<PAGE>
As filed with the Securities and Exchange Commission on April 27, 1998
Registration No. 333-_______
Post-Effective Amendment No. 1 to
Registration Statement No. 33-84840
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
-------------------
AMERICAN EXPRESS MASTER TRUST
(Issuer of Certificates)
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION
(Originators of the Trust Described Herein)
(Exact Names of Registrant as Specified in its Charter)
Delaware 13-3632012
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
World Financial Center
200 Vesey Street
New York, New York 10285
(212) 640-2000
(Address, Including Zip Code, and Telephone Number, Including Area
Code, of each Registrant's Principal Executive Offices)
LOUISE M. PARENT, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
AMERICAN EXPRESS COMPANY
World Financial Center
200 Vesey Street
New York, New York 10285
(212) 640-2000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copies to:
ROBERT D. KRAUS, ESQ. CAMERON L. COWAN, ESQ.
CAROL V. SCHWARTZ, ESQ. ORRICK, HERRINGTON & SUTCLIFFE LLP
Group Counsel Washington Harbour
AMERICAN EXPRESS COMPANY 350 K Street, N.W.
World Financial Center Washington, D.C. 20007
200 Vesey Street (202) 339-8400
New York, New York 10285
(212) 640-2000
Approximate date of commencement of proposed sale to the public: From
time to time after this registration statement becomes effective as determined
by market conditions.
If any of the securities being registered on this form are to be
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, please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum Amount of
Title of Securities to be Amount to be Aggregate Price Per Aggregate Offering Registration
Registered Registered Certificate(1) Price Fee
------------------------- ------------ ------------------- ------------------ -------------
<S> <C> <C> <C> <C>
Asset Backed Certificates $1,000,000 100% $1,000,000 $295
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
In accordance with Rule 429 of the General Rules and Regulations under
the Securities Act of 1933, as amended, the Prospectus included herein is a
combined prospectus which also relates to $350,000,000 of unissued Asset Backed
Certificates registered under Registration Statement No. 33-84840 and this
Registration Statement constitutes Post-Effective Amendment No. 1 to
Registration Statement No. 33-84840. A filing fee of $70,000 was paid with
Registration Statement No. 33-84840 in connection with such unissued Asset
Backed Certificates.
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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 without the
delivery of a final Prospectus and accompanying Prospectus Supplement. This
Prospectus and accompanying 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.
SUBJECT TO COMPLETION, DATED [o], 1998
PROSPECTUS
AMERICAN EXPRESS MASTER TRUST
Accounts Receivable Trust Certificates
American Express Receivables Financing Corporation
and
American Express Centurion Bank,
as Transferors
American Express Travel Related Services Company, Inc.
as Servicer
The Accounts Receivable Trust Certificates (collectively, the
"Certificates") described herein may be sold from time to time in one or more
Series (each, a "Series"), in amounts, at prices and on terms to be determined
at the time of sale and to be set forth in a supplement to this Prospectus (a
"Prospectus Supplement"). The Certificates of each Series will evidence an
undivided interest in the American Express Master Trust (the "Trust"), a trust
that has been formed pursuant to the Amended and Restated Master Pooling and
Servicing Agreement among American Express Receivables Financing Corporation
("RFC") and American Express Centurion Bank ("Centurion Bank"), as transferors
(each, a "Transferor"), American Express Travel Related Services Company, Inc.
("TRS"), as servicer (in such capacity, the "Servicer"), and The Bank of New
York, as trustee (in such capacity, the "Trustee"). The assets of the Trust
include, receivables (the "Receivables") generated from time to time in a
portfolio of designated American Express(R) Card, American Express(R) Gold Card
and Platinum Card(R) accounts, or other card accounts (the "Designated
Accounts"), all monies due or to become due in respect of the Receivables
(including, without limitation, amounts owing for the payment of merchandise and
services and, unless
(cover sheet continued on next page)
-----------------
Potential investors should consider, among other considerations, the
information set forth in the sections entitled "Risk Factors" commencing on page
[o] herein and in the related Prospectus Supplement.
-----------------
THE CERTIFICATES WILL REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND WILL
NOT REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF AND WILL NOT BE GUARANTEED
BY RFC, CENTURION BANK, TRS, AMERICAN EXPRESS COMPANY OR ANY AFFILIATE THEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Certificates may be sold directly to purchasers, through agents
designated from time to time, through underwriting syndicates led by one or more
managing underwriters or through
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one or more underwriters acting alone. If underwriters or agents are involved in
the offering of the Certificates of any Series offered hereby, the name of the
managing underwriter or underwriters or agents will be set forth in the related
Prospectus Supplement. If an underwriter, agent or dealer is involved in the
offering of the Certificates of any Series offered hereby, the underwriter's
discount, agent's commission or dealer's purchase price will be set forth in, or
may be calculated from, the related Prospectus Supplement, and the net proceeds
to the Transferors from such offering will be the public offering price of such
Certificates less such discount in the case of an underwriter, the purchase
price of such Certificates less such commission in the case of an agent or the
purchase price of such Certificates in the case of a dealer, and less, in each
case, the other expenses of the Transferors associated with the issuance and
distribution of such Certificates. See "Underwriting."
This Prospectus may not be used to consummate sales of any Series of
Certificates unless accompanied by the related Prospectus Supplement.
The date of this Prospectus is [o], 1998.
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(continued from previous page)
otherwise specified in the related Prospectus Supplement, annual membership fees
and certain other administrative fees and charges, and recoveries on charged-off
Receivables), any Receivables in accounts added to the Trust from time to time,
moneys on deposit in certain accounts of the Trust and all of the right, title
and interest of the Transferor in the related RFC Receivable Purchase Agreement.
See "Description of the Certificates and the Agreement-General." The Transferors
will initially own the remaining undivided interest in the Trust. Unless
otherwise specified in the related Prospectus Supplement, TRS will service the
related Receivables.
The American Express(R) Card, American Express(R) Gold Card and
Platinum Card(R) are charge cards, not credit cards that provide for a revolving
line of credit. Therefore, except in the limited circumstances related to
Recovery Arrangements and described under "Domestic Consumer Charge Card
Business--Collection Efforts," the Receivables that originate in the Designated
Accounts are payable in full each month, and balances of the Designated Accounts
are not subject to a monthly finance charge. Therefore, unless otherwise
specified in the related Prospectus Supplement, a portion of the collections on
the Receivables in the Designated Accounts received in any Due Period equal to
the product of the aggregate amount of such collections and the Yield Factor
will be treated as Yield Collections and will be used, among other things, to
pay interest on the Certificates. The remainder of such collections will be
treated as Principal Collections and will be used to pay principal on the
Certificates. The Yield Factor is equal to 3.0% under the Agreement. The
Transferors have the ability, with certain restrictions, to change the Yield
Factor. See "Summary--Yield Factor; Collections."
Each Series will consist of one or more classes of Certificates (each,
a "Class"), one or more of which may be fixed rate Certificates, floating rate
Certificates or another type of Certificates, as specified in the related
Prospectus Supplement. Each Certificate will represent an undivided interest in
the Trust and the interest of the Certificateholders of each Class or Series
will include the right to receive a varying percentage of each month's
collections with respect to the Receivables at the times, in the manner and to
the extent described herein and, with respect to any Series offered hereby, in
the related Prospectus Supplement. Interest and principal payments with respect
to each Series offered hereby will be made as specified in the related
Prospectus Supplement. One or more Classes of a Series offered hereby may be
entitled to the benefits of a letter of credit, a maturity guaranty facility, a
cash collateral account, a cash collateral guaranty, an interest rate cap, a tax
protection agreement, an interest rate swap, a guaranteed rate agreement, an
insurance policy, a spread account, a reserve account, the use of cross support
features, a subordinated interest in the Receivables or certain cash flows in
respect of the Receivables or other form of enhancement as specified in the
Prospectus Supplement relating to such Series. In addition, any Series offered
hereby may include one or more Classes which are subordinated in right and
priority to payment of principal of, and/or interest on, one or more other
Classes of such Series or another Series, in each case to the extent described
in the related Prospectus Supplement. Each Series of Certificates or Class
thereof offered hereby will be rated in one of the four highest rating
categories by at least one nationally recognized rating organization.
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While the specific terms of any Series in respect of which this
Prospectus is being delivered will be described in the related Prospectus
Supplement, the terms of such Series will not be subject to prior review by, or
consent of, the Certificateholders of any previously issued Series.
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PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series to be offered thereby
and hereby will, among other things, set forth with respect to such Series: (a)
the initial aggregate principal amount of each Class of such Series; (b) the
certificate interest rate (or method for determining it) of each Class of such
Series; (c) certain information concerning the Receivables allocated to such
Series; (d) the expected date or dates on which the principal amount of the
Certificates will be paid to holders of each Class of Certificates (the
"Certificateholders"); (e) the extent to which any Class within a Series is
subordinated to any other Class of such Series or any other Series; (f) the
identity of each Class of floating rate Certificates and fixed rate Certificates
included in such Series, if any, or such other type of Class of Certificates;
(g) the Distribution Dates for the respective Classes; (h) relevant financial
information with respect to the Receivables; (i) additional information with
respect to any Enhancement relating to such Series; and (j) the plan of
distribution of such Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly unaudited
reports, containing information concerning the Trust and prepared by the
Servicer, will be sent on behalf of the Trust to Cede & Co. ("Cede"), as
registered holder of the related Certificates, pursuant to the Agreement. See
"Description of the Certificates and the Agreement--Book-Entry Registration,"
"--Reports to Certificateholders" and "--Evidence as to Compliance." Such
reports will not constitute financial statements prepared in accordance with
generally accepted accounting principles. Copies of such reports may be obtained
by owners of beneficial interests in the Certificates ("Certificate Owners")
upon written request to the Trustee at The Bank of New York, 101 Barclay Street,
New York, New York 10286, Attention: Corporate Trust Division. The Servicer will
file with the Securities and Exchange Commission (the "Commission") such reports
with respect to the Trust as are required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder.
AVAILABLE INFORMATION
This Prospectus, which forms a part of the Registration Statement,
omits certain information contained in such Registration Statement pursuant to
the rules and regulations of the Commission. For further information, reference
is made to the Registration Statement and amendments thereof and exhibits
thereto and any reports and other documents incorporated herein by reference as
described below under "Incorporation of Certain Documents by Reference," which
are available for inspection without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
7 World Trade Center, 13th Floor, New York, New York 10008; and Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661-2511. Copies of the
Registration Statement and amendments thereof and exhibits thereto may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Servicer will
file with the Commission such periodic reports, if any, with respect to the
Trust as are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder. In
addition, the Commission maintains
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a public access site on the Internet through the World Wide Web at which site
reports, proxy and information statements and other information regarding
registrants, including all electronic filings, may be viewed. The Internet
address of the Commission's World Wide Web site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be part hereof. Any statement contained
herein or in a document deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in any other subsequently filed document which
also is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as modified or superseded, to constitute a party of this
Prospectus.
The Servicer will provide without charge to each person to whom a copy
of this Prospectus is delivered, on the written or oral request of any such
person, a copy of any or all of the documents incorporated herein by reference,
except the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to American Express Travel Related Services Company, Inc.,
American Express Tower, World Financial Center, 200 Vesey Street, New York, New
York 10048, Attention: Secretary. Telephone requests for such copies should be
directed to (212) 640-5583.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in the
accompanying Prospectus Supplement. Certain capitalized terms which are used in
this summary are defined elsewhere in this Prospectus and in the accompanying
Prospectus Supplement. See "Glossary for Prospectus" and "Glossary for
Prospectus Supplement". Unless the context otherwise requires, capitalized terms
used in this Prospectus and in the accompanying Prospectus Supplement refer only
to the particular Series being offered by such Prospectus Supplement.
<TABLE>
<S> <C>
Type of Security............................ Accounts Receivable Trust Certificates (the "Certificates").
The Trust................................... American Express Master Trust (the "Trust"), a trust created under
the Amended and Restated Master Pooling and Servicing Agreement,
dated as of [o], 1998, as the same may be amended, supplemented or
otherwise modified from time to time (together with any assignment
of Receivables in Additional Accounts entered into pursuant
thereto, the "Agreement") among the Servicer, the Transferors and
the Trustee. The Trust was created as a master trust under which
one or more Series will be issued pursuant to a series supplement
to the Agreement (each, a "Series Supplement"). Any Series issued
by the Trust may or may not be a Series offered pursuant to this
Prospectus. The Certificates will represent undivided interests in
the Trust. Each Prospectus Supplement will identify the Trust and
all Series previously issued by such Trust.
The Transferors............................. American Express Receivables Financing Corporation, a Delaware
corporation ("RFC"), and American Express Centurion Bank, a
Utah-chartered industrial loan company ("Centurion Bank"), are the
transferors of the Receivables. RFC is a wholly owned,
limited-purpose subsidiary of American Express Travel Related
Services Company, Inc. ("TRS"), a New York corporation that, in
turn, is a wholly owned subsidiary of American Express Company.
Centurion Bank is also a wholly owned subsidiary of TRS. The
Receivables transferred to the Trust by RFC are purchased by it
from TRS, the owner of the Designated Accounts in which such
Receivables arise. The Receivables transferred to the Trust by
Centurion Bank will arise in Designated Accounts that are owned by
Centurion Bank.
</TABLE>
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<TABLE>
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Trustee..................................... The Bank of New York, unless otherwise specified in the related
Prospectus Supplement.
Trust Assets................................ The assets of the Trust include receivables consisting of amounts
charged by cardmembers for merchandise and services, and, unless
otherwise specified in the related Prospectus Supplement, all
annual membership fees and certain other administrative fees
billed to Cardmembers (the "Receivables") arising from time to
time in certain designated American Express(R)Card, American
Express(R)Gold Card and Platinum Card(R)* Accounts owned by TRS or
Centurion Bank or, if specified in a related Prospectus
Supplement, in certain other designated card accounts described in
such Supplement (the "Designated Accounts"), funds collected or to
be collected from Cardmembers in respect of the Receivables
(including recoveries on charged-off Receivables ("Recoveries")),
monies on deposit in certain accounts of the Trust, all of the
Transferors' respective right, title and interest in the related
RFC Receivable Purchase Agreement, payments made in respect of any
Enhancement issued with respect to any particular Series or Class,
or other assets, as described in the related Prospectus
Supplement. See "Domestic Consumer Charge Card Business." The term
"Enhancement" means, with respect to any Series or Class thereof,
any letter of credit, maturity guaranty facility, cash collateral
account, cash collateral guaranty, collateral interest, tax
protection agreement, interest rate swap, interest rate cap,
surety bond, guaranteed rate agreement, insurance policy, spread
account, reserve account, subordinated interest in the Receivables
or certain cash flows in respect of the Receivables or other
contract or agreement for the benefit of Certificateholders of
such Series or Class. Enhancement may also take the form of
subordination of one or more Classes of a Series to any other
Class or Classes of a Series or a cross-support feature which
requires collections on Receivables of one Series to be paid as
principal and/or interest with respect to another Series.
TRS has sold to RFC, and RFC has conveyed to the Trust, all of TRS'
right, title and interest in and to the Receivables existing and
arising in the Designated Accounts owned by TRS from time to time
until the
</TABLE>
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* American Express and Platinum Card are registered trademarks of American
Express Company.
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<TABLE>
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termination of the Trust and, when added, all of TRS' right, title
and interest in and to the Receivables arising in the Additional
Accounts owned by TRS. Centurion Bank will convey to the Trust all
of Centurion Bank's right, title and interest in and to the
Receivables existing and arising in the Designated Accounts owned
by Centurion Bank from time to time until the termination of the
Trust and, when added, all of Centurion Bank's right, title and
interest in and to the Receivables arising in the Additional
Accounts owned by Centurion Bank. See "Description of the RFC
Receivable Purchase Agreement."
The Designated Accounts..................... The Designated Accounts met and will meet, as applicable, the
criteria for eligibility provided in the Agreement applied as of
the date specified in the Agreement (the "Selection Date"). Unless
otherwise specified in the related Prospectus Supplement, the
Designated Accounts include and will include all related accounts
that are originated as a result of (a) the Card with respect to a
Designated Account being lost or stolen or (b) the conversion of a
Designated Account into another type of Eligible Account, in each
case which satisfies certain conditions set forth in the
Agreement.
In addition, the Agreement provides that the Transferors have the
right (subject to certain limitations and conditions), and in some
circumstances will be obligated, to designate additional Eligible
Accounts to be included as Designated Accounts (the "Additional
Accounts") and to convey to the Trust all of the Receivables in
such Additional Accounts, whether such Receivables are then
existing or thereafter created.
Further, the Agreement provides that the Transferors have the right
(subject to certain limitations and conditions) to accept removal
of certain Designated Accounts designated by the Transferors from
the Trust (the "Removed Accounts") and accept the conveyance of
all of the Receivables in the Removed Accounts, whether such
Receivables are then existing or thereafter created.
The Receivables............................. The Receivables consist of amounts charged on the Designated Accounts
for merchandise and services
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and, unless otherwise specified in the related Prospectus
Supplement, all annual membership fees and certain other
administrative fees billed to the Designated Accounts on and after
the date (the "Cut Off Date") specified in the related Prospectus
Supplement. The Designated Accounts have been and will be selected
based on criteria provided in the Agreement and described in the
related Prospectus Supplement as applied on the Selection Date
specified in the related Prospectus Supplement and, with respect
to Additional Accounts, if any, on such subsequent dates specified
in the Agreement and described in the related Prospectus
Supplement.
All new Receivables arising in the Designated Accounts (including in
any Additional Accounts) during the term of the Trust will be the
property of the Trust. Accordingly, the amount of Receivables in
the Trust will fluctuate as new Receivables are generated and as
existing Receivables are collected, charged off as uncollectible
or otherwise adjusted.
Yield Factor; Collections................... Except in the limited circumstances related to Recovery Arrangements
and described under "Domestic Consumer Charge Card
Business-Collection Efforts," the Receivables that originate in
the Designated Accounts are not subject to a monthly finance
charge, and, therefore, it will be necessary to treat a portion of
the collections on the Receivables in the Designated Accounts
received in any Due Period (as such term is defined below) as
"yield" to the Trust. This yield will equal the product of the
aggregate amount of such collections (including any payments made
by the Transferors in respect of any Recovery Arrangements, any
Ineligible Receivables or any Adjustments and payments made by the
Servicer in connection with the breach by it of certain covenants)
and the Yield Factor. Such collections will be treated as Yield
Collections. The remainder of such collections will be treated as
Principal Collections (Principal Collections and Yield Collections
are collectively sometimes referred to herein as "Collections").
Unless otherwise specified in the related Prospectus Supplement,
Recoveries will not be considered Collections but will instead be
utilized as an offset to Defaulted Receivables. The "Yield Factor"
of the Trust is currently equal to 3.0% under the Agreement, and,
subject to certain limitations, may be changed from time to time
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<S> <C>
thereafter by the Transferors. See "Risk Factors--Ability to
Change Yield Factor."
Unless otherwise provided in a Prospectus Supplement, the "Due Period"
means, for each Distribution Date, the period from and including
the day following the last day of the first billing cycle
applicable to the Accounts occurring on or after the 20th day of
the second preceding calendar month (if more than one billing
cycle occurs on such day, then the last billing cycle to occur on
such day shall be the applicable billing cycle) to and including
the last day of such billing cycle in the preceding calendar
month.
Description of the Certificates............. Payments received on the Trust's assets will be allocated among
the Certificateholders of all outstanding Series issued by the
Trust (the "Certificateholders' Interest") and the interest of the
Transferors (the "Transferor Interest").
Each Series of Certificates will evidence undivided interests in the
assets of the Trust and will represent the right to receive from
the Trust Assets (i) payments of interest at the specified rate or
rates per annum (each, a "Certificate Rate"), which may be a fixed
rate, a floating rate or another type of rate and (ii) (a) payments of
principal during the Controlled Amortization Period, the Early
Amortization Period or the Rapid Amortization Period (each, an
"Amortization Period"), as specified in the related Prospectus
Supplement or (b) deposits of principal into the Principal
Funding Account during the Controlled Accumulation Period or the
Early Accumulation Period (each an "Accumulation Period") as
specified in the related Prospectus Supplement.
Each Series of Certificates will consist of one or more Classes, one
or more of which may be Senior Certificates ("Senior
Certificates") and one or more of which may be Subordinated
Certificates ("Subordinate Certificates"). Each Class of a Series
may evidence the right to receive a specified portion of each
distribution of principal or interest or both. The Certificates of
a Class may also differ from Certificates of other Classes of the
same Series in, among other things, the amounts allocated to
principal payments, priority of payments, payment dates,
</TABLE>
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maturity, interest rates, interest rate computation, and
availability and form of Enhancement.
The assets of the Trust will be allocated among the
Certificateholders of each Series and the holder of the
Exchangeable Transferor Certificate. The aggregate principal
amount of the interest of the Certificateholders of a Series is
referred to herein as the "Invested Amount." The aggregate
principal amount of the interest of the holder of the Exchangeable
Transferor Certificate is referred to herein as the "Transferor
Amount." See "Description of the Certificates--General."
The Certificateholders' Interest will include the right to receive
(but only to the extent needed to make required payments under the
Agreement and the related Series Supplement and subject to any
reallocation of such amounts if the Series Supplement so provides)
varying percentages of Yield Collections and Principal Collections
during each Due Period. In addition, a varying percentage of
Defaulted Receivables will be allocated to the Certificateholders'
Interest. Such varying percentages are referred to collectively
herein as the "Invested Percentage." The Prospectus Supplement
related to each Series will specify the Invested Percentages with
respect to the allocation of collections of Yield Collections,
Principal Collections and Defaulted Receivables during the
Revolving Period, any Amortization Period and any Accumulation
Period, as applicable. If the Certificates of a Series offered
hereby include more than one Class of Certificates, the assets of
the Trust allocable to the Certificates of such Series may be
further allocated among each Class in such Series as described in
the related Prospectus Supplement. See "Description of the
Certificates--Allocation Percentages" and "Pay Out Events."
The Certificates of each Series will represent undivided interests
in the Trust only and will not represent interests in or recourse
obligations of and will not be guaranteed by RFC, Centurion Bank,
the Servicer, American Express Company or any affiliate thereof.
The principal amount of the Transferor Interest will fluctuate as
the amount of the Receivables held by the Trust changes from time
to time. Further, the Transferors may tender the certificate which
represents
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<S> <C>
the Transferor Interest (the "Exchangeable Transferor Certificate")
or, if provided in the related Series Supplement, certificates
representing any Series of certificates and the Exchangeable
Transferor Certificate, to the Trustee and, upon satisfying
certain other terms and conditions, cause the Trustee to issue one
or more new Series, as described in "Description of the
Certificates--Exchanges." Any Exchange involving only the tender
of the Exchangeable Transferor Certificate to the Trustee will
have the effect of decreasing the Transferor Interest.
Interest.................................... Interest on each Series of Certificates or Class thereof for each
accrual period (each, an "Interest Period") specified in the
Prospectus Supplement related to such Series will accrue at a per
annum rate equal to the Certificate Rate specified in such
Prospectus Supplement and be distributed to Certificateholders of
such Series or Class thereof in amounts and on the dates (which
may be monthly, quarterly, semiannually or otherwise as specified
in such Prospectus Supplement) (each an "Interest Payment Date"),
specified in such Prospectus Supplement. Interest payments on each
Distribution Date will be funded from Yield Collections allocated
to the Certificateholders' Interest during the preceding Due
Period, as described in the related Prospectus Supplement, and may
be funded from certain investment earnings on funds in certain
accounts of the Trust and from any applicable Enhancement, if
necessary, or certain other amounts as specified in the related
Prospectus Supplement. If the Interest Payment Dates for payment
of interest for a Series or Class occur less frequently than
monthly, such collections or other amounts allocable to such
Series or Class may be deposited in one or more trust accounts
pending distribution to the Certificateholders of such Series or
Class, all as described in the related Prospectus Supplement. See
"Description of the Certificates--General" and "--Distributions
from the Collection Account."
Principal................................... The principal of the Certificates of each Series offered hereby
will be scheduled to be paid commencing on a date specified in the
Prospectus Supplement related to such Series (the "Principal
Commencement Date") either in installments, in which case such
Series may have a Controlled Amortization Period, as described
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below, or in one full payment on an expected date specified in the
related Prospectus Supplement (the "Expected Final Payment Date"),
in which case such Series may have a Controlled Accumulation
Period, as described below, or on each Interest Payment Date after
the Principal Commencement Date to the extent of available
Principal Collections, in which case such Series will have a Rapid
Amortization Period as described below. If a Series has more than
one Class of Certificates, a different method of paying principal,
and a different Principal Commencement Date or Expected Final
Payment Date may be assigned to each Class. The payment of
principal with respect to the Certificates of a Series or Class
may commence earlier than the applicable Principal Commencement
Date or Expected Final Payment Date if a Pay Out Event occurs and
either the Early Amortization Period or the Early Accumulation
Period commences with respect to such Series or Class or under
certain other circumstances described in the Prospectus Supplement
related to such Series. The final principal payment with respect
to the Certificates of a Series or Class may also be made later
than the Expected Final Payment Date.
The RFC Receivable Purchase
Agreement................................... RFC, as purchaser, has entered into a RFC Receivable Purchase
Agreement, dated as of June 30, 1992, as amended from time to
time, with TRS, as seller (together with any supplements thereto
or assignments of Receivables in Additional Accounts entered into
pursuant thereto, "RFC Receivable Purchase Agreement"). Pursuant
to the RFC Receivable Purchase Agreement, TRS has sold or will
sell, as applicable, to RFC all of TRS' right, title and interest
in and to the Receivables existing in the Designated Accounts
owned by TRS and referred to in the RFC Receivable Purchase
Agreement on the Cut Off Date specified in the RFC Receivable
Purchase Agreement and arising from time to time thereafter and,
when added to the Trust assets, the Receivables existing in any
Additional Accounts on the related Additional Account Cut Off Date
and arising from time to time thereafter. RFC, in turn, has
transferred or will transfer, as applicable, to the Trust,
pursuant to the Agreement, those Receivables purchased by it from
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TRS. RFC has assigned to the Trust all of its right, title and
interest in and to such Receivables and all of its rights under
the RFC Receivable Purchase Agreement. See "Description of the RFC
Receivable Purchase Agreement."
Exchanges................................... The Agreement authorizes the Trustee to issue two types of
certificates: (i) one or more Series of certificates which may be
in one or more classes and which will be transferable and have the
characteristics described below and (ii) the Exchangeable
Transferor Certificate, which initially will be held by the
Transferors and which will be transferable only as provided in the
Agreement. Pursuant to any one or more Series Supplements to the
Agreement, the holder of the Transferor Certificate may tender the
Exchangeable Transferor Certificate or, if permitted by the
applicable Series Supplement, certificates representing any Series
of certificates (which may include Series offered pursuant to this
Prospectus) and the Exchangeable Transferor Certificate, to the
Trustee in exchange for one or more new Series (which may include
Series offered pursuant to this Prospectus) and a reissued
Exchangeable Transferor Certificate (any such tender, an
"Exchange"). Under the Agreement, the Transferors may define, with
respect to any Series, the Principal Terms of the Series. See
"Description of the Certificates--Exchanges". The Transferors may
offer any Series to the public or other investors 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
"Act") or exempt from registration thereunder, directly or through
one or more underwriters or placement agents, in fixed-price
offerings or in negotiated transactions or otherwise.
Unless otherwise specified in the related Prospectus Supplement,
an Exchange may occur only upon delivery to the Trustee of the
following: (i) a Series Supplement specifying the Principal Terms
of such Series, (ii) an opinion of counsel to the effect that the
certificates of such Series under existing law will be
characterized either as indebtedness or an interest in a
partnership for Federal income tax purposes and that the issuance
of such Series will not materially adversely affect the Federal
income tax
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characterization of any outstanding Series, (iii) if required by
the related Series Supplement, a form of Enhancement and any
Agreement, (iv) written confirmation from the applicable Rating
Agency that the Exchange will not result in the Rating Agency
reducing or withdrawing its rating on any then-outstanding Series
rated by it, and (v) the existing Exchangeable Transferor
Certificate and, if applicable, the certificates representing the
Series to be exchanged.
Registration of the
Certificates............................. Unless otherwise specified in the related Prospectus Supplement,
the Certificates of each Series will be issued in book-entry form
only and will initially be represented by one or more Certificates
registered in name of Cede as the nominee of The Depository Trust
Company ("DTC"). A Certificate Owner will not be entitled to
receive a definitive certificate representing such person's
interest, except in the event that Definitive Certificates are
issued under the limited circumstances described herein. All
references herein to Certificateholders shall refer to Certificate
Owners, except as otherwise specified herein. See "Description of
the Certificates--Definitive Certificates."
Clearance and Settlement.................... Unless otherwise provided in the related Prospectus Supplement,
Certificate Owners of each Series offered hereby may elect to hold
their Certificates through any of DTC (in the United States) or
CEDEL or Euroclear (in Europe). Transfers within DTC, CEDEL or
Euroclear, as the case may be, will be in accordance with the
usual rules and operating procedures of the relevant system.
Cross-market transfers between persons holding directly or
indirectly through DTC, on the one hand, and counterparties
holding directly or indirectly through depositories for CEDEL or
Euroclear, on the other, will be effected in DTC through the
relevant depositories of CEDEL and Euroclear. See "Description of
the Certificates and the Agreement--Book-Entry Registration" and
"Annex I" hereto.
Revolving Period............................ Unless otherwise specified in the related Prospectus Supplement,
with respect to each Series and any Class thereof, no principal
will be payable to Certificateholders until the Principal
Commencement Date or the Expected Final Payment Date with respect
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to such Series or Class, as described below or, upon the
occurrence of a Pay Out Event which results in an Early
Amortization Period, on the first Special Payment Date. For each
Due Period during the period beginning on the date of issuance of
the related Series (the "Closing Date") and ending on the day
prior to the day on which any Amortization Period, or any
Accumulation Period commences (the "Revolving Period"), all
Principal Collections otherwise allocable to the Certificateholders'
Interest generally will be reinvested in the Trust or otherwise
used to maintain the Certificateholders' Interest or treated as
Excess Principal Collections and paid to the holders of other
Series of Certificates, as described herein and in the related
Prospectus Supplement. See "Description of the Certificates--Pay
Out Events" for a discussion of the events which might lead to the
termination of the Revolving Period prior to its scheduled ending
date.
