post-effective amendment thereby
is contained in periodic reports filed pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Exchange Act of 1933 Act, each such post-effective
amendment shall be deemed to be a new Registration Statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the
termination of the offering.
B. Filing Incorporating Subsequent Exchange Act Documents By Reference.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Trust's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
C. Undertaking in Respect of Indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will
be governed by the final adjudication of such issue.
D. Undertaking in Respect of Acceleration of Effective Date or Filing of
Registration Statement.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as
part of this Registration
<PAGE>
Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
under the Securities Act of 1933 shall be deemed to be part of this
Registrant Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
E. Undertaking in Respect of the Eligibility of the Trustee.
The undersigned Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance
with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Trust Indenture Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on September 3, 1999.
A.I. Receivables Transfer Corp.,
as depositor to the Trust
By: /s/ Gerald V. Vitkauskas
------------------------------
Gerald V. Vitkauskas
President
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Michael D. Vogen his true and lawful attorney-in-fact and agent, with full
powers of substitution, for him and in his name, place and stead, in any and all
capacities, to sign and to file any and all amendments, including post-effective
amendments, to this Registration Statement with the Securities and Exchange
Commission, hereby granting to said attorney-in-fact full power and authority to
perform each and every act and thing whatsoever, on behalf of the undersigned,
requisite or desirable to be done and about the premises as fully to all intents
and purposes as the undersigned might or could do in person, hereby ratifying
and confirming all acts and things that said attorney-in-fact may do or cause to
be done by virtue of these presents.
The Registrant reasonably believes that the security rating requirements of
the securities will be met at the time of sale of the securities.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on September 3, 1999 by the
following persons in the capacities indicated.
Signatures Title Date
---------- ----- ----
/s/ Gerald V. Vitkauskas President and Director September 3, 1999
- ------------------------
Gerald V. Vitkauskas
/s/ Michael D. Vogen Chief Financial Officer; September 3, 1999
- ------------------------ Treasurer; Director
Michael D. Vogen
Exhibit 3.1
CERTIFICATE OF INCORPORATION
of
A.I. RECEIVABLES TRANSFER CORP.
THE UNDERSIGNED, being a natural person, for the purpose of executing a
Certificate of Incorporation of A.I. Receivables Transfer Corp. under the
General Corporation Law of the State of Delaware, hereby certifies that:
FIRST: The name of the corporation is A.I. Receivables Transfer Corp. (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1013 Centre Street, Wilmington, Delaware 19805, located in
New Castle County. The name of the registered agent of the Corporation in the
State of Delaware at such address is Corporation Service Company.
THIRD: The nature of the business and the purpose to be conducted or
promoted by the Corporation are to engage in only the following activities:
A. to purchase, acquire, own and hold loans to insureds to finance the
premiums on property and casualty insurance policies ("Loans") and the
interest in certain payments of premiums to become due from insureds for
commercial property and casualty insurance ("Deferred Payment Obligations,"
and together with the Loans, the "Premium Finance Obligations"), and/or
beneficial interests in such Premium Finance Obligations, all collections
and recoveries on such Premium Finance Obligations, proceeds of any
collateral securing such Premium Finance Obligations and any interest in
the ownership interest in one or more trusts that finances Premium Finance
Obligations (collectively, the "Receivables");
B. to transfer, sell, assign, pledge and/or grant security interests
in the Receivables to AIG Credit Premium Finance Master Trust (the "Trust")
pursuant to a sale and servicing Agreement or other similar agreements;
C. to borrow money to facilitate activities specifically authorized by
this Certificate of Incorporation;
D. to hold, loan, invest, dividend, transfer to investors and
otherwise take any action in respect of the proceeds generated by the
transfer, sale, assignment or pledge of the Receivables;
E. to authorize, offer, sell and deliver one or more series and
classes of certificates or bonds, notes,
<PAGE>
participation interests or other evidences of indebtedness collateralized
or secured by one or more pools of the Receivables or by certificates of
any class, in each case issued by the Trust; and
F. to engage in any activity, enter into any agreement, undertaking,
contract, indenture, assignment, sale agreement, support agreement,
security agreement or certificate, appoint any agent or dealer with respect
to the foregoing, and to exercise any powers permitted to corporations
under the corporate law of the State of Delaware which are incidental to
the foregoing or necessary or appropriate to accomplish the foregoing.
