<PAGE>
As filed with the Securities and Exchange Commission on May 12, 1998
Registration No. 333-51045
Post-Effective Amendment No. 1 to
Registration Statement No. 33-84840
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
FORM S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
-------------------
AMERICAN EXPRESS MASTER TRUST
(Issuer of Certificates)
AMERICAN EXPRESS AMERICAN EXPRESS RECEIVABLES
CENTURION BANK FINANCING CORPORATION
Utah 13-3256118 Delaware 13-3632012
(State or Other (I.R.S. Employer (State or Other (I.R.S. Employer
Jurisdiction of Identification Number) Jurisdiction of Identification
Incorporation or Incorporation Number)
Organization) or Organization)
6985 Union Park Center World Financial Center
Midvale, Utah 84047 200 Vesey Street
(801) 565-5000 New York, New York 10285
(212) 640-2000
(Originators of the Trust Described Herein)
(Exact Names of Registrant as Specified in its Charter)
(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(2)
------------------------- ------------ ------------------- ------------------ -------------
<S> <C> <C> <C> <C>
Asset Backed Certificates $3,000,000,000 100% $3,000,000,000 $885,000
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) $295 was paid on April 27, 1998
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
3
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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.
4
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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>
5
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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.
6
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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
</TABLE>
8
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<TABLE>
<S> <C>
thereafter by the Transferors. See "Risk Factors--Ability to
Change Yield Factor."
The "Due Period" means, unless otherwise provided in a Prospectus
Supplement, with respect to each Distribution Date, (i) prior to
the May 1998 Distribution Date, the period from and including the
first day of a calendar month and ending at the close of business
on the last day of such calendar month, (ii) for the June 1998
Distribution Date, the period from and including May 1, 1998
to and including May 27, 1998, and (iii) commencing with the
July 1998 Distribution Date, the period (a) from and including
the day following the last day of the eighth billing cycle
applicable to the Accounts ending during the second preceding
calendar month (b) to and including the last day of the eighth
billing cycle applicable to the Accounts ending in the calendar
month immediately preceding the month in which each Distribution
Date shall occur; provided, however, that the Initial Due
Period with respect to any Series will commence on the Closing
Date with respect to such Series.
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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<S> <C>
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 Transferors were
required to designate Additional Accounts and did not have
sufficient Eligible Accounts for such purpose. Amounts deposited
may be withdrawn by the Transferors 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
(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 the transferors may deem 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 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).
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 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 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 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 which 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. Each Class of Certificates of any Series must be tested
separately for this purpose.
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 a 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 the acquisition of such
Certificates would constitute or result in a prohibited transaction, whether
the 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, under currently applicable law, (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, including certain withholding tax revisions generally effective
begining January 1, 2000. 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>
EXPLANATORY NOTE
A form of Prospectus Supplement for the initial Series of Certificates
to be offered under this Registration Statement follows immediately after this
Explanatory Note.
A form of Prospectus Supplement for all Series subsequent to the
initial Series follows immediately after the form of Prospectus Supplement for
the initial Series. Such form describes the issuance of Certificates in two
Classes, each of which may bear interest on a floating rate or fixed rate basis
and utilizes a Controlled Accumulation Period. The Prospectus contemplates the
issuance of future Series of Certificates on either a fixed or floating rate
basis and in one or more Classes, utilizing either a Controlled Amortization
Period or a Controlled Accumulation Period. Enhancement for any such Series may
include various forms of enhancement described in the Prospectus designed to
decrease the risk of loss for Certificateholders of a particular Series or
Class, including subordination, a Collateral Interest, a Cash Collateral
Account, a letter of credit, a maturity guaranty facility, a cash collateral
guaranty, a tax protection agreement, a guaranteed rate agreement, a cash
collateral guaranty, an interest rate swap, an interest rate cap, a surety bond
or insurance policy, a spread account or a reserve account.
If a Series is issued with only one Class, references to separate
Classes, including references to subordination and reallocation between
Classes, will be deleted from the attached form of Prospectus Supplement. In
the event that any future Series utilizes a form of Enhancement as described
above, disclosure regarding the applicable form of Enhancement will be added.
See "Enhancement" in the Prospectus regarding the scope of such Prospectus
Supplement disclosure. All other material variations in the terms of a future
Series from the terms set forth in the attached form of Prospectus Supplement
will be disclosed in the Prospectus Supplement for such Series.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD WITHOUT
THE DELIVERY OF A FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS 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.
PROSPECTUS SUPPLEMENT
(To Prospectus dated May [o], 1998)
$[o]
AMERICAN EXPRESS MASTER TRUST
[o]% Class A Accounts Receivable Trust Certificates,
Series 1998-1
-----------------
American Express Receivables Financing Corporation
American Express Centurion Bank
Transferors
-----------------
American Express Travel Related Services Company, Inc.
Servicer
-----------------
Each of the [o]% Class A Accounts Receivable Trust Certificates,
Series 1998-1 (collectively, the "Class A Certificates") offered hereby 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, 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
(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 [S-14] herein and on page [o] in the Prospectus.
-----------------
THE CLASS A CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY
AND DO NOT REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF AND
ARE NOT 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.
Underwriting
Price to Discounts and Proceeds to
Public Commissions Transferor(1)(2)
-------- ------------- ---------------
Per Class A Certificate........ [o]% [o]% [o]%
Total.......................... $[o] $[o] $[o]
(1) Plus accrued interest, if any, at the Class A Certificate Rate.