Controlled Amortization Period.............. If the Prospectus Supplement relating to a Series so specifies,
unless and until a Pay Out Event shall have occurred with respect
to such Series, the Certificates of such Series or any Class
thereof will have an amortization period (the "Controlled
Amortization Period") during which Principal Collections allocable
to the Certificateholders' Interest of such Series (and certain
other amounts if so specified in the related Prospectus
Supplement) will be used on each Distribution Date to make
principal distributions in scheduled amounts to the
Certificateholders of such Series or any Class of such Series then
scheduled to receive such distributions. The amount to be
distributed on any Distribution Date during the Controlled
Amortization Period will be limited to an amount (the "Controlled
Distribution Amount") equal to an amount specified in the related
Prospectus Supplement plus any existing deficit controlled
amortization amount arising from prior Distribution Dates
(together with the Controlled Distribution Amount, the "Controlled
Amortization Amount"). If a Series has more than one Class of
Certificates, each Class may have a separate Controlled
Amortization Amount. In addition, the related Prospectus
Supplement may describe certain priorities among such Classes with
respect to such distributions. The Controlled Amortization Period
will commence at the close of business on a date specified in the
related
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Prospectus Supplement and continue until the earliest of (a) the
commencement of the Early Amortization Period, (b) the
commencement of the Early Accumulation Period, (c) payment in full
of the Invested Amount of such Series or Class and (d) the Series
Termination Date with respect to such Series.
Controlled Accumulation Period.............. If the Prospectus Supplement relating to a Series so specifies,
unless and until a Pay Out Event has occurred, the Certificates of
such Series will have an accumulation period (the "Controlled
Accumulation Period") during which Principal Collections allocable
to the Certificateholders' Interest of such Series (and certain
other amounts if so specified in the related Prospectus
Supplement) up to an amount (the "Controlled Deposit Amount")
equal to an amount specified in the related Prospectus Supplement
plus any existing controlled accumulation shortfall arising from
prior Distribution Dates (together with the Controlled Deposit
Amount, the "Controlled Accumulation Amount"), will be deposited
on each Distribution Date in a Trust account to be established in
the name of the Trustee for the benefit of the Certificateholders
of such Series or Class (a "Principal Funding Account"). Any
Principal Collections allocated to the Certificateholders'
Interest in excess of amounts required to be deposited in the
Principal Funding Account during the Controlled Accumulation
Period may be treated as Excess Principal Collections. See
"Description of the Certificates--Distributions from the
Collection Account." If a Series has more than one Class of
Certificates, each Class may have a separate Principal Funding
Account and Controlled Accumulation Amount. In addition, the
related Prospectus Supplement may describe certain priorities
among such Classes with respect to deposits of principal into such
Principal Funding Accounts. The Controlled Accumulation Period
will commence at the close of business on a date specified in the
related Prospectus Supplement and continue until the earliest of
(a) the commencement of the Early Amortization Period, (b) the
commencement of the Early Accumulation Period, (c) payment in full
of the Invested Amount of such Series or Class and (d) the Series
Termination Date with respect to such Series. If specified in the
related Prospectus Supplement, the Servicer may, based on
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the payment rate on the Receivables and the amount of principal
distributable to Certificateholders of all outstanding Series
issued by the Trust, postpone the commencement of the Controlled
Accumulation Period.
Funds on deposit in any Principal Funding Account may be invested
in permitted investments or subject to a guaranteed rate or
investment contract or other arrangement intended to assure a
minimum return on the investment of such funds. Investment
earnings on such funds may be applied to pay interest on the
related Series of Certificates. In order to enhance the likelihood
of payment in full of principal at the end of the Controlled
Accumulation Period with respect to a Series of Certificates, such
Series may be subject to a principal maturity guaranty or other
similar arrangement. See "Description of the
Certificates--Principal Payments."
Rapid Amortization Period................... If the Prospectus Supplement relating to a Series so specifies,
during the period from the Principal Commencement Date with
respect to such Series to the earliest of the date on which the
Invested Amount of such Series and the Enhancement Invested
Amount, if any, with respect to such Series have been paid in full
or the related Series Termination Date (the "Rapid Amortization
Period"), Principal Collections allocable to the
Certificateholders' Interest of such Series (and certain other
amounts if so specified in the related Prospectus Supplement) will
be distributed as principal payments to the Certificateholders of
such Series monthly on each Distribution Date with respect to such
Series in the manner and order of priority set forth in the
related Prospectus Supplement. During the Rapid Amortization
Period with respect to a Series, distributions of principal to
Certificateholders will not be limited to any maximum amount.
Early Amortization Period................... If the Prospectus Supplement relating to a Series so specifies,
during the period beginning on the day on which a Pay Out Event
occurs or is deemed to have occurred with respect to a Series to
the earlier of the date on which the Invested Amount of such
Series and the Enhancement Invested Amount, if any, with respect
to such Series, have been paid in full or the related Series
Termination Date (the "Early Amortization Period"), Principal
Collections
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allocable to the Certificateholders' Interest will no longer be
reinvested in the Trust or otherwise used to maintain the
Certificateholders' Interest or held in the Principal Funding
Account, but instead will be distributed as principal payments to
the Certificateholders monthly on each Distribution Date beginning
with the first Special Payment Date (which will be the first
Distribution Date following the Due Period in which a Pay Out
Event occurs or is deemed to have occurred). In addition, unless
otherwise specified in the related Prospectus Supplement, after
the occurrence of a Pay Out Event with respect to a Series, any
funds on deposit in the Interest Funding Account or Principal
Funding Account related to such Series will be paid to
Certificateholders of such Series on the first Special Payment
Date. See "Description of the Certificates--Pay Out Events" for a
discussion of the events which might lead to the commencement of
an Early Amortization Period.
Early Accumulation Period................... If the Prospectus Supplement relating to a Series so specifies,
during the period beginning on the day on which a Pay Out Event
occurs or is deemed to have occurred with respect to such Series
until the earliest of (a) the commencement of the Early Amortization
Period, (b) payment in full of the Investor Interest of the Certificates
of such Series and, if so specified in the related Prospectus
Supplement, of the Enhancement Invested Amount, if any, with respect
to such Series and (c) the related Series Termination Date (the
"Early Accumulation Period"), Principal Collections allocable
to the Certificateholder's Interest will no longer be reinvested in
the Trust or otherwise used to maintain the Certificateholders' Interest,
but instead will be deposited in the Principal Funding Account on the
dates indicated in the related Prospectus Supplement, and used to make
distributions of principal to the Certificateholders of such Series
or Class on the Expected Final Payment Date. The amount to be deposited
in the Principal Funding Account on each Distribution Date during the
Early Accumulation Period will not be limited to the Controlled Deposit
Amount. See "Description of the Certificates -- Pay Out Events" for a
discussion of the events which might lead to commencement of a
Early Accumulation Period.
During the Early Accumulation Period, funds on deposit in any
Principal Funding Account may be invested in
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permitted investments or subject to a guaranteed rate or
investment contract or other arrangement intended to assure a
minimum return on the investment of such funds. Investment
earnings on such funds may be applied to pay interest on the
related Series of Certificates or make other payments as specified
in the related Prospectus Supplement. In order to enhance the
likelihood of payment in full of principal at the end of the Early
Accumulation Period with respect to a Series of Certificates, such
Series may be subject to a principal guaranty or other similar
arrangement.
Application of Yield Collections............ Yield Collections allocable to the Certificateholders' Interest
for any Due Period will be applied in the following order of
priority, unless otherwise specified in the related Prospectus
Supplement: (i) to the payment of interest accrued for the current
month ("Monthly Interest") and any overdue Monthly Interest (with
interest thereon) on the Certificates of such Series or Class;
(ii) to the payment of the Monthly Servicing Fee with respect to
such Series or Class plus any accrued Monthly Servicing Fee that
was due but not paid on any prior Distribution Date; (iii) to the
reimbursement of unreimbursed Investor Charge-Offs with respect to
such Series or Class; (iv) to the Investor Default Amount with
respect to such Series or Class; and (v) to other amounts
specified in the related Prospectus Supplement.
Principal Collections; Certain
Allocations................................. Principal Collections for any Due Period will be allocated to any
Series or Class on the basis of the Invested Percentage of such
Series or Class with respect to Principal Collections. Under the
Agreement, such collections will generally be reinvested in the
Trust or otherwise used to maintain the Certificateholders'
Interest during the Revolving Period, paid to the
Certificateholders during any Amortization Period or deposited in
the Principal Funding Account during any Accumulation Period and
paid to Certificateholders on the Expected Final Payment Date with
excess amounts, if any, reinvested in the Trust or otherwise used
to maintain the Certificateholders' Interest.
During any Accumulation Period or any Amortization Period, as
applicable, the amount of Principal Collections allocable to the
Certificateholders of a Series issued will, unless otherwise
specified in the
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related Prospectus Supplement, equal the product of (a) the
Principal Collections during the related Due Period and (b) a
fraction, the numerator of which is the Invested Amount as of the
end of the last day of the Revolving Period and the denominator of
which is the greater of (i) the product of the total amount of
Receivables in the Trust as of the last day of the prior Due
Period and one minus the Yield Factor (the "Trust Principal
Component") and (ii) the sum of the numerators used to calculate
the Invested Percentage with respect to Principal Collections for
all Series of Certificates outstanding for the current
Distribution Date.
To the extent that Principal Collections and other amounts that are
allocated to the Certificateholders' Interest are available to be
reinvested in the Trust, they may be applied to cover principal
payments due to or for the benefit of investor Certificateholders
of another Series, as specified in the related Prospectus
Supplement. Any such reallocation will not result in a reduction
in the Certificateholders' Interest. In addition, Principal
Collections and certain other amounts otherwise allocable to other
Series, to the extent such collections are available to be
reinvested in the Trust, may be applied to cover principal
payments due to or for the benefit of the Certificateholders, as
specified in the related Prospectus Supplement. See "Description
of the Certificates--Principal Collections for all Series."
Excess Principal Collections................ If so specified in the related Prospectus Supplement, to the
extent that Principal Collections that are allocated to the
Certificateholders' Interest of any Series are not needed to make
payments or deposits with respect to such Series, such Collections
("Excess Principal Collections") will be applied to cover
principal payments due to or for the benefit of Certificateholders
of another Series. Any such reallocation will not result in a
reduction in the Certificateholders' Interest of the Series to
which such collections were initially allocated.
Enhancement................................. Enhancement with respect to a Series or any Class thereof may be
provided in the form or forms of a letter of credit, a maturity
guaranty facility, a cash collateral account, a cash collateral
guaranty, a collateral interest, a tax protection agreement, an
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interest rate swap, an interest rate cap, a surety bond, a
guaranteed rate agreement, an insurance policy, a spread account,
a reserve account, a subordinated interest in the Receivables or
certain cash flows in respect of the Receivables or other contract
or agreement for the benefit of Certificateholders of such Series
or Class. Enhancement may also take the form of subordination of
one or more Classes of a Series to any other Class or Classes of a
Series or a cross-support feature which requires collections on
Receivables of one Series to be paid as principal and/or interest
with respect to another Series as specified in the related
Prospectus Supplement. Enhancement may also be provided to a Class
or Classes of different Series by a cross-support feature which
requires that distributions of principal and/or interest be made
with respect to Certificates of one or more Classes of a
particular Series before distributions are made to one or more
Classes of another Series.
The type, characteristics and amount of the Enhancement will be
determined based on several factors, including the characteristics
of the Receivables and Accounts included in the Trust Portfolio as
of the Closing Date with respect to any Series, and will be
established on the basis of requirements of each Rating Agency
rating the Certificates of such Series. If so specified in the
related Prospectus Supplement, any such Enhancement will apply
only in the event of certain types of losses and the protection
against losses provided by such Enhancement will be limited. See
"Enhancement" and "Risk Factors--Rating of the Certificates."
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Sharing of Excess
Yield Collections Among
Excess Allocation Series.................... To the extent provided in a Prospectus Supplement for a Series,
such Series may be designated as a Series that shares with other
Series similarly designated, subject to certain limitations,
certain Excess Yield Collections (as such term is defined herein)
allocable to any such Series (an "Excess Allocation Series").
Subject to certain limitations described under "Description of the
Certificates--Sharing of Excess Yield Collections Among Excess
Allocation Series", Yield Collections and certain other amounts
allocable to the Certificateholders' Interest of any Series that
is designated as an Excess Allocation Series in excess of the
amounts necessary to make required payments with respect to such
Series (including payments to the provider of any related
Enhancement) will be applied to cover shortfalls with respect to
amounts payable from Yield Collections allocable to any other
Series designated as an Excess Allocation Series, in each case pro
rata based upon the respective Invested Amounts of such Series
that have such a shortfall with respect to the related Due Period.
See "Description of the Certificates--Sharing of Excess Yield
Collections Among Excess Allocation Series."
Special Funding Account..................... The Transferors, at their election, may at any time, other than
during an Early Amortization Period, deposit Excess Principal
Collections which would otherwise be payable to the Transferors
into an account (the "Special Funding Account"). Amounts on
deposit in the Special Funding Account may be treated as Principal
Receivables for purposes of avoiding or delaying the occurrence of
a Pay Out Event which would otherwise occur if the Transferor were
required to designate Additional Accounts and did not have
sufficient Eligible Accounts for such purpose. Amounts deposited
may be withdrawn by the Transferor at any time, so long as after
such withdrawal the Transferor Amount expressed as a percentage of
the Trust Principal Component (reduced by the Privileged Assets
Calculated Amount) is greater than or equal to the Minimum
Transferor Percentage. If an accumulation or amortization period
commences with respect to any Series, any funds in the Special
Funding Account will be released and treated as Trust Excess
Principal Collections to the extent needed to
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cover principal payments due to or for the benefit of such Series
as described under "Description of the Investor
Certificates-Special Funding Account" and "Principal Payment
Considerations".
Final Payment of Principal;
Termination of the Trust.................... Each Series of Certificates will be subject to optional repurchase by
the Transferors on any Distribution Date on or after which the
Invested Amount is reduced to an amount less than or equal to 10%
of the initial Invested Amount or such other amount specified in
the related Prospectus Supplement unless certain events of
bankruptcy, insolvency or receivership have occurred with respect
to the Transferor. Unless otherwise specified in the related
Prospectus Supplement, the repurchase price will be equal to the
Invested Amount plus accrued and unpaid interest on the
Certificates through the day preceding the Distribution Date on
which the repurchase occurs. See "Description of the
Certificates--Final Payment of Principal; Termination of Trust."
Servicing................................... Under the Agreement, unless otherwise specified in the related
Prospectus Supplement, TRS, as Servicer, will be responsible for
servicing, managing and making collections on all Receivables in
the Trust. Unless otherwise specified in the related Prospectus
Supplement, subject to certain conditions, the Servicer may use
for its own benefit and will not segregate collections of
Receivables received in each Due Period until the business day
preceding the Distribution Date succeeding such Due Period. During
each Due Period, the Servicer will allocate as described herein
all Collections received with respect to such Due Period to the
Certificateholders' Interest, any other applicable Series and the
Transferor Interest. On the business day prior to the Distribution
Date, the Servicer will deposit the portion allocable to the
Certificateholders' Interest and the holders of certificates of
any other Series into a segregated trust account held in the name
of the Trustee for the benefit of Certificateholders (the
"Collection Account"). See "Description of the
Certificates--Application of Collections." In certain
circumstances, TRS may resign or be removed as Servicer, in which
event either the Trustee or another entity may be appointed as
successor Servicer (TRS or any such
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successor Servicer is referred to herein as the "Servicer"). As
servicing compensation from the Trust, the Servicer will receive a
Servicing Fee from allocations of Yield Collections based upon the
outstanding principal amount, from time to time, of certificates
issued by the Trust and certain other amounts, as described
herein. See "Description of the Certificates--Servicing
Compensation and Payment of Expenses."
Tax Status.................................. Except to the extent otherwise specified in the related Prospectus
Supplement, Special Counsel to the Transferors is of the opinion
that under existing law the Certificates of each Series will be
characterized as debt for federal income tax purposes. Except to
the extent otherwise specified in the related Prospectus
Supplement, the Certificate Owners will agree to treat the
Certificates as debt for federal, state and local income and
franchise tax purposes. See "Federal Income Tax Consequences" for
additional information concerning the application of federal
income tax laws.
ERISA Considerations........................ See "ERISA Considerations" herein and "Summary of Series Terms-ERISA
Considerations" in the applicable Prospectus Supplement.
Rating...................................... It is a condition to the issuance of each Series of Certificates
or Class thereof offered hereby that they be rated in one of the
four highest rating categories by at least one nationally
recognized rating agency. The rating or ratings applicable to the
Certificates of each Series or Class thereof offered hereby will
be set forth in the related Prospectus Supplement. See "Risk
Factors--Rating of the Certificates."
Listing..................................... If so specified in the Prospectus Supplement relating to a
Series, application will be made to list the Certificates of such
Series, or all or a portion of any Class thereof, on the
Luxembourg Stock Exchange or any other specified exchange.
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RISK FACTORS
Investors should consider, among other things, the following factors in
connection with an investment in the Certificates.
Limited Liquidity. It is anticipated that, to the extent permitted, the
underwriters of any Series of Certificates offered hereby will make a market in
such Certificates, but in no event will any such underwriter be under an
obligation to do so. There is no assurance that a secondary market will develop
with respect to the Certificates of any Series, or if it does develop, that it
will provide Certificateholders with liquidity of investment or will continue
for the life of such Certificates.
Sale of Receivables to TRS and RFC. TRS has repurchased and will
repurchase from American Express Credit Corporation ("Credco") all Receivables
owned by Credco in the Designated Accounts under the Trust and in existence on
the date specified in the Receivable Purchase Agreement and in any assignments
of Receivables in Additional Accounts entered pursuant thereto. Credco, as
seller, and TRS, as purchaser, have treated and will treat the sale of Credco's
right, title and interest in and to such Receivables to TRS as an absolute
transfer thereof to TRS. In addition, TRS warrants in the Receivable Purchase
Agreement that the sale by it of all its right, title and interest in and to the
Receivables arising under the Designated Accounts owned by TRS is a valid sale
thereof to RFC, and TRS, as seller, and RFC, as purchaser, have treated and will
treat the sale of TRS' right, title and interest in and to such Receivables to
RFC as an absolute transfer thereof to RFC. As a result of such absolute
transfers, the Receivables would not be part of the bankruptcy estate of Credco
or TRS and would generally not be available to creditors of Credco or TRS,
respectively.
However, in the event of the insolvency of Credco or TRS, it is
possible that the bankruptcy trustee of Credco or TRS, or a creditor of Credco
or TRS, or Credco or TRS as debtor-in-possession, may argue that the
transactions between Credco and TRS or TRS and RFC, as applicable, are pledges
of such Receivables rather than an absolute transfer. Such position, if accepted
by a court, could prevent timely payments of amounts due to Certificateholders.
In a 1993 decision, Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir.
1993), the United States Court of Appeals for the 10th Circuit suggested that
even where a transfer of accounts from a seller to a buyer constitutes a "true
sale," the accounts would nevertheless constitute property of the seller's
estate in a bankruptcy of the seller. If Credco or TRS were to become subject to
a bankruptcy proceeding and a court were to follow the Octagon court's
reasoning, Certificateholders might experience delays in payment or possibly
losses on their investment in the Certificates. Counsel to RFC has advised RFC
that the facts of the Octagon case are distinguishable from those in the sale
transactions between Credco and TRS, and between TRS and RFC and the reasoning
of the Octagon case appears to be inconsistent with established precedent and
the Uniform Commercial Code.
Transfers to the Trust. Each Transferor warrants in the Agreement that
the transfer of the Receivables to the Trusts constitutes either a valid
transfer and assignment of the Receivables to the Trust or the grant to the
Trust of a security interest in the Receivables. The Transferors and TRS have
taken or will take all actions as are required under New York law to perfect the
Trust's interest in the Receivables and each Transferor warrants that if the
transfer by it to the
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Trust granted to the Trust a security interest in the Receivables, such
security interest constitutes a first priority perfected security interest
therein and, with certain exceptions and for certain limited periods of time, in
proceeds thereof.
Potential Priority of Certain Liens. If the sale of Receivables by TRS
to RFC or the transfer of the Receivables by either Transferor to the Trust is
deemed to create a security interest therein under the New York Uniform
Commercial Code (the "UCC"), a tax or government lien on property of the
Servicer or such Transferor arising before any Receivable comes into existence
may have priority over such Transferor's or the Trust's interest in such
Receivable. See "Certain Legal Aspects of the Receivables--Transfer of
Receivables."
Insolvency Issues: RFC. To the extent that RFC grants a security
interest in the Receivables to the Trust and that security interest is validly
perfected prior to any insolvency of RFC, and is not taken in contemplation of
insolvency, that security interest should not be subject to avoidance, and
payments to the Trust with respect to the Receivables should not be subject to
recovery by a creditor of or a bankruptcy trustee for RFC or RFC as
debtor-in-possession. If, however, a creditor of RFC or a bankruptcy trustee for
RFC or RFC as debtor-in-possession were to assert a contrary position, delays in
payments on the Certificates and possible reductions in the amount of those
payments could occur.
Insolvency Issues: Centurion Bank. To the extent Centurion Bank has
granted or will grant a security interest in the Receivables to the Trust, and
such security interest is validly perfected before the occurrence of an
insolvency event relating to Centurion Bank and was not or will not be taken in
contemplation of insolvency or with the intent to hinder, delay or defraud
Centurion Bank or its creditors, the Federal Deposit Insurance Act ("FDIA"), as
amended, including as amended by the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended ("FIRREA"), provides that such security
interest should not be subject to avoidance by the FDIC as receiver or
conservator for Centurion Bank. Positions taken by the FDIC staff prior to the
passage of FIRREA do not suggest that the FDIC, as receiver or conservator for
Centurion Bank, would interfere with the timely transfer to the Trust of
payments collected on the related Receivables. If, however, the FDIC were to
assert a contrary position, such as requiring the Trustee to establish its right
to those payments by submitting to and completing the administrative claims
procedure under the FDIA, or the conservator or receiver were to request a stay
of proceedings with respect to Centurion Bank as provided under the FDIA, delays
in payments on the Certificates and possible reductions in the amount of those
payments could occur. See "Certain Legal Aspects of the Receivables--Transfer of
Receivables" and "--Certain Matters Relating to Bankruptcy."
TRS as Servicer. While TRS is the Servicer, Collections held by TRS
may, subject to certain conditions, and unless specified otherwise in the
related Prospectus Supplement, be commingled and used for TRS's own benefit
prior to each Distribution Date and, in the event of the insolvency or
receivership of TRS or, in certain circumstances, the lapse of certain time
periods, the Trust may not have a perfected interest in such Collections. Unless
otherwise agreed to by the applicable Rating Agency, if the short-term debt
rating of TRS is reduced below A-1 or P-1 by the applicable Rating Agency,
within two business days thereafter TRS will begin depositing a portion of the
Collections directly into the Collection Account on the business day after the
related transaction is first output in written form under the Servicer's
customary and
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usual servicing practices from the Servicer's computer file of Accounts
(without regard to the effective date of such recordation). While the
Servicer holds Collections and payments made by the Transferors, including in
respect of Ineligible Receivables, the Certificateholders of Series issued by
such Trust are subject to risk of loss of such amounts in the event of the
bankruptcy or insolvency of the Servicer. See "Description of the
Certificates--Allocation of Collections; Deposits in Collection Account."
In the event of a Servicer Default, if a receiver or bankruptcy trustee
is appointed for the Servicer, and no Servicer Default other than such
bankruptcy or insolvency of the Servicer exists, the receiver or bankruptcy
trustee may have the power to prevent either the Trustee or Certificateholders
from appointing a successor Servicer.
Other Insolvency Issues. If certain events relating to the bankruptcy,
insolvency or receivership of a Transferor or TRS were to occur, causing a Pay
Out Event with respect to all Series then outstanding, then, pursuant to the
Agreement, new Receivables would not be transferred to the Trust and the Trustee
would sell the portion of the Receivables of the Trust allocable in accordance
with the Agreement to each Series of the Trust (unless holders of more than 50%
of the principal amount of each class of such Series, other than the Transferors
or TRS if the bankruptcy or insolvency of a Transferor or TRS, as applicable,
resulted in such Pay Out Event, and any other person specified in the related
Prospectus Supplement instruct otherwise), thereby causing a loss to
Certificateholders of a Series, if the net proceeds allocable to
Certificateholders from such sale, if any, were insufficient to pay such
Certificateholders in full. However, upon the occurrence of a Pay Out Event that
consists of the insolvency of a Transferor or the appointment of a bankruptcy
trustee or receiver for a Transferor, the bankruptcy trustee or the receiver for
such Transferor may have the power to prevent the disposition of the Receivables
transferred to the Trust and the occurrence of an Early Amortization or Early
Accumulation Period. In addition, such bankruptcy trustee or receiver may have
the power to cause the early sale of the Receivables and the early retirement of
the Certificates notwithstanding instructions from the Certificateholders
directing the Trustee not to sell the Receivables. See "Certain Legal Aspects of
the Receivables--Transfer of Receivables."
The Transferors will receive an opinion of counsel on the closing date
of the issuance of a Series of Certificates, with respect to TRS, concluding on
the basis of a reasoned analysis of analogous case law (although there is no
precedent based on directly similar facts) that subject to certain facts,
assumptions and qualifications specified therein (including matters set forth
under "Certain Legal Aspects of the Receivables--Transfer of Receivables"), that
a creditor of or a bankruptcy trustee for RFC or RFC as debtor-in-possession
would not have valid legal grounds to cause a bankruptcy court to disregard the
corporate forms so as to consolidate the assets and liabilities of TRS with
those of RFC. However, if a court concluded otherwise, or a filing were made
under any bankruptcy or insolvency law by or against RFC , or if an attempt were
made to litigate any of the foregoing issues, delays of distributions on the
Certificates (and possible reductions of such distributions) could occur.
Potential Effects of Consumer Protection Laws. The Accounts and
Receivables are subject to numerous federal and state consumer protection laws
which impose requirements on the solicitation, making, enforcement and
collection of consumer loans. Such laws, as well as any new laws or rulings
which may be adopted (including, but not limited to, federal or state
27
interest rate or fee caps on credit or charge cards), may adversely affect the
Servicer's ability to collect on the Receivables or the Account Originator's
ability to maintain the required level of annual membership fees and other
fees. In addition, failure by the Servicer to comply with such requirements
could adversely affect the Servicer's ability to enforce the Accounts or
Receivables.
Pursuant to the Agreement, the Account Originator will make certain
representations and warranties relating to the validity and enforceability of
the Accounts and each of the Transferors will make certain representations and
warranties relating to the validity and enforceability of the Receivables, and
pursuant to the Receivable Purchase Agreement, TRS will make similar
representations and warranties with respect to the Receivables. However, it is
not anticipated that the Trustee will make any examination of the Receivables or
the records relating thereto for the purpose of establishing the presence or
absence of defects, compliance with such representations and warranties, or for
any other purpose. The sole remedy if any such representation or warranty is not
complied with and such noncompliance continues beyond the applicable cure
period, is that the Receivables affected thereby will be reassigned to the
Transferors (in the case of RFC, for reassignment, in turn, to TRS pursuant to
the Receivable Purchase Agreement) or assigned to the Servicer, as the case may
be. In addition, in the event of the breach of certain representations and
warranties, the Transferors may be obligated to accept the reassignment of the
entire Trust portfolio, in which case a Pay Out Event would occur, causing
Certificateholders to receive principal payments on their certificates sooner
than anticipated and thereby reducing the anticipated yield on such
Certificates. For more information regarding the foregoing, see "Description of
the Certificates-Covenants, Representations and Warranties" and "-Servicer
Covenants" and "Certain Legal Aspects of the Receivables-Consumer Protection
Laws."
Application of federal and state bankruptcy and debtor relief laws
would affect the interests of Certificateholders in the Receivables if such laws
result in any Receivables being written off as uncollectible when there are no
funds available pursuant to any applicable Enhancement or other sources. For
more information regarding the foregoing, see "The Pooling and Servicing
Agreement Generally-Defaulted Receivables; Recoveries; Adjustments."
Potential Effect of Non-Compliance with CEBA. The Competitive
Equality Banking Act of 1987 ("CEBA") contains provisions that prohibit
certain overdrafts by Centurion Bank on its account at a Federal Reserve Bank
on behalf of an affiliate or by an affiliate on its account at Centurion Bank.
Violation of these provisions would result in Centurion Bank being deemed to
be a "bank" under the Bank Holding Company Act, requiring TRS and American
Express Company either to divest control of Centurion Bank or to comply with
other provisions of the Bank Holding Company Act.
Legislation. From time to time, there are proposed in the Congress and
certain state legislatures new laws and amendments to existing laws to regulate
further the consumer credit industry. The Transferors are unable to determine
and have no basis on which to predict whether or to what extent changes in laws
or regulations will affect charge use, payment patterns or revenues.
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Payments and Maturity. The Receivables may be paid at any time and
there is no assurance that there will be additional Receivables created in the
Designated Accounts or that any particular pattern of repayments will occur. A
significant decline in the amount of Receivables generated in the Designated
Accounts could result in commencement of an Early Amortization Period for any or
all related Series. The Agreement provides that the Transferors are required to
designate Additional Accounts, from which Receivables that are in existence on,
or that come into existence after, a cut off date specified by the Transferors
if (each such date, an "Additional Account Cut Off Date") will be added to the
Trust if as of the end of any two consecutive Due Periods the Transferor Amount
as a percentage of the Trust Principal Component (reduced by the Privileged
Assets Calculated Amount) is not maintained at the Minimum Transferor Percentage
or the Trust Principal Component (as so reduced) falls below the Minimum Trust
Principal Component. The RFC Receivable Purchase Agreement provides that, upon
request of RFC, TRS may designate Additional Accounts the receivables of which
will be sold to RFC and transferred to the Trust in such event. The Minimum
Trust Principal Component for the Trust may be increased by Series Supplements
pursuant to which additional Series are issued by the Trust, or decreased due to
the retirement of any Series issued by the Trust or if the Trustee receives
written notice from the applicable Rating Agency that such decrease will not
result in a withdrawal or reduction of its rating of the Certificates issued by
the Trust. There can be no assurance that TRS or Centurion Bank will have
eligible Additional Accounts to so designate. If Additional Accounts are not
designated by the Transferors when required, a Pay Out Event may occur with
respect to any related Series and an Early Amortization or Early Accumulation
Period for such Series would commence with respect to such Series. A significant
decrease in the rate of repayment by Cardmembers of the outstanding balances or
an increase in defaults or delinquencies of Designated Accounts could delay the
return of principal and could cause a loss of principal to Certificateholders.
See "Domestic Consumer Charge Card Business."