FOURTH: The total number of shares of capital stock of all classes which
the Corporation shall have authority to issue is one thousand (1,000) shares,
all of which shall be common stock each having a par value of one cent ($.01).
FIFTH: The name and mailing address of the sole incorporator is R. Sharon
Gravesande, c/o Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York
10153.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: For so long as any rated securities which the Corporation has
caused the Trust to issue are outstanding, at least one of the directors of the
Corporation shall be an Independent Director. "Independent Director" shall mean
a director of the Corporation who shall at no time be, or have been for a period
commencing 24 months prior to such director's election to the board of directors
of the Corporation (the "Board of Directors"), a director (other than an
Independent Director), officer, supplier or direct customer of, an employee of,
or holder of any beneficial interest in (direct or indirect), the Corporation or
any Affiliate, or a person who has served as a trustee in bankruptcy for the
Corporation or any Affiliate. "Affiliate" shall mean any entity other than the
Corporation (i) which owns beneficially, directly or indirectly, 10% or more of
the outstanding shares of the common stock of the Corporation, (ii) which is in
control of the Corporation, as defined under Section 230.405 of the Rules and
Regulations of the Securities and Exchange Commission, 17 C.F.R.ss. 230 405,
(iii) of which 10% or more of the outstanding shares of its common stock is
owned beneficially, directly or indirectly, by any entity described in clause
(i) or (ii) above, or (iv) which is controlled by an entity described in clause
(i) or (ii) above, as defined under Section 230.405 of the Rules and regulations
of the Securities and Exchange Commission, 17 C.F.R.ss. 230 405.
EIGHTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the by-laws of the Corporation; provided, however, that any action in respect of
the by-laws of the Corporation that bears upon whether the separate corporate
identity of the Corporation and its Affiliates (as defined in Article Seventh
hereof) will be respected and the assets of the Corporation not consolidated
2
<PAGE>
with those of any Affiliate under applicable federal or state bankruptcy or
insolvency law, or that otherwise relates to articles Twelfth, Thirteenth or
Fourteenth hereof, must receive the prior written consent of the Independent
Director (as defined in Article Seventh hereof).
NINTH: The Corporation shall indemnify, to the full extent permitted by
Section 145 of the General Corporation Law of Delaware, as amended from time to
time, all persons who it may indemnify pursuant thereto.
TENTH: No director of the Corporation shall be personally liable to the
Corporation or any stockholder for monetary damages for breach of fiduciary duty
as a director, except for any matter in respect of which such director shall be
liable under Section 174 of Title 8 of the Delaware Code (relating to the
Delaware General Corporation Law) or any amendment thereto or successor
provision thereto or shall be liable by a reason that, in addition to any and
all other requirements for such liability, such director (i) shall have breached
the duty of loyalty to the Corporation or its stockholders, (ii) shall not have
acted in good faith or, in failing to act, shall have not acted in good faith,
(iii) shall have acted in a manner involving intentional misconduct or a knowing
violation of law or, in failing to act, shall have acted in a manner involving
intentional misconduct or a knowing violation of law or (iv) shall have derived
an improper personal benefit. Neither the amendment nor the repeal of this
Article Tenth, nor the adoption of any provision of the Certificate of
Incorporation inconsistent with this Article Tenth, shall eliminate or reduce
the effect of this Article Tenth in respect of any matter occurring, or any
cause of action, suit or claim that, but for this Article Tenth, would accrue or
arise, prior to such amendment, repeal or adoption of an inconsistent provision.
ELEVENTH: Election of directors need not be by written ballot.