(2) Before deducting expenses payable by the Transferors, expected to be
approximately $[o].
-----------------
The Class A Certificates are offered when, as and if delivered to and
accepted by the Underwriters, subject to prior sale, withdrawal or
modification of the offer without notice, the approval of counsel and other
conditions. It is expected that the Class A Certificates will be delivered in
book-entry form on or about May [o], 1998, through the facilities of The
Depository Trust Company, Cedel Bank societe anonyme and the Euroclear System.
[LEHMAN BROTHERS]
[OTHER UNDERWRITER(S)]
May [o], 1998
<PAGE>
(continued from previous page)
portfolio of designated American Express(R) Card, American Express(R) Gold
Card and Platinum Card(R) 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, annual membership
fees and 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 RFC in the RFC Receivable Purchase Agreement. See
"Description of the Certificates--General" in the Prospectus.
Concurrently with the issuance of the Class A Certificates, the Trust
will issue $[o] aggregate initial amount of [o]% Class B Accounts Receivable
Trust Certificates, Series 1998-1 (the "Class B Certificates"; the Class A
Certificates and the Class B Certificates are herein collectively referred to
as the "Certificates"). The right of the Class B Certificateholders to receive
interest payments on the Class B Certificates each month will be subordinated
under all circumstances to the right of the Class A Certificateholders to
receive monthly allocations of interest with respect to the Class A
Certificates, and the right of the Class B Certificateholders to receive
principal payments on the Class B Certificates will be subordinated under all
circumstances to the right of the Class A Certificateholders to receive all
payments of principal on the Class A Certificates. See "Prospectus
Summary--Subordination of Class B Certificates" herein. The Transferors will
initially own the remaining interest in the Trust not allocable to the
Certificates or other outstanding series of certificates, and the Servicer
will be responsible for servicing the Receivables. Only the Class A
Certificates are being offered hereby.
Interest with respect to the Class A Certificates will accrue from
[o], 1998, and is payable on the 15th day of each month (or, if any such day
is not a business day, the next succeeding business day) (each an "Interest
Payment Date"), commencing June 15, 1998. The principal of the Class A
Certificates is payable in full on [o] (the "Expected Final Payment Date"),
unless a Pay Out Event has occurred, in which case it shall be paid monthly to
the extent available from Principal Collections. Although it is anticipated
that accumulated principal will be sufficient to pay all principal due on the
Class A Certificates on the Expected Final Payment Date, if such accumulated
principal is insufficient to make payment in full of the principal due on the
Class A Certificates, thereafter principal will be paid monthly to the extent
available from Principal Collections. In such a case, the actual maturity of
the Class A Certificates would be later than the Expected Final Payment Date.
The Class A Certificates will be represented by one or more Class A
Certificates which will be registered in the name of Cede & Co., the nominee
of The Depository Trust Company. The interests of holders of beneficial
interests in the Class A Certificates ("Class A Certificate Owners") will be
represented by book-entries on the records of The Depository Trust Company and
participating members thereof. Definitive Certificates will be available to
Class A Certificate Owners only under the limited circumstances described
herein. See "Description of the Certificates--Definitive Certificates" in the
Prospectus.
Application will be made to list the Class A Certificates on the
Luxembourg Stock Exchange.
S-2
<PAGE>
There currently is no secondary market for the Series 1998-1
Certificates, and there is no assurance that one will develop or, if one does
develop, that it will continue until the Series 1998-1 Certificates are paid
in full.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS
A CERTIFICATES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
-----------
The Certificates offered hereby constitute a single Series of
Certificates being offered by the Transferors from time to time pursuant to
the Prospectus dated [o] 1998. This Prospectus Supplement does not contain
complete information about the offering of the Certificates. Additional
information is contained in the Prospectus and investors are urged to read
both this Prospectus Supplement and the Prospectus in full. Sales of the
Certificates may not be consummated unless the purchaser has received both
this Prospectus Supplement and the Prospectus.
S-3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Prospectus Supplement and
the accompanying Prospectus. Certain capitalized terms which are used herein
are defined elsewhere in this Prospectus Supplement and the accompanying
Prospectus. See "Glossary for Prospectus Supplement" and "Glossary for the
Prospectus." Unless the context otherwise requires, certain capitalized terms,
when used herein, only relate to the Certificates. Other Series issued
pursuant to other prospectus supplements or disclosure documents may also use
such capitalized terms in such prospectus supplements or documents. However,
in such cases, reference to such terms, unless the context otherwise requires,
is made only in the context of the issuance of such other Series.
<TABLE>
<S> <C>
Type of Security.................... [o]% Class A Accounts Receivable Trust Certificates, Series 1998-1
(the "Class A Certificates").
Issuer.............................. 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 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 Class
A Certificates and the Class B Certificates represent undivided interests in the
Trust. Only the Class A Certificates are being offered hereby. The Trust, as a
master trust, currently has seven other series of certificates outstanding. The
Trust may issue additional series of certificates from time to time (each such
series and Series 1998-1, a "Series"). See "Annex I" for a description of certain
terms of the Series of Certificates previously issued by the Trust.
Trustee............................. The Bank of New York (the "Trustee").