In addition to the foregoing, subject to the limits and conditions
described in this paragraph, the Transferors may also from time to time, at
their sole discretion, designate newly originated Eligible Accounts to be
included as Designated Accounts (such Accounts are referred to herein as " New
Accounts"). If the number of New Accounts designated with respect to any three
consecutive Due Periods would not exceed 15% of the number of Designated
Accounts as of the first day of the calendar year in which such Due Periods
commence or the number of New Accounts designated during any such calendar year
would exceed 20% of the number of Designated Accounts as of the first day of
such calendar year then such New Accounts may be added to the Trust if the
Transferors receive from Moody's written confirmation that such addition will
not result in a downgrade or withdrawal of their then current rating of any
outstanding Series. If the number of New Accounts designated exceeds such
percentages during such time periods then such New Account may be added to the
Trust if the Transferors receive written confirmation from each of Moody's and
S&P that such addition will not result in a downgrade or withdrawal of their
respective then current rating of any outstanding Series. The designation of New
Accounts may be made at random or according to the application of criteria that
may be prescribed from time to time by the Transferors, but, in all cases, the
designation of New Accounts will be subject to certain conditions, including the
following: (a) the New Accounts must all be Eligible Accounts and (b) at the
time of transfer of the Additional Accounts neither Transferor is insolvent or
will be made insolvent as a result of such transfer. When used herein, the term
"Additional Accounts" includes the New Accounts described in this paragraph.
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Social, Legal, Economic and Other Factors. Changes in Card use and
payment patterns by Cardmembers whose Accounts are included in the Trust may
result from a variety of social, legal and economic factors. Economic factors
including the rate of inflation and unemployment will also be reflected in
changes in consumer spending and payment patterns, including increased risk of
default by Cardmembers. There can be no assurance as to what extent social,
legal and economic factors will affect future charge and repayment patterns.
Competition. There exists substantial and increasingly intense
competition worldwide with respect to the American Express Card, the American
Express Gold Card and the Platinum Card (collectively, the "Card" or the
"Cards") from other financial institutions (such as MBNA, Citicorp and Bank of
America) that are members of VISA International Service Association, Inc. or
VISA USA, Inc. (collectively, "VISA") and/or MasterCard International,
Incorporated ("MasterCard"), that issue general-purpose credit cards, primarily
under revolving credit plans, in connection with one or both of these systems.
As a network, TRS also encounters intense competition from card systems like
VISA, MasterCard, Diners Club(R), Morgan Stanley Dean Witters' NOVUSSM Network
and JCB. There is also very limited competition from businesses that issue their
own cards or otherwise extend credit to their customers, such as retailers and
airline associations, although these products are not generally substitutes for
the Card products due to their limited acceptance. Numerous United States banks
issuing credit cards under revolving credit plans charge annual fees in addition
to interest charges where permitted by state law. However, the issuer of the
Discover Card on the NOVUS Network, as well as many issuers of VISA cards and
MasterCard cards, generally charge no annual fees.
Competing card issuers offer a variety of products and services to
attract cardholders including premium cards with enhanced services or lines of
credit, airline frequent flyer program mileage credits and other reward or
rebate programs, "teaser" promotional rates for both card acquisition and
balance transfers, and co-branded arrangements with partners that offer benefits
to cardholders. Recent industry trends include mergers and consolidations among
banking and financial services companies, which have resulted in some issuers
becoming larger, with greater resources, economies of scale and potential brand
recognition to compete; and the increased use of debit cards for point of sale
purchases as many banks have replaced ATM cards with general purpose debit cards
bearing either the VISA or MasterCard Logo.
The principal competitive factors that affect the Card business are (i)
the quality of the service and services, including rewards programs, provided to
Cardmembers and participating establishments; (ii) the number, spending
characteristics and credit performance of Cardmembers; (iii) the quantity and
quality of the establishments that will accept the Card; (iv) the cost of Cards
to Cardmembers and Card acceptance to participating establishments; (v) the
terms of payment available to Cardmembers and participating establishments; (vi)
the nature and quality of expense management data capture, and reporting
capability; (vii) the number and quality of other payment instruments available
to Cardmembers and participating establishments; (viii) the success of targeted
marketing and promotion campaigns; and (ix) reputation and brand recognition.
If consumers choose to use competing sources of payment other than the
Card, the rate at which new Receivables are generated in the Designated Accounts
may be reduced and certain
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purchase and payment patterns with respect to Receivables may be affected. The
Trust will be dependent upon the continued ability of TRS and Centurion Bank to
generate new Receivables. If the rate at which new Receivables are generated
declines significantly and the Transferors do not add Additional Accounts, a Pay
Out Event could occur, in which event an Early Amortization or Early
Accumulation Period would commence. A significant decrease in the usage of the
Designated Accounts could also delay the return of principal on or following the
Expected Final Payment Date and extend the period during which charged-off
Receivables may be allocated to the Certificates. See "Description of the
Certificates--Investor Charge-Offs" and "--Pay Out Events."
Effect of Subordination. With respect to Certificates of a Series
having a Class or Classes of Subordinated Certificates, unless otherwise
specified in the related Prospectus Supplement, payments of principal in respect
of the Subordinated Certificates of a Series will not commence until after the
final principal payment with respect to the Senior Certificates of such Series.
In addition, if so specified in the related Prospectus Supplement, if Yield
Collections allocable to the Certificates of a Series are insufficient to cover
required amounts due with respect to the Senior Certificates of such Series, the
Invested Amount with respect to the Subordinated Certificates may be reduced,
resulting in a reduction of the portion of Yield Collections allocable to the
Subordinated Certificates in future periods and a possible delay or reduction in
principal and interest payments on the Subordinated Certificates. Moreover, if
so specified in the related Prospectus Supplement, in the event of a sale of
Receivables due to the insolvency of the seller or the appointment of a
conservator or receiver for the seller, or due to the inability of the Trustee
to act as or find a successor Servicer after a Servicer Default, the portion of
the net proceeds of such sale allocable to pay principal to the Certificates of
a Series will be used first to pay amounts due to the Senior Certificateholders
and any remainder will be used to pay amounts due to the Subordinated
Certificateholders.
Ability to Change Terms of the Designated Accounts. Pursuant to the RFC
Receivable Purchase Agreement, TRS has not transferred to RFC, and, pursuant to
the Agreement, the Transferors have not transferred to the Trust, the Designated
Accounts but only the Receivables arising in the Designated Accounts. As owner
of the Accounts, TRS, Centurion Bank or any other seller has the right to
determine the fees which will be applicable from time to time to the Designated
Accounts, to alter the payment terms required under the Designated Accounts and
to change various other terms with respect to the Designated Accounts. In
servicing the Designated Accounts, the Servicer is required to exercise the same
care and apply the same policies that it exercises in handling similar matters
for its own or other comparable accounts. The owners of the Designated Accounts,
TRS and Centurion Bank (each, an "Account Originator"), have agreed not to
change the terms of the Designated Accounts unless the change is also made
applicable to the comparable segment of their respective portfolios of accounts
with characteristics similar to the Designated Accounts. Except as specified
above, there are no restrictions on the ability of the Account Originators to
change the terms of the Designated Accounts. There can be no assurances that
changes in the marketplace or prudent business practice might not result in a
determination by an Account Originator to change payment or other terms of the
Designated Accounts in the future. The Transferors have the right and may be
required from time to time to designate Additional Accounts for inclusion in the
Trust which Additional Accounts may not be of the same credit quality as the
initial Designated Accounts. See "Description of the Certificates--Addition of
Accounts."
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Ability to Change Yield Factor. Unless otherwise specified in the
related Prospectus Supplement, the Receivables originated under the Designated
Accounts are not subject to a monthly finance charge. As a result, in order to
provide yield to the Trust on such Receivables, pursuant to the Agreement a
portion of Collections received in any period equal to the product of
Collections and the Yield Factor will be treated as "Yield Collections" and the
remainder of such Collections will be treated as "Principal Collections."
Recoveries will not be considered Collections but will instead be utilized as an
offset to Defaulted Receivables. The Yield Factor is 3.0% under the Agreement.
Any increase in the Yield Factor would result in a higher yield on the
Receivables originated under the Designated Accounts and a slower payment rate
of Principal Collections than otherwise would occur. Conversely, any decrease in
the Yield Factor would result in less yield on such Receivables and a faster
payment rate of Principal Collections than otherwise would occur. Pursuant to
the Agreement, upon receipt of written confirmation from Moody's Investor's
Service Inc. ("Moody's") that such action will not cause a downgrade or
withdrawal of Moody's then current rating of any outstanding Series, and without
notice to or the consent of Certificateholders, the Transferors have the ability
to change the Yield Factor applied to Collections; the Transferors may not,
however, reduce the Yield Factor at any time below 3.0%, nor may the Transferors
increase the Yield Factor above 5.0%. In addition, the Transferors may not
otherwise change the Yield Factor if a Pay Out Event has occurred and is
continuing, or, as a result of such change, its reasonable expectation is that a
Pay Out Event would occur. In the event that the Servicer is not required to
make daily deposits of Collections in the Collection Account at the date of such
change, the Transferors may specify either the first day of the current Due
Period or the first day of the next succeeding Due Period as the effective date
of such change. Under the Agreement, if the Servicer is required to make daily
deposits of Collections in the Collection Account at the time of such change,
the Transferors may specify that the date all of the conditions specified in the
Agreement regarding changing the Yield Factor are met is the effective date of
such change.
Master Trust Considerations. The Trust, as a master trust, previously
has issued Series of Certificates prior to the date of this Prospectus, and is
expected to issue additional Series from time to time. While the Principal Terms
of any Series will be specified in a related Series Supplement, the provisions
of a Series Supplement and, therefore, the terms of any additional Series, will
not be subject to the prior review or consent of Certificateholders of any
previously issued Series. Such Principal Terms may include methods for
determining applicable investor percentages and allocating collections,
provisions creating different or additional security or other credit
enhancement, provisions subordinating such Series to another Series or other
Series (if the Series Supplement relating to such Series so permits) to such
Series, and any other amendment or supplement to the Agreement which is made
applicable only to such Series. See "Description of the Certificates--Exchanges"
and "--Addition of Accounts." It is a condition precedent to the issuance of any
additional Series by the Trust that each Rating Agency shall have advised the
Trustee that the issuance of such Series will not result in the reduction or
withdrawal of their rating of any outstanding Series previously issued by the
Trust. There can be no assurance that the Principal Terms of any Series issued
from time to time will not have an impact on the timing and amount of payments
received by a Certificateholder of any other Series of that Trust. Finally,
certain remedies may require the consent of a majority of the holders of all
outstanding Series of certificates of the Trust, and the interest of the holders
of one Series of certificates may conflict with the interest of another Series
of certificates. See "Description of the Certificates--Exchanges."
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Rating of the Certificates. It is a condition to the issuance of the
Certificates of each Series or Class offered hereby that they be rated in one of
the four highest rating categories by at least one nationally recognized rating
agency (the rating agency or rating agencies selected by the Transferors to rate
the certificates of a Series is herein referred to as the "Rating Agency"). The
rating will not be a recommendation to purchase, hold or sell Certificates,
inasmuch as such rating does not comment as to market price or suitability for a
particular investor. The rating of the Certificates will not address the
possibility of the imposition of United States withholding tax on non-U.S.
persons or back-up withholding for U.S. persons. The rating of the Certificates
will address the likelihood of the ultimate payment of principal and interest on
the Certificates. However, the Rating Agency will not evaluate, and the rating
of the Certificates will not address, the likelihood that the outstanding
principal amount of the Certificates will be paid by the Expected Final Payment
Date.
Book-Entry Registration. Unless otherwise specified in the related
Prospectus Supplement, the Certificates of each Series initially will be
represented by Certificates registered in the name of Cede, the nominee for DTC,
and will not be registered in the names of the Certificate Owners or their
nominees. Because of this, unless and until Definitive Certificates are issued,
Certificate Owners will not be recognized by the Trustee as Certificateholders,
as that term will be used in the Agreement. Hence, until such time, Certificate
Owners will only be able to receive payments from, and exercise the rights of
Certificateholders indirectly through, DTC, CEDEL or Euroclear and their
respective participating organizations, and, unless a Certificate Owner requests
a copy of any such report from the Trustee, will receive reports and other
information provided for under the Agreement only if, when and to the extent
provided to Certificate Owners by DTC, CEDEL or Euroclear and their respective
participating organizations. In addition, the ability of Certificate Owners to
pledge Certificates to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such Certificates, may be
limited due to the lack of physical certificates for such Certificates. See
"Description of the Certificates--Book-Entry Registration" and "--Definitive
Certificates."
DOMESTIC CONSUMER CHARGE CARD BUSINESS
General
Consumer charge card receivables are generated from transactions made
by residents of the United States (including certain of its territories and
possessions) that have American Express Cards, American Express Gold Cards and
Platinum Cards (each such person, a "Cardmember;" and each such card, a "Card").
Cards are accepted at service establishments worldwide, and may be used for the
purchase of merchandise and services. Each Card is associated with an account
maintained by an Account Originator (an "Account"), the full receivables balance
of which is due upon receipt of a monthly billing statement and is generally
not subject to finance-charge assessments. The Accounts do not have pre-set
spending limits. As of the date hereof, all of the Accounts are owned and
maintained by TRS. However, it is expected that, over a period of time beginning
in the later half of 1998 and continuing through 1999, the ownership of the
Accounts will be transferred from TRS to Centurion Bank. When this transfer
period ends, all Accounts will be owned and maintained by Centurion Bank, and
Centurion Bank may cause the Accounts to be combined into larger,
multifunctional accounts that would offer to the Cardmembers other credit
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products, including revolving credit products, the receivables of which will not
be Eligible Receivables and will not be conveyed to the Trust. The Accounts are
serviced, and are expected to continue to be serviced, by TRS, primarily at TRS'
facilities at several locations in the United States.
The American Express Card was launched in 1958, the American Express
Gold Card in 1966, and the Platinum Card in 1984. Account charges are subject to
an approval process based on the Cardmember's past spending and payment patterns
and personal resources. Accounts are designed for use as a method of payment,
not as a means for financing the purchase of merchandise and services. See
"Distinctions Between Accounts and Revolving Credit Plan Products" and "Billing
and Fees" below.
Underwriting and Authorization Procedures
Accounts are originated primarily through pre-approved, direct mail
solicitations (the "pre-approved process") and through receipt of applications
available to the public through a variety of channels, including service
establishments, financial institutions, publications and over the telephone (the
"application process"). The pre-approved process involves determining in advance
that a person will qualify for an Account. The Account Originator selects
certain persons on the basis of such persons' activities (e.g., holding credit
cards, magazine or newspaper subscriptions, club memberships, college
enrollment). Typically, these names are submitted to credit bureaus, and the
Account Originator provides the bureaus with screening criteria. These criteria
were initially developed from TRS' proprietary risk and profitability models and
commercially available risk evaluation scores. Persons who meet these criteria
are solicited to become Cardmembers.
The application process is used for evaluation of unsolicited
applications and certain other categories of applicants. The primary sources of
unsolicited applications are the American Express "Take-One" boxes located in a
variety of public establishments and the "inbound" telemarketing program
featuring the 1-800-THE-CARD telephone number. The application process entails
receiving a completed application, evaluating the application using proprietary
scoring models and credit bureau information, screening out prior delinquencies
and incidents of fraud with TRS or Centurion Bank, and verifying that the
information on the application is both accurate and provided by the true
applicant. For some categories of applicants (e.g., undergraduate or graduate
students), the Account Originator requires less information and bases its credit
decision on individual and aggregate factors. The Account Originator may also
request less information on certain Take-One applications. Where such
information supplemented by credit bureau data is insufficient for the Account
Originator to make a decision, the Account Originator requests further
information from the applicant.
In addition to the credit review performed in connection with
origination of Accounts, utilization of the Accounts is subject to authorization
at the time of such utilization based upon the Cardmember's past spending and
payment activity and personal resources. Certain utilizations, such as purchases
indicating out-of-pattern spending, initial utilizations on new accounts and
charges to non-current accounts, are subject to closer credit scrutiny.
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Billing and Fees
Each Cardmember is subject to an agreement with an Account Originator
governing the terms and conditions of the Account. Each Account Originator
reserves the right to change or terminate any terms or conditions of the Account
(including increasing or decreasing fees). The ability of an Account Originator
to make such changes is subject to the requirements of applicable laws and to
certain limitations in the Agreement and the RFC Receivable Purchase Agreement.
Pursuant to Account agreements, Cardmembers are charged an annual membership fee
of $55 for the American Express Card, $75 for the American Express Gold Card and
$300 for the Platinum Card. In the Senior Membership program, Cardmembers aged
over 62 that are enrolled in the program are charged an annual membership fee of
$35 for the American Express Card and $55 for the American Express Gold Card.
Except in the limited circumstances related to Recovery Arrangements and
described under "Domestic Consumer Charge Card Business--Collection Efforts," no
monthly finance charges are assessed and the full balance is due upon receipt of
each month's billing statement. The Accounts are grouped into billing cycles for
purposes of administrative efficiency. In accordance with TRS' usual servicing
procedures the payment status of an Account is determined by reference to the
cycle billing date for such Account.
Unless otherwise specified in the related Prospectus Supplement, other
fees associated with the Accounts include (i) a fee of $30 for each additional
American Express Card ($20 if the Cardmember is over 62 years old and part of
the Senior Membership program), $35 for each additional American Express Gold
Card ($25 if the Cardmember is over 62 years old and part of the Senior
Membership program), and $150 for the first additional Platinum Card, (ii)
returned payment fees, and (iii) late fees.
Collection Efforts
Each Account Originator will consider an Account delinquent after a
charge first appears as part of an unpaid "Previous Balance" on any monthly
billing statement. Efforts to collect delinquent Account balances are made by
TRS as Servicer and collection agencies and attorneys retained by such
collection agencies and by TRS as Servicer. Under current practice, the Account
Originator includes a request for payment of any overdue amounts on all billing
statements following delinquency. The Account Originator uses its proprietary
risk and profitability evaluation systems to determine the appropriate
collection strategy. Cardmembers considered to be high risk may be contacted by
either a letter or a telephone call when an Account becomes delinquent, or prior
to delinquency based on a number of factors, including the Cardmember's tenure
and the amount owed in relation to prior spending and payment behavior. If it is
determined that the Cardmember may be unable to pay the outstanding balance, the
Account may be "preempted" --i.e., the Account is cancelled, charge privileges
are revoked, and a more intensive collection action is initiated. For all other
Cardmembers with delinquent balances, charge privileges are generally cancelled
90 days from the date of the billing statement on which a charge first appeared
(the "Original Billing Date"). For both the preempted Accounts and those
reaching the 90 days status, attorney demand letters may also be sent. If an
Account remains delinquent, it may be sent to collection agencies who continue
with telephone calls and letters. Legal action may be instituted. Arrangements
may be made with Cardmembers to extend or otherwise change payment schedules to
maximize collections. In some cases, an
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Account Originator and a delinquent Cardmember may agree to an arrangement (a
"Recovery Arrangement") that will simultaneously suspend the charge privileges
associated with the Cardmember's Account and obligate the Cardmember to repay
delinquent balances in his or her Account in installments according to an
agreed-upon installment plan. While a Recovery Arrangement is in effect, finance
charges will be assessed on the delinquent balance until the balance is repaid
in full.
Pursuant to the Agreement, the Receivables in a Designated Account
will be charged-off no later than the date when the Account remains unpaid
for 360 days from the Original Billing Date. The Receivables in a Designated
Account owned by Centurion Bank will generally be charged-off after the Account
remains unpaid for six contractual payment dates, approximately 180 days from
the Original Billing Date. In either case, charge-offs may be made earlier in
some circumstances. The credit evaluation, servicing, charge-off and collection
practices of the Account Originators and the Servicer, as applicable, may change
over time in accordance with its business judgment and applicable law.
Distinctions Between Accounts and Revolving Credit Plan Products
There are important distinctions between Accounts and revolving credit
plan products. Accounts have no pre-set spending limit and are designed for use
as a convenient method of payment for the purchase of merchandise and services.
Accounts cannot be used as a means of financing such purchases. Accordingly, the
full balance of a month's purchases is billed to Cardmembers and is due upon
receipt of the billing statement. By contrast, revolving credit plans allow
customers to make a minimum monthly payment and to borrow the remaining
outstanding balance from the credit issuer up to a predetermined limit. As a
result of these payment requirement differences, the Accounts have a high
monthly payment rate and balances which turn over rapidly relative to their
charge volume when compared to revolving credit plan products.
Another distinction between Accounts and revolving credit plan products
is that Account balances are not subject to monthly finance charges. As
described above, the full Account balance is billed monthly and is due upon
receipt of the billing statement. Cardmembers do not have the option of using
their Accounts to extend payment and to pay a finance charge on the remaining
outstanding balance. Revolving credit plan products, by contrast, do allow
customers to pay a specified minimum portion of an outstanding amount and to
finance the balance at a finance charge rate determined by the credit issuer.
Because Account balances are not assessed finance charges, for the purpose of
providing yield to the Trust, a portion of the Collections received in any Due
Period equal to the product of Collections and the Yield Factor will be treated
as Yield Collections.
THE DESIGNATED ACCOUNTS
General
The Receivables conveyed to the Trust will consist of all Eligible
Receivables existing on the applicable Cut Off Date, or that arise thereafter,
in Eligible Accounts which were selected from the entire portfolio of Accounts
owned by the Account Originators (the "Portfolio") on the
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basis of criteria set forth in the Agreement, as applied on the applicable
Selection Date and, in the case of (vii) below, also on the applicable Cut Off
Date and designated for inclusion in the Trust (the "Trust Portfolio"). In order
to qualify as an "Eligible Account," each such Account is or will be as of the
applicable Selection Date, among other things, (i) an American Express Card,
American Express Gold Card, Platinum Card, or other card account owned by an
Account Originator and whose billed balances are payable in full each month;
(ii) payable in United States dollars; (iii) not an Account classified by such
Account Originator as fraudulent or reported stolen or lost; (iv) created or
purchased in accordance with or under underwriting and credit standards no less
stringent than those generally applied by such Account Originator; (v) not a
corporate card account; (vi) not an Account which has been identified by such
Account Originator in its computer files as having a deceased obligor or having
been cancelled due to the obligor's bankruptcy and (vii) not an Account
classified as having been charged-off (each Eligible Account the Receivables of
which have been selected for inclusion in a Trust, a "Designated Account").
Unless otherwise specified in the Related Prospectus Supplement, the Designated
Accounts will include all related accounts that are originated as a result of
(a) the Card with respect to a Designated Account being lost or stolen or (b)
the conversion of a Designated Account into another type of Eligible Account, in
each case which satisfies certain conditions set forth in the Agreement. Unless
otherwise specified in the Related Prospectus Supplement, the Designated
Accounts are and will be selected through a random selection process applied to
Eligible Accounts within the Portfolio or in a manner not adverse to the
interests of the Certificateholders.
Pursuant to the Agreement, the Transferors will have the right
(subject to certain limitations and conditions) and, in certain circumstances,
will be obligated to designate additional Eligible Accounts to be included as
Designated Accounts ("Additional Accounts") and to convey to the Trust all
Receivables of such Additional Accounts, whether such Receivables are then
existing or thereafter created. These accounts must meet the eligibility
criteria set forth in the Agreement, as of the date that the Transferors
designate such accounts as Additional Accounts. As of the Selection Date and
any date as of which Additional Accounts are selected pursuant to the
Agreement (the "Additional Account Selection Date"), the Transferor will
severally represent and warrant to the Trust that the Receivables existing on
the Selection Date or the Additional Account Selection Date, as applicable,
meet the eligibility requirements specified in the Agreement. In addition, on
each day on which any new Receivable is created, the Transferor conveying such
Receivable to the Trust shall be deemed to represent and warrant to the Trust
that each Receivable created on such day meets the eligibility requirements
specified in the Agreement. See "Description of the Certificates--Covenants,
Representations and Warranties."
Notwithstanding any of the foregoing, with respect to Additional
Accounts, Eligible Accounts may include Accounts, the Receivables of which
have been written off, or with respect to which the Servicer believes the
Cardmember is bankrupt or insolvent, in each case as of the related Additional
Account Selection Date and/or Additional Account Cut Off Date; provided that
(a) the balances of all Receivables included in such Accounts are reflected on
the books and records of the Account Originators, and is treated for all
purposes of the Agreement, as "zero", and (b) charging privileges with respect
to all such Accounts have been cancelled in accordance with the Account
guidelines applicable thereto.
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Further, pursuant to the Agreement, the Transferor will have the
right (subject to certain limitations and conditions discussed herein) to
accept removal of certain Designated Accounts designated by such Transferor
from the Trust ("Removed Accounts") and accept the conveyance of all the
Receivables in the Removed Accounts, whether such Receivables are then
existing or thereafter created. Throughout the term of the Trust, the
Designated Accounts from which the Receivables conveyed to such Trust arise
will be the same Designated Accounts selected by the Transferors on the Cut
Off Date plus any Additional Accounts, but will not include any Removed
Accounts. See "Description of the Certificates--Conveyance of Receivables."
The Prospectus Supplement relating to each Series of Certificates
will provide certain information about the Trust Portfolio as of the date
specified. Such information will include, but not be limited to, the range of
balances of the Accounts, the range of payment status of the Accounts, the
range of ages of the Accounts and the geographic distribution of the Accounts.
THE TRANSFERORS AND RELATED PARTIES
RFC
American Express Receivables Financing Corporation ("RFC" and a
"Transferor") was incorporated under the laws of the State of Delaware on July
30, 1991. All of its outstanding common stock is owned by American Express
Travel Related Services Company, Inc. ("TRS"). TRS is a wholly owned subsidiary
of American Express Company ("American Express"), a publicly-held corporation
engaged principally, through its subsidiaries, in providing travel related
services, investors diversified financial services and international banking
services throughout the world. RFC was organized for the limited purpose of
issuing securities of the type offered hereby, purchasing, holding, owning and
selling receivables and any activities incidental to and necessary or convenient
for the accomplishment of such purposes. Neither TRS, as stockholder of RFC, nor
RFC's board of directors, intends to change the business purpose of RFC. RFC's
executive offices are located at American Express Tower, World Financial Center,
New York, New York 10285.
Centurion Bank
American Express Centurion Bank ("Centurion Bank" and a "Transferor")
was incorporated under Utah laws as an industrial loan company in 1987 and
received FDIC insurance in 1989. Its principal office is located at 6985 Union
Park Center, Midvale, Utah 84047. Centurion Bank is a wholly owned subsidiary of
TRS. Centurion Bank is the surviving company of a 1996 merger with an affiliated
bank that was also named "American Express Centurion Bank."
TRS and Credco
TRS is a wholly owned subsidiary of American Express. TRS, directly or
through subsidiaries, provides a variety of products and services, including the
Accounts, consumer lending, American Express(R) Travelers Cheques, corporate and
consumer travel products and services, magazine publishing, database marketing
and management and insurance. Credco is a
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wholly owned subsidiary of TRS primarily engaged in the business of purchasing
certain Cardmember receivables generated by TRS and its subsidiaries.
THE TRUST
The Trust was formed pursuant to the Agreement under the laws of the
State of New York. Since its formation, the Trust has not engaged in any
business activity other than to acquire and hold Receivables and the other
assets of the Trust and proceeds therefrom, issue Series of Certificates and the
related Exchangeable Transferor Certificate, make payments thereon and engage in
related activities. As a consequence, the Trust is not expected to have any need
for, or source of, additional capital resources other than the assets of the
Trust.
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS
Unless otherwise specified in the related Prospectus Supplement, for
each Series, following the Revolving Period, Principal Collections are expected
to be distributed to the Certificateholders of such Series or any specified
Class thereof on each specified Distribution Date during the Controlled
Amortization Period or the Rapid Amortization Period, or are expected to be
accumulated for payment to Certificateholders of such Series or any specified
Class thereof during the Controlled Accumulation Period or Early Accumulation
Period and distributed on an Expected Final Payment Date; provided, however,
that, if the Early Amortization Period commences, Principal Collections will be
paid to Certificateholders in the manner described herein and in the related
Prospectus Supplement. The related Prospectus Supplement will specify the date
on which the Controlled Amortization Period, the Rapid Amortization Period or
the Controlled Accumulation Period, as applicable, will commence, the principal
payments expected or available to be received or accumulated during such
Controlled Amortization Period, Rapid Amortization Period or Controlled
Accumulation Period, or on the Expected Final Payment Date, as applicable, the
manner and priority of principal accumulations and payments among the Classes of
a Series of Certificates, 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 an Early Amortization or
Early Accumulation Period.
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued in Series. Each Series will represent
an interest in the Trust other than the interests represented by any other
Series of Certificates issued by the Trust and the Exchangeable Transferor
Certificate. Each Series will be issued pursuant to the Agreement and a Series
Supplement entered into between the Transferors, as the transferors of the
Receivables, TRS (or other specified entity), as Servicer of the Designated
Accounts and the Receivables and the Trustee, substantially in the form filed as
exhibits to the Registration Statement of which this Prospectus is a part.
Pursuant to the Agreement, the Transferors may execute further Series
Supplements thereto between the Transferors and the Trustee in order to issue
additional Series. See "--Exchanges." The Trustee will provide a copy of the
Agreement (without exhibits or schedules), including any Series Supplements, to
Certificateholders without charge upon written request. The Prospectus
Supplement for each Series will describe any
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provisions of the Agreement filed as an Exhibit to the Registration Statement.
The following summary describes certain terms common to each Series of
Certificates.
General
The Certificates of each Series will represent undivided interests in
the Trust, including the right to receive the applicable Invested Percentage of
all Collections received with respect to the Receivables in the Trust up to (but
not in excess of) amounts required to make payments of interest at the
Certificate Rate and the Invested Amount on the Expected Final Payment Date, or
earlier or later in certain circumstances. The property of the Trust consists of
the Receivables generated under the Designated Accounts and under any Additional
Accounts subsequently designated to the Trust, all funds to be collected from
Cardmembers in respect of such Receivables (including Recoveries), all of RFC's
right, title and interest under the RFC Receivable Purchase Agreement, all
moneys on deposit in the Collection Account, the Principal Funding Account, if
any, and the Interest Funding Account, if any, with respect to such Series, any
other accounts established for the benefit of any other Series issued by the
Trust and any other amounts specified in the related Prospectus Supplement,
benefits of any Enhancement and payments made in respect of Enhancements issued
with respect to any other Series issued by the Trust.
Each Series of Certificates may consist of one or more Classes, one or
more of which may be Senior Certificates and one or more of which may be
Subordinated Certificates. Each Class of a Series will evidence the right to
receive a specified portion of each distribution of principal or interest or
both. The Invested Amount with respect to a Series with more than one Class will
be allocated among the Classes as described in the related Prospectus
Supplement. The Certificates of a Class may differ from Certificates of other
Classes of the same Series in, among other things, the amounts allocated to
principal payments, maturity date, Certificate Rate and the availability of
Enhancement.