TWELFTH: For so long as any securities which the Corporation has caused the
Trust to issue are outstanding, all transactions between the Corporation and any
Affiliate (as defined in Article Seventh hereof) must receive the prior written
consent of the Independent Director (as defined in Article Seventh hereof) and
must be conducted on an arms'-length basis (except with respect to any support
agreement between the Corporation and American International Group, Inc.,
("AIG')) or with respect to any support agreement to which AIG is a party
relating to any pooling and servicing agreement, sale and servicing agreement,
purchase agreement, indenture or supplement thereto, or any other similar
agreement among the Corporation, any of A.I. Credit Corp., AICCO, Inc., Imperial
Premium Finance, Inc. (a Delaware Corporation), Imperial Premium Finance Inc. (a
California Corporation) and Imperial Funding, Inc. and any third party
originator, seller, servicer, trustee or owner trustee.
THIRTEENTH: For so long as any securities which the Corporation has caused
the Trust to issue are outstanding, the Corporation shall not, without the prior
consent of the Independent Director (as defined in Article Seventh hereof), (i)
institute, or consent to the institution of, proceedings seeking liquidation,
reorganization
3
<PAGE>
or other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect, or seek or consent
to the appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator or similar official of the Corporation or a substantial part of its
property, or make any assignment for the benefit of creditors, or except as
required by law, admit in writing its inability to pay its debts as they become
due, or take any corporate action in furtherance of such action or (ii) sell all
or substantially all of its assets, merge or consolidate with another entity, or
take any corporate action in furtherance of any such action. In deciding whether
to consent to any action described in the foregoing sentence, the Independent
Director's fiduciary duty shall be to the Corporation (including the senior
creditors of the Corporation who are not Affiliates (as defined in Article
Seventh hereof)) and not to the stockholders and/or subordinated creditors of
the Corporation.
FOURTEENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereinafter prescribed by statute, and all rights conferred by the
stockholders herein are granted subject to this reservation; provided, however,
that any action in respect of this Certificate of Incorporation by the
Corporation and its Affiliates (as defined in Article Seventh hereof) will be
respected and the assets of the Corporation not consolidated with those of any
Affiliate under applicable federal or state bankruptcy or insolvency law, or
that amends, alters, changes or repeals Articles Third, Fourth, Seventh, Eighth,
Twelfth, Thirteenth or Fourteenth or this Article Fifteenth must receive the
prior consent of the Independent Director (as defined in Article Seventh
hereof). At all times prior to the payment in full of issuance of indebtedness
secured by the Receivables, no material amendment to this Certificate of
Incorporation or to the Corporation's by-laws may be made unless the Corporation
confirms in writing that such material amendment will not result in any rating
agency reducing or withdrawing its then-existing rating of any then-outstanding
certificates, notes or other securities (any such rating agency (a "Rating
Agency")). Notwithstanding any other provisions of this Certificate of
Incorporation and any provision of law that otherwise so empowers the
Corporation, the Corporation does not have the power to cause the Trust to issue
any additional securities unless the Rating Agency which has rated any
outstanding securities previously issued confirms in writing that the issuance
of the additional securities, in and of itself, will not cause the Rating Agency
to lower or downgrade its rating on such outstanding securities.
4
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of
Incorporation this 1st day of September, 1999.
A.I. Receivables Transfer Corp.
By: /s/ R. Sharon Gravesande
-----------------------------------
Name: R. Sharon Gravesande
Title: Sole Incorporator
Exhibit 3.2
BY-LAWS
of
A.I. RECEIVABLES TRANSFER CORP.
(a Delaware Corporation)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by, or in the name
of, the Corporation by the Chairman or Vice-Chairman of the board of directors
of the Corporation (the "Board"), if any, or by the President or a
Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation certifying the number of shares
owned by him in the Corporation. Any and all signatures on any such certificate
may be facsimiles. In case any officer, transfer agent, or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, such certificate may be issued by the Corporation with
the same effect as if such person were such officer, transfer agent, or
registrar at the date of issue.