The Receivables..................... TRS has sold to RFC and RFC has conveyed to the Trust all its
right, title and interest in and to the Receivables existing as of the close of
business on June 30, 1992, August 31, 1993, June 30, 1994 and January 17, 1996
(each, a "Cut Off Date") and arising from time to time thereafter until
termination of the Trust in the Accounts that were designated on the related
Account addition closing dates (the "June 1992 Designated Accounts", the "August
1993 Additional Accounts", the "June 1994 Additional Accounts" and the "January
1996 Additional Accounts", respectively, and collectively the "Designated
Accounts"). The June 1992 Designated Accounts met the criteria provided in the
Agreement applied as of the close of business on the cycle billing date for each
Account occurring in the period beginning on the close of business on March 1,
1992 and ending at the close of business on March 31, 1992 and, with respect to
certain selection criteria, as of the applicable Cut Off Date. The August 1993
Additional Accounts met the criteria provided in the Agreement applied as of the
close of business on the cycle billing date for each Account occurring in the
period beginning on the opening of business on July 1, 1993 and ending at the
close of business on July 31, 1993 and, with respect to certain selection
criteria, as of the applicable Cut Off Date. The June 1994 Additional Accounts
met the criteria provided in the Agreement applied as of the close of business
on the cycle billing date for each Account occurring in the period beginning on
the opening of business on March 22, 1994 and ending at the close of business
S-4
<PAGE>
<S> <C>
on April 17, 1994 and, with respect to certain selection criteria, as of the
applicable Cut Off Date. The January 1996 Additional Accounts met the criteria
provided in the Agreement applied as of the close of business on the cycle
billing date for each Account occurring in the period beginning on the opening
of business on November 1, 1995 and ending at the close of business on November
30, 1995 and, with respect to certain selection criteria, as of the applicable
Cut-Off Date.
As of the date hereof, all of the Designated Accounts are owned 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 Designated Accounts will be
conveyed by TRS to Centurion Bank, at which time Receivables existing and
thereafter arising in such Designated Accounts will be conveyed by Centurion
Bank to the Trust.
The aggregate amount of Receivables in the Designated Accounts (excluding
Accounts charged off and Accounts closed at the Cardmembers' request) as of [o],
1998 was $[o] and as of [o], 1998 was $[o]. 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 will fluctuate as new Receivables are generated and as existing
Receivables are collected, charged off as uncollectible or otherwise adjusted.
Description of the Class A
Certificates...................... Payments received on the Trust's assets will be allocated among
the Class A Certificateholders and the Class B Certificateholders (the
"Certificateholders' Interest"), the interest of the holders of other
outstanding Series, and the interest of the Transferors (the last being referred
to as the "Transferor Interest").
The Class A Certificates offered hereby will evidence undivided interests in the
Trust assets allocated to the Certificateholders' Interest and will represent
the right to receive from such Trust assets funds up to (but not in excess of)
the amounts required to make payments of interest at the rate set forth on the
cover hereof (the "Class A Certificate Rate") payable monthly on each
Distribution Date. Unless a Pay Out Event shall have occurred, principal will be
payable in full on [o] (or if such day is not a business day, on the next
succeeding business day) (the "Expected Final Payment Date"). Principal will be
payable monthly to Class A Certificateholders prior to the Expected Final
Payment Date if a Pay Out Event occurs, and, together with interest as described
below under "Prospectus Summary--Interest," will be payable monthly to Class A
Certificateholders following the Expected Final Payment Date to the extent
principal has not been paid in full on the Expected Final Payment Date. In all
circumstances, principal is payable to the extent of the Class A Invested Amount
(which may be less than the aggregate unpaid principal balance of the Class A
Certificates, in certain circumstances, if the Investor Default Amount exceeds
available Yield Collections and the Class B Invested Amount is zero).
The Class B Certificates will evidence undivided interests in the Trust assets
allocated to the Certificateholders' Interest and will
S-5
<PAGE>
<S> <C>
represent the right to receive from such Trust assets funds up to (but not in
excess of) the amounts required to make payments of interest on the Class B
Certificates at the rate of [o]% per annum (the "Class B Certificate Rate"),
payable monthly on each Distribution Date, and the payment of principal with
respect to the Class B Certificates following the final principal payment with
respect to the Class A Certificates. The Class B Certificates are not being
offered hereby.
The Certificateholders' Interest will include the right to receive (but only to
the extent needed to make required payments under the Agreement) varying
percentages of Yield Collections and Principal Collections during each Due
Period. Yield Collections and Defaulted Receivables will be allocated at all
times to the Certificateholders' Interest based on the Floating Allocation
Percentage applicable during the related Due Period. During the Revolving
Period, subject to certain limitations, all Principal Collections allocable to
the Certificateholders' Interest will generally be reinvested in the Trust or
otherwise used to maintain the Certificateholders' Interest. During the
Accumulation Period and any Early Amortization Period, Principal Collections
will be allocated to the Certificateholders' Interest based on the Fixed
Allocation Percentage. See "Description of the Class A Certificates and the
Agreement--Allocation Percentages" and "--Pay Out Events." The Floating
Allocation Percentage and the Fixed Allocation Percentage are sometimes referred
to collectively herein as the "Invested Percentage."
The Class A Certificates represent undivided interests in the Trust only and do
not represent interests in or recourse obligations of and are not guaranteed by
RFC, Centurion Bank, TRS, American Express Company or any affiliate thereof.