For each Series of Certificates, the Transferors or a designated
affiliate of the Transferors initially will own the interest (the "Transferor
Interest") not represented by the Certificates and any other Series of
certificates to be issued. The Transferor Interest will be evidenced by the
Exchangeable Transferor Certificate representing an undivided interest in the
Trust, including the right to a percentage (the "Transferor Percentage"),
which may vary from month to month, of all Collections on the Receivables in
the Trust. The Exchangeable Transferor Certificate may be transferred in whole
or in part subject to certain limitations and conditions contained in the
Agreement.
For each Series of Certificates, payments of interest will be made on
dates (each, a "Distribution Date") specified in the related Prospectus
Supplement to Certificateholders in whose names the Certificates were registered
(or if Definitive Certificates are issued, to holders of such Definitive
Certificates) on the record dates specified in the related Prospectus Supplement
(each, a "Record Date"). Interest will be distributed in amounts, for the
periods and on the dates specified in the related Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates during the Revolving Period, the amount
of the Invested Amount in the
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Trust will remain constant except under certain limited circumstances. See
"--Defaulted Receivables; Recoveries; Adjustments" and "--Investor Charge-Offs."
The amount of Principal Collections in the Trust, however, will vary each day as
new Receivables are created and others are paid. The amount of the Transferor
Interest will fluctuate each day, therefore, to reflect the changes in the
amount of Receivables in the Trust. When a Series is amortizing, the Invested
Amount of such Series will decline as Principal Collections are distributed to
the Certificateholders. As a result, the Transferor Interest will generally
increase each month to reflect the reductions in the Invested Amount and will
also change to reflect the variations in the amount of Principal Collections.
The Transferor Interest in the Trust may also be reduced as the result of an
Exchange. See "--Exchange."
Unless otherwise specified in the related Prospectus Supplement,
Certificates of each Series will initially be represented by certificates
registered in the name of the nominee of DTC (together with any successor
depository selected by the Transferors, the "Depository") except as set forth
below. Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, beneficial interests in the Certificates
will available for purchase in minimum denominations of $1,000 and integral
multiples thereof in book-entry form only. The Transferors have been informed by
DTC that DTC's nominee will be Cede. Accordingly, Cede is expected to be the
holder of record of each Series of Certificates. Unless and until Definitive
Certificates are issued for any Series under the limited circumstances described
herein, no Certificate Owner acquiring an interest in the Certificates will be
entitled to receive a certificate representing such person's interest in the
Certificates. All references herein to actions by Certificateholders shall refer
to actions taken by DTC upon instructions from its participating organizations
(the "Participants") and all references herein to distributions, notices,
reports and statements to Certificateholders shall refer to distributions,
notices, reports and statements to DTC or Cede, as the registered holder of the
Certificates, as the case may be, for distribution to Certificate Owners in
accordance with DTC procedures. See "--Book-Entry Registration" and
"--Definitive Certificates."
If so specified in the Prospectus Supplement relating to a Series,
application will be made to list the Certificates of such Series, or all or a
portion of any Class thereof, on the Luxembourg Stock Exchange or any other
specified exchange.
Book-Entry Registration
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates, Certificateholders may hold their
Certificates through DTC (in the United States) or CEDEL or Euroclear (in
Europe) if they are participants of such systems, or indirectly through
organizations which are participants in such systems.
Cede, as nominee for DTC, will hold the global Certificates. CEDEL and
Euroclear will hold omnibus positions on behalf of their participants through
customers' securities accounts in CEDEL's and 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.
Citibank, N.A. will act as depositary for CEDEL and Morgan Guaranty Trust
Company of New York will act as depositary for Euroclear (in such capacities,
the "Depositaries"), unless otherwise specified in the related Prospectus
Supplement. Transfers between DTC participants
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will occur in the ordinary way in accordance with DTC rules. Transfers between
CEDEL Participants and Euroclear Participants will occur in the ordinary way in
accordance with their applicable rules and procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL 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. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities received in
CEDEL or Euroclear as a result of a transaction with a DTC participant will be
made during subsequent securities settlement processing and dated the business
day following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or CEDEL participant on such business day. Cash received in CEDEL or
Euroclear as a result of sales of securities by or through a CEDEL Participant
or a Euroclear Participant to a DTC participant will be received with value on
the DTC settlement date but will available in the relevant CEDEL or Euroclear
cash account only as of the business day following settlement in DTC. For
additional information regarding clearance and settlement procedures for the
Certificates, see Annex I hereto and for information with respect to tax
documentation procedures relating to the Certificates, see Annex I hereto and
"Federal Income Tax Consequences."
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its Participants and facilitate the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other organizations (including the Underwriters).
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").
Certificate Owners that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Certificates may do so only through Participants and Indirect
Participants. In addition, Certificate Owners will receive all distributions of
principal of and interest on the Certificates from the Trustee, as paying agent,
or its successor in such capacity (the "Paying Agent"), through the Participants
who in turn will
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receive them from DTC. Under a book-entry format, Certificate Owners may
experience some delay in their receipt of payments, since such payments will be
forwarded by the Paying Agent to Cede, as nominee for DTC. DTC will forward such
payments to its Participants which thereafter will forward them to Indirect
Participants or Certificate Owners. It is anticipated that the only
"Certificateholder" will be Cede, as nominee of DTC. Certificate Owners will not
be recognized by the Trustee as Certificateholders, as such term is used in the
Agreement or any Supplement, and Certificate Owners will only be permitted to
exercise the rights of Certificateholders indirectly through the Participants
who in turn will exercise the rights of Certificateholders 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 Certificates and is
required to receive and transmit distributions of principal of and interest on
the Certificates. Participants and Indirect Participants with which Certificate
Owners have accounts with respect to the Certificates similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
their respective Certificate Owners. Accordingly, although Certificate Owners
will not possess Certificates, Certificate 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 Certificate
Owner to pledge Certificates to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such Certificates, may
be limited due to the lack of a physical certificate for such Certificates.
DTC has advised the Transferors that it will take any action permitted
to be taken by a Certificateholder under any Agreement or any Supplement only at
the direction of one or more Participants to whose account with DTC the
Certificates are credited. Additionally, DTC has advised the Transferors that it
will take such actions with respect to specified percentages of the Invested
Amount only at the direction of and on behalf of Participants whose holdings
include undivided interests that satisfy such specified percentages. DTC may
take conflicting actions with respect to other undivided interests to the extent
that such actions are taken on behalf of Participants whose holdings include
such undivided interests.
CEDEL BANK, societe anonyme. ("CEDEL") is incorporated under the laws
of Luxembourg as a professional depositary. CEDEL holds securities for its
participating organizations ("CEDEL Participants") and facilitates the clearance
and settlement of securities transactions between CEDEL Participants through
electronic book-entry changes in accounts of CEDEL Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to its Participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. CEDEL interfaces with domestic markets in
several countries. As a professional depositary, CEDEL is subject to regulation
by the Luxembourg Monetary Institute. CEDEL Participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include the Underwriters. Indirect access to CEDEL
is also
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available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a CEDEL
Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear Participants") and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of 29
currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. The Euroclear
System is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office (the "Euroclear Operator" or "Euroclear"), under contract with
Euroclear Clearance System S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
Underwriters. Indirect access to the Euroclear system is also available to other
firms that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly .
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of 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, withdrawals of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants, and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Certificates held through CEDEL or
Euroclear will be credited to the cash accounts of CEDEL Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. See "Tax Matters." The CEDEL or the Euroclear Operator, as the case
may be, will take any other action permitted to be taken by a Certificateholder
under the Agreement on behalf of a CEDEL Participant or Euroclear Participant
only in accordance with its relevant rules
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and procedures and subject to its Depositary's ability to effect such actions
on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Class A Certificates among
participants of DTC, CEDEL and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
Definitive Certificates
Unless otherwise specified in the related Prospectus Supplement, the
Certificates of each Series will be issued in fully registered, certificated
form to Certificate Owners or their nominees (the "Definitive Certificates"),
rather than to DTC or its nominee, only if (i) the Transferors advise the
Trustee in writing that DTC is no longer willing or able to discharge properly
its responsibilities as depositary with respect to the Certificates, and the
Trustee is, or the Transferors are, unable to locate a qualified successor, (ii)
the Transferors, at their option, elect to terminate the registration of the
Certificates on the book-entry system through DTC, or (iii) after the occurrence
of a servicer default, Certificate Owners representing in the aggregate more
than 50% (or such other percentage specified in the related Prospectus
Supplement) of the Invested Amount advise DTC through Participants in writing
that the continuation of a book-entry system with respect to the Certificates
through any depositary is no longer in the best interest of the Certificate
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 Certificates. Upon surrender by DTC of
the Definitive Certificates representing the Certificates and instructions for
reregistration, the Trust will issue the Certificates as Definitive
Certificates, and thereafter the Trustee will recognize the holders of such
Definitive Certificates as holders under the Agreement ("Holders").
Distribution of principal of and interest on the Certificates will be
made by the Paying Agent directly to Holders of Definitive Certificates in
accordance with the procedures set forth herein and in the Agreement. Interest
payments and any principal payments on each Distribution Date will be made to
Holders in whose names the Definitive Certificates were registered at the close
of business on the related Record Date. Distributions will be made by check
mailed to the address of such Holder as it appears on the certificate register.
The final payment on any Certificate (whether Definitive Certificates or the
Certificate registered in the name of DTC's nominee), however, will be made only
upon presentation and surrender of such Certificate at the office or agency
specified in the notice of final distribution to Certificateholders. The Trustee
will provide such notice to registered Certificateholders not later than the
fifth day of the month of such final distribution.
Definitive Certificates will be transferable and exchangeable at the
offices of the Transfer Agent and Registrar, which shall initially be the
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.
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Interest Payments
For each Series of Certificates and Class thereof, interest will accrue
from the relevant Closing Date on the applicable Invested Amount at the
applicable Certificate Rate, which may be a fixed rate, a floating rate or
another type of rate as specified in the related Prospectus Supplement. Interest
will be distributed to Certificateholders on the Distribution Dates specified in
the related Prospectus Supplement. Interest payments on any Distribution Date
will be funded from Yield Collections allocated to the Certificateholders'
Interest during the preceding Due Period or Periods and may be funded from
certain investment earnings on funds held in accounts of the Trust and, from any
applicable Enhancement, if necessary, or certain other amounts as specified in
the related Prospectus Supplement. If the Distribution Dates for payment of
interest for a Series or Class occur less frequently than monthly, such
collections or other amounts (or the portion thereof allocable to such Class)
may be deposited in one or more trust accounts (each, an "Interest Funding
Account") pending distribution to Certificateholders of such Series or Class, as
described in the related Prospectus Supplement. If a Series has more than one
Class of Certificates, each such Class may have a separate Interest Funding
Account. The Prospectus Supplement relating to each Series of Certificates and
each Class thereof will describe the amounts and sources of interest payments to
be made, the Certificate Rate, and, for a Series or Class thereof bearing
interest at a floating Certificate Rate, the initial Certificate Rate, the dates
and the manner for determining subsequent Certificate Rates, and the formula,
index or other method by which such Certificate Rates are determined.
Principal Payments
Unless otherwise specified in the related Prospectus Supplement, during
the Revolving Period for each Series of Certificates (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
Certificateholders of such Series. During the Controlled Amortization Period,
Rapid Amortization Period or Accumulation Period, as applicable, which will be
scheduled to begin on the date specified in the related Prospectus Supplement,
and during the Early Amortization or Early Accumulation Period, which will begin
upon the occurrence of a Pay Out Event, principal will be paid to the
Certificateholders in the amounts and on Distribution Dates specified in the
related Prospectus Supplement or will be accumulated in a Principal Funding
Account for later distribution to Certificateholders on the Expected Final
Payment Date in the amounts specified in the related Prospectus Supplement.
Principal payments for any Series or Class thereof will be funded from Principal
Collections received during the related Due Period or Periods as specified in
the related Prospectus Supplement and allocated to such Series or Class and from
certain other sources specified in the related Prospectus Supplement. In the
case of a Series with more than one Class of Certificates, the
Certificateholders of one or more Classes may receive payments of principal at
different times. The related Prospectus Supplement will describe the manner,
timing and priority of payments of principal to Certificateholders of each
Class. Upon satisfaction of certain conditions set forth in the related
Prospectus Supplement, the Servicer may elect to postpone the commencement of
the Controlled Accumulation Period, if any, and extend the length of the
Revolving Period.
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
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in the related 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 Certificates or Class
thereof at the end of the Controlled Accumulation Period, such Series of
Certificates or Class thereof may be subject to a principal maturity guaranty or
other similar arrangement specified in the related Prospectus Supplement.
Conveyance of Receivables
The Transferors have transferred and assigned to the Trustee, all of
their respective right, title and interest in and to the Receivables in the
related Designated Accounts and all Receivables thereafter created in such
Accounts and the proceeds of all the foregoing. Credco has sold or will sell to
TRS all its right, title and interest in and to all the Receivables owned by it
and existing as of the applicable Cut Off Date under the Designated Accounts.
Pursuant to the Receivable Purchase Agreement, TRS sold to RFC all of TRS'
right, title and interest in and to the Receivables existing under the related
Designated Accounts and all Receivables arising under such Accounts from time to
time in the future.
In connection with the sale of the Receivables owned by Credco and
existing as of the applicable Cut Off Date to TRS and the sale of the
Receivables by TRS to RFC and the transfer of the Receivables by the Transferors
to the Trust, and in connection with each sale of Receivables by Credco to TRS,
by TRS to RFC and each transfer of such Receivables to the Trust, TRS for itself
and as servicer for Credco has indicated and will indicate, as applicable, in
its records, including any computer files, that such Receivables have been sold,
as appropriate, to RFC and then transferred to the Trust and each Transferor has
indicated and will indicate, as applicable, in its records, including any
computer files, that the Receivables have been transferred by such Transferor to
the Trust. In addition, the Transferors provided, and will provide, to the
Trustee computer files or microfiche lists containing a true and complete list
showing for each related Designated Account, as of the applicable Cut Off Date
and for each Additional Account as of each Additional Account Cut Off Date, (i)
its account number and (ii) the amount of Receivables in such Designated
Account. TRS, as initial Servicer, will retain and will not deliver to the
Trustee any other records or agreements relating to the Designated Accounts or
the Receivables. Except as set forth above, the records and agreements relating
to the Designated Accounts and the Receivables have not been and will not be
segregated from those relating to other charge card accounts and receivables and
neither the computer files nor the physical documentation relating to the
Designated Accounts or Receivables has been or will be stamped or marked to
reflect the transfer of Receivables to the Trust. The Trustee will have
reasonable access to such records and agreements as required by applicable law
or to enforce the rights of the Certificateholders. Credco and TRS have filed
one or more UCC-1 financing statements in accordance with the UCC to perfect
TRS' and the Transferors' respective interests in the Receivables. Each
Transferor, in turn, has filed one or more UCC-1 financing statements in
accordance with applicable law to perfect the Trust's interest in the
Receivables. See "Risk Factors" and "Certain Legal Aspects of the
Receivables--Transfer of Receivables."
Exchanges
Unless otherwise specified in the related Prospectus Supplement, for
each Series of Certificates, the Agreement will provide for the Trustee to issue
two types of certificates: (i) one
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or more Series of Certificates which are transferable and have the
characteristics described below and (ii) the Exchangeable Transferor
Certificate, a certificate which evidences the Transferor Interest, which will
initially be held by the Transferors or a designated affiliate of the
Transferors and will be transferable only as provided in the Agreement. The
Agreement will also provide that, pursuant to any one or more Series
Supplements, the Transferors may tender the Exchangeable Transferor Certificate,
or the Exchangeable Transferor Certificate and the Certificates evidencing any
Series of certificates, to the Trustee in exchange for one or more newly issued
Series (which may include Series offered pursuant to this Prospectus) and a
reissued Exchangeable Transferor Certificate. Pursuant to the Agreement, the
holder of the Exchangeable Transferor Certificate may define, with respect to
any newly issued Series: (i) its name or designation, (ii) its initial principal
amount (or method for calculating such amount), (iii) its certificate rate (or
formula for the determination thereof), (iv) the interest payment date or dates
and the date or dates from which interest shall accrue, (v) the method for
allocating collections to Certificateholders, (vi) the names of any accounts to
be used by such Series and the terms governing the operation of any such
accounts, (vii) the percentage used to calculate monthly servicing fees, (viii)
the Minimum Transferor Percentage, (ix) the minimum amount of Trust Principal
Component required to be maintained through the designation by the Transferors
of Additional Accounts, (x) the issuer and terms of any Enhancement with respect
thereto, (xi) the base rate for such Series, if applicable, (xii) the terms on
which the Certificates of such Series may be repurchased at the Transferors'
option or remarketed to other investors, (xiii) the series termination date,
(xiv) any deposit into any account maintained for the benefit of
Certificateholders, (xv) the number of classes of such Series, and if more than
one class, the rights and priorities of each such class, (xvi) the extent to
which the certificates of such Series will be issuable in temporary or permanent
global form (and, in such case, the depositary for such global certificate or
certificates, the terms and conditions, if any, upon which such global
certificate may be exchanged, in whole or in part, for definitive certificates,
and the manner in which any interest payable on a temporary or global
certificate will be paid), (xvii) whether the certificates of such Series may be
issued in bearer form and any limitations imposed thereon, (xviii) the priority
of any Series with respect to any other Series, (xix) the rights of the holder
of the Exchangeable Transferor Certificate that have been transferred to the
holders of such Series, (xx) whether such Series will be an Excess Allocation
Series, and (xxi) any other relevant terms (all such terms, the "Principal
Terms" of such Series). Upon the issuance of an additional Series of
Certificates, none of the Transferors, the Servicer, the Trustee or the Trust
will be required or will intend to obtain the consent of any Certificateholder
of any other Series previously issued by such Trust. However, as a condition of
an Exchange, the Transferors will deliver to the Trustee written confirmation
that the Exchange will not result in the applicable Rating Agency reducing or
withdrawing its rating of any outstanding Series previously issued by the Trust.
The Transferors may offer any Series to the public or other investors under a
Disclosure Document in offerings pursuant to this Prospectus or in transactions
either registered under the Act or exempt from registration thereunder,
directly, through one or more underwriters or placement agents, in fixed-price
offerings or in negotiated transactions or otherwise.
Unless otherwise specified in the related Prospectus Supplement, the
Transferors may perform Exchanges and define Principal Terms such that each
Series has a period during which amortization 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 revolving periods while other Series are not. Thus, certain Series may
not
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be amortizing, while other Series are amortizing. A Series may have the benefits
of a form of Enhancement issued by issuers different from the issuers of the
form of Enhancement with respect to any other Series. Under the Agreement, the
Trustee shall hold any such Enhancement only on behalf of the Series with
respect to which such Enhancement relates. Likewise, with respect to each such
Enhancement, the Transferors may deliver a different form of Enhancement
agreement. The holder of the Exchangeable Transferor Certificate may specify
different certificate rates and monthly servicing fees with respect to each
Series. Yield Collections not used to pay interest on the certificates, the
monthly servicing fee, the investor default amount or investor charge-offs with
respect to any Series may be allocated as provided in the form of the
Enhancement agreement for such Series, if applicable. The holder of the
Exchangeable Transferor Certificate will also have the option under the
Agreement to vary between Series the terms upon which a Series (or a particular
Class within such Series) may be repurchased at the Transferors' option or
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 Exchanges that the Transferor may perform
under the Agreement. The Trust will terminate only as provided in the Agreement.
Unless otherwise specified in the related Prospectus Supplement, an
Exchange may only occur upon the satisfaction of certain conditions provided in
the Agreement. Under the Agreement, the Transferors may perform an Exchange by
notifying the Trustee, at least three business days in advance of the date upon
which the Exchange is to occur. Under the Agreement, the notice will state the
designation of any Series to be issued on the date of the Exchange and, with
respect to each such Series: (i) its initial invested amount (or method for
calculating such amount) and (ii) its certificate rate (or the method for
allocating interest payments or other cash flow to such Series). The Agreement
provides that, on the date of the Exchange, the Trustee will issue any such
Series only upon delivery to it of the following: (i) a Supplement in form
satisfactory to the Trustee signed by the Transferors and specifying the
Principal Terms of such Series, (ii) the form of Enhancement and the Enhancement
agreement, if any, with respect thereto executed by the Transferors and the
provider of the form of Enhancement, (iii) an opinion of counsel to the effect
that certificates of such Series will be characterized either as indebtedness or
an interest in a partnership under existing law for Federal income tax purposes
and that the issuance of such Series will not affect the Federal income tax
characterization of any outstanding Series of the Trust, (iv) written
confirmation from the applicable Rating Agency that the Exchange will not result
in such Rating Agency reducing or withdrawing its rating on any outstanding
Series and (v) the existing Exchangeable Transferor Certificate and the
applicable certificates of the Series to be exchanged, if applicable. Upon
satisfaction of such conditions, the Trustee will cancel the existing
Exchangeable Transferor Certificate and the certificates of the exchanged
Series, if applicable, and issue the new Series and new Exchangeable Transferor
Certificate.
Covenants, Representations and Warranties
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Certificates, each Transferor has severally covenanted in the
Agreement to the Trustee for the benefit of all Certificateholders of all Series
which from time to time may have an interest in the Trust that, as to the
Receivables conveyed to the Trust by it, such Transferor will accept the
transfer of any Receivable which is charged-off as uncollectible or any
Receivable the proceeds
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of which are unavailable to the Trust, if (i) such Receivable is not an Eligible
Receivable, (ii) such Receivable was not conveyed to the Trust free and clear of
all liens (except such liens as may be permitted by the Agreement) or in
compliance in all material respects with all requirements of law, (iii) all
material information with respect to the Receivables, and the Designated
Accounts related thereto, in the list provided to the Trustee was not true and
correct in all material respects, (iv) such Transferor did not obtain all
consents, licenses, approvals or authorizations required in connection with the
conveyance of the Receivables to the Trust, or (v) on the applicable Closing
Date and on the applicable Additional Account Closing Date with respect to
Additional Accounts, the computer file or list of Designated Accounts or
Additional Accounts, as the case may be, provided by such Transferor to the
Trustee was not an accurate and complete listing of all such Accounts in all
material respects as of the related Cut Off Date or the Additional Account Cut
Off Date, as applicable, or the information contained therein with respect to
the identity of such Accounts and the Receivables existing thereunder was not
true and correct in all material respects as to the related Cut Off Date or the
Additional Account Cut Off Date, as applicable, unless cured within 60 days or
any longer period agreed upon by the Trustee (not to exceed an additional 60
days) or within any other period of time as specified in the related Prospectus
Supplement, from the earlier to occur of the discovery of any such event by such
Transferor or the Servicer, or receipt by such Transferor or the Servicer of
written notice of any such event given by the Trustee. Additionally, each
Transferor covenants and will covenant in each Agreement to accept, under
certain conditions, the transfer of Receivables which are subject to certain
specified liens immediately upon the discovery of such liens.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Certificates, a Transferor shall accept the transfer of any Receivable
as described above (an "Ineligible Receivable") by paying to the Servicer within
two business days for deposit in the Collection Account an amount equal to the
balance of such Ineligible Receivable. Any deposit into the Collection Account
in connection with the reassignment of an Ineligible Receivable shall be deemed
a payment in full of the Ineligible Receivable and will be treated under the
Agreement in the same manner as are payments received by the Servicer from
Cardmembers under the Designated Accounts. Any amounts so paid by a Transferor
shall be allocated in respect of Yield Collections and Principal Collections as
provided in the Agreement. Notwithstanding the foregoing, no such reassignment
shall be considered to occur unless such deposit is made.
The obligation of a Transferor to accept reassignment of any Ineligible
Receivable as described above will be the sole remedy with respect to such
Receivable available to Certificateholders of all Series outstanding or the
Trustee on behalf of Certificateholders of all Series outstanding. Pursuant to
the Receivable Purchase Agreement, TRS has made covenants with respect to
Ineligible Receivables substantially similar to those described above with
respect to the Transferors. As a result, in the event that a Receivable sold to
RFC by TRS becomes an Ineligible Receivable, TRS will be required to repurchase
such Receivable from RFC so as to enable RFC to repurchase such Receivable from
the Trust.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Certificates, each Transferor has represented and warranted in the
Agreement to the Trustee for the benefit of all holders of all Series which from
time to time may have an interest in the Trust that (i) such Transferor is duly
organized and validly existing in good standing under the laws of
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the jurisdiction of its organization, has the full corporate power, authority
and legal right to own its properties and conduct its business as such
properties are presently owned and such business is presently conducted, and to
execute, deliver and perform its obligations under the Agreement and, with
respect to RFC only, the RFC Receivable Purchase Agreement and to execute and
deliver to the Trustee the Certificates pursuant to the Agreement, (ii) the
Agreement and, with respect to RFC only, the RFC Receivable Purchase Agreement
constitute legal, valid, binding and enforceable obligations of such Transferor,
and (iii) the Agreement constitutes a valid transfer to the Trust of all right,
title and interest of such Transferor in and to the Receivables transferred to
the Trust by such Transferor, whether then existing or thereafter created in the
Designated Accounts, and the proceeds thereof (which amount shall include
amounts in any of the accounts established for the benefit of the
Certificateholders) or the grant of a first priority perfected security interest
in such Receivables and with certain exceptions made for certain limited time
periods the proceeds thereof (which amount shall include amounts in any of the
accounts established for the benefit of the Certificateholders), which is
effective as to each Receivable upon the transfer thereof to the Trust or upon
its creation, as the case may be, and, with respect to RFC only, that the RFC
Receivable Purchase Agreement constitutes a valid transfer to RFC of all right,
title and interest of TRS or the applicable seller in and to the Receivables,
whether then existing or thereafter created in the applicable Designated
Accounts, and the proceeds thereof. In the event that (x) any of the
representations and warranties described in clauses (i) through (iii) above are
not true and correct or (y) a material amount of Receivables are not Eligible
Receivables, and in either case such event has a material adverse effect on the
interests of holders of the certificates of all Series which have an interest in
the Trust, either the Trustee or the holders of certificates evidencing
undivided interests in such Trust aggregating more than 50% of the outstanding
invested amount of all such Series, by written notice to the Transferors (and to
the Trustee and the Servicer, if given by the Certificateholders), may direct
the Transferors to accept reassignment of all Receivables within 60 days of such
notice or any longer period agreed upon by the Trustee (not to exceed an
additional 60 days). The Transferors will be obligated to accept reassignment of
all such Receivables on a Distribution Date occurring within such applicable
period, unless the representations and warranties shall then be true and correct
in all material respects or there shall no longer be a material amount of such
Receivables which are not Eligible Receivables, as the case may be. The price
for such transfer of Receivables shall be equal to the sum of the aggregate
invested amounts of all such Series on the Record Date related to the applicable
payment date on which the transfer is scheduled to be made (less the aggregate
principal amount on deposit in any principal funding account) plus an amount
equal to all interest accrued but unpaid on all such Series at the applicable
certificate rates through the end of the interest accrual periods of such
Series. The payment of such amount into the Collection Account in immediately
available funds will be considered a prepayment in full of all such Receivables
and will be paid in full to the Certificateholders. The obligations described
above shall be the sole remedies respecting the foregoing representations,
warranties and events available to the Trustee or the Certificateholders.
Pursuant to the RFC Receivable Purchase Agreement, TRS has made
representations and warranties with respect to the Receivables sold by it to RFC
pursuant to the RFC Receivable Purchase Agreement substantially similar to those
described above with respect to the Transferors. As a result, in the event that
RFC breaches a representation and warranty described above with respect to a
Receivable sold to RFC by TRS or such seller, TRS or such seller will be
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required to repurchase from RFC the Receivables retransferred to RFC for an
amount of cash equal to the amount RFC is required to deposit under the
Agreement in connection with such retransfer.
Unless otherwise specified in the related Prospectus Supplement, with
respect to each Series of Certificates an "Eligible Receivable" will be defined
to mean each Receivable (i) which has arisen under an Eligible Account, (ii)
which was created in compliance with all requirements of law and pursuant to a
Cardmember agreement which complies with all requirements of law in either case
the failure to comply with which would have a material adverse effect upon
Certificateholders, (iii) with respect to which all material consents, licenses,
approvals or authorizations of, or registrations with, any governmental
authority required to be obtained or given by an Account Originator in
connection with the creation of such Receivable or the execution, delivery and
performance by such Account Originator of the related Cardmember agreement have
been duly obtained or given and are in full force and effect as of such date of
creation, (iv) as to which at the time of the transfer of such Receivable to the
Trust, the Trust will have good and marketable title, free and clear of all
liens, encumbrances, charges and security interests (except those permitted by
the Agreement), (v) which has been the subject of either a valid transfer and
assignment from a Transferor to the Trust of all of such Transferor's right,
title and interest therein or the grant of a first priority perfected security
interest therein (and in the proceeds thereof), effective until the termination
of the Trust, (vi) which will at all times be the legal, valid and binding
payment obligation of the Cardmember thereof enforceable against such Cardmember
in accordance with its terms, subject to certain bankruptcy and equity related
exceptions, (vii) which constitutes either an "account" or a "general
intangible" under and as defined in Article 9 of the UCC as then in effect in,
with respect to any Receivable conveyed to the Trust by RFC, the State of New
York or, with respect to any Receivable conveyed to the Trust by Centurion Bank,
the State of Utah, (viii) which, at the time of its transfer to the Trust, has
not been waived or modified except in accordance with the policies and
procedures of the relevant Account Originator relating to the operation of its
consumer charge card business, (ix) which is not subject to any right of
rescission, setoff, counterclaim or other defense (including the defense of
usury), other than certain bankruptcy and equity related defenses, (x) as to
which the relevant Account Originator and the Transferor have satisfied all
obligations to be fulfilled at the time it is transferred to the Trust and (xi)
as to which the relevant Account Originator and the Transferor have done
nothing, at the time of its transfer to the Trust, to impair the rights of the
Trust or Certificateholders therein.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Certificates, it will not be required or anticipated that the Trustee
will make any initial or periodic 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 the Transferors' representations and
warranties or for any other purpose. In addition, it is not anticipated or
required that the Trustee will make any initial or periodic general examination
of the Servicer for the purpose of establishing the compliance by the Servicer
with its representations or warranties or the performance by the Servicer of its
obligations under the Agreement for any other purpose. The Servicer, however,
will be required to deliver to the Trustee on or before March 1 (or such other
date specified in the related Prospectus Supplement) of each year an opinion of
counsel with respect to the validity of the security interest of the Trust in
and to the Receivables and certain other components of such Trust.