Whenever the Corporation shall be authorized to issue more than one class
of stock or more than one series of any class of stock and whenever the
Corporation shall issue any shares of its stock as partly paid stock, the
certificate representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
Delaware General Corporation Law. Any restrictions on the transfer or
registration of transfer of any shares of stock of any class or series shall be
noted conspicuously on the certificate representing such shares.
The Corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board may require the owner of any lost, stolen, or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The Corporation may, but shall not be
required to, issue fractions of a share. If the Corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered or bearer form which
shall entitle the holder to receive a certificate for a full
<PAGE>
share upon the surrender of such scrip or warrants aggregating a full share. A
certificate for a fractional share shall, but scrip or warrants shall not unless
otherwise provided therein, entitle the holder to exercise voting rights, to
receive dividends thereon, and to participate in any of the assets of the
Corporation in the event of liquidation, in each case to the extent of such
fraction. The Board may cause scrip or warrants to be issued subject to the
conditions that they shall become void if not exchanged for certificates
representing full shares before a specified date, or subject to the conditions
that the shares for which scrip or warrants are exchangeable may be sold by the
Corporation and the proceeds thereof distributed to the holders of scrip or
warrants, or subject to any other conditions which the Board may impose.
3. STOCK TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the Corporation shall be made
only on the stock ledger of the Corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the Corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or the allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the Board may fix, in advance, a record date, which
shall not be more than sixty days nor less than 10 days before the date of such
meeting, nor more than sixty days prior to any other action. If no record date
is fixed, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held; the record date for determining stockholders entitled to express consent
to corporate action in writing without a meeting, when no prior action by the
Board is necessary, shall be the day on which the first written consent is
expressed; and the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board adopts
the resolution relating thereto. A determination of stockholders of record
entitled to notice of or to vote at any meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
5. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the Corporation has only one class of
2
<PAGE>
shares of stock outstanding; and said reference is also intended to include any
outstanding share or shares of stock and any holder or holders of record of
outstanding shares of stock of any class upon which or upon whom the certificate
of incorporation of the Corporation (the "Certificate of Incorporation") confers
such rights where there are two or more classes or series of shares of stock or
upon which or upon whom the Delaware General Corporation Law confers such rights
notwithstanding that the Certificate of Incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder.
6. STOCKHOLDER MEETINGS.
(a) TIME. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the Board, provided, that the first annual meeting
shall be held on a date within thirteen months after the organization of the
Corporation, and each successive annual meeting shall be held on a date within
thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the Board.
(b) PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of Delaware, as the Board may, from time to
time, fix. Whenever the director shall fail to fix such place, the meeting shall
be held at the registered office of the Corporation in the State of Delaware.
(c) CALL. Annual meetings and special meetings may be called by the Board
or by any officer instructed by the Board to call the meeting.
(d) NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
given, stating the place, date, and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the Corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes of the meeting. The
notice of a special meeting shall in all instances state the purpose or purposes
for which the meeting is to be called. The notice of any meeting shall also
include, or be accompanied by, any additional statements, information, or
documents prescribed by the Delaware General Corporation Law. Except as
otherwise provided by the Delaware General Corporation Law, a copy of the notice
of any meeting shall be given, personally or by mail, not less than ten days nor
more than sixty days before the date of the meeting, unless the lapse of the
prescribed period of time shall have been waived, and directed to each
stockholder at his record address or at such other address which he may have
furnished by request in writing to the Secretary of the Corporation. Notice by
mail shall be deemed to be given when deposited, with postage thereon prepaid,
in the United States Mail. If a meeting is adjourned to another time, not more
than thirty days hence, and/or to another place, and if an announcement of the
adjourned time and/or place is made at the meeting, it shall not be necessary to
give notice of the adjourned meeting unless the Board, after adjournment, fix a
new record date
3
<PAGE>
for the adjourned meeting. Notice need not be given to any stockholder who
submits a written waiver of notice signed by him before or after the time stated
therein. Attendance of a stockholder at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except when the stockholder
attends the meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose or purposes of, any regular or special meeting of the stockholders need
be specified in any written waiver of notice.