Interest............................ Interest will accrue on the unpaid principal amount of the Class
A Certificates at a per annum rate equal to the Class A Certificate Rate and,
except as otherwise provided herein, be distributed to Class A
Certificateholders on June 15, 1998, and on the 15th day of each month
thereafter (or, if any such day is not a business day, on the next succeeding
business day) and on the Expected Final Payment Date (each an "Interest Payment
Date"). If (a) an Early Amortization Period commences or (b) the final principal
payment on the Class A Certificates is not made on the Expected Final Payment
Date, then thereafter interest will be distributed to the Class A
Certificateholders monthly on each Special Payment Date. Interest for any
Interest Payment Date will include accrued interest at the Class A Certificate
Rate from and including the preceding Interest Payment Date or, in the case of
the first Interest Payment Date, from and including the Closing Date, to but
excluding such Interest Payment Date. Interest for any Interest Payment Date or
Special Payment Date due but not paid on any Interest Payment Date or Special
Payment Date will be due on the next succeeding Interest Payment Date or Special
Payment Date together with, to the extent permitted by applicable law,
additional interest on such amount at a per annum rate equal to the Class A
Certificate Rate plus 2% per annum. Interest will be calculated on the basis of
a 360-day year comprised of twelve 30-day months. See "Description of the Class
A Certificates and
S-6
<PAGE>
<S> <C>
the Agreement--General" and "--Distributions from the Collection Account."
Principal.......................... Unless a Pay Out Event shall have occurred, no payment of
principal will be made on the Class A Certificates until the Expected Final
Payment Date, when principal on the Class A Certificates will be payable in
full. To the extent that principal on the Class A Certificates is not paid in
full on the Expected Final Payment Date, the total amount of any such principal
remaining to be paid on the Class A Certificates after the Expected Final
Payment Date will be payable monthly until all principal on the Class A
Certificates has been paid in full. Beginning in the month following the
occurrence of a Pay Out Event, principal of the Class A Certificates will be
payable monthly until paid in full. See "Description of the Class A Certificates
and the Agreement--Distributions to Class A Certificateholders."
Registration of the Class A
Certificates.................... The Class A Certificates will be issued in book-entry form only
in initial principal amount of $[o] (the "Class A Initial Invested Amount") and
will initially be represented by one or more Class A Certificates registered in
the name of Cede as the nominee of Depository Trust Company ("DTC"). As used
herein, the term "Class A Certificateholders" refers to registered holders of
the Class A Certificates, the term "Class B Certificateholders" refers to
registered holders of the Class B Certificates and the term "Certificateholders"
refers to the Class A Certificateholders and the Class B Certificateholders
collectively.
A Class 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. In such event, interests in the Class A Certificates will be available
in denominations of $1,000 and in integral multiples thereof. All references
herein to Class A Certificateholders shall refer Class A Certificate Owners,
except as otherwise specified herein. See "Description of the
Certificates--Definitive Certificates" in the Prospectus.
Record Date........................ The last business day of the month immediately preceding any
Interest Payment Date or Special Payment Date (each, a "Record Date").
Revolving Period................... No principal will be payable to the Class A Certificateholders
until the Expected Final Payment Date or, upon the occurrence of a Pay Out Event
as described herein, on the first Special Payment Date. No principal will be
payable to the Class B Certificateholders until the final principal payment has
been made to the Class A Certificateholders. For each Due Period during the
period beginning on [o], 1998, and ending on the day prior to the day on which
the earlier of the Accumulation Period or the Early Amortization 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. See
"Description of the Class A Certificates and the Agreement--Pay Out Events" for
a discussion of the events which might lead to the termination of the Revolving
Period prior
S-7
<PAGE>
<S> <C>
to its scheduled ending date. In addition, the Servicer, based on the payment
rate of the Receivables and the amount of principal distributable to
Certificateholders of all outstanding Series, may postpone the commencement of
the Accumulation Period and therefore extend the length of the Revolving Period.
Accumulation Period and
Expected Final Payment Date...... The aggregate principal amount of the Class A Certificates will
be payable on the Expected Final Payment Date, but may be distributable earlier
on a monthly basis upon the occurrence of a Pay Out Event and the commencement
of an Early Amortization Period as described herein. See "Description of the
Class A Certificates and the Agreement--Pay Out Events." Unless and until a Pay
Out Event shall have occurred, for each Due Period beginning at the close of
business on [o], and ending on [o] (the "Accumulation Period"), on each related
Distribution Date all Principal Collections allocable to the Certificateholders'
Interest plus Excess Principal Collections, if any, from other Series allocable
to the Certificates plus certain other amounts comprising Class A Monthly
Principal up to the Controlled Deposit Amount, will be deposited in a trust
account that will be established in the name of the Trustee for the benefit of
the Class A Certificateholders (the "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
Accumulation Period will be treated as Excess Principal Collections. See
"Description of the Class A Certificates and the Agreement--Distributions from
the Collection Account." Unless and until a Pay Out Event has occurred, all
amounts in the Principal Funding Account will be invested from the date of
deposit to the Expected Final Payment Date by the Trustee at the direction of
the Servicer in Eligible Investments. On each Distribution Date with respect to the
Accumulation Period, all investment income in the Principal Funding Account
(other than any amounts in excess of the Class A Certificate Rate) will be
withdrawn from the Principal Funding Account and deposited into the Collection
Account. See "Description of the Class A Certificates and the
Agreement--Principal Funding Account." For a description of the circumstances
under which the commencement of the Accumulation Period may be postponed, see
"Description of the Class A Certificates and the Agreement--Postponement of the
Accumulation Period."