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Addition of Accounts
Subject to the conditions set forth in the second succeeding sentence,
the Transferors will have the right to designate from time to time Additional
Accounts to be included as Designated Accounts and to convey to the Trust on
designated dates all Receivables in such Additional Accounts (each such date, an
"Additional Account Closing Date"), whether such Receivables are then existing
or thereafter created. In addition, the Transferors will be required to
designate the Receivables of Additional Accounts (to the extent available) and
to transfer the Receivables in such Additional Accounts to the Trust if, as of
the end of any two consecutive Due Periods, the Trust Principal Component minus
the sum of the invested amounts (or adjusted invested amounts) for all Series
having an interest in the Trust and plus the principal amount on deposit in any
Principal Funding Account and the Special Funding Account (the "Transferor
Amount") as a percentage of the Trust Principal Component (reduced, for the
purpose of this calculation, by the Privileged Assets Calculated Amount for the
prior Due Period) is less than 15% (the "Minimum Transferor Percentage") or
under the circumstances and in the amounts specified in the related Prospectus
Supplement. The Transferors will in each case convey to the Trusts all
Receivables in such Additional Accounts, whether such Receivables are then
existing or thereafter created, subject to the following conditions, among
others: (i) each such Additional Account at the time of its selection must be an
Eligible Account; (ii) the selection of the Additional Accounts by each
Transferor will be made in a manner which it reasonably believes will not
materially adversely affect the Certificateholders' interests; and (iii) the
Transferors shall have delivered prior written notice of the addition to the
Rating Agency, the Trustee and the Servicer, and, if such Additional Accounts
are being designated at the option of the Transferors, the Transferors shall
have been notified in writing that such addition will not result in a reduction
or withdrawal of the rating of any Series of Certificates as described under
"Risk Factors-Payments and Maturity".
Although each Additional Account must satisfy certain criteria set
forth in the Agreement at the time of its selection, it is possible that
Additional Accounts will not be of the same credit quality as the initial
Designated Accounts.
Removal of Designated Accounts
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Certificates, subject to the conditions set forth in the next
succeeding sentence, on each Determination Date with respect to which the
Transferor Amount as a percentage of the Trust Principal Component (reduced, for
the purpose of this calculation, by the Privileged Assets Calculated Amount for
the prior Due Period) exceeds 20% at the end of any Due Period or under the
circumstances and in the amounts specified in the related Prospectus Supplement,
the Transferors will have the right to accept removal from the Trust of certain
Designated Accounts designated by the Transferors (the "Removed Accounts") and
accept the conveyance of all the Receivables in the Removed Accounts, without
notice to the Certificateholders. The Transferors may, in their sole discretion,
accept such offer in an aggregate amount equal to an amount not greater than the
excess of the Transferor Amount over 15% of the Trust Principal Component
(reduced as aforesaid) as of the end of the related Due Period, unless otherwise
specified in the related Prospectus Supplement. The Transferors will be
permitted to designate and require reassignment to them of the Receivables from
Removed Accounts only upon satisfaction of the
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following conditions: (i) the Transferors shall have delivered to the Trustee
for execution a written instrument of reassignment and a computer file or
microfiche list containing a true and complete list of all Designated Accounts
after such removal, the Designated Accounts to be identified by account number
and aggregate amount of Receivables; (ii) the Transferors shall represent and
warrant that no selection procedure used by the Transferors which is adverse to
the interests of the Certificateholders or any provider of Enhancements was
utilized in selecting the Removed Accounts; (iii) the removal of any Receivables
of any Removed Accounts shall not, in the reasonable belief of the Transferors,
cause a Pay Out Event to occur; (iv) the Transferors shall have delivered prior
written notice of the removal to each Rating Agency which has rated any
outstanding Series and prior to the date on which such Receivables are to be
removed shall have received notice from each Rating Agency that such removal
will not cause the reduction or withdrawal of its rating of any Series of
certificates; and (v) the Transferors shall have delivered to the Trustee and
each Rating Agency officers' certificates confirming the items set forth in
clauses (i) through (iv) above.
Collection Account
The Trustee will establish and maintain or cause to be established and
maintained, in the name of the Trustee, on behalf of the Trust, a segregated
trust account (the "Collection Account") for the benefit of the
Certificateholders of all Series, including any Series offered hereby, with an
Eligible Institution. An "Eligible Institution" means a depositary institution,
which may include the Trustee, organized under the laws of the United States or
any one of the States thereof including the District of Columbia (or any
domestic branches of foreign banks), which at all times has a short-term
unsecured debt or certificate of deposit rating of at least A-1+ and P-1 by the
applicable Rating Agency; provided, however, that no such rating shall be
required of an institution which shall have corporate trust powers and which
maintains the Collection Account, any principal funding account, any interest
funding account or any other account maintained for the benefit of
Certificateholders as a fully segregated trust account with the trust department
of such institution. Funds in the Collection Account may be invested, at the
direction of the Servicer, in (i) obligations fully guaranteed by the United
States of America or its agencies, (ii) time deposits, certificates of deposit
or banker's acceptances of certain depository institutions or trust companies
having the highest rating from the applicable Rating Agency, (iii) commercial
paper having, at the time of the Trust's investment, a rating in the highest
rating category from the applicable Rating Agency, (iv) money market funds which
have a rating in the highest rating category from the applicable Rating Agency,
(v) Eurodollar time deposits having, at the time of the Trust's investment or
contractual commitment to invest therein, a rating in the highest rating
category from the applicable Rating Agency, (vi) repurchase agreements involving
certain of the above-listed investments so long as the other party thereto has
at the time of the Trust's investment therein, a rating in the highest rating
category from the applicable Rating Agency and (vii) any other investments as
may be approved in writing by the applicable Rating Agency prior to the Trust's
investment therein (collectively, the "Eligible Investments"). Any such
investment shall be held to maturity. Any earnings (net of losses and investment
expenses) on funds in the Collection Account shall be paid monthly to the
Transferors unless a Pay Out Event occurs, in which event such funds will remain
on deposit in the Collection Account. The Servicer will have the revocable power
to withdraw funds from the Collection Account and to instruct the Trustee to
make withdrawals and payments from the Collection Account for the purpose of
carrying out the Servicer's or the Trustee's duties under
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the Agreement. So long as no Servicer Default has occurred and the Servicer
maintains certain short-term credit ratings, or obtains a guaranty or written
confirmation of the ratings on the Certificates from each Rating Agency, the
Servicer need not deposit funds into the Collection Account until the business
day preceding the following Distribution Date and may use such funds for its own
purposes. See "--Allocation of Collections; Deposits in Collection Account."
Other Trust Accounts
The Agreement provides that the Trustee shall have the power to
establish series accounts in accordance with the terms of Series Supplements,
including an Interest Funding Account, a Principal Funding Account or such other
account specified in the related Series Supplement, each of which series account
shall be held for the benefit of the Certificateholders of the related Series
and for the purposes set forth in the related Prospectus Supplement.
Allocation Percentages
Pursuant to the Agreement, during each Due Period the Servicer will
allocate, among the Certificateholders' Interest of all Series of Certificates
issued by the Trust (and between each Class of each Series) and the Transferor
Interest, all Yield Collections, all Principal Collections and the amount of all
Defaulted Receivables. The Servicer will make each allocation by reference to
the applicable Invested Percentage of each Series and the Transferor Percentage
in each case. The Prospectus Supplement relating to a Series will specify the
Invested Percentage with respect to Yield Collections, Principal Collections and
Defaulted Receivables during the Revolving Period, any Amortization Period and
any Accumulation Period, as applicable. In addition, for each Series of
Certificates having more than one Class, the related Prospectus Supplement will
specify the method of allocation among the classes of such Series.
The Transferor Percentage will, in each case, be equal to 100% minus
the aggregate Invested Percentage for all Series then outstanding.
Allocation of Collections; Deposits in Collection Account
Unless otherwise specified in the related Prospectus Supplement, on the
date of processing (generally the first business day after a record of a
transaction is first output in written form), the Servicer will deposit
Collections on the Receivables and payments made by the Transferor in respect of
Ineligible Receivables allocable to the Certificateholders' Interest into the
Collection Account except as described below. So long as a Servicer Default has
not occurred, TRS or an affiliate of TRS is the Servicer and the Servicer (i)
maintains a short-term credit rating (which may be an implied rating) of at
least A-1 and P-1 by the applicable Rating Agency, or (ii) obtains a guarantee
pursuant to the Agreement with respect to the Servicer's deposit and payment
obligations thereunder so long as the guarantor maintains a short-term credit
rating (which may be an implied rating) of at least A-1 and P-1 by the
applicable Rating Agency, or (iii) obtains a written notification from each
Rating Agency to the effect that such Rating Agency does not intend to downgrade
or withdraw its then current rating of any outstanding Series of Certificates
despite the Servicer's inability to satisfy the rating requirement specified in
clause (i), and for the two business day period following any reduction of
either such rating or failure to satisfy the conditions of either clause (ii) or
(iii), the Servicer need not deposit
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Collections and payments made by the Transferors in respect of Ineligible
Receivables allocable to the Certificateholders' Interest into the Collection
Account on the day indicated in the preceding sentence but may use for its own
benefit all such Collections and payments until the business day preceding the
Distribution Date, at which time the Servicer must deposit such amounts (net of
the Monthly Servicing Fee and net of any amounts to be distributed to the
Transferors) into the Collection Account. Until such Collections and payments
are deposited in the Collection Account, such amounts will not be segregated
from the assets of the Servicer, and the proceeds of any short-term investment
of such proceeds will accrue to the Servicer. Although S&P and Moody's have
assigned short-term debt ratings to the Servicer of A-1 and P-1, respectively,
while the Servicer holds Collections and payments made by the Transferors in
respect of Ineligible Receivables, the Certificateholders will be subject to
risk of loss, including risk resulting from the bankruptcy or insolvency of the
Servicer. The Servicer will pay no fee to the Trust or the Certificateholders
for use of Collections and payments made by the Transferors in respect of
Ineligible Receivables. See "--Risk Factors--Certain Legal Aspects." Collections
on the Receivables allocable to the Transferor Interest will be remitted by the
Servicer on each day to the Transferors.
Unless otherwise specified in the related Prospectus Supplement, if the
Servicer's short-term credit rating is reduced below A-1 by S&P, the Trustee,
within five business days, shall deliver to the banks maintaining accounts into
which Cardmember payments on the Accounts are deposited certain lockbox letters
executed by TRS relating to control of funds in such accounts unless other
arrangements satisfactory to S&P are put into place.
Unless otherwise specified in the Prospectus Supplement relating to a
Series of Certificates, if the Servicer is required to deposit Collections on
the Receivables for the related Due Period allocable to the Certificateholders'
Interest into the Collection Account on the date of processing: (i) during the
Revolving Period, an amount equal to the applicable Invested Percentage of
Principal Collections received each day will first be deposited into the
Collection Account as Excess Principal Collections to the extent required to be
distributed to other Series on the next succeeding Distribution Date and then
will be remitted by the Servicer to the Transferors on the date of processing
unless such Principal Collections would reduce the Transferor Amount as a
percentage of the Trust Principal Component (reduced by the Privileged Assets
Calculated Amount) below 3% (after giving effect to any new Receivables
transferred to the Trust) in which case such amount will be deposited in the
Collection Account as Undistributed Principal Collections, and an amount equal
to the applicable Invested Percentage of Yield Collections received each day
will be deposited by the Servicer into the Collection Account on the date of
processing, (ii) during the Controlled Amortization Period or the Rapid
Amortization Period, as applicable, an amount equal to the applicable Invested
Percentage of Principal Collections received each day will be deposited by the
Servicer into the Collection Account on the date of processing until such
deposits equal an amount specified in the related Prospectus Supplement;
thereafter the applicable Invested Percentage of Principal Collections received
each day will first be deposited into the Collection Account as Excess Principal
Collections to the extent required to be distributed to other Series on the next
succeeding Distribution Date, then will be remitted by the Servicer to the
Transferors on the date of processing unless such Principal Collections would
reduce the Transferor Amount as a percentage of the Trust Principal Component
(reduced as aforesaid) below 3% (after giving effect to any new Receivables
transferred to the Trust), in which case such amount will be
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deposited into the Collection Account as Undistributed Principal Collections and
the applicable Invested Percentage of Yield Collections received each day will
be deposited by the Servicer into the Collection Account on the date of
processing, and (iii) during an Early Amortization Period, all Principal
Collections received each day allocable to the Certificateholders' Interest will
be deposited by the Servicer into the Collection Account on the date of
processing until such deposits equal the amount of principal permitted to be
paid to Certificateholders on each Special Payment Date; thereafter such
Principal Collections will be deposited into the Collection Account as Excess
Principal Collections and the applicable Invested Percentage of Yield
Collections received each day will be deposited by the Servicer into the
Collection Account on the date of processing.
Principal Collections for all Series
If so specified in the related Prospectus Supplement, to the extent
that Principal Collections and certain other amounts that are allocated to the
Certificateholders' Interest of any Series are not needed to make payments or
deposits with respect to such Series, such collections will constitute Excess
Principal Collections and will be applied to cover principal payments due to or
for the benefit of Certificateholders of other Series. Any such reallocation
will not result in a reduction in the Invested Amount of the Series to which
such collections were initially allocated.
Application of Collections
Any Principal Collections not distributed to the Transferors because
such Principal Collections would reduce the Transferor Amount as a percentage of
the Trust Principal Component (reduced, for the purpose of such calculation, by
the Privileged Assets Calculated Amount) below 3% (after giving effect to any
new Receivables transferred to the Trust for the related Due Period)
("Undistributed Principal Collections") will be deposited to the Collection
Account until distributable to the holders of the Exchangeable Transferor
Certificate or, if the Controlled Accumulation Period, Early Accumulation Period
or the Early Amortization Period has commenced, on each Distribution Date all or
a portion thereof will be treated as specified in the related Prospectus
Supplement. Any proceeds from any repurchase of the Certificates occurring in
connection with a Service Transfer and the proceeds of any sale, disposition or
liquidation of Receivables following the occurrence of a Pay Out Event as a
result of the bankruptcy or insolvency of TRS or a Transferor or in connection
with the Series Termination Date will also be deposited into the Collection
Account immediately upon receipt and will be allocated as Principal Collections
or Yield Collections, as applicable.
Distributions from the Collection Account
Unless otherwise specified in the related Prospectus Supplement, the
Servicer shall apply or shall cause the Trustee to apply the funds on deposit in
the Collection Account with respect to each Distribution Date to make the
following distributions and allocations for such Distribution Date:
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(a) An amount equal to the applicable Invested Percentage of Yield
Collections deposited in the Collection Account for the Due Period immediately
preceding such Distribution Date will be allocated in the priority described in
the related Prospectus Supplement.
(b) For each Distribution Date with respect to any Accumulation Period
or any Amortization Period and thereafter, the remaining funds on deposit in the
Collection Account with respect to such Distribution Date will be allocated in
the priority described in the related Prospectus Supplement.
In the case of a Series of Certificates 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 related Prospectus Supplement.
Sharing of Excess Yield Collections Among Excess Allocation Series
Any Series may be designated as an Excess Allocation Series. Yield
Collections and certain other amounts allocable to the Certificateholders'
Interest of any Excess Allocation Series in excess of the amounts necessary to
make required payments with respect to such Series (including payments to the
provider of any Enhancement for such Series) that are payable out of Yield
Collections (any such excess being referred to herein as "Excess Finance Charge
Collections") may be applied to cover any shortfalls with respect to amounts
payable from Yield Collections allocable to any other Excess Allocation Series
pro rata based upon the amount of the shortfall, if any, with respect to each
other Excess Allocation Series; provided, however, that the sharing of Excess
Yield Collections among Excess Allocation Series will cease if the Transferors
shall deliver to the Trustee a certificate of an authorized representative to
the effect that, in the reasonable belief of the Transferors, the continued
sharing of Excess Yield Collections among Excess Allocation Series would have
adverse regulatory implications with respect to one or both of the Transferors
or TRS. Following the delivery by the Transferors of any such certificate to the
Trustee there will not be any further sharing of Excess Yield Collections among
such Excess Allocation Series. In all cases, any Excess Yield Collections
remaining after covering shortfalls with respect to all outstanding Excess
Allocation Series will be paid to the holders of the Exchangeable Transferor
Certificate. While any Series may be designated as an Excess Allocation Series,
there can be no assurance that for any Excess Allocation Series (a) any other
Series will be designated as an Excess Allocation Series, (b) for any Due Period
there will be any Excess Yield Collections from any other Excess Allocation
Series, (c) any agreement relating to the Enhancement for another Excess
Allocation Series will not be amended to increase payments to the providers of
such Enhancement, thereby decreasing the amount of Excess Yield Collections
available from such other Series or (d) the Transferors will not at any time
deliver a certificate as described above. While the Transferors believes that,
based upon applicable rules and regulations as currently in effect, the sharing
of Excess Yield Collections among Excess Allocation Series will not have adverse
regulatory implications for either of them or TRS, there can be no assurance
that this will continue to be true in the future.
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Special Funding Account
If on any date the Transferor Amount, expressed a percentage of the
Trust Principal Component (reduced by the Privileged Assets Calculated Amount),
is not maintained at the Minimum Transferor Percentage, the Servicer may elect
not to distribute to the holders of the Transferor Certificates any collections
of Excess Principal Collections allocable to a Series or a Group that otherwise
would be distributed to such holders, but may deposit such funds in the Special
Funding Account. Funds on deposit in the Special Funding Account may be
withdrawn and paid to the holders of the Transferor Certificates or pay amounts
to other Series on any Distribution Date to the extent that, after giving effect
to such payment, the Transferor Amount expressed as a percentage of the Trust
Principal Component (reduced by the Privileged Assets Calculated Amount) exceeds
the Minimum Transferor Percentage on such date; provided, however, that if a
Controlled Accumulation Period, Early Accumulation Period, Controlled
Amortization Period, Rapid Amortization Period or Early Amortization Period is
in effect for any Series, any funds on deposit in the Special Funding Account
will be released and treated as Principal Collections to the extent needed to
cover principal payments due to or for the benefit of such Series, but only to
the extent that doing so would not cause the Transferor Amount, expressed as a
percentage of the Trust Principal Component (reduced by the Privileged Assets
Calculated Amount), to be less than the Minimum Transferor Percentage.
Funds on deposit in the Special Funding Account will be invested by the
Trustee, at the direction of the Servicer, in Eligible Investments. Any earnings
(net of losses and investment expenses) earned on amounts on deposit in the
Special Funding Account during any Due Period will be withdrawn from the Special
Funding Account and treated as Yield Collections for such Due Period.
Defaulted Receivables; Recoveries; Adjustments
"Defaulted Receivables" for any Due Period are Receivables which were
charged off as uncollectible in such Due Period. Unless otherwise specified in
the related Prospectus Supplement, Receivables in a Designated Account will be
considered charged off for the purposes of the Agreement on the earlier of (i)
the cycle billing date next following the date when such Designated Account
becomes 360 days past due from the date of the billing statement and (ii) the
cycle billing date on which such Designated Account is charged off in accordance
with the customary and usual servicing procedures of the Servicer. The amount of
Defaulted Receivables for any Due Period will be an amount (not less than zero)
equal to the product of one minus the Yield Factor and an amount equal to (a)
the amount of the Receivables that were charged off in such Due Period less (b)
the amount of Recoveries received by the Servicer in such Due Period and less
(c) the full amount of any Defaulted Receivables as to which the Transferors or
the Servicer are obligated to accept reassignment for such Due Period unless
certain events of bankruptcy, insolvency or receivership have occurred with
respect to one of the Transferors or the Servicer. Unless otherwise specified in
the related Prospectus Supplement, a portion of all Defaulted Receivables (the
"Investor Default Amount") will be allocated to the Certificateholders' Interest
for each Distribution Date in an amount equal to the product of (a) the
applicable Invested Percentage as specified in the related Prospectus
Supplement, during the
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immediately preceding Due Period and (b) the amount of Defaulted Receivables for
such Due Period.
If the Servicer makes a downward adjustment of the amount of any
Receivable because of a rebate, refund, unauthorized charge, billing effort,
nonpayment of a Privileged Assets billed amount or certain other noncash items,
or if the Servicer otherwise adjusts downward the amount of any Receivable
without receiving collections therefor or charging off such amount as
uncollectible, or any Receivable is discovered as having been created through a
fraudulent or counterfeit action (each, an "Adjustment"), the Trust Principal
Component will be reduced by the product of (i) one minus the Yield Factor and
(ii) the amount of such Adjustment. To the extent that such reduction in the
Trust Principal Component would cause the Transferor Amount, expressed as a
percentage of the Trust Principal Component (reduced, for the purpose of this
calculation, by the Privileged Assets Calculated Amount), to be less than 3%,
the Transferors shall deposit to the Collection Account an amount (the "Transfer
Deposit Amount") sufficient to cause the Transferor Amount as a percentage of
the Trust Principal Component (reduced as aforesaid) to be at least equal to 3%.
Any such deposit into the Collection Account shall be deemed a Principal
Collection.
As one of the features of Cardmembership, a Privileged Assets program
(the "Privileged Assets program") is offered, under which Cardmembers can make
voluntary contributions to an annuity program with a TRS insurance affiliate.
Enrollees can choose a monthly contribution amount not to exceed $5,000 per
month, which amount is billed to their Card account. Payment of such billed
contribution amounts is voluntary, and therefore such amounts do not constitute
Receivables, although they are treated under the Agreement in the same manner as
Receivables when they are billed to Cardmembers, in the same manner as
Collections when they are paid by Cardmembers and in the same manner as an
Adjustment if they are not paid within 60 days of first being billed. Because
payment of Privileged Assets billed amounts is voluntary by the Cardmember, a
portion of the Privileged Assets billed amounts estimated to have occurred with
respect to the Designated Accounts in a Due Period is excluded from the
calculation of Trust Principal Component for the purposes of determining whether
the Transferor is required to add Accounts or to deposit any Transfer Deposit
Amount, whether a Pay Out Event has occurred and whether the Transferor is
permitted to remove Accounts. Such excluded portion (the "Privileged Assets
Calculated Amount") will be determined monthly as the product of (a) one minus
the Yield Factor, (b) the Privileged Assets billed amounts estimated to have
occurred with respect to the Designated Accounts in the preceding Due Period and
(c) a statistical formula applied to the lowest monthly payment experience of
Privileged Assets billed amounts for the previous twelve months. Pursuant to the
Agreement, if the estimated Privileged Assets billed amounts in the Trust
increase beyond a specified level or if the payment rate of the Privileged
Assets billed amounts in the entire Portfolio falls below a specified level, the
Transferors are required to remove, within 120 days of such occurrence, a
portion of the Accounts of Cardmembers who have enrolled in the Privileged
Assets program. Unless otherwise provided in the related Prospectus Supplement,
Privileged Assets billed amounts are included in the receivable balances and
charge volume information for the Portfolio and in the Receivable balances for
the Designated Accounts.
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Investor Charge-Offs
With respect to each Series of Certificates, if, on any Distribution
Date, the Investor Default Amount, if any, for such Distribution Date exceeds
the amount of Yield Collections which are allocated and available to fund such
amount, then the Invested Amount for such Series shall be reduced by the
aggregate amount of such excess, but not more than the Investor Default Amount
for such Distribution Date (an "Investor Charge-Off"). The Invested Amount for
such Series will thereafter be increased (but not in excess of the unpaid
principal balance of the Certificates of such Series) on any Distribution Date
by the amount of Yield Collections allocated and available for that purpose.
In the case of a Series of Certificates having more than one Class, the
related Prospectus Supplement will describe the manner and priority of
allocating Investor Charge-Offs and reimbursements thereof among the Invested
Amounts of the Classes of such Series.
Final Payment of Principal; Termination of Trust
With respect to each Series, the Certificates will be subject to
optional repurchase by the Transferors on any Distribution Date on or after
which the Invested Amount is reduced to an amount less than or equal to 10% (or
such other amount specified in the related Prospectus Supplement) of the initial
Invested Amount, unless certain events of bankruptcy, insolvency or receivership
have occurred with respect to a Transferor. Unless otherwise specified in the
related Prospectus Supplement, the repurchase price will be equal to the total
Invested Amount (less the amount, if any, on deposit in any Principal Funding
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
Certificates through the day preceding the Distribution Date with respect to
which the repurchase occurs.
Each Prospectus Supplement will specify the final date on which
principal and interest on the Certificates will be scheduled to be distributed
(the "Series Termination Date"), subject to prior termination as provided above.
In the event that the Invested Amount of the Certificates is greater than zero
on the Series Termination Date, the Trustee will sell or cause to be sold, and
apply the proceeds to the extent necessary to pay such remaining amounts to all
Certificateholders pro rata as final payment of the Certificates, an amount of
Receivables up to 110% of the Invested Amount of the Certificates at the close
of business on such date, but not more than the total amount of Receivables
allocable to the Certificates, unless otherwise specified in the related
Prospectus Supplement. The proceeds of any such sale will be treated as
collections on the Receivables and applied as provided above in "--Application
of Collections."
Unless the Transferors instruct the Trustee otherwise, the Trust will
only terminate on the earlier to occur of: (a) the day following the day on
which the aggregate invested amounts of all Series issued by the Trust is zero
or (b) the date specified in the related Prospectus Supplement (the "Final
Termination Date"). Upon the termination of the Trust and the surrender of the
Exchangeable Transferor Certificate, the Trustee shall convey to the Transferors
all right, title and interest of the Trust in and to the Receivables and other
funds of the Trust (other than amounts in the accounts maintained by the Trust
for the final payment of principal and interest to Certificateholders).
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Pay Out Events
Unless otherwise specified in the related Prospectus Supplement, the
Revolving Period for a Series will continue through the end of the date
specified in the related Prospectus Supplement, unless a Pay Out Event occurs.
An Early Amortization or Early Accumulation Period will commence on the day on
which a Pay Out Event occurs or is deemed to occur. A "Pay Out Event" with
respect to all Series issued by any Trust refers to any of the following events,
unless otherwise specified in the related Prospectus Supplement:
(i) certain events of bankruptcy or insolvency relating to
either Transferor or TRS;
(ii) the Trust becomes an "investment company" within the
meaning of the Investment Company Act of 1940, as amended; or
(iii) after any applicable grace period, a failure by the
Transferors to convey Receivables in Additional Accounts to the Trust
when required by the Agreement.
In addition, a Pay Out Event may occur with respect to any Series upon
the occurrence of any other event specified as a Pay Out Event in the related
Prospectus Supplement. The Early Amortization or Early Accumulation Period will
commence on the day on which an a Pay Out Event occurs or is deemed to occur.
Monthly distributions of principal to the Certificateholders or deposits of
principal to the Principal Funding Account, as specified in the related
Prospectus Supplement, will begin (if they have not already) on the first
Distribution Date following the Due Period in which a Pay Out Event occurs or is
deemed to have occurred. Thus, if an Early Amortization Period commences,
Certificateholders may begin receiving distributions of principal earlier than
they otherwise would have, which may shorten the final maturity of the
Certificates. If the only Pay Out Event to occur is either the insolvency of a
Transferor or TRS or the appointment of a receiver or bankruptcy trustee for the
Transferor or TRS, the receiver or bankruptcy trustee for such Transferor or TRS
may have the power to delay or prevent commencement of the Early Amortization
Period and Early Accumulation Period.
In addition to the consequences of a Pay Out Event discussed above, if
TRS (or another seller specified in the related Prospectus Supplement) or a
Transferor voluntarily files a bankruptcy petition or goes into liquidation or
any person is appointed a receiver or bankruptcy trustee of TRS (or such other
seller) or a Transferor, on the day of such appointment TRS (or such other
seller) will immediately cease to sell Receivables to RFC under the Receivable
Purchase Agreement and promptly give notice to the Trustee of such appointment.
If a Transferor voluntarily files for bankruptcy or a receiver or bankruptcy
trustee is appointed for a Transferor, on the day of such appointment such
Transferor will immediately cease to transfer Receivables to the Trust and such
Transferor will promptly give notice to the Trustee of such appointment. Within
15 days, the Trustee will publish a notice of the liquidation or the appointment
stating that the Trustee intends to sell, dispose of or otherwise liquidate the
Receivables of the Trust in a commercially reasonable manner and to the best of
its ability. Unless otherwise instructed within a specified period by the
Certificateholders (other than a Transferor or TRS , as holder of the Class B
Certificates of any Series, if the bankruptcy of such Transferor or TRS, as
applicable, resulted in such Pay Out Event) representing undivided
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interests aggregating more than 50% of the aggregate principal amount of each
Series issued by the Trust (or, if such Series has more than one Class, of each
Class thereof) and, with respect to any Series, any other person specified in
the related Prospectus Supplement, the Trustee will sell, dispose of or
otherwise liquidate the Receivables of the Trust (other than the Receivables
allocable, in accordance with the Agreement, to any outstanding Series that
voted to continue the Trust) in accordance with the Agreement in a commercially
reasonable manner and on commercially reasonable terms. The proceeds from the
sale, disposition or liquidation of the Receivables will be treated as
collections on the Receivables and such proceeds allocable to the
Certificateholders will be distributed as specified above in "--Distributions
from the Collection Account" and in the related Prospectus Supplement.
Indemnification
Unless otherwise specified in the related Prospectus Supplement, the
Agreement provides that the Servicer indemnify the Trust, for the benefit of
Certificateholders, and the Trustee, including its officers, directors and
employees, from and against any loss, liability, expense, damage or injury
arising out of or relating to any claims, actions or proceedings brought or
asserted by third parties which are suffered or sustained by reason of any acts
or omissions of the Servicer pursuant to the Agreement and any Series
Supplement; provided, however, that the Servicer shall not indemnify the Trust,
the Trustee or the Certificateholders for any liabilities, costs or expenses
with respect to U.S. Federal, state or local income or franchise taxes required
to be paid by the Trust or the Certificateholders.
Under the Agreement, the Transferors indemnify injured parties for the
entire amount of any losses, claims, damages or liabilities arising out of or
based on the Agreement or the actions of the Servicer taken pursuant to the
Agreement as though the Agreement created a partnership under the Uniform
Partnership Act. The Transferors will also indemnify each Certificateholder for
any such losses, claims, damages or liabilities (other than those incurred by a
Certificateholder in the capacity of an investor in the certificates) except to
the extent that they arise from any action by any Certificateholder. In the
event of a Service Transfer, the successor Servicer will indemnify each
Transferor for any losses, claims, damages and liabilities of such Transferor as
described in this paragraph arising from the actions or omissions of such
successor Servicer.