(e) STOCKHOLDER LIST. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the Corporation, or to vote at any meeting of
stockholders.
(f) CONDUCT OF MEETING. Meetings of the stockholders shall be presided over
by one of the following officers in the order of seniority and if present and
acting: the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any, the President, a Vice-President, if any, or, if none of the foregoing is in
office and present and acting, by a Chairman to be chosen by the stockholders.
The Secretary of the Corporation, or in his or her absence, an Assistant
Secretary, shall act as secretary of every meeting, but if neither the Secretary
nor an Assistant Secretary is present the Chairman of the meeting shall appoint
a secretary of the meeting.
(g) PROXY REPRESENTATION. Every stockholder may authorize another person or
persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provided for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the Corporation generally.
(h) INSPECTORS. The Board, in advance of any meeting, may, but need not,
appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding
4
<PAGE>
at the meeting may, but need not, appoint one or more inspectors. In case any
person who may be appointed as an inspector fails to appear or act, the vacancy
may be filled by appointment made by the Board in advance of the meeting or at
the meeting by the person presiding thereat. Each inspector, if any, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question or matter determined by him or them and execute a
certificate of any fact found by him or them.
(i) QUORUM. The holders of a majority of the outstanding shares of stock
shall constitute a quorum at a meeting of stockholders for the transaction of
any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
(j) VOTING. Each share of stock shall entitle the holder thereof to one
vote. In the election of directors, a plurality of the votes cast shall elect.
Any other action shall be authorized by a majority of the votes cast except
where the Delaware General Corporation Law prescribes a different percentage of
votes and/or a different exercise of voting power, and except as may be
otherwise prescribed by the provisions of the Certificate of Incorporation or
these By-Laws. In the election of directors, and for any other action, voting
need not be by ballot.
7. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the Delaware
General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the Corporation
shall be managed by or under the direction of the Board. The Board shall have
the authority to fix the compensation of the members thereof. The use of the
phrase
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"whole Board" herein refers to the total number of directors which the
Corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, or a
citizen or resident of the United States or the State of Delaware. The initial
Board shall consist of two (2) persons. Except for the initial Board, the number
of directors may be fixed from time to time by action of the stockholders or of
the Board, or, if the number is not fixed, the number shall be two (2). The
number of directors may be increased or decreased by action of the stockholders
or of the Board.
3. INDEPENDENT DIRECTOR. At all times, at least one of the directors of the
Corporation shall be an Independent Director, as such term is defined in Article
SEVENTH of the Certificate of Incorporation.
4. ELECTION AND TERM. The initial Board, unless the members thereof shall
have been named in the Certificate of Incorporation, shall be elected by the
incorporator or incorporators and shall hold office until the first annual
meeting of stockholders and until their successors are elected and qualified or
until their earlier resignation or removal. Any director may resign at any time
upon written notice to the Corporation. Directors who are elected at an annual
meeting of stockholders, and directors who are elected in the interim to fill
vacancies and newly created directorships, shall hold office until the next
annual meeting of stockholders or until their successors are elected and
qualified or until their earlier resignation or removal. In the interim between
annual meetings of stockholders or of special meetings of stockholders called
for the election of directors and/or for the removal of one or more directors
and for the filling of any vacancies in that connection, newly created
directorships and any vacancies in the Board, including unfilled vacancies
resulting from the removal of directors for cause or without cause, may be
filled by the vote of a majority of the remaining directors then in office
although less than a quorum, or by the sole remaining director.
5. MEETINGS.
(a) TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
(b) PLACE. Meetings shall be held at such place within or without the State
of Delaware as shall be fixed by the Board.
(c) CALL. No call shall be required for regular meetings for which the time
and place have been fixed. Special meetings may be called by or at the direction
of the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, or
the President, or of a majority of the directors in office.
(d) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required
for regular meetings for which the time and place have been fixed. Written,
oral, or any other mode of notice of the time and place shall be given for
special meetings in sufficient time for the convenient assembly of the directors
thereat.