The funds on deposit in the Principal Funding Account will be available to pay
the Class A Invested Amount on the Expected Final Payment Date. Even if the
funds available for distribution to the Class A Certificateholders on the
Expected Final Payment Date are insufficient to pay the Class A Invested Amount
in full, all such funds will be distributed to the Class A Certificateholders at
such time. Thereafter, principal and interest payments will be made to Class A
Certificateholders monthly on each Special Payment Date.
During either the Accumulation Period or the Early Amortization Period, the
amount of Principal Collections allocable to the Class
S-8
<PAGE>
<S> <C>
A Certificateholders will 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 Percentages with respect to Principal
Collections for all Series of certificates outstanding for the current
Distribution Date.
Early Amortization Period........... During the period beginning on the day on which a Pay Out Event
occurs or is deemed to have occurred to the earlier of the date on which the
Class A Invested Amount and the Class B Invested Amount have been paid in full
or the Final Series 1998-1 Termination Date (the "Early Amortization Period"),
Principal Collections 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 Class A
Certificateholders and, following the final principal payment to the Class A
Certificateholders, will be distributed as principal payments to the Class B
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). See
"Description of the Class A Certificates and the Agreement--Pay Out Events" for
a discussion of events which might lead to the commencement of an Early
Amortization Period. Principal payments with respect to the Class B Certificates
will not be made until the final principal payment has been made to the Class A
Certificateholders.
Application of Yield
Collections...................... Yield Collections allocable to the Certificateholders' Interest
for any Due Period will be applied in the following order of priority:
(i) an amount equal to Class A Monthly Interest and any overdue Class A
Monthly Interest (with interest thereon) will be paid to the Class A
Certificateholders;
(ii) an amount equal to Class B Monthly Interest and any overdue Class B
Monthly Interest (with interest thereon) will be paid to the Class B
Certificateholders;
(iii) an amount equal to the Monthly Servicing Fee plus any accrued Monthly
Servicing Fee that was due but not paid on any prior Distribution Date
will be distributed to the Servicer;
(iv) an amount equal to unreimbursed Class A Investor Charge-Offs will be
reinvested in the Trust or otherwise used to reinstate the
Certificateholders' Interest during the Revolving Period or deposited
in the Principal Funding Account and included in Class A Monthly
Principal during the Accumulation Period or paid to Class A
Certificateholders during any Early Amortization Period;
S-9
<PAGE>
<S> <C>
(v) an amount equal to the Investor Default Amount will be reinvested in the
Trust or otherwise used to maintain the Certificateholders' Interest during the
Revolving Period or deposited in the Principal Funding Account and included in
Class A Monthly Principal during the Accumulation Period or paid to Class A
Certificateholders during any Early Amortization Period;
(vi) an amount equal to the unpaid accrued interest (with interest thereon)
on the outstanding aggregate principal amount of the Class B
Certificates will be paid to Class B Certificateholders;
(vii) an amount equal to unreimbursed Class B Investor Charge-Offs will be
reinvested in the Trust or otherwise used to reinstate the
Certificateholders' Interest during the Revolving Period or deposited
in the Principal Funding Account and included in Class A Monthly
Principal during the Accumulation Period or paid to Class A
Certificateholders during any Early Amortization Period; and
(viii) the remainder will be distributed to the Transferors.
Subordination of Class B
Certificates..................... If Yield Collections allocable to the Certificateholders'
Interest for any Due Period are insufficient to pay the Investor Default Amount
for such Due Period in accordance with the priorities listed above under
"Application of Yield Collections," then the Class B Invested Amount will be
reduced by an amount equal to such insufficiency. If the Class B Invested Amount
is reduced to zero, any further insufficiency will reduce the Class A Invested
Amount, but not in excess of the Investor Default Amount for such Due Period,
and the Class A Certificateholders will bear directly the credit and other risks
associated with their undivided interest in the Trust. The Class B Invested
Amount will initially be equal to $[o] (the "Class B Initial Invested Amount")
and will be decreased or reinstated under certain circumstances as described
herein. See "Description of the Class A Certificates and the
Agreement--Allocation Percentages." Principal payments with respect to the Class
B Certificates will not be made until the final principal payment has been made
with respect to the Class A Certificateholders. Interest payments with respect
to the Class B Certificates will be made monthly on each Distribution Date to
the extent of funds available from Yield Collections for the related Due Period
after the deposit of Class A Monthly Interest. See "Description of the Class A
Certificates and the Agreement--Distributions from the Collection Account."
Principal Collections; Certain
Allocations...................... Principal Collections for any Due Period will be allocated to the
Certificateholders' Interest on the basis of the Invested Percentage 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, or deposited in the
Principal Funding Account with excess amounts, if any, reinvested in the Trust
or otherwise used to maintain the Certificateholders' Interest during the
S-10
<PAGE>
<S> <C>
Accumulation Period or paid to the holders of the Class A Certificates in
respect of the Class A Invested Amount during any Early Amortization Period.
Other outstanding Series offered by the Trust, as well as other Series that in
the future may be offered by the Trust, may or may not have accumulation periods
like the Accumulation Period or amortization periods like the Early Amortization
Period for the Class A Certificates, and such periods may have different lengths
or begin on different dates than the Accumulation Period or Early Amortization
Period. Thus, certain Series may be in their revolving periods, while others are
in periods in which Principal Collections are distributed to or accumulated for
such Series. Under certain circumstances, one or more Series may be in their
amortization periods, while other Series are not. In addition, other Series may
allocate Principal Collections based upon different invested percentages. See
"Description of the Certificates--Exchanges" in the Prospectus for a discussion
of the potential terms of other Series. See Annex I for a description of the
terms of Series [o], being all previously issued and outstanding Series of the
Trust.