The Agreement provides that none of the Transferors, the Servicer, TRS
or any of their directors, officers, employees or agents will be under any other
liability to the Trust, the Trustee, the Certificateholders, any Enhancement
provider or any other person for any action taken, or for refraining from taking
any action, in good faith pursuant to the Agreement. However, none of the
Transferors, the Servicer, TRS or any of their 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 any such
person in the performance of their duties or by reason of reckless disregard of
their obligations and duties thereunder.
In addition, the 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 Agreement. The Servicer
may, in its sole discretion, undertake any such legal action which it may deem
necessary or desirable for the benefit of Certificateholders
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with respect to the Agreement and the rights and duties of the parties thereto
and the interest of the Certificateholders thereunder.
Collection and Other Servicing Procedures
Unless otherwise specified in the related Prospectus Supplement,
pursuant to the Agreement, the Servicer, whether acting itself or through one or
more subservicers, will be responsible for servicing, collecting, enforcing and
administering the Receivables in accordance with the policies and procedures and
the degree of skill and care applied or exercised with respect to charge card
receivables owned by the Servicer or any subservicer.
TRS (or any other entity specified in the related Prospectus
Supplement), as Servicer, will be permitted under the Agreement to delegate its
servicing obligations. Notwithstanding any such delegation, TRS, as Servicer,
will continue to be liable for all of its obligations as Servicer under the
Agreement.
Servicing activities performed by the Servicer with respect to the
Designated Accounts include collecting and recording payments, communicating
with Cardmembers, investigating payment delinquencies, providing billing records
to Cardmembers and maintaining internal records. Managerial and custodial
services performed by the Servicer on behalf of the Trust include providing
assistance in any inspections of the documents and records relating to the
Designated Accounts and Receivables by the Trustee pursuant to the Agreement,
maintaining the agreements, documents and files relating to the Designated
Accounts and Receivables as custodian for the Trust and providing related data
processing and reporting services for Certificateholders and on behalf of the
Trustee.
Servicer Covenants
In the Agreement, the Servicer covenants to the Certificateholders and
the Trustee as to each Receivable and related Designated Account that: (i) it
will duly fulfill all obligations on its part to be fulfilled under or in
connection with the Receivable or Designated Account, and will maintain in
effect all qualifications required in order to service the Receivable or
Designated Account and will comply with all requirements of law in connection
with servicing the Receivables and the Designated Accounts, the failure to
comply with which would have a material adverse effect on Certificateholders;
(ii) it will not permit any rescission or cancellation of the Receivable, except
as ordered by a court of competent jurisdiction or except in accordance with the
Servicer's usual and customary servicing practices; and (iii) it will do nothing
to impair the rights of the Certificateholders in the Receivables and will not
reschedule, revise or defer payments due on the Receivables, except in
accordance with the Servicer's usual and customary servicing practices.
Under the terms of the Agreement, the Servicer will be obligated to
accept the transfer of any Receivable if it discovers, or receives written
notice from the Trustee, that (i) any covenant of the Servicer set forth above
has not been complied with respect to such Receivable or (ii) the Servicer has
not complied in all material respects with all requirements of law applicable to
the Receivables or Designated Accounts, and in either case such noncompliance
has not been cured within 60 days thereafter and the Receivable has been charged
off as uncollectible or the
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proceeds of the Receivables are not available to the Trust. Such assignment and
transfer will be made when the Servicer deposits an amount equal to the amount
of such Receivable in the Collection Account on the business day preceding the
Distribution Date following the Due Period during which such obligation arises,
provided that, if the Servicer is then required to make deposits to the
Collection Account more frequently than monthly, the Servicer shall make such
deposits not later than two business days after such obligation arises. The
amount of such deposit shall be deemed a payment in respect of the related
Receivable and will be treated under the Agreement in the same manner as are
payments received by the Servicer from Cardmembers under the Designated
Accounts. Any amounts so paid by the Servicer shall be allocated in respect of
Yield Collections and Principal Collections as provided in the Agreement. This
reassignment or transfer and assignment to the Servicer constitutes the sole
remedy available to the Certificateholders if such covenant or warranty of the
Servicer is not satisfied and the Trust's interest in any such reassigned
Receivables shall be automatically assigned to the Servicer.
Servicing Compensation and Payment of Expenses
Unless otherwise specified in the related Prospectus Supplement, for
each Series of Certificates, the Servicer's compensation for its servicing
activities is a monthly servicing fee (the "Servicing Fee") payable at the times
and in the amounts specified in the related Prospectus Supplement. The Servicing
Fee will be allocated among the Transferor Interest and the Certificateholders
of all Series. The portion of the Servicing Fee allocable to the
Certificateholders' Interest on each Distribution Date (the "Monthly Servicing
Fee") or such other specified periodic basis is equal to one-twelfth of the
product of the applicable Servicing Fee and the Invested Amount as of the last
day of the second preceding Due Period. The remainder of the Servicing Fee,
which will be allocable to the Transferor Interest, will be paid directly by the
holder of the Exchangeable Transferor Certificate from Yield Collections
allocated to the Transferor Interest and neither the Trust nor the
Certificateholders will have any obligations to pay such portion of the
Servicing Fee. The Monthly Servicing Fee will be paid with respect to each Due
Period from the Collection Account (unless such amount has been netted against
deposits to the Collection Account) as described in the related Prospectus
Supplement.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Designated Accounts and the
Receivables including, without limitation, expenses related to enforcement of
the Receivables, payment of fees and disbursements of the Trustee and
independent accountant and all other fees and expenses which are not expressly
stated in the Agreement to be payable by the Trust or the Certificateholders
other than Federal, state and local income and franchise taxes, if any, of the
Trust.
Resignation and Certain Other Matters Regarding the Servicer
With respect to each Series of Certificates, the Servicer may not
resign from its obligations and duties under the Agreement, except, among other
reasons, (i) upon determination that such duties are impermissible under
applicable law, regulation or order or (ii) upon the satisfaction of the
following conditions: (a) the assumption of the duties and obligations of the
Servicer under the Agreement by a proposed successor Servicer, (b) the written
confirmation by the applicable Rating Agency that the rating of any related
Series of Certificates then outstanding
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will not, solely as a result of such assumption, be reduced or withdrawn, (c)
the delivery to the Trustee of an opinion of counsel to the effect that such
assumption will not materially adversely affect the treatment of any related
Series of Certificates then outstanding, after such assumption, as debt for
Federal income tax purposes and that such assumption will not have any material
adverse impact on the Federal income taxation of the Trust or any related
Certificateholder or Certificate Owner, and (d) the proposed successor Servicer
has a net worth of not less than $50,000,000 and its regular business includes
the servicing of charge card or revolving credit receivables. No such
resignation described in clause (i) above will become effective until the
Trustee or a successor to the Servicer has assumed the Servicer's
responsibilities and obligations under the Agreement.
Any person into which, in accordance with the Agreement, any of the
Transferor or the Servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which any of the Transferor or the Servicer
is a party, or any person succeeding to the business of any of the Transferor or
the Servicer will be the successor to the Transferor or the Servicer, as the
case may be, under the Agreement.
Servicer Default
Unless otherwise specified in the related Prospectus Supplement, in the
event of any Servicer Default (as defined below), either the Trustee or
Certificateholders evidencing undivided interests aggregating more than 50% of
the aggregate principal amount of all Series, by written notice to the Servicer
(and to the Trustee, if given by the Certificateholders), may terminate all of
the rights and obligations of the Servicer, in its capacity as servicer under
the Agreement, with respect to all of the Receivables held by the Trust and the
proceeds thereof, and the Trustee shall thereafter appoint a new Servicer (a
"Service Transfer"). The rights and interests of the Transferors under the
Agreement in the Transferor Interest will not be affected by any Service
Transfer. The Transferors shall have the right, which shall be exercisable at
any time within 60 days of the giving of the notice of termination as described
above, to nominate to the Trustee the name of a potential successor Servicer.
The Trustee shall as promptly as possible appoint the entity nominated by the
Transferors if such entity meets certain eligibility criteria set forth in the
Agreement. If the Transferors do not nominate an entity to be successor Servicer
within such 60-day period, the Trustee shall as promptly as possible appoint a
successor Servicer, and if no successor Servicer has been appointed by the
Trustee 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
Agreement will pass to, and be vested in, the Trustee. Prior to any Service
Transfer, the Trustee will seek to obtain bids from potential Servicers meeting
certain eligibility requirements set forth in the Agreement to serve as a
successor Servicer for servicing compensation not in excess of the Servicing
Fee. If the 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 related Servicer Default, then the Trustee will offer to the
Transferors the right to accept the retransfer of all of the Receivables.
A "Servicer Default" refers to any of the following events:
(i) failure by the Servicer to make any payment, transfer or
deposit, or to give instructions to the Trustee to make any withdrawal,
on the date the
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Servicer is required to do so under the Agreement or any Series
Supplement thereto (upon expiration of a five business day grace
period), provided, however, that any such failure caused by a
nonwillful act of the Servicer shall not constitute a Servicer Default
if the Servicer promptly remedies such failure within five business
days after receiving notice thereof;
(ii) failure on the part of the Servicer duly to observe or
perform any other covenants or agreements of the Servicer in the
Agreement or any Series Supplement thereto which has a material adverse
effect on the Certificateholders of the related Series, which continues
unremedied for a period of 60 days after written notice and which
continues to materially adversely affect the rights of the
Certificateholders of any related Series then outstanding for such
period, or the Servicer assigns its duties under the Agreement, except
as specifically permitted thereunder;
(iii) any representation, warranty or certification made by
the Servicer in the Agreement or any Series Supplement thereto or in
any certificate delivered pursuant to the Agreement or any Series
Supplement thereto proves to have been incorrect when made, which has a
material adverse effect on the rights of the Certificateholders of the
related Series, and which material adverse effect continues for the
Certificateholders for a period of 60 days after written notice and
which continues to materially adversely affect the rights of the
Certificateholders of any related Series then outstanding for such
period; or
(iv) the occurrence of certain events of bankruptcy or
insolvency relating to the Servicer.
Unless otherwise stated in the related Prospectus Supplement,
notwithstanding the foregoing, a delay in or failure of performance referred to
under clause (i) above for a period of 10 business days after the applicable
grace period or a delay in or failure of performance referred to under clauses
(ii) or (iii) for a period of 60 business days after the applicable grace period
shall not constitute a Servicer Default, if such delay or failure could not have
been 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 shall not be relieved from using
its best efforts to perform its obligations in a timely manner in accordance
with the terms of the Agreement or any Series Supplement thereto and the
Servicer shall provide the Trustee, the issuer of any irrevocable letter of
credit or provider of other form of Enhancement, if any, applicable to any
related Series, the Transferor and the Certificateholders prompt notice of such
failure or delay by it, together with a description of its efforts to so perform
its obligations. The Servicer will immediately notify the Trustee in writing of
an Servicer Default.
Reports to Certificateholders
Unless otherwise specified in the related Prospectus Supplement,
prior to each Distribution Date, the Servicer will forward to the Trustee a
statement (the "Monthly Servicer Report") prepared by the Servicer setting
forth certain information with respect to the Trust and
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the Certificates, including: (a) the aggregate amount of Collections, the
aggregate amount of Yield Collections and the aggregate amount of Principal
Collections processed during the immediately preceding Due Period; (b) the
applicable Invested Percentages for such Due Period; (c) the total amount to be
deposited in the Principal Funding Account, if applicable; (d) the aggregate
outstanding balance of the Designated Accounts which were delinquent by,
respectively, 30 days, 60 days, 90 days and 120 days or more as of the cycle
billing date for each such Designated Account occurring in the Due Period
immediately preceding such Distribution Date; (e) the Investor Default Amount
for such Distribution Date; (f) the amount of Investor Charge-Offs and the
amount of reimbursements thereof for such Distribution Date; (g) the amount of
the Monthly Servicing Fee for such Distribution Date; (h) the existing Deficit
Controlled Amortization Amount or Deficit Controlled Accumulation Amount, if
applicable; (i) the aggregate amount of Receivables in the Trust at the close of
business on the last day of the Due Period preceding such Distribution Date; (j)
the Invested Amount at the close of business on the last day of the Due Period
immediately preceding such Distribution Date; (k) the amount available under any
Enhancement, if any, at the close of business on such Distribution Date; and (1)
whether a Pay Out Event shall have occurred. The Trustee will make such
statement available to the Certificateholders or Certificate Owners upon
request. In the case of a Series of Certificates having more than one Class, the
statements forwarded to Certificateholders will provide information as to each
Class of Certificates, as appropriate.
On each Interest Payment Date (including the Expected Final Payment
Date) or Special Payment Date, as the case may be, the Paying Agent, on behalf
of the Trustee, will forward to each Certificateholder of record a statement
(the "Payment Date Statement") prepared by the Servicer setting forth the
information with respect to the Certificates set forth in the Monthly Servicer
Report supplied to the Trustee as described in the preceding paragraph since the
immediately preceding Interest Payment Date or Special Payment Date, as the case
may be, and the following additional information (which, in the case of (a), (b)
and (c) below, will be stated on the basis of an original principal amount of
$1,000 per Certificate): (a) the total amount distributed; (b) the amount of
such distribution allocable to principal on the Certificates; (c) the amount of
such distribution allocable to interest on the Certificates; (d) the amount, if
any, by which the principal balance of the Certificates exceeds the Invested
Amount as of the Record Date with respect to such Interest Payment Date or
Special Payment Date, as the case may be; and (e) the "series factor" as of the
end of the Record Date with respect to such Interest Payment Date or Special
Payment Date (consisting of an eight-digit decimal expressing the Invested
Amount as of such Record Date (determined after taking into account any increase
or decrease in the Invested Amount which will occur on the following
Distribution Date) as a proportion of the Initial Invested Amount).
The fiscal year of the Trust ends on December 31 in each year. On or
before January 31 of each calendar year the Paying Agent, on behalf of the
Trustee, will furnish or cause to be furnished to each person who at any time
during the preceding calendar year was a Certificateholder of record (or, if so
provided in applicable Treasury regulations, made available to Certificate
Owners) a statement prepared by the Servicer containing the information required
to be provided by an issuer of indebtedness under the Code for such calendar
year or the applicable portion thereof during which such person was a
Certificateholder, together with such other customary information as the
Servicer deems necessary or desirable to enable the Certificateholders to
prepare their tax returns. See "Federal Income Tax Consequences."
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Evidence as to Compliance
The Agreement provides that on or before March 31 of each calendar year
(or such other date specified in the related Prospectus Supplement), the
Servicer will cause a firm of nationally recognized independent accountants to
furnish a report to the effect that such firm has applied procedures, as agreed
upon between such firm and the Servicer, to certain documents and records
relating to the servicing of the Receivables and that, based upon such
agreed-upon procedures, no matters came to their attention that caused them to
believe that such servicing was not conducted in compliance with certain
applicable terms and conditions set forth in the Agreement except for such
exceptions or errors as shall be set forth in such statement. In addition, on or
before March 31 of each calendar year (or such other date specified in the
related Prospectus Supplement), such accountants will compare the mathematical
calculations of the amounts contained in the Monthly Servicer Reports and other
certificates delivered during such year with the computer reports of the
Servicer and statements of any agents engaged by the Servicer to perform
servicing activities which were the source of such amounts and deliver a
certificate to the Trustee stating that such amounts are in agreement except for
such exceptions which shall be set forth in such report.
The Agreement provides for delivery to the Trustee on or before March
31 of each calendar year of a statement signed by an officer of the Servicer to
the effect that the Servicer has, or has caused to be, fully performed its
obligations in all material respects under the Agreement throughout the
preceding year or, if there has been a default in the performance of any such
obligation, specifying the nature and status of the default.
Copies of all statements, certificates and reports furnished to the
Trustee may be obtained by a request in writing delivered to the Trustee.
Amendments
Unless otherwise specified in the related Prospectus Supplement, the
Agreement and the related Series Supplement may be amended by the Transferors,
the Servicer and the Trustee, without Certificateholder consent to cure any
ambiguity, to correct or supplement any provision therein which may be
inconsistent with any other provision therein, to add, modify or eliminate such
provisions as may be necessary or advisable in order to enable all or a portion
of the Trust (i) to qualify as, and to permit an election to be made to cause
the Trust to be treated as, a "financial asset securitization investment trust"
as described in the provisions of Section 860L of the Internal Revenue Code and
(ii) to avoid the imposition of state or local income or franchise taxes imposed
on the Trust's property or its income, and to add any other provisions with
respect to matters or questions arising under the Agreement or the related
Series Supplement which are not inconsistent with the provisions of the
Agreement or such Series Supplement. The amendments which the Transferors may
make without the consent of Certificateholders pursuant to the preceding
sentence may include, without limitation, the addition or deletion of a sale of
Receivables and termination of the Trust upon the occurrence of an insolvency of
either of the Transferors. In addition, the Agreement and the related Series
Supplement may be amended from time to time by the Transferors, the Servicer and
the Trustee, without Certificateholder consent, for the purpose of adding any
provisions to, changing in any manner or eliminating any of the provisions of
the Agreement or the related Series Supplement or of modifying in any
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manner the rights of Certificateholders of any Series then issued and
outstanding thereunder provided that (i) the Servicer must provide an opinion of
counsel to the Trustee to the effect that such amendment will not materially and
adversely affect the interests of the Certificateholders of any outstanding
Series thereunder (or 100% of the Class of Certificateholders so affected shall
have consented), (ii) such amendment shall not, as evidenced by an opinion of
counsel, cause the Trust to be characterized for Federal income tax purposes as
an association taxable as a corporation or otherwise have any material adverse
impact on the Federal income taxation of any outstanding Series of Certificates
thereunder or any Certificate Owner and (iii) the applicable Rating Agency shall
confirm that such amendment shall not cause a reduction or withdrawal of the
rating of any outstanding Series of Certificates thereunder. Any Series
Supplement and any amendments regarding the addition or removal of Receivables
from the Trust will not require Certificateholder consent under the provisions
of the Agreement or any Series Supplement.
Each Agreement and the related Series Supplement may also be amended by
the Transferors, the Servicer and the Trustee with the consent of the holders of
Certificates evidencing undivided interests aggregating not less than 66% 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 Agreement or the related Series Supplement or of modifying in any manner the
rights of Certificateholders of any Series then issued thereunder and
outstanding. No such amendment, however, may (i) reduce in any manner the amount
of, or delay the timing of, distributions required to be made on such Series,
(ii) change the definition or the manner of calculating the invested amount,
invested percentage, the applicable available amount under any Enhancement or
the investor default amount of such Series, or (iii) 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
Certificateholders of all Series adversely affected.
Promptly following the execution of any amendment to the Agreement or a
Series Supplement, the Trustee will furnish written notice of the substance of
such amendment to each Certificateholder of all Series.
List of Certificateholders
With respect to each Series of Certificates, upon written request of
three or more Certificateholders of record or any Certificateholder or group
of Certificateholders of record representing undivided interests in the Trust
aggregating not less than 10% (or such other percentage specified in the
related Prospectus Supplement) of the Invested Amount, the Trustee will afford
such Certificateholders access during business hours to the current list of
Certificateholders of the Trust for purposes of communicating with other
Certificateholders with respect to their rights under the Agreement.
Unless otherwise specified in the related Prospectus Supplement, no
Agreement generally will provide for any annual or other meetings of
Certificateholders.
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The Trustee
The Trustee is The Bank of New York. Any Transferor, the Servicer and
their respective affiliates may from time to time enter into normal banking and
trustee relationships with the Trustee and its affiliates. The Trustee, the
Transferors, the Servicer and any of their respective affiliates may hold
Certificates in their own names; however, any Certificates so held shall not be
entitled to participate in any decisions made or instructions given to the
Trustee by the Certificateholders as a group.
For purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee will have the power to appoint a co-trustee or
separate trustees of all or any part of the Trust. In the event of such an
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee will be conferred or imposed upon and exercised or performed by
the Trustee and such separate trustee or co-trustee jointly, or, in any
jurisdiction in which the Trustee will be incompetent or unqualified to perform
certain acts, singly upon such separate trustee or co-trustee who shall exercise
and perform such rights, powers, duties and obligations solely at the direction
of the Trustee.
The Trustee may resign at any time, in which event a successor Trustee
will be appointed as provided in the Agreement. The Servicer may also remove the
Trustee, if the Trustee ceases to be eligible to continue as such under the
Agreement or if the Trustee becomes insolvent. In such circumstances, a
successor Trustee will be appointed as provided in the Agreement. Any
resignation or removal of the Trustee and appointment of a successor Trustee
does not become effective until acceptance of the appointment by the successor
Trustee.
ENHANCEMENT
General
For any Series, Enhancement may be provided with respect to one or more
Classes thereof. Enhancement may be in the form of a letter of credit, a
maturity guaranty facility, a cash collateral account, a cash collateral
guaranty, a collateral interest, a tax protection agreement, an interest rate
swap, an interest rate cap, a surety bond, a guaranteed rate agreement, an
insurance policy, a spread account, a reserve account, a subordinated interest
in the Receivables or certain cash flows in respect of the Receivables or other
contract or agreement for the benefit of Certificateholders of such Series or
Class. Enhancement may also take the form of subordination of one or more
Classes of a Series to any other Class or Classes of a Series or a cross-support
feature which requires collections on Receivables of one Series to be paid as
principal and/or interest with respect to another Series. If so specified in the
related Prospectus Supplement, any form of Enhancement may be structured so as
to be drawn upon by more than one Class to the extent described therein.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Enhancement will not provide protection against all risks of loss
and will not guarantee repayment of the entire principal balance of the
Certificates and interest thereon. If losses occur which exceed the amount
covered by the Enhancement or which are not covered by the Enhancement,
Certificateholders will bear their allocable share of deficiencies.
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If Enhancement is provided with respect to a Series, the related
Prospectus Supplement will include a description of (a) the amount payable under
such Enhancement, (b) any conditions to payment thereunder not otherwise
described herein, (c) the conditions (if any) under which the amount payable
under such Enhancement may be reduced and under which such Enhancement may be
terminated or replaced and (d) any material provision of any agreement relating
to such Enhancement. Additionally, the related Prospectus Supplement may set
forth certain information with respect to any Enhancement Provider, including
(i) a brief description of its principal business activities, (ii) its principal
place of business, place of incorporation and the jurisdiction under such it is
chartered or licensed to do business, (iii) if applicable, the identity of
regulatory agencies which exercise primary jurisdiction over the conduct of its
business and (iv) 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 related
Prospectus Supplement, Enhancement with respect to a Series may be available to
pay principal of the Certificates of such Series following the occurrence of
certain Pay Out Events with respect to such Series. In such event, the Enhancer
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 related Prospectus Supplement, one or more
Classes of Subordinated Certificates of any Series will be subordinated as
described in the related Prospectus Supplement to the extent necessary to fund
payments with respect to the Senior Certificates. The rights of the holders of
any such Subordinated Certificates to receive distributions of principal and/or
interest on any Distribution Date for such Series will be subordinate in right
and priority to the rights of the holders of Senior Certificates, but only to
the extent set forth in the related Prospectus Supplement. If so specified in
the related Prospectus Supplement, subordination may apply only in the event of
certain types of losses not covered by another Enhancement. The related
Prospectus Supplement will also set forth information concerning the amount of
subordination of a Class or Classes of Subordinated Certificates 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 such amounts available from payments that would otherwise
be made to holders of such Subordinated Certificates will be distributed to
holders of Senior Certificates. 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 related Prospectus Supplement will
specify the manner and conditions for applying such a cross-support feature.
Letter of Credit
If so specified in the related 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 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 related Prospectus Supplement.
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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 related Prospectus
Supplement of the initial Invested Amount 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 related Prospectus
Supplement.
Cash Collateral Guaranty or Account
If so specified in the related 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 related Prospectus Supplement.
The related 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 related Prospectus Supplement, support for a
Series or one or more Classes thereof will be provided initially by an undivided
interest in the Trust (the "Collateral Interest") in an amount initially equal
to a percentage of the Certificates of such Series as 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 related Prospectus Supplement which will be
increased (i) to the extent the Transferors elect, subject to certain conditions
specified in the related Prospectus Supplement, to apply Principal Collections
allocable to the Collateral Interest to decrease the Collateral Interest, (ii)
to the extent Principal Collections allocable to the Collateral Interest are
required to be deposited into the Cash Collateral Account as specified in the
related Prospectus Supplement and (iii) to the extent Excess Yield Collections
are required to be deposited into the Cash Collateral Account as specified in
the related Prospectus Supplement. The total amount of the 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 related Prospectus Supplement. The related 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 Certificates and, if applicable, the circumstances under which
payment will be made under the Cash Collateral Guaranty or under the Cash
Collateral Account.
Surety Bond or Insurance Policy
If so specified in the related 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 related Prospectus Supplement.
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If so specified in the related Prospectus Supplement, a surety bond
will be purchased for the benefit of the holders of any Series or Class of such
Series to assure distributions of interest or principal with respect to such
Series or Class of Certificates in the manner and amount specified in the
related Prospectus Supplement.
Spread Account
If so specified in the related 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 assure the subsequent distribution of interest and
principal on the Certificates of such Class or Series in the manner specified in
the related Prospectus Supplement.
Reserve Account
If so specified in the related Prospectus Supplement, support for a
Series or one or more Classes thereof 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 related 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 Certificates,
including the Subordinated Certificates, 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 assure the subsequent distribution of
principal or interest on the Certificates of such Series or Class thereof in the
manner provided in the related Prospectus Supplement.
DESCRIPTION OF THE RFC RECEIVABLE PURCHASE AGREEMENT
The Receivables in the Designated Accounts that are owned by TRS, and
which are transferred to the Trust by RFC, were purchased by RFC from TRS
pursuant to the Receivable Purchase Agreement, dated as of June 30, 1992, as
amended and supplemented, between RFC, as purchaser, and TRS, as seller (the
"Receivable Purchase Agreement"). (A copy of the Receivable Purchase Agreement
is incorporated by reference to the Registration Statement of which this
Prospectus is a part.) The following summary describes certain terms of the
Receivable Purchase Agreement.
Sale of Receivables
Under the Receivable Purchase Agreement, TRS sold to RFC all of TRS'
right, title and interest in and to the Receivables existing and arising in the
Designated Accounts owned by TRS. Under the Agreement, all of such Receivables
are, in turn, assigned by RFC to the Trust, and RFC has assigned all of its
rights in, to and under the RFC Receivable Purchase Agreement to the Trust. In
addition, under the Receivable Purchase Agreement, TRS may sell to RFC all of
its right, title and interest in and to the Receivables existing and arising in
Additional Accounts owned by TRS. Unless otherwise specified in the related
Prospectus Supplement, the purchase price for the Receivables sold by TRS to RFC
was paid and will be payable by RFC in cash or, at the election of RFC, as a
capital contribution by TRS, RFC's parent, or a combination thereof.
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In connection with the sale of the Receivables contemplated by the
Receivable Purchase Agreement, TRS has indicated and will indicate in its
records, including any computer files, that the Receivables in the Designated
Accounts owned by TRS have been sold to RFC by TRS and that such Receivables, in
turn, have been transferred by RFC to the Trust. In addition, TRS provided and
will provide to RFC a computer file or a microfiche list containing a true and
complete list identifying the Designated Accounts by account number and total
outstanding balance on the Cut Off Date or Additional Account Cut Off Date, as
the case may be, as of which the Receivables in such Designated Account were
sold to RFC. The records and agreements relating to such Designated Accounts and
Receivables have not been and will not be segregated by TRS from other documents
and agreements relating to other charge accounts and receivables and have not
been and will not be stamped or marked to reflect the sale thereof to RFC. TRS
has filed UCC financing statements naming itself as debtor and RFC as secured
party and meeting the requirements of state law in New York with respect to the
Receivables arising under the Designated Accounts, the Receivables of which have
been sold by it to RFC, and will similarly file UCC financing statements with
respect to such Receivables in any Additional Accounts. See "Risk
Factors--Certain Legal Aspects" and "Certain Legal Aspects of Receivables."
Pursuant to the Receivable Purchase Agreement, TRS may, if RFC is
required to designate Additional Accounts under the Agreement, upon request of
RFC designate Additional Accounts to be included as Designated Accounts under
the Receivable Purchase Agreement. TRS and RFC may also agree from time to time
to designate Additional Accounts under the Receivable Purchase Agreement. RFC
may require TRS to repurchase Receivables existing or to be created in
Designated Accounts designated as Removed Accounts pursuant to the Agreement.
See "Description of the Certificates and the Agreement--Removal of Designated
Accounts."
Representations and Warranties
TRS has represented and warranted to RFC in the Receivable Purchase
Agreement, that on the Closing Date (a) TRS is duly organized and validly
existing in good standing under the laws of the jurisdiction of its
organization, has the full corporate power, authority and legal right to own its
properties and conduct its business as such properties are presently owned and
such business is presently conducted, and to execute, deliver and perform its
obligations under the Receivable Purchase Agreement, (b) the Receivable Purchase
Agreement constitutes a legal, valid and binding obligation of TRS, (c) the
Receivable Purchase Agreement constitutes a valid sale to RFC of all right,
title and interest of TRS in and to the Receivables, whether then existing or
thereafter created in the Designated Accounts owned by TRS and the proceeds
thereof which is effective as to each such Receivable upon the creation thereof
and (d) as of the applicable Selection Date and, in the case of certain
selection criteria, also as of the applicable Cut Off Date (or as of the
Additional Account Selection Date and, in the case of certain selection
criteria, also as of the Additional Account Cut Off Date), each Account subject
to the Receivable Purchase Agreement was an Eligible Account. Upon the breach of
certain of the representations and warranties described in this paragraph or if
a material amount of the Receivables are determined not to be Eligible
Receivables, TRS will repurchase from RFC for an amount of cash equal to the
amount of cash which RFC is required to deposit under the Agreement connection
with such breach.
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TRS has covenanted and will covenant to RFC for the benefit of all
Certificateholders of all Series which from time to time may have an interest in
the Trust that, as to the Receivables and the Designated Accounts subject to the
Receivable Purchase Agreement, unless cured within 60 days from receipt of
notice from RFC or the Trustee, it will accept the transfer of any Receivable
sold by TRS to RFC that is charged off as uncollectible or any such Receivable
the proceeds of which are unavailable to the Trust if (i) such Receivable is not
an Eligible Receivable, (ii) such Receivable was not conveyed by TRS to RFC free
and clear of all liens (except such liens as may be permitted by the Agreement)
or in compliance in all material respects with all requirements of law, (iii)
all material information with respect to the Receivables and the Designated
Accounts related thereto in the list provided by TRS to RFC was not true and
correct in all material respects, (iv) TRS did not obtain all consents,
licenses, approvals or authorizations required in connection with the conveyance
of the Receivables to RFC and, in turn, to the Trust, or (v) on the closing date
with respect to the initial Designated Accounts owned by TRS, and on the
applicable Additional Account Closing Date with respect to Additional Accounts
owned by TRS, the computer file or list of Designated Accounts or Additional
Accounts, as the case may be, provided by TRS to RFC was not an accurate and
complete listing of all such Accounts in all material respects as of the Cut Off
Date or the Additional Account Cut Off Date, as applicable, or the information
contained therein with respect to the identity of such Accounts and the
Receivables existing thereunder was not true and correct in all material
respects as of the Cut Off Date or the Additional Account Cut Off Date, as
applicable. Additionally, TRS covenants in the Receivable Purchase Agreement to
repurchase, under certain conditions, each Receivable sold by it to RFC which is
subject to certain specified liens immediately upon the discovery of such liens.