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Notice need not be given to any director or to any member of a committee of
directors who submits a written waiver of notice signed by him before or after
the time for the meeting stated herein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
(e) QUORUM AND ACTION. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A majority
of the directors present, whether or not a quorum is present, may adjourn a
meeting to another time and place. Except as otherwise provided herein or in the
Certificate of Incorporation and except as other-wise provided by the Delaware
General Corporation Law, the vote of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board. The quorum
and voting provisions herein stated shall not be construed as conflicting with
any provisions of the Delaware General Corporation Law and these By-Laws which
govern a meeting of directors held to fill vacancies and newly created
director-ships in the Board or action of disinterested directors.
(f) CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
6. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the
Delaware General Corporation Law, any director or the entire Board may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
7. COMMITTEES. The Board may, by resolution passed by a majority of the
whole Board, designate one or more committees, each committee to consist of one
or more of the directors of the Corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of any member of any such committee or committees, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board, shall have and may exercise the powers and authority of
the Board in the management of the business and affairs of the Corporation with
the exception of any authority the delegation of which is prohibited by Section
141 of the Delaware General Corporation Law, and may authorize the seal of the
Corporation to be affixed to all papers which may require it.
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<PAGE>
8. WRITTEN ACTION. Any action required or permitted to be taken at any
meeting of the Board or any committee thereof may be taken without a meeting if
all members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
9. ELECTRONIC COMMUNICATION. Any member or members of the Board or of any
committee designated by the Board, may participate in a meeting of the Board, or
any such committee, as the case may be, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other.
ARTICLE III
OFFICERS
The officers of the Corporation shall consist of a President and a
Secretary, and may include, by election or appointment, one or more Vice
Presidents (any one or more of whom may be given an additional designation of
rank or function), a Treasurer and such Assistant Secretaries, such Assistant
Treasurers and such other officers with such titles as the resolution of the
Board choosing them shall designate. Except as may otherwise be provided in the
resolution of the Board choosing him or her, no officer other than the Chairman
or Vice-Chairman of the Board, if any, need be a director. Any number of offices
may be held by the same person.
Unless otherwise provided in the resolution choosing him or her, each
officer shall be chosen for a term which shall continue until the meeting of the
Board following the next annual meeting of stockholders and until his successor
shall have been chosen and qualified. Any officer may be removed with or without
cause by the Board. Any vacancy in any office may be filled by the Board.
All officers of the Corporation shall have such authority and perform such
duties in the management and operation of the Corporation as may be prescribed
in the resolutions of the Board designating and choosing such officers or
prescribing the authority and duties of the various officers of the Corporation,
and as are customarily incident to their office, except to the extent that such
resolutions may be inconsistent therewith. The Secretary shall keep or cause to
be kept in the corporate minute books the minutes of the meetings of the
stockholders, the Board, and all committees created by the Board and shall have
such other powers and authority which ordinarily are inherent in such office in
addition to those which the Board may from time to time prescribe. The Treasurer
shall have charge and custody of, and be responsible for, all funds and
securities of the Corporation and shall have such other powers and authority
which ordinarily are inherent in such office in addition to those which the
Board from time to time may prescribe.
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<PAGE>
ARTICLE IV
BOOKS AND RECORDS
The Corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of the shareholders, of the
Board, and of any committee which the Board may appoint. Any of the foregoing
books, minutes or records may be in written form within a reasonable time.
ARTICLE V
INDEMNIFICATION
The Corporation, to the full extent permitted, and in the manner required
by the laws of the State of Delaware as in effect at the time of the adoption of
this Article V or as the same may be amended from time to time, shall (i)
indemnify any person (and the heirs and legal representatives of such person)
who is made or is threatened to be made a party to any threatened, pending, or
completed action, suit or proceeding, whether in nature civil, criminal,
administrative or investigative, by reason of the fact that he or she is or was
a director, officer, employee or agent of the Corporation or of any constituent
Corporation absorbed into the Corporation by consolidation or merger or served
with another Corporation, partnership, joint venture, trust or other enterprise
at the request of the Corporation or of any such constituent Corporation and
(ii) provide to any such person (and the heirs and legal representatives of such
person) advances for expenses reasonably incurred in defending any such action,
suit or proceeding, upon receipt of an undertaking by or on behalf of such
person (and the heirs and legal representatives of such person) to repay such
advances unless it is ultimately determined that he or she is entitled to
indemnification by the Corporation.