Final Payment of Principal;
Termination of the Trust......... The Class A Certificates and Class B 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 $[o]
(10% of the sum of the Class A Initial Invested Amount and the Class B Initial
Invested Amount), unless certain events of bankruptcy, insolvency or
receivership have occurred with respect to one or both of the Transferors. The
repurchase price will be equal to the sum of the Class A Invested Amount plus
accrued and unpaid interest on the Class A Certificates and the Class B Invested
Amount plus accrued and unpaid interest on the Class B Certificates through the
day preceding the Distribution Date on which the repurchase occurs. In any
event, the final payment of the principal of and interest on the Class A
Certificates will be no later than the [o] Distribution Date (the "Final Series
1998-1 Termination Date"). See "Description of the Class A Certificates and the
Agreement--Final Payment of Principal; Termination of Trust." After such date,
neither the Trust nor the Transferors will have any further obligation to pay
the principal of or interest on the Class A Certificates.
Tax Status.......................... In the opinion of special tax counsel to the Transferors which is
described in the Prospectus, the Class A Certificates will be characterized as
debt for Federal income tax purposes. Under the Agreement, the Transferors, the
Servicer, the Class A Certificateholders and the Class A Certificate Owners will
agree to treat the Class A Certificates as debt for federal, state, and other
tax purposes. See "Federal Income Tax Consequences" in the prospectus for
additional information concerning the application of federal income tax laws.
ERISA Considerations................ Under the regulations issued by the Department of Labor, the
Trust's assets would not be deemed "plan assets" of any employee benefit plan
holding interests in the Class A Certificates if certain conditions are met,
including that interests in the Class
S-11
<PAGE>
<S> <C>
A Certificates be held, upon completion of the public offering being made
hereby, by at least 100 investors who are independent of the issuer and one
another. The Underwriters expect, although no assurance can be given, that
interests in the Class A Certificates will be held by at least 100 separately
named persons, and it is anticipated that the other conditions of the
regulations will be met. If the Trust's assets were deemed to be "plan assets"
of such a plan, there is uncertainty as to whether existing exemptions from the
"prohibited transaction" rules of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and Section 4975 of the Internal Revenue Code of
1986, as amended (the "Code"), would apply to all transactions involving the
Trust's assets. Accordingly, employee benefit plans contemplating purchasing
Class A Certificates should consult their counsel before making a purchase. See
"ERISA Considerations" in the Prospectus.
Rating.............................. It is a condition to the issuance of the Class A Certificates
that they be rated in the highest rating category by at least one nationally
recognized rating agency. The rating of the Class A Certificates is based
primarily on the quality of the Receivables, the continued ability of TRS and
the Transferors, as applicable, to generate and transfer Receivables and the
terms of the subordination of the Class B Certificates. See "Risk
Factors--Rating of the Class A Certificates."
</TABLE>
S-12
<PAGE>
RISK FACTORS
Investors should consider, among other things, the following factors
in connection with an investment in the Class A Certificates.
Limited Liquidity. There is currently no market for the Class A
Certificates and there can be no assurance that a secondary market for the
Class A Certificates will develop, or if it does develop, that it will provide
Class A Certificateholders with liquidity of investment or will continue for
the life of the Class A Certificates. The Underwriters intend, but are not
obligated, to make a market in the Class A Certificates.
Limited Subordination. The amount of credit enhancement of the Class
A Certificates provided by the subordination of the Class B Certificates is
limited. Payment of interest on the Class B Certificates on each Distribution
Date is subordinated to the payment of interest on the Class A Certificates on
such Distribution Date and the payment in full of the Class B Certificates is
subordinated to the payment in full of the Class A Certificates. The Class B
Invested Amount will be reduced on any Distribution Date to the extent Yield
Collections allocable to pay the Investor Default Amount are insufficient
therefor, which reduction will result in the reduction of the amount of Yield
Collections allocable to the Certificateholders' Interest in future Due
Periods. If the Class B Invested Amount is reduced to zero, the Class A
Certificateholders will bear directly the credit and other risks associated
with their undivided interest in the Trust and the Class A Invested Amount may
be reduced.
Rating of the Class A Certificates. It is a condition to the issuance
of the Class A Certificates that they be rated in the highest rating category
by at least one nationally recognized rating agency (the rating agency or
rating agencies selected by the Transferors to rate the Class A Certificates
is herein referred to as the "Rating Agency"). The rating is based primarily
on the quality of the Receivables, the continued ability of TRS and the
Transferors, as applicable, to generate and transfer Receivables and the terms
of the subordination of the Class B Certificates. There is no assurance that
the rating will remain for any given period of time or that the rating will
not be lowered or withdrawn entirely by the Rating Agency, if in its judgment
circumstances in the future so warrant, including a change in the ability of
TRS and the Transferors, as applicable, to generate and transfer Receivables
or a reduction in the financial strength of American Express Company, TRS or
Centurion Bank. The rating is not a recommendation to purchase, hold or sell
Class A Certificates, inasmuch as such rating does not comment as to market
price or suitability for a particular investor. The rating of the Class A
Certificates does 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 Class A Certificates addresses the likelihood of
the ultimate payment of principal and interest on the Class A Certificates.
However, the Rating Agency does not evaluate, and the rating of the Class A
Certificates does not address, the likelihood that the outstanding principal
amount of the Class A Certificates will be paid by the Expected Final Payment
Date.