TRS shall repurchase any such Receivable, if RFC is required to accept the
retransfer of such Receivable under the Agreement, on the date of such
retransfer. The purchase price for such Ineligible Receivable shall be the
balance of such Receivable.
TRS has also agreed to indemnify RFC and to hold RFC harmless from and
against any and all losses, damages and expenses (including reasonable
attorneys' fees) suffered or incurred by RFC if the foregoing representations
and warranties are materially false.
Certain Covenants
In the RFC Receivable Purchase Agreement, TRS covenants to perform its
obligations under the account agreements relating to the Designated Accounts
owned by it and TRS' policies and procedures relating to the Designated Accounts
owned by it unless the failure to do so would not have a material adverse effect
on the rights of the Trust, as assignee of the Receivables existing or arising
thereunder, or the Certificateholders. In that regard, TRS may change the terms
and provisions of such account agreements or policies and procedures in any
respect (including, without limitation, the calculation of the amount, or the
timing, of charge-offs), so long as any such changes are made applicable to
comparable segments of the charge accounts owned and serviced by TRS which have
characteristics the same as, or substantially similar to, the Designated
Accounts.
In addition, TRS expressly acknowledges and consents to RFC's
assignment of its rights relating to Receivables and under the Receivable
Purchase Agreement to the Trustee for the benefit of the Certificateholders. TRS
also agrees, for the benefit of the Trustee and any provider
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of any Enhancement, that any amounts payable by TRS to RFC pursuant to the
Receivable Purchase Agreement that are to be paid by RFC to the Trustee for the
benefit of the Certificateholders will be paid by TRS on behalf of RFC directly
to the Trustee.
Termination
The Receivable Purchase Agreement will terminate immediately after the
Trust terminates. In addition, if pursuant to certain provisions of Federal law,
TRS becomes party to any bankruptcy or similar proceeding (other than as a
claimant) and, if such proceeding is not voluntary and it is not dismissed
within 90 days of its institution, or if a bankruptcy trustee is appointed for
TRS, TRS will immediately cease to sell Receivables to RFC and promptly give
notice of such event to the Transferor and to the Trustee.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
The following is a description of certain legal aspects of the transfer
from TRS to RFC of Receivables under the Receivable Purchase Agreement and of
the assignment of Receivables by RFC and Centurion Bank, the Transferors, to the
Trust under the Agreement.
Transfer of Receivables
Pursuant to the Receivable Purchase Agreement, TRS has sold to RFC all
of TRS' right, title and interest in and to all Receivables existing or arising
from time to time in the Designated Accounts owned by TRS. Pursuant to the
Agreement, RFC, as a Transferor, in turn, has assigned to the Trust, without
recourse, all of RFC's right, title and interest in and to such Receivables. In
the Agreement, RFC covenants and warrants that such transfer constitutes either
a valid absolute transfer and assignment to the Trust of all right, title and
interest of RFC in and to such Receivables (except as otherwise resulting from
RFC's interest in the Exchangeable Transferor Certificate) or a grant of a
security interest in such Receivables by RFC to the Trust. See "Risk
Factors--Insolvency Issues: RFC", "-Insolvency Issues: Centurion Bank", "-TRS as
Servicer" and "-Other Insolvency Issues".
Pursuant to the Agreement, Centurion Bank, as a Transferor has assigned
to the Trust, without recourse, all of Centurion Bank's right, title and
interest in and to all Receivables existing or arising from time to time in the
Designated Accounts owned by Centurion Bank.
In the Agreement, each Transferor covenants and warrants to the Trust
that, if the transfer of Receivables by such Transferor to the Trust is deemed
to create a security interest under the UCC and, assuming that such Transferor
is not at the time the subject of any insolvency proceeding, there will exist
(i) a valid, subsisting and enforceable, first-priority, perfected security
interest in the Receivables assigned to the Trust by such Transferor and in
existence since the time of the formation of the Trust in favor of the Trust,
and (ii) a valid, subsisting and enforceable, first-priority, perfected security
interest in the Receivables assigned to the Trust by such Transferor and created
thereafter and, in each case, with certain exceptions, and for certain limited
time periods, the proceeds thereof, in favor of the Trust on and after their
creation. For a discussion of the Trust's rights arising from these covenants
and warranties not being satisfied, see "Description of the
Certificates-Covenants, Representations and Warranties."
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The Receivables are "accounts" or "general intangibles" as defined in
Article 9 of the UCC. To the extent the Receivables constitute "accounts", both
the absolute transfer of such Receivables and the transfer of such Receivables
as security for an obligation are subject to the provisions of Article 9 of the
UCC, including the filing of financing statements to perfect the Trust's rights
as a secured party or as a purchaser. To the extent the Receivables constitute
"general intangibles" and the transfer of such Receivables is deemed to be a
transfer as security for an obligation, Article 9 of the UCC is applicable to
the same extent as it is applicable to Receivables constituting accounts.
Accordingly, financing statements covering the Receivables assigned to the Trust
by Centurion Bank will be filed under the UCC as in effect in the State of Utah
to perfect the interest of the Trust in and to such Receivables, and financing
statements covering the Receivables assigned to the Trust by RFC will be filed
under the UCC as in effect in the State of New York to perfect the interest of
the Trust in and to such Receivables. To the extent the Receivables constitute
"general intangibles" and the transfer of such Receivables is deemed to be an
absolute transfer, then the UCC is not applicable, and no further action is
required to perfect the Trust's interest in such Receivables from third-party
claims.
Under the UCC, there are certain circumstances under which prior or
subsequent transferees of Receivables coming into existence after the date of
the Agreement could have an interest in such Receivables with priority over the
Trust's interest. A tax or other government lien on property of a Transferor
arising prior to the time a Receivable comes into existence may also have
priority over the interest of the Trust in such Receivables. Under the RFC
Receivable Purchase Agreement, however, TRS will be obligated to repurchase from
RFC any Receivable in any Designated Account owned by TRS that is not free and
clear of the lien of any third party, except certain permitted tax liens. In
addition, under the Agreement, each Transferor will covenant to accept the
reassignment of any Receivable conveyed by it to the Trust that is not free and
clear of the lien of any third party, except certain permitted tax liens. In
addition, the Transferors covenant that they will not sell, pledge, assign,
transfer or grant any lien on any of the Receivable (or any interest therein)
other than to the Trust.
Unless continuation statements are filed within the time specified in
the UCC in respect of the ownership interest of RFC in and to the Receivables
sold by TRS to RFC or the ownership or security interest of the Trust in and to
the Receivables assigned to the Trust by the Transferors, the perfection of such
interest will lapse.
Because the Trust's interest in and to the Receivables is dependent
upon the Transferors' respective interests in and to the Receivables, any
adverse change in the priority or perfection of a Transferor's ownership or
security interest in the Receivable assigned by it to the Trust would
correspondingly affect the Trust's interest in such Receivables.
As set forth under "Risk Factors--Certain Legal Aspects," cash
Collections of Receivables will, except in certain circumstances, be available
for use by the Servicer until deposited into the Collection Account on each
Distribution Date. In the event of insolvency or receivership of the Servicer
or, in certain circumstances, the lapse of certain time periods, the Trust may
not have a perfected interest in such cash Collections.
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Certain Matters Relating to Bankruptcy
The Agreement provides that, upon the appointment of a receiver or
bankruptcy trustee for a Transferor or TRS, the affected Transferor or TRS, as
applicable, will promptly give notice thereof to the Trustee, and a Pay Out
Event with respect to all Series issued by the Trust will occur. Under the
Agreement no new Receivables will be transferred to the Trust and, unless
otherwise instructed within a specified period by the holders of Certificates
(other than the Transferors or TRS, as holder of Class B Certificates, if the
appointment of a receiver or bankruptcy trustee for a Transferor or TRS, as
applicable, resulted in such Pay Out Event) representing undivided interests
aggregating more than 50% of the aggregate principal amount of each Class of
each Series and, with respect to any Series, any other person specified in the
related Prospectus Supplement, or unless otherwise required by the receiver or
bankruptcy trustee for the affected Transferor or TRS, the Trustee will proceed
to sell, dispose of or otherwise liquidate the Receivables in a commercially
reasonable manner and on commercially reasonable terms. The proceeds from the
sale of the Receivables would then be treated by the Trustee as Collections. If
the only Pay Out Event to occur is either the insolvency of TRS or a Transferor
or the appointment of a receiver or bankruptcy trustee for TRS or a Transferor,
such receiver or bankruptcy trustee may have the power to continue to require
TRS to transfer new Receivables to RFC or to require such Transferor to continue
to transfer new Receivables to the Trust, as applicable, and to prevent the
early sale, liquidation or disposition of the Receivables and the commencement
of an Early Amortization Period and an Early Accumulation Period. See
"Description of the Certificates--Pay Out Events."
Consumer Protection Laws
The relationship of the consumer and the provider of consumer credit is
extensively regulated by federal and state consumer protection laws. With
respect to credit accounts issued by Centurion Bank, the most significant
federal laws include the Federal Truth-in-Lending, Equal Credit Opportunity,
Fair Credit Reporting and Fair Debt Collection Practices Acts. The statutes
impose various disclosure requirements either before or when an Account is
opened, or both, and at the end of monthly billing cycles, and, in addition,
limit account holder liability for unauthorized use, prohibit certain
discriminatory practices in extending credit, and regulate practices followed in
collections. In addition, account holders are entitled under these laws to have
payments and credits applied to credit and charge accounts promptly and to
request prompt resolution of billing errors. Congress and the states may enact
new laws and amendments to existing laws to regulate further the consumer credit
industry. The Trust may be liable for certain violations of consumer protection
laws that apply to the Receivables, either as assignee from the Transferors with
respect to obligations arising before transfer of the Receivables to the Trust
or as the party directly responsible for obligations arising after the transfer.
In addition, an Account holder may be entitled to assert such violations by way
of set-off against the obligation to pay the amount of receivables owing. All
Receivables that were not created in compliance in all material respects with
the requirements of such laws (if such noncompliance has a material adverse
effect on the Certificateholders' interest therein) will be reassigned to the
Transferors. The Servicer has also agreed in the Agreement to indemnify the
Trust, among other things, for any liability arising from such violations. For a
discussion of the Trust's rights if the Receivables were not created in
compliance in all material respects with applicable laws, see "Description of
the Certificates-Covenants, Representations and Warranties."
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Application of federal and state bankruptcy and debtor relief laws
would affect the interests of the Certificateholders if such laws result in any
Receivables being charged-off as uncollectible. See "Description of the
Certificates-Defaulted Receivables; Recoveries; Adjustments."
Claims and Defenses of Cardmembers Against Trust
The UCC provides that (a) unless an obligor has made an enforceable
agreement not to assert defenses or claims arising out of a sale, the rights of
the Trust, as assignee, are subject to all the terms of the contract between TRS
and the obligor and any defense or claim arising therefrom and to any other
defense or claim of the obligor against TRS which accrues before the obligor
receives notification of the assignment and (b) any obligor is authorized to
continue to pay TRS until (i) the obligor receives notification, reasonably
identifying the rights assigned, that the amount due or to become due has been
assigned and that payment is to be made to the Trustee and (ii) if requested by
the obligor, the Trustee has furnished reasonable proof of the assignment.
FEDERAL INCOME TAX CONSEQUENCES
General
The following is a discussion of material federal income tax
consequences relating to the investment in a Certificate offered hereunder.
Additional federal income tax considerations relevant to a particular Series may
be set forth in the related Prospectus Supplement. This discussion is based on
current law, which is subject to changes that could prospectively or
retroactively modify or adversely affect the tax consequences summarized below.
The discussion does not address all of the tax consequences relevant to a
particular Certificate Owner in light of that Certificate Owner's circumstances,
and some Certificate Owners may be subject to special tax rules and limitations
not discussed below. Each prospective Certificate Owner is urged to consult its
own tax adviser in determining the federal, state, local and foreign income and
any other tax consequences of the purchase, ownership and disposition of a
Certificate.
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), or an estate or
trust the income of which is includible in gross income for U.S. federal income
tax purposes regardless of its source. The term "U.S. Certificate Owner" means
any U.S. Person and any other person to the extent that the income attributable
to its interest in a Certificate is effectively connected with that person's
conduct of a U.S. trade or business.
Treatment of the Certificates as Debt
The Transferors express in the Agreement the intent that for federal,
state and local income and franchise tax purposes, the Certificates will be debt
secured by the Receivables. The Transferors, by entering into the Agreement, and
each investor, by the acceptance of a beneficial
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interest in a Certificate, will agree to treat the Certificates as debt for
federal, state and local income and franchise tax purposes. However, because
different criteria are used in determining the non-tax accounting treatment of
the transaction, the Transferors will treat the Agreement for certain non-tax
accounting purposes as causing a transfer of an ownership interest in the
Receivables and not as creating a debt obligation.
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 Internal Revenue Service (the "IRS") to treat a
transaction in accordance with its economic substance, as determined under
federal income tax law, even though the participants in the transaction have
characterized it differently for non-tax purposes.
The determination of whether the economic substance of a purchase of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed to
determine whether the Transferors have relinquished (and the purchaser has
obtained) substantial incidents of ownership in the property. Among those
factors, the primary ones examined are whether the purchaser has the opportunity
to gain if the property increases in value, and has the risk of loss if the
property decreases in value. Except to the extent otherwise specified in the
related Prospectus Supplement, Orrick, Herrington & Sutcliffe LLP, special
counsel to the Transferors ("Special Counsel"), is of the opinion that, under
current law as in effect on the Closing Date, although no transaction closely
comparable to that contemplated herein has been the subject of any Treasury
regulation, revenue ruling or judicial decision, for federal income tax purposes
the Certificates offered hereunder will not constitute an ownership interest in
the Receivables but will properly be characterized as debt. Except where
indicated to the contrary, the following discussion assumes that the
Certificates offered hereunder are debt for federal income tax purposes.
Treatment of the Trust
General. The Agreement permits the issuance of Certificates and certain
other interests (including any collateral interest) in the Trust, each of which
may be treated for federal income tax purposes either as debt or as equity
interests in the Trust. If all of the Certificates and other interests (other
than the Exchangeable Transferor Certificate) in the Trust were characterized as
debt, the Trust might be characterized as a security arrangement for debt
collateralized by the Receivables and issued directly by the Transferors (or
other holders of the Exchangeable Transferor Certificate). Under such a view,
the Trust would be disregarded for federal income tax purposes. Alternatively,
if some of the Certificates or other interests (other than the Exchangeable
Transferor Certificate) in the Trust were characterized as equity, the Trust
might be characterized as a separate entity owning the Receivables, issuing its
own debt, and jointly owned by the Transferors (or other holders of the
Exchangeable Transferor Certificate) and the other holders of equity interests
in the Trust.
Possible Treatment of the Trust as a Partnership or a Publicly Traded
Partnership. Although, as described above, Special Counsel is of the opinion
that the Certificates will properly be treated as debt for federal income tax
purposes, such opinion does not bind the IRS
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and thus no assurance can be given that such treatment will prevail. If the IRS
were to contend successfully that some or all of the Exchangeable Transferor
Certificate, the Certificates or any other interest in the Trust (including any
collateral interest) were equity in the Trust for federal income tax purposes,
all or a portion of the Trust could be classified as a partnership or as a
publicly traded partnership taxable as a corporation for such purposes. Because
Special Counsel is of the opinion that the Certificates will be characterized as
debt for federal income tax purposes and because any holder of an interest in a
collateral interest will agree to treat that interest as debt for such purposes,
no attempt will be made to comply with any tax reporting requirements that would
apply as a result of such alternative characterizations.
If the Trust were treated in whole or in part as a partnership in which
some or all holders of interests in the publicly offered Certificates were
partners, that partnership could be classified as a publicly traded partnership,
and so could be taxable as a corporation. Further, regulations published by the
Treasury Department on December 4, 1995 (the "Regulations") could cause the
Trust to constitute a publicly traded partnership even if all holders of
interests in publicly offered Certificates are treated as holding debt. The
Regulations generally apply to taxable years beginning after December 31, 1995,
and thus could affect the classification of presently existing entities and the
ongoing tax treatment of already completed transactions. Although the
Regulations provide for a 10-year grandfather period for a partnership actively
engaged in an activity before December 4, 1995, it is not clear whether the
Trust would qualify for this grandfather period. If the Trust were classified as
a publicly traded partnership, whether by reason of the treatment of publicly
offered Certificates as equity or by reason of the Regulations, it would avoid
taxation as a corporation if its income was not derived in the conduct of a
"financial business"; however, whether the income of the Trust would be so
classified is unclear.
Under the Code and the Regulations, a partnership will be classified as
a publicly traded partnership if equity interests therein are traded on an
"established securities market," or are "readily tradable" on a "secondary
market" or its "substantial equivalent." The Transferors intend to take measures
designed to reduce the risk that the Trust could be classified as a publicly
traded partnership by reason of interests in the Trust other than the publicly
traded Certificates. Although the Transferors expect such measures will
ultimately be successful, certain of the actions that may be necessary for
avoiding the treatment of such interests as "readily tradable" on a "secondary
market" or its "substantial equivalent" are not fully within the control of the
Transferors. As a result, there can be no assurance that the measures the
Transferors intend to take will in all circumstances be sufficient to prevent
the Trust from being classified as a publicly traded partnership under the
Regulations.
If the Trust treated as a partnership nevertheless were not treated as
a publicly traded partnership taxable as a corporation, that partnership would
not be subject to federal income tax. Rather, each item of income, gain, loss
and deduction of the partnership generated through the ownership of the related
Receivables would be taken into account directly in computing taxable income of
the Transferors (or the holders of the Exchangeable Transferor Certificate) and
any Certificate Owners treated as partners in accordance with their respective
partnership interests therein. The amounts and timing of income reportable by
any Certificate Owners treated as partners would likely differ from that
reportable by such Certificate Owners had they been treated as owning debt. In
addition, if the Trust were treated in whole or in part as a partnership
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other than a publicly traded partnership, income derived from the partnership by
any Certificate Owner that is a pension fund or other tax-exempt entity may be
treated as unrelated business taxable income. Partnership characterization also
may have adverse state and local income or franchise tax consequences for a
Certificate Owner. Further, if the Trust were treated in whole or in part as a
partnership and the number of holders of interests in the publicly offered
Certificates and other interests in the Trust treated as partners equaled or
exceeded 100, the Transferors may cause that Trust to elect to be an "electing
large partnership." The consequence of such election to investors could include
the determination of certain tax items at the partnership level and the
disallowance of otherwise allowable deductions. No representation is made as to
whether any such election will be made.
If the arrangement created by the Agreement were treated in whole or in
part as a publicly traded partnership taxable as a corporation, that entity
would be subject to federal income tax at corporate tax rates on its taxable
income generated by ownership of the Receivables. That tax could result in
reduced distributions to Certificate Owners. No distributions from the Trust
would be deductible in computing the taxable income of the corporation, except
to the extent that any Certificates were treated as debt of the corporation and
distributions to the related Certificate Owners were treated as payments of
interest thereon. In addition, distributions to Certificate Owners not treated
as holding debt would be dividend income to the extent of the current and
accumulated earnings and profits of the corporation (and Certificate Owners may
not be entitled to any dividends received deduction in respect of such income).
I. FASIT Election. Upon satisfying certain conditions set forth
in the Agreement, the Transferors will be permitted to amend the
Agreement and any Series Supplement in order to enable all or a portion
of a Trust to qualify under the Code as a "Financial Asset
Securitization Investment Trust" or "FASIT" and to permit a FASIT
election to be made with respect thereto. See "Description of the
Certificates-Amendments." Under the FASIT provisions of the Code, a
FASIT generally would avoid federal income taxation and could issue
securities substantially similar to the Certificates, and those
securities would be treated as debt for federal income tax purposes.
However, there can be no assurance that the Transferors will or will
not cause any permissible FASIT election to be made with respect to the
Trust, or amend the Agreement or any Series Supplement in connection
with any election. Regulations needed to implement the FASIT
legislation have not yet been issued and, until such regulations are
issued and become effective, the Transferors are unable to provide
specific information concerning any such election or amendment or the
probability that any such election or amendment would be made. However,
if such an election is made, it may cause a Certificate Owner to
recognize gain with respect to its Certificate, even though Special
Counsel is of the opinion that a Certificate will be treated as debt
for federal income tax purposes without regard to the election and the
Certificate would be treated as debt following the election, because
the Certificate Owner could be treated as surrendering one debt
instrument in exchange for another. Any such gain would be equal to the
excess of the value of the Certificate over the Certificate Owner's
basis therein at the time of the election; any loss similarly
determined would likely be disallowed under the "wash sale" rules of
Section 1091 of the Code. Additionally, any such election and any
related amendments to the Agreement and any Series Supplement may have
other tax and non-tax consequences to
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Certificate Owners. Accordingly, prospective Certificate Owners should
consult their tax advisors with regard to the effects of any such
election and any permitted related amendments on them in their
particular circumstances.
Taxation of Interest Income of U.S. Certificate Owners
General. Stated interest on a beneficial interest in a Certificate will
be includible in gross income in accordance with a U.S. Certificate Owner's
method of accounting.
Original Issue Discount. If the Certificates are issued with original
issue discount ("OID"), the provisions of sections 1271 through 1273 and 1275 of
the Internal Revenue Code of 1986 (the "Code") will apply to the Certificates.
Under those provisions, a U.S. Certificate Owner (including a cash basis holder)
generally would be required to accrue the OID on its interest in a Certificate
in income for federal income tax purposes on a constant yield basis, resulting
in the inclusion of OID in income somewhat in advance of the receipt of cash
attributable to that income. In general, a Certificate will be treated as having
OID to the extent that its "stated redemption price" exceeds its "issue price,"
if such excess is more than 0.25 percent multiplied by the weighted average life
of the Certificate (determined by taking into account only the number of
complete years following issuance until payment is made for any partial
principal payments). Under section 1272(a)(6) of the Code, special provisions
apply to debt instruments on which payments may be accelerated due to
prepayments of other obligations securing those debt instruments. However, no
regulations have been issued interpreting those provisions, and the manner in
which those provisions would apply to the Certificates is unclear. Additionally,
the IRS could take the position based on Treasury regulations that none of the
interest payable on a Certificate is "unconditionally payable" and hence that
all of such interest should be included in the Certificate's stated redemption
price at maturity. If sustained, such treatment should not significantly affect
the tax liability of most Certificate Owners, but prospective U.S. Certificate
Owners should consult their own tax advisers concerning the impact to them in
their particular circumstances.
Market Discount. A U.S. Certificate Owner who purchases an interest in
a Certificate at a discount that exceeds any unamortized OID may be subject to
the "market discount" rules of sections 1276 through 1278 of the Code. These
rules provide, in part, that gain on the sale or other disposition of a
Certificate and partial principal payments on a Certificate are treated as
ordinary income to the extent of accrued market discount. The market discount
rules also provide for deferral of interest deductions with respect to debt
incurred to purchase or carry a Certificate that has market discount.
Market Premium. A U.S. Certificate Owner who purchases an interest in a
Certificate at a premium may elect to offset the premium against interest income
over the remaining term of the Certificate in accordance with the provisions of
section 171 of the Code.
Sale or Exchange of Certificates
Upon a disposition of an interest in a Certificate, a U.S. Certificate
Owner generally will recognize gain or loss equal to the difference between the
amount realized on the disposition and
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the U.S. Certificate Owner's adjusted basis in its interest in the Certificate.
The adjusted basis in the interest in the Certificate will equal its cost,
increased by any OID or market discount includible in income with respect to the
interest in the Certificate prior to its sale and reduced by any principal
payments previously received with respect to the interest in the Certificate and
any amortized premium. Subject to the market discount rules, gain or loss will
be capital gain or loss if the interest in the Certificate was held as a capital
asset. Capital losses generally may be used only to offset capital gains.
Non-U.S. Certificate Owners
In general, a non-U.S. Certificate Owner will not be subject to U.S.
federal income tax on interest (including OID) on a beneficial interest in a
Certificate unless (i) the non-U.S. Certificate Owner actually or constructively
owns 10 percent or more of the total combined voting power of all classes of
stock of either of the Transferors entitled to vote (or of a profits or capital
interest of the Trust if characterized as a partnership, or of stock in the
Trust if treated as a corporation), (ii) the non-U.S. Certificate Owner is a
controlled foreign corporation that is related to either of the Transferors (or
the Trust if treated as a partnership) through stock ownership, (iii) the
non-U.S. Certificate Owner is a bank receiving interest described in Code
Section 881(c)(3)(A), (iv) such interest is contingent interest described in
Code Section 871(h)(4), or (v) the non-U.S. Certificate Owner bears certain
relationships to any holder of either of the Exchangeable Transferor Certificate
other than either of the Transferors or any other interest in the Trust not
properly characterized as debt. To qualify for the exemption from taxation, the
last U.S. Person in the chain of payment prior to payment to a non-U.S.
Certificate Owner (the "Withholding Agent") must have received (in the year in
which a payment of interest or principal occurs or in either of the two
preceding years) a statement that (i) is signed by the non-U.S. Certificate
Owner under penalties of perjury, (ii) certifies that the non-U.S. Certificate
Owner is not a U.S. Person and (iii) provides the name and address of the
non-U.S. Certificate Owner. Under currently applicable law, the statement may be
made on a Form W-8 or substantially similar substitute form, and the non-U.S.
Certificate Owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of the change. If a Certificate is
held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in that case, the signed statement must be
accompanied by a Form W-8 or substitute form provided by the non-U.S.
Certificate Owner to the organization or institution holding the Certificate on
behalf of the non-U.S. Certificate Owner. The U.S. Treasury Department is
considering implementation of further certification requirements aimed at
determining whether the issuer of a debt obligation is related to holders
thereof. The U.S. Treasury Department recently issued final Treasury regulations
which will revise some of the foregoing procedures whereby a non-U.S.
Certificate Owner may establish an exemption from withholding generally
beginning January 1, 2000; non-U.S. Investor Certificateholders should consult
their tax advisers concerning the impact to them, if any, of such revised
procedures.
Generally, any gain or income realized by a non-U.S. Certificate Owner
upon retirement or disposition of an interest in a Certificate will not be
subject to U.S. federal income tax, provided that (i) in the case of a
Certificate Owner that is an individual, such Certificate Owner is not present
in the United States for 183 days or more during the taxable year in which such
retirement or disposition occurs and (ii) in the case of gain representing
accrued interest, the
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conditions described in the preceding paragraph for exemption from withholding
are satisfied. Certain exceptions may be applicable, and an individual non-U.S.
Certificate Owner should consult a tax adviser.
If the Certificates were treated as an interest in a partnership, the
recharacterization could cause a non-U.S. Certificate Owner to be treated as
engaged in a trade or business in the United States. In that event, the non-U.S.
Certificate Owner would be required to file a federal income tax return and, in
general, would be subject to U.S. federal income tax (including the branch
profits tax) on its net income from the partnership. Further, certain
withholding obligations apply with respect to income allocable or distributions
made to a foreign partner. That withholding may be at a rate as high as 39.6
percent. If some or all of the Certificates were treated as stock in a
corporation, any related dividend distributions to a non-U.S. Certificate Owner
generally would be subject to withholding of tax at the rate of 30 percent,
unless that rate were reduced by an applicable tax 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 Certificate 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. Certificate Owner must be reported to the IRS, unless the U.S.
Certificate 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.
Certificate Owner who is not an exempt recipient.
In addition, upon the sale of a Certificate 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. Certificate Owner certifies that
the seller is a non-U.S. Certificate 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.
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Any amounts withheld under the backup withholding rules from a payment
to a Certificate Owner would be allowed as a refund or a credit against such
Certificate 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; Investor Certificateholders 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
Certificates under any state or local tax law. Each investor should consult its
own tax adviser regarding state and local tax consequences.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), imposes certain requirements on those pension, profit sharing and
other employee benefit plans to which it applies and on those persons who are
fiduciaries with respect to such plans. In accordance with ERISA's fiduciary
standards, before purchasing Certificates a fiduciary should determine whether
such an investment is permitted under the documents and instruments governing
the plan and is appropriate for the plan in view of its overall investment
policy and the composition and diversification of its investment portfolio.
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit plan, an individual retirement account
or a Keogh plan which is subject to such provisions (a "Plan") from engaging in
certain transactions involving "plan assets" with certain persons ("parties in
interest" under ERISA or "disqualified persons" under the Code (collectively,
"Parties in Interest")) with respect to the Plan. A violation of these
"prohibited transaction" rules may generate excise tax and other liabilities
under ERISA and the Code for such persons. For example, a prohibited transaction
would arise, unless an exemption is applicable, if a Certificate were viewed as
debt of either Transferor and such Transferor were a party in interest or a
disqualified person with respect to a Plan that acquired the Certificate.
Moreover, additional prohibited transactions could arise if the Trust
Assets were deemed to constitute "plan assets" of any Plan that owned
Certificates. The Department of Labor ("DOL") has issued a final regulation (the
"Final Regulation") concerning the definition of what constitutes "plan assets"
of a Plan subject to ERISA or Section 4975 of the Code. Under the Final
Regulation, the assets and properties of corporations, partnerships and certain
other entities in which a Plan makes an investment in an "equity interest" could
be deemed to be "plan assets" of the Plan in certain circumstances. Accordingly,
if Plans (or other entities whose assets include "plan assets") purchase
Certificates, the Trust could be deemed to hold "plan assets" unless one of the
exceptions under the Final Regulation (or another statutory or administrative
exemption) is applicable to the Trust. The operations of the Trust could result
in prohibited
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transactions if Benefit Plans that purchase the Certificates are deemed to own
an interest in the underlying assets of the Trust. There may also be an improper
delegation of the responsibility to manage plan assets if Benefit Plans that
purchase the Certificates are deemed to own an interest in the underlying assets
of the Trust.