ARTICLE VI
CORPORATE SEAL
The corporate seal shall be in such form as the Board shall prescribe.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and shall be subject to
change, by the Board.
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ARTICLE VIII
CONTROL OVER BY-LAWS
Subject to the provisions of the Certificate of Incorporation and the
provisions of the Delaware General Corporation Law, the power to amend, alter or
repeal these By-Laws and to adopt new By-Laws may be exercised by the Board or
by the stockholders.
END OF BY-LAWS
Exhibit 5.1
[Form of Opinion]
[Date]
A.I. Receivables Transfer Corp.
Registration Statement on Form S-3
A.I. Receivables Transfer Corp.
160 Water Street
New York, New York 10038
We have acted as counsel to A.I. Receivables Transfer
Corp., a Delaware corporation, (the "Company"), in connection with the
preparation and filing with the Securities and Exchange Commission of the
Company's Registration Statement on Form S-3, (together with the exhibits and
any and all amendments thereto, the "Registration Statement"), under the
Securities Act of 1933, as amended (the "Securities Act"), relating to the
registration by the Company of asset-backed notes (the "Asset-Backed Notes"). As
described in the Registration Statement, the Asset-Backed Notes will be issued
in series (and may be issued in classes within any given series), with each
series being issued by AIG Credit Premium Finance Master Trust, a Delaware
business trust, a wholly owned subsidiary of the Company (the "Trust") to be
formed by the Company pursuant to a trust agreement (the "Trust Agreement")
between the Trust and a trustee to be determined (the "Trustee") secured by an
indenture (including the supplmenet for each series, the "Indenture") between
the Trust and a trustee to be determined (the "Indenture Trustee").
In so acting, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the Registration
Statement, the Trust Agreement, the Indenture and such corporate records,
agreements, documents and other instruments, and such certificates or comparable
documents of public officials and of officers, directors and representatives of
the Company, and the Trust, and have made such inquiries of such officers,
directors and representatives, as we have deemed relevant and necessary as a
basis for the opinion hereinafter set forth.
In such examination, we have assumed the genuineness of all
signature, the authenticity of all documents submitted to us as originals, the
conformity to original documents of documents submitted to us as certified or
photostatic copies and the authenticity of the originals of such latter
documents. As to all questions of fact material to this opinion that have not
been independently established, we have relied upon certificates or comparable
documents of officers and representatives of the Company and
<PAGE>
the Trust. We have also assumed that the Company and the Trust are duly
organized and validly existing and have the requisite power and authority to
execute, deliver and perform their obligations under the Trust Agreement and the
Indenture. The opinion set forth below is also based on the assumptions that (i)
the Registration Statement, as finally amended (including any necessary
post-effective amendments), has become effective under the Securities Act, (ii)
the amount, price, interest rate and other principal terms of the Asset-Backed
Notes have been or will be duly approved by the Board of Directors (or the
authorized designees) of the Company, (iii) the Trust Agreement and the
Indenture have been duly authorized, executed and delivered by the parties
thereto substantially in the form filed as an exhibit to the Registration
Statement, and (iv) the Asset-Backed Notes have been duly executed by the
Trustee and authenticated by the Trustee in accordance with the Trust Agreement
and sold and delivered by the Trust against payment therefor.
Based on the foregoing, and subject to the qualifications
stated herein, we are of the opinion that any asset-backed notes will be the
binding obligation of the Trust, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors rights and remedies generally, and subject to general principles or
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity).
The opinions herein are limited to the laws of the State of
New York and the federal laws of the United States, and we express no opinion as
to the effect on the matters covered by this opinion of the laws of any other
jurisdiction.