Book-Entry Registration. The Class A Certificates initially will be
represented by Class A Certificates registered in the name of Cede, the
nominee for DTC, and will not be registered in the names of the Class A
Certificate Owners or their nominees. Because of this, unless and until
Definitive Certificates are issued, Class A Certificate Owners will not be
recognized by the Trustee as Class A Certificateholders, as that term is used
in the Agreement. Hence, until such time, Class A Certificate Owners will only
be able to receive payments from, and exercise the rights of Class A
Certificateholders indirectly through, DTC, Cedel or Euroclear and the
respective participating organizations, and, unless a Class 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 Class A Certificate Owners by DTC, Cedel or
Euroclear and their respective participating organizations. In addition, the
ability of Class A Certificate Owners to pledge Class A Certificates to
persons or entities that do not participate in the DTC system, or otherwise to
take actions in respect of such Class A Certificates, may be limited due to
the lack of physical certificates for such Class A Certificates. See
"Description of the Class A Certificates and the Agreement--Book-Entry
Registration" and "--Definitive Certificates" in the Prospectus.
S-13
<PAGE>
DOMESTIC CONSUMER CHARGE CARD BUSINESS
Portfolio Experience
The following tables set forth the historical receivable turnover
rate, payment rate, loss experience, periodic yield computation and
delinquency experience for each of the periods shown for the entire Portfolio.
Because the Designated Accounts are only a portion of the Portfolio,
actual experience with respect to the Designated Accounts may have been
different from that of the Portfolio. Because the Designated Accounts have
been selected from the Portfolio in a manner not believed to be adverse to
Certificateholders and represent a sizable portion of the Portfolio, TRS and
the Transferors believe that the performance of the Portfolio reflected in the
following tables is indicative of the historical performance of the Designated
Accounts. Because the Designated Accounts are a fixed pool of Accounts,
receivable turnover rate, payment rate, loss experience, periodic yield
computation, delinquency experience and the rate of receivable growth with
respect to the Designated Accounts may be different from that of the Portfolio
in the future.
Receivable Turnover Rate and Payment Rate Experience. The Accounts
are designed for use as a method of payment for the purchase of merchandise
and services, and, except in the limited circumstances related to Recovery
Arrangements and described under "Domestic Consumer Charge Card
Business--Collection Efforts" in the Prospectus, account balances are due in
full each month. Therefore, Accounts cannot be used by Cardmembers for the
purpose of financing these purchases. In contrast to revolving credit plan
products which do not require payment in full each month, the requirement that
Account balances be paid in full each month creates a high monthly payment
rate and, therefore, Account balances which turn over rapidly relative to
charge volume. The following two tables illustrate this product characteristic
based on the historical Portfolio experience.
Receivable Turnover Rates for the Portfolio
(Dollars in Thousands)
<TABLE>
Three Months Ended
March 31, Years Ended December 31,
------------------ ----------------------------------------
<S> <C> <C> <C> <C>
1998 1997 1996 1995
---- ---- ---- ----
Charge Volume and Fees(1)...................... $ 15,765,340 $ 65,311,110 $ 62,207,966 $ 57,792,171
Average Receivables $ 7,596,368 $ 7,808,748 $ 7,385,284 $ 7,287,351
Outstanding(2)...............................
Receivables Turnover Rate(3)(4)................ 8.30 8.36 8.42 7.93
</TABLE>
- -----------------
(1) Charge Volume and Fees is the sum of (a) amounts charged by Cardmembers
for merchandise and services for each period shown and (b) all membership
and administrative fees billed to Accounts for each period shown. Charge
Volume and Fees includes amounts billed under the Privileged Assets
program, which amounts are not material.
(2) Average Receivables Outstanding is the arithmetic average of the month
end Portfolio balances including the opening Portfolio balance for each
period shown.
(3) Receivable Turnover Rate is calculated by dividing Charge Volume and Fees
by Average Receivables Outstanding for each period shown.
(4) The rate for the three-month period ended March 31, 1998 is annualized.
S-14
<PAGE>
<TABLE>
<CAPTION>
Monthly Payment Rates for the Portfolio (1)
Three Months Ended
March 31, Years Ended December 31,
------------------ ------------------------
1998 1997 1996 1995
---- ---- ---- -----
<S> <C> <C> <C> <C>
Average Monthly Rate......................................78.63% 77.94% 76.09% 76.83%
Highest Monthly Rate......................................84.82% 81.07% 78.48% 81.20%
Lowest Monthly Rate.......................................70.21% 67.86% 69.93% 68.10%
</TABLE>
- -----------------
(1) Monthly Payment Rate is calculated by dividing total collections received
(excluding recoveries on charged-off receivables) during each month by
such month's opening billed balance.
There can be no assurance that the receivable turnover rate and the
monthly payment rate, and thus the rate at which Certificateholders can expect
principal to be paid on and after the Principal Commencement Date, including
on or following the Expected Final Payment Date or during any Early
Amortization Period, will be similar to the historical Portfolio experience
set forth above.
Periodic Yield Computation. Receivables originated under the
Accounts, consisting of amounts charged by Cardmembers for merchandise and
services, annual membership fees and certain other administrative fees billed
to Cardmembers on the Accounts, are not (except in the limited circumstances
related to Recovery Arrangements and described under "Domestic Consumer Charge
Card Business--Collection Efforts" in the Prospectus) 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 the Collections on the
Receivables in the Designated Accounts received in any Due 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.