The Final Regulation only applies to the purchase by a Plan of an
"equity interest" in an entity. Assuming that a Certificate is an equity
interest, the Final Regulation contains an exception that provides that if a
Plan (or an entity whose assets include "plan assets") acquires a
"publicly-offered security" the issuer of the security is not deemed to hold
Plan assets. A "publicly-offered security" is a security which is (i) freely
transferable, (ii) part of a class of securities that is owned by 100 or more
investors independent of the issuer and of one another at the conclusion of the
initial offering and (iii) either is (A) a part of a class of securities
registered under section 12(b) or 12(g) of the Exchange Act, or (B) sold to the
Plan as part of an offering of securities to the public pursuant to an effective
registration statement under the Securities Act and the class of securities of
which such security is a part is registered under the Exchange Act within 120
days (or such later time as may be allowed by the Commission) after the end of
the fiscal year of the issuer during which the offering of such securities to
the public occurred. There are no restrictions imposed on the transfer of the
Certificates offered hereby, and the Certificates offered hereby will be sold as
part of an offering pursuant to an effective registration statement under the
Securities Act and then will be timely registered under the Exchange Act. Based
on information provided by any underwriter, agent or dealer involved in the
distribution of the Certificates offered hereby, the Transferors will notify the
Trustee as to whether or not the Certificates of any Series (or, if there is
more than one Class in a Series, each Class of Certificates) will be expected to
be held by at least 100 separately named persons at the conclusion of the
offering. The Transferor will not, however, determine whether there will, in
fact, be at least 100 separately named persons or whether the 100 independent
investor criterion of the exception for publicly-offered securities is satisfied
as to the Certificates of such Series (or Class). Prospective purchasers may
obtain a copy of the notification described in the second preceding sentence
from the Trustee at its Corporate Trust Department.
If the Certificates fail to meet the criteria of publicly-offered
securities and the Trust's assets are deemed to include "plan assets" of
Certificateholders that are Plans, transactions involving the Trust and Parties
in Interest with respect to such Plans holding such Certificates might be
prohibited under Section 406 of ERISA and Section 4975 of the Code unless an
exemption is applicable. Thus, for example, if a participant in any Plan is a
Cardmember under one of the Designated Accounts, under DOL interpretations the
purchase of such Certificates by such Plan could constitute a prohibited
transaction. The following five class exemptions issued by the DOL could apply
in such event: DOL Prohibited Transaction Class Exemption ("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), PTCE 91-38 (Class Exemption for Certain Transactions
Involving Bank Collective Investment Funds), PTCE 90-1 (Class Exemption for
Certain Transactions Involving Insurance Company Pooled Separate Accounts) and
PTCE 84-14 (Class Exemption for Plan Asset Transactions determined by
Independent Qualified Professional Asset Managers). There is no assurance that
these exemptions, even if all of the conditions specified therein are satisfied,
will apply to all transactions involving the Trust's assets.
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Moreover, as discussed above, although (unless provided otherwise in
the applicable Prospectus Supplement) Special Counsel has given its opinion that
the Certificates will properly be treated as debt for federal income tax
purposes, if any Certificates are treated as equity interests in a partnership
for such purposes in which other Certificates are debt, all or part of a
tax-exempt investor's share of income from the Certificates that are treated as
equity could be treated as unrelated debt-financed income under the Code and
taxable to the investor.
In addition, the Transferors or their affiliates may be considered to
be Parties in Interest or fiduciaries with respect to some Plans. Accordingly,
an investment by such Plan in Certificates may constitute or result in a
prohibited transaction under ERISA and Section 4975 of the Code unless such
investment is subject to a statutory or administrative exemption.
In light of the foregoing, fiduciaries of Plans (or other entities
whose assets include "plan assets") considering the purchase of Certificates
should consult their own counsel as to whether considering the purchase of
Certificates should consult their own counsel as to whether the acquisition of
such Certificates would constitute or result in a prohibited transaction,
whether trust assets which are represented by such Certificates would be
considered "plan assets," the consequences that would apply if the Trust Assets
were considered "plan assets," the applicability of exemptive relief from the
prohibited transaction rules and the applicability of the tax on unrelated
business income and unrelated debt-financed income.
Unless otherwise provided in the applicable Supplement, if the
Transferors do not notify the Trustee, as described above, that the Certificates
of any particular Series (or Class) will be expected to be held by at least 100
separately named persons, the Certificates of such Series (or Class) may not be
acquired by any Plan or by any entity investing assets that are treated as "plan
assets" of a Plan. Furthermore, in that case, the Agreement and the applicable
Prospectus Supplement will provide that each holder of such Certificate shall be
deemed to have represented and warranted that it is not a Plan and is not
purchasing such Certificate on behalf of a Plan or with assets that are treated
as "plan assets" of a Plan.
LEGAL MATTERS
Unless other legal counsel is specified in the related Prospectus
Supplement, certain legal matters relating to the Certificates will be passed
upon for RFC by Carol V. Schwartz, Group Counsel to American Express and, for
Centurion Bank, by Robert D. Kraus, Group Counsel to Centurion Bank. Ms.
Schwartz and Mr. Kraus each own or have the right to acquire a number of shares
of the common stock of American Express which, in the aggregate is less than
0.05% of the outstanding common stock of American Express. Certain other legal
matters will be passed upon for the Transferors, the Trust and the Underwriters
by Orrick, Herrington & Sutcliffe LLP. Certain legal matters relating to the
Federal tax consequences of the issuance of the Certificates will be passed upon
for the Transferors by Orrick, Herrington & Sutcliffe LLP. Orrick, Herrington &
Sutcliffe LLP has from time to time represented Centurion Bank, the Servicer and
Credco and certain of their affiliates.
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PLAN OF DISTRIBUTION
The Transferors may sell the Certificates offered hereby either
directly or through one or more underwriters or underwriting syndicates (the
"Underwriters"). The Prospectus Supplement for each Series will set forth the
terms of the offering of such Series and of each Class within such Series,
including the name or names of the Underwriters, the proceeds to and their use
by the Transferors, and either the initial public offering price, the discounts
and commissions to the Underwriters and any discounts or concessions allowed or
reallowed to certain dealers, or the method by which the price at which the
Underwriters will sell the Certificates will be determined.
The Certificates of a Series may be acquired by Underwriters for their
own account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The obligations of any
Underwriters will be subject to certain conditions precedent, and such
Underwriters will be severally obligated to purchase all the Certificates of a
Series described in the related Prospectus Supplement, if any are purchased. If
Certificates of a Series are offered other than through Underwriters, the
related Prospectus Supplement will contain information regarding the nature of
such offering and any agreements to be entered into between the Transferors and
purchasers of Certificates of such Series.
The place and time of delivery for any Series of Certificates in
respect of which this Prospectus is delivered will be set forth in the
accompanying Prospectus Supplement.
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GLOSSARY FOR PROSPECTUS
Term Page(s)
- ---- -------
Account........................................................ 22
Account Originator............................................. 31
Accumulation Period............................................ 11
Act............................................................ 9
Additional Account Closing Date................................ 37
Additional Account Cut Off Date................................ 29
Additional Account Selection Date.............................. 25
Additional Accounts............................................ 5, 25
Adjustment..................................................... 41
Adverse Party.................................................. 26
Agreement...................................................... 4
American Express............................................... 26
Amortization Period............................................ 7
application process............................................ 22
Bankruptcy Code................................................ 26
Card........................................................... 19, 22
Cardmember..................................................... 22
Cash Collateral Account........................................ 51
Cash Collateral Guaranty....................................... 51
CEBA........................................................... 28
Cede........................................................... 2
CEDEL.......................................................... 30
CEDEL Participants............................................. 30
Centurion Bank................................................. cover, 5, 38
Certificate Owners............................................. 2
Certificate Rate............................................... 6
Certificateholders............................................. 2
Certificateholders' Interest................................... 6
Certificates................................................... cover, 4
Class.......................................................... cover
Closing Date................................................... 10
Code........................................................... 56
Collateral Interest............................................ 73
Collection Account............................................. 15, 38
Collections.................................................... 6
Commission..................................................... 2
Controlled Accumulation Amount................................. 11
Controlled Accumulation Period................................. 16
Controlled Amortization Amount................................. 11
Controlled Amortization Period................................. 11
Controlled Deposit Amount...................................... 11
Controlled Distribution Amount................................. 11
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Cooperative.................................................... 31
Credco......................................................... 17
Cut Off Date................................................... 6
Defaulted Receivables.......................................... 41
Definitive Certificates........................................ 31
Depositaries................................................... 29
Depository..................................................... 28
Designated Accounts............................................ cover, 5, 25
Disclosure Document............................................ 9
Distribution Date.............................................. 28
DOL............................................................ 60
DTC............................................................ 10
Due Period..................................................... 6
Early Accumulation Period...................................... 9
Early Amortization Period...................................... 12
Eligible Account............................................... 25
Eligible Institution........................................... 38
Eligible Investments........................................... 38
Eligible Receivable............................................ 36
Enhancement.................................................... 5
Enhancement Invested Amount.................................... 50
ERISA.......................................................... 15
Euroclear...................................................... 31
Euroclear Operator............................................. 31
Euroclear Participants......................................... 30
Excess Allocation Series....................................... 22
Excess Principal Collections................................... 14
Exchange....................................................... 9
Exchange Act................................................... 2
Exchangeable Transferor Certificate............................ 8
Expected Final Payment Date.................................... 8
FASIT.......................................................... 83
FDIA........................................................... 26
Final Regulation............................................... 60
Final Termination Date......................................... 42
Financial Asset Securitization Investment Trust................69, 83
FIRREA......................................................... 26
Foreign Investors.............................................. 59
Global Securities.............................................. 65
Holders........................................................ 31
Indirect Participants.......................................... 30
Ineligible Receivable.......................................... 35
Interest Funding Account....................................... 32
Interest Payment Date.......................................... 8
Interest Period................................................ 8
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Invested Amount................................................ 7
Invested Percentage............................................ 7
Investor Charge-Off............................................ 42
Investor Default Amount........................................ 41
IRS............................................................ 56
L/C Bank....................................................... 50
MasterCard..................................................... 19
Minimum Transferor Percentage.................................. 37
Monthly Interest............................................... 13
Monthly Servicer Report........................................ 47
Monthly Servicing Fee.......................................... 45
Moody's........................................................ 32
New Accounts................................................... 29
OID............................................................ 57
Original Billing Date.......................................... 23
Participants................................................... 29
Parties in Interest............................................ 87
Paying Agent................................................... 30
Payment Date Statement......................................... 47
Pay Out Events................................................. 7
Plan........................................................... 87
Portfolio...................................................... 25
pre-approved process........................................... 22
Principal Collections.......................................... 21
Principal Commencement Date.................................... 8
Principal Funding Account...................................... 11
Principal Terms................................................ 34
Privileged Assets Calculated Amount............................ 41
Privileged Assets program...................................... 41
Prospectus Supplement.......................................... cover
Rapid Amortization Period...................................... 12
Rating Agency.................................................. 21
Receivable Purchase Agreement.................................. 9
Receivables.................................................... cover, 4
Record Date.................................................... 28
Recoveries..................................................... 5
Recovery Arrangements.......................................... 36
Regulations.................................................... 57
Removed Accounts............................................... 6, 25, 37
Reserve Account................................................ 51
Revolving Period............................................... 10
RFC............................................................ 2
Selection Date................................................. 5
Senior Certificates............................................ 7
Series......................................................... cover
Series Supplement.............................................. 4
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Series Termination Date........................................ 42
Service Transfer............................................... 46
Servicer....................................................... cover, 15
Servicer Default............................................... 46
Servicing Fee.................................................. 45
S&P............................................................ 32
Special Counsel................................................ 81
Special Funding Account........................................ 22
Spread Account................................................. 51
Subordinate Certificates....................................... 7
Tax Counsel.................................................... 56
Terms and Conditions........................................... 31
Transfer Deposit Amount........................................ 41
Transferor..................................................... cover, 26
Transferor Amount.............................................. 7, 37
Transferor Interest............................................ 6, 28
Transferor Percentage.......................................... 28
TRS............................................................ 4, 26
Trust.......................................................... cover
The Trust...................................................... cover, 4
Trust Portfolio................................................ 25
Trust Principal Component...................................... 13
Trustee........................................................ 4
UCC............................................................ 17
Underwriters................................................... 62
Undistributed Principal Collections............................ 40
U.S. Person.................................................... 80
VISA........................................................... 19
Yield Collections.............................................. 21
Yield Factor................................................... 6
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, any globally offered
Certificates ("Global Securities") will be available only in book-entry form.
Investors in Global Securities may hold such Global Securities through any of
The Depository Trust Company ("DTC"), CEDEL or Euroclear. The Global Securities
will be tradeable as home market instruments in both the European and U.S.
domestic markets. Initial settlement and all secondary trades will settle in
same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (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 CEDEL or Euroclear and DTC
participants holding Certificates will be effected on a delivery-against-payment
basis through the respective depositories of CEDEL and Euroclear and as
participants in DTC.
Non-U.S. holders of Global Securities will be exempt from U.S.
withholding taxes, provided that such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the
name of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect participants in DTC. As a result, CEDEL and
Euroclear will hold positions on behalf of their participants through their
respective depositories, which in turn will hold such positions in accounts as
participants of DTC.
Investors electing to hold their Global Securities through DTC 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 CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
95
Secondary Market Trading
Since the purchase determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC participants. Secondary market trading between DTC
participants will be settled using the procedures applicable to U.S. corporate
debt issues in same-day funds.
Trading between CEDEL and/or Euroclear participants. Secondary market
trading between CEDEL participants and/or Euroclear participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC participant to
the account of a CEDEL participant or a Euroclear participant, the purchaser
will send instructions to CEDEL or Euroclear through a participant at least one
business day prior to settlement. CEDEL or Euroclear will instruct the
respective depositary to receive the Global Securities against payment. Payment
will include interest accrued on the Global Securities from and including the
last coupon payment date to and excluding the settlement date, on the basis of a
calendar year consisting of twelve 30-day calendar months. For transactions
settling on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. Payment will then be made by the
respective depositary to the DTC participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the CEDEL participant's or Euroclear
participant's account. The Global Securities credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest on
the Global Securities will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the CEDEL or
Euroclear cash debit will be valued instead as of the actual settlement date.
CEDEL participants and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within CEDEL or Euroclear. Under this
approach, they may take on credit exposure to CEDEL or Euroclear until the
Global Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit
to them, participants can elect not to preposition funds and allow that credit
line to be drawn upon to finance settlement. Under this procedure, CEDEL
participants or Euroclear participants purchasing Global Securities would incur
overdraft charges for one day, assuming they cleared the overdraft when the
Global Securities were credited to their accounts. However, interest on the
Global Securities would accrue from the value date. Therefore, in many cases the
investment income on the Global Securities earned during that one-day period may
substantially reduce or
96
<PAGE>
offset the amount of such overdraft charges, although this result will depend on
each participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC participants can employ their usual procedures for sending Global Securities
to the respective depositary for the benefit of CEDEL participants or Euroclear
participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC participant a cross-market transaction will
settle no differently than a trade between two DTC participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, CEDEL and Euroclear participants may
employ their customary procedures for transactions in which Global Securities
are to be transferred by the respective clearing system, through the respective
depositary, to a DTC participant. The seller will send instructions to CEDEL or
Euroclear through a participant at least one business day prior to settlement.
In this case, CEDEL or Euroclear will instruct the respective depositary to
deliver the bonds to the DTC participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment date to and excluding the settlement date on the basis of a
calendar year consisting of twelve 30-day calendar months. For transactions
settling on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. The payment will then be
reflected in the account of the CEDEL participant or Euroclear participant the
following day, and receipt of the cash proceeds in the CEDEL or Euroclear
participant's account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). Should the CEDEL or
Euroclear participant have a line of credit with its respective clearing system
and elect to be in debit in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft charges incurred over
that one-day period. If settlement is not completed on the intended value date
(i.e., the trade fails), receipt of the cash proceeds in the CEDEL or Euroclear
participant's account would instead be valued as of the actual settlement date.
Finally, day traders that use CEDEL or Euroclear and that purchase
Global Securities from DTC Participants for delivery to CEDEL participants or
Euroclear participants should note that these trades would automatically fail on
the sale side unless affirmative action were taken. At least three techniques
should be readily available to eliminate this potential problem:
1. borrowing through CEDEL or Euroclear for one day (until
the purchase side of the day trade is reflected in their CEDEL or
Euroclear accounts) in accordance with the clearing system's customary
procedures;
2. borrowing the Global Securities in the U.S. from a DTC
participant no later than one day prior to settlement, which would give
Global Securities sufficient time to be reflected in their CEDEL or
Euroclear account in order to settle the sale side of the trade; or
3. staggering the value dates for the buy and sell sides of
the trade so that the value date for the purchase from the DTC
participant is at least one day prior to the value date for the sale to
the CEDEL participant or Euroclear participant.
97
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A holder of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original interest discount) on registered debt issued by
U.S. persons, unless (i) each clearing system, bank or other financial
institution that holds customers' securities in the ordinary course of its trade
or business in the chain of intermediaries between such beneficial owner and the
U.S. entity required to withhold tax complies with applicable certification
requirements and (ii) such holder takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-US. persons (Form W-8). Non-U.S. persons that are
beneficial owners can obtain a complete exemption from the withholding tax by
filing a signed Form W-8 (Certificate of Foreign Status).
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 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. persons resident in treaty
countries (Form 1001). Non-U.S. persons that are beneficial owners residing in a
country that has a tax treaty with the United States can obtain an exemption or
reduced tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the beneficial 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 Global Security holder
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 which he 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.
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 or any political subdivision thereof or (iii) an estate or trust
the income of which is includable in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all aspects
of U.S. Federal income tax withholding that may be relevant to foreign holders
of Global
98
<PAGE>
Securities. Investors are advised to consult their own tax advisors
for specific tax advice concerning their holding and disposing of Global
Securities.
This summary does not deal with all aspects of Federal income tax
withholding that may be relevant to foreign holders of Global Securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of Global Securities.
99
<PAGE>
- -------------------------------------------------------------------------------
No dealer, salesperson or other individual has been authorized to give
any information or to make any representations other than those contained in
this Prospectus Supplement and the accompanying Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Transferor or the Underwriters. Neither the delivery of this
Prospectus Supplement nor the accompanying Prospectus nor any sale made
hereunder shall under any circumstance create an implication that there has been
no change in the affairs of the Transferors, TRS, American Express or any
affiliate thereof or in the Receivables or the Designated Accounts since the
date hereof. This Prospectus Supplement and the accompanying Prospectus do not
constitute an offer to sell or solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction.
--------------------
TABLE OF CONTENTS
Page
----
PROSPECTUS SUPPLEMENT
Prospectus Summary............................................
Risk Factors..................................................
Domestic Consumer Charge Card Business........................
The Designated Accounts.......................................
Use of Proceeds...............................................
Maturity and Principal Payment Considerations.................
Description of the Class A Certificates and the
Agreement..................................................
Tax Matters...................................................
ERISA Considerations..........................................
Legal Matters.................................................
Underwriting..................................................
Glossary for Prospectus Supplement............................
Annex I: Other Issuances of Investor Certificates............
PROSPECTUS
Prospectus Supplement.........................................
Reports to Certificateholders.................................
Available Information.........................................
Incorporation of Certain Documents by Reference...............
Prospectus Summary............................................
Risk Factors..................................................
Domestic Consumer Charge Card Business........................
The Designated Accounts.......................................
The Transferor and Related Parties............................
The Trust.....................................................
Maturity and Principal Payment Considerations................
Description of Certificates...................................
Enhancement...................................................
Description of the Receivable Purchase Agreement..............
Certain Legal Aspects of the Receivables......................
Federal Income tax Consequences...............................
State and Local Taxation......................................
ERISA Considerations..........................................
Legal Matters.................................................
Plan of Distribution..........................................
Glossary for the Prospectus...................................
Annex 1: Global Clearance, Settlement and
Tax Documentation Procedures...............................
--------------------
Until [ o ], 1998 (90 days after the date of this Prospectus
Supplement) all dealers effecting transactions in the Class A Certificates,
whether or not participating in this distribution, may be required to deliver a
Prospectus Supplement and a Prospectus. This delivery requirement is in addition
to the obligation of dealers to deliver a Prospectus Supplement and a Prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
[ o ]
AMERICAN EXPRESS
MASTER TRUST
[ o ]% Class A Accounts
Receivable
Trust Certificates,
Series 1998-1
American Express Receivables
Financing Corporation
and
American Express
Centurion Bank
Transferors
American Express
Travel Related
Services Company, Inc
Servicer
---------------------
PROSPECTUS SUPPLEMENT
[ o ], 1998
---------------------
[UNDERWRITERS]
- -------------------------------------------------------------------------------
<PAGE>
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.
Registration Fee.......................................... $295*
Printing and Engraving.................................... **
Trustee's Fees............................................ **
Legal Fees and Expenses................................... **
Blue Sky Fees and Expenses................................ **
Accountants' Fees and Expenses............................ **
Rating Agency Fees........................................ **
Miscellaneous Fees........................................ **
----
Total.................................................. $**
===
* Actual
** To be filed by Amendment.
Item 15. Indemnification of Directors and Officers.
American Express Receivables Financing Corporation
The American Express Receivables Financing Corporation ("RFC")
Certificate of Incorporation provides for indemnification of directors and
officers of RFC to the fullest extent permitted by Delaware law.
Section 145 of the Delaware General Corporation Law provides, in
substance, that Delaware corporations shall have the power, under specified
circumstances, to indemnify their directors, officers, employees and agents in
connection with actions, suits or proceedings brought against them by a third
party or in the right of the corporation, by reason of the fact that they are or
were such directors, officers, employees or agents, against expenses incurred in
any such action, suit or proceeding. The Delaware General Corporation Law also
provides that RFC may purchase insurance on behalf of any such director,
officer, employee or agent.
Article XII of RFC's Certificate of Incorporation provides that, to the
extent that a director, officer, employee or agent of RFC has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
above, or in defense of any claim, issue or matter therein, he or she shall be
indemnified by RFC against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith, without the necessity
of any action being taken by RFC other than the determination, in good faith,
that such defense has been successful. In all other cases wherein
indemnification is provided by Article XII, unless ordered by a court,
indemnification shall be made by RFC only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he or she has met the applicable
standard of conduct specified in Article XII. Such determination shall be made
(i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion or (iii)
by the holders of a majority of the shares of capital stock of RFC entitled to
vote thereon.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person seeking
indemnification did not act in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interests of RFC, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful. Entry of a judgment by consent as
part of a settlement shall not be deemed a final adjudication of liability for
negligence or misconduct in the performance of duty, nor of any other issue or
matter.
63
<PAGE>
Expenses incurred by an officer or director in defending any civil or
criminal action, suit or proceeding may be paid by RFC in advance of the final
disposition of such action, suit or proceeding as authorized by the Board of
Directors in the specific case upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by RFC. Expenses
incurred by other employees or agents of RFC in defending any civil or criminal
action, suit or proceeding may be paid by RFC upon such terms and conditions, if
any, as the Board of Directors deems appropriate.
No director shall be personally liable to RFC or its stockholders for
monetary damages for any breach of fiduciary duty by such director as a
director. Notwithstanding the foregoing sentence, a director shall be liable to
the extent provided by applicable law (i) for breach of the director's duty of
loyalty to RFC or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit. No
amendment to or repeal of subparagraph (e) to Article XII of the Certificate of
Incorporation shall apply to or have any effect on the liability or alleged
liability of any director of RFC for or with respect to any acts or omissions of
such director occurring prior to such amendment.
The indemnification provided by Article XII of the Certificate of
Incorporation shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any By-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
Item 16. Exhibits.
(a) Exhibits
1.1 - Form of Underwriting Agreement.*
4.1 - Form of Pooling and Servicing Agreement.*
4.2 - Form of Series Supplement, including form of Asset Backed
Certificate.*
5.1 - Opinion of Orrick, Herrington & Sutcliffe LLP with respect to
legality.*
8.1 - Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax
matters.*
10.1 - Form of RFC Purchase Agreement.*
23.1 - Consent of Orrick, Herrington & Sutcliffe LLP (included in its
opinions filed as Exhibits 5.1 and 8.1).*
24.1 - Power of Attorney (including Resolutions of the Board of Directors
of the Registrant authorizing such Power of Attorney).
- ---------------
* To be filed by amendment.
(b) Financial Statements
All financial statements, schedules and historical information have
been omitted as they are not applicable.
Item 17. Undertakings.
The undersigned Registrant on behalf of American Express Credit Account
Master Trust (the "Trust") hereby undertake as follows:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement; (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement, notwithstanding the
foregoing, any increase of decrease in volume
<PAGE>
of securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement; provided, however, that (a)(i) and
(a)(ii) do 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.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering hereof.
(c) 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.
(d) 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.
(e) To provide to the underwriter at the closing specified in the
underwriting agreements, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
(f) That 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 provisions described under Item 15
above, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
each Registrant of expenses incurred or paid by a director, officer or
controlling person of such Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(g) That, for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) under the Securities Act of 1933 shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(h) That, 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this 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 April 23, 1998.
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION
as originator of the Trust and Registrant
By: /s/ Jay B. Stevelman
----------------------
Name: Jay B. Stevelman
Title: Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on April 23, 1998 by the following
persons in the capacities indicated.
Signature
- ---------
/s/ Vincent P. Lisanke*
- ------------------------------
Name: Vincent P. Lisanke
Title: Director, President and
Chief Executive Officer
/s/
- ------------------------------
Name: John J.P. McDonnell
Title: Director
/s/ Jay B. Stevelman
- ------------------------------
Name: Jay B. Stevelman
Title: Director
/s/ John D. Koslow*
- ------------------------------
Name: John D. Koslow
Title: Chief Financial Officer
and Chief Accounting Officer
/s/Leslie R. Scharfstein
- ------------------------------
Name: Leslie R. Scharfstein
Title: Vice President
- ---------------
* By: /s/ Leslie R. Scharfstein Leslie R. Scharfstein / / Attorney-in-Fact
-------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page Number in
the Sequential
Exhibits Numbering System
- -------- ----------------
<S> <C>
1.1 - Form of Underwriting Agreement.*
4.1 - Form of Pooling and Servicing Agreement.*
4.2 - Form of Series Supplement, including form of Asset Backed
Certificate.*
5.1 - Opinion of Orrick, Herrington & Sutcliffe LLP with respect to
legality.*
8.1 - Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax
matters.*
10.1 - Form of RFC Purchase Agreement.*
23.1 - Consent of Orrick, Herrington & Sutcliffe LLP (included in its
opinions filed as Exhibits 5.1 and 8.1).*
24.1 - Power of Attorney (including Resolutions of the Board of Directors of
the Registrant authorizing such Power of Attorney).
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE>
Exhibit 24.1
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION
POWER OF ATTORNEY
American Express Receivables Financing Corporation, a Delaware
corporation (the "Company"), and each of the undersigned officers and directors
of the Company, hereby constitute and appoint Jay B. Stevelman, John D. Koslow,
Leslie R. Scharfstein and Stephen P. Norman, jointly and severally, with full
power of substitution and revocation, their true and lawful attorneys-in-fact
and agents, for them and on their behalf and in their respective names, places
and steads, in any and all capacities, to sign, execute and affix their
respective seals thereto and file any of the documents referred to below
relating to the registration of up to $3,000,000,000 aggregate amount of
Accounts Receivables Trust Certificates to be issued by the American Express
Master Trust: a registration statement under the Securities Act of 1933,
including all amendments thereto, with all exhibits and any and all documents
required to be filed with respect thereto with any regulatory authority or stock
exchange, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as they might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney may be executed in counterparts.
IN WITNESS WHEREOF, American Express Receivables Financing Corporation
has caused this Power of Attorney to be executed in its name by its President
and its corporate seal to be affixed and attested by its Secretary, and the
undersigned officers and directors have hereunto set their hand as of the 22nd
day of April 1998.
AMERICAN EXPRESS RECEIVABLES
FINANCING CORPORATION
By: /s/ Leslie R. Scharfstein
-------------------------
Leslie R. Scharfstein
Vice President
ATTEST:
/s/ Michael Kuchs
- -----------------
Michael Kuchs
Secretary
<PAGE>
/s/ John J.P. McDonnell
- -----------------------
John J.P. McDonnell
Director
/s/ Jay B. Stevelman
- -----------------------
Jay B. Stevelman
Director
/s/ Vincent P. Lisanke
- -----------------------
Vincent P. Lisanke
President and Director
(Chief Executive Officer)
/s/ Leslie R. Scharfstein
- -----------------------
Leslie R. Scharfstein
Vice President
/s/ John D. Koslow
- -----------------------
John D. Koslow
Vice President and Treasurer
(Chief Financial Officer
and Chief Accounting Officer)
<PAGE>
American Express Receivables Financing Corporation
Unanimous Written Consent of Directors
In Lieu of Meeting
The undersigned, being all of the members of the board of Directors of
American Express Receivables Financing Corporation (the "Corporation") hereby
give their written consent and authorization pursuant to Section 141(f) of the
General Corporation Law of Delaware, to the following resolutions:
Registration of Accounts Receivable Trust Certificates
RESOLVED, that this Board of Directors hereby authorizes each of the
Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer of
this Corporation to sign on behalf of this Corporation, as registrant, a
registration statement under the Securities Act of 1933 to register up to $3
billion aggregate amount of Accounts Receivable Trust Certificates to be issued
by the American Express Master Trust (the "Registration Statement") and any
amendment or amendments thereto which he or she, in his or her discretion, deems
to be necessary or desirable.
RESOLVED, that each officer and director who may be required to
entitled to execute the Registration Statement or any amendment thereto, whether
on behalf of the corporation or as an officer or director thereof or by
attesting the seal of the Corporation or otherwise, be, and hereby is,
authorized to execute a power of attorney appointing Leslie R. Scharfstein,
Stephen Norman, Jay B. Stevelman and John D. Koslow, and each of them severally
, their true and lawful attorney(s) to execute in their name, place and stead in
any such capacity the Registration Statement and any and all amendments thereto,
including post-effective amendments, and to file the same with the Securities
and Exchange Commission, each of said attorneys to have power to act with or
without the others and to have full power and authority to do and perform in the
name and on behalf of each of the said officers and directors every act
whatsoever necessary or advisable to be done as fully as, and to the same extent
that, such officer or director might or could do in person.
IN WITNESS WHEREOF, the undersigned, being all of the directors of
American Express Receivables Financing Corporation have executed this written
consent as of the 22nd day of April 1998.
/s/ Jay B. Stevelman
------------------------
Jay B. Stevelman
/s/ Vincent P. Lisanke
------------------------
Vincent P. Lisanke
/s/ John J.P. McDonnell
------------------------
John J.P. McDonnell