We hereby consent to the use of this opinion as an exhibit
to the Registration Statement. We further consent to the reference to our firm's
name under the caption "Legal Matters" in the prospectus which is a part of the
Registration Statement.
Very truly yours,
2
Exhibit 8.1
[Form of Opinion]
September 3, 1999
A.I. Receivables Transfer Corp.
160 Water Street
New York, NY 10038
Re: Re: AIG Credit Premium Finance Master Trust Asset Backed Notes
Ladies and Gentlemen:
We have acted as counsel to A.I. Receivables Transfer Corp. (the "Seller"),
in connection with the preparation and filing with the Securities and Exchange
Commission of a Registration Statement on Form S-3 (Registration Number
333-______), as amended to the date hereof (together with the exhibits thereto,
the "Registration Statement") relating to the registration by the Seller and AIG
Credit Premium Finance Master Trust (the "Trust") of the Trust's Asset Backed
Notes (the "Notes"). As described in the Registration Statement, the Notes will
be issued in series (and may be issued in classes within any given series). The
Trust will be formed pursuant to a Trust Agreement between the Seller and an
Owner Trustee (the "Trust Agreement"). Each series of Notes will be issued
pursuant to an Indenture between the Trust and an Indenture Trustee (the
"Indenture"). All capitalized terms not otherwise defined herein have the
meanings ascribed to them in the Registration Statement.
In so acting, we have examined originals or copies, certified or otherwise
identified to our satisfaction, of the Registration Statement, including the
Prospectus and Prospectus Supplement which are a part thereof (collectively, the
"Prospectus"), a draft of the Trust Agreement, a draft of the Indenture, a draft
of the Notes, a draft of the AIG Support Agreement, and such corporate records,
agreements, documents and other instruments (the aforementioned documents
together, the "Documents"), and have made such inquiries of such officers and
representatives of the Seller and the Trust and such other persons, as we have
deemed relevant and necessary as a basis for the opinion hereinafter set forth.
In such examination, we have assumed the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies, the authenticity of the
originals of such latter documents, the genuineness of all signatures, and the
correctness of all representations made therein. (The terms of the Documents are
incorporated herein by reference.) We have further assumed that the final
executed Documents will be substantially the same as those which we have
reviewed and that there are no agreements or understandings between or among the
parties to the Documents with respect to the transactions contemplated therein
other than those contained in the Documents.
<PAGE>
Based on the foregoing, subject to the next succeeding paragraph, and
assuming full compliance with all the terms of the Documents it our opinion
that, although there is no direct authority with respect to a transaction
closely comparable to that contemplated in the Documents, the discussion
included in the Prospectus under the caption "Certain United States Federal
Income Tax Consequences," insofar as it constitutes statements of law or legal
conclusions and except to the extent qualified therein, is accurate in all
material respects.
The foregoing opinion is based on current provisions of the Internal
Revenue Code of 1986, as amended, the Treasury Regulations promulgated
thereunder, published pronouncements of the Internal Revenue Service, and case
law, any of which may be changed at any time with retroactive effect. Further,
you should be aware that opinions of counsel are not binding on the Internal
Revenue Service or the courts. We express no opinion either as to any matters
not specifically covered by the foregoing opinion or as to the effect on the
matters covered by this opinion of the laws of any other jurisdictions.
Additionally, we undertake no obligation to update this opinion in the event
there is either a change in the legal authorities, in the facts including the
taking of any action by any party to any of the transactions described in the
Documents pursuant to an opinion of counsel as required by any of the Documents
relating to such transactions, or in the Documents on which this opinion is
based, or an inaccuracy in any of the representations or warranties upon which
we have relied in rendering this opinion.
We consent to the references in the Prospectus under the captions
"Prospectus Summary - Tax Status" and "Certain United States Federal Income Tax
Consequences" to our firm. This opinion may not be used for any other purpose
any may not otherwise be relied upon by, or disclosed, quoted or referred to,
any other person.
Very truly yours,
2