The dollar amounts representing Computed Yield in the table below
have been derived by applying a Yield Factor of 3.0% (which is, as of the date
hereof, the Yield Factor under the Agreement) to historical monthly
collections of receivables (excluding recoveries on charged-off receivables)
in the Accounts for each period shown. Each of those dollar amounts is divided
by Charge Volume and Fees for the appropriate period to produce a Computed
Yield for the Portfolio. To the extent that Charge Volume and Fees did not
equal collections for any given period, there is a difference between the
Computed Yield as a Percentage of Charge Volume and Fees and the assumed Yield
Factor of 3.0%
<TABLE>
Periodic Yield Computation for the
Portfolio Assuming a 3.0% Yield Factor
(Dollars in Thousands)
Three Months Ended
March 31, Years Ended December 31,
------------------ ------------------------
<S> <C> <C> <C> <C>
1998 1997 1996 1995
---- ---- ---- ----
Computed Yield(1).............................. $529,244 $1,993,964 $1,875,807 $1,757,635
Computed Yield as a Percentage of 3.36% 3.05% 3.02% 3.04%
Charge Volume and Fees(2)....................
</TABLE>
- -----------------
(1) Computed Yield is the dollar amount equal to the product of the 3.0%
assumed Yield Factor and collections (excluding recoveries on charged-off
receivables) for each period shown.
(2) Computed Yield as a Percentage of Charge Volume and Fees may not equal
the 3.0% assumed Yield Factor because Charge Volume and Fees may not
equal collections (excluding recoveries on charged-off receivables) for
the periods shown.
S-15
<PAGE>
There can be no assurance that the yield experience for Receivables
in Designated Accounts will be similar to the periodic yield computation for
the Portfolio set forth in the table. The actual yield experience will vary
month to month due to variations in receivable turnover rates, payment rates
and Cardmember charge activity. The actual yield experience will also be
affected by any changes to the Yield Factor. Pursuant to the Agreement,
without notice to or the consent of certificateholders, the Transferors have
the ability to change the Yield Factor. The Transferors may not, however,
reduce the Yield Factor below 3.0% or increase it above 5.0%. Further, the
Transferors may not change the Yield Factor if a Pay Out Event has occurred
and is continuing, or, as a result of such change, their reasonable
expectation is that a Pay Out Event would occur. See "Risk Factors--Ability to
Change Yield Factor" in the Prospectus.
Loss Experience. The following table sets forth the Portfolio's
historical gross loss, recovery and net loss experience for the periods shown.
Due to the Portfolio's Receivable Turnover Rate and Monthly Payment Rate,
gross losses, recoveries and net losses are expressed as a percentage of
Charge Volume and Fees.
<TABLE>
Loss Experience for the Portfolio
(Dollars in Thousands)
Three Months Ended
March 31, Years Ended December 31,
------------------ ------------------------
<S> <C> <C> <C> <C>
1998 1997 1996 1995
---- ---- ---- ----
Gross Losses................................... $115,938 $495,049 $478,656 $429,761
Gross Losses as a Percentage of 0.74% 0.76% 0.77% 0.74%
Charge Volume and Fees.......................
Recoveries..................................... $23,717 $102,317 $98,970 $101,988
Recoveries as a Percentage of 0.15% 0.16% 0.16% 0.18%
Charge Volume and Fees.......................
Net Losses..................................... $92,221 $392,732 $379,686 $327,773
Net Losses as a Percentage of
Charge Volume and Fees....................... 0.58% 0.60% 0.61% 0.57%
</TABLE>
There can be no assurance that the loss experience for the Designated
Accounts in the future will be similar to the historical Portfolio experience
set forth above.
Periodic Net Yield Computation. Computed Net Yield is the dollar
amount equal to Computed Yield minus Net Losses. The table below sets forth
the Computed Net Yield for the periods shown.
<TABLE>
Periodic Net Yield Computation for
the Portfolio Assuming a 3.0% Yield Factor
(Dollars in Thousands)
Three Months Ended
March 31, Years Ended December 31,
------------------ ------------------------
<S> <C> <C> <C> <C>
1998 1997 1996 1995
---- ---- ---- ----
Computed Net Yield............................. $437,023 1,601,233 1,496,121 $1,429,862
Computed Net Yield as a Percentage of 2.77% 2.45% 2.41% 2.47%
Charge Volume and Fees.......................
</TABLE>
The ability of the Trust to generate sufficient yield to pay interest
to Certificateholders and to pay the Monthly Servicing Fee with respect to
each Series depends upon the Monthly Payment Rate, the Yield Factor, Net
Losses and the generation of new Receivables. Based on the Portfolio
experience described in the foregoing tables, the following example
illustrates how these variables would interact to produce yield to the Trust.
For the year
S-16
<PAGE>
ended December 31, 1997, the Computed Net Yield as a Percentage of Charge Volume
and Fees was 2.45% and the Receivable Turnover Rate (total Charge Volume and
Fees divided by Average Receivables Outstanding) was 8.36. The product of these
two variables results in a net yield as a percentage of Average Receivables
Outstanding of 20.48% for the year ended December 31, 1997. There can be no
assurance that the experience for the Designated Accounts in the future will be
similar to the historical Portfolio experience set forth above.
Delinquency Experience. The table below sets forth the Portfolio's
delinquency experience for the periods shown.
<TABLE>
Delinquency Experience for the Portfolio
(Dollars in Thousands)
Average of Three Months
Ended March 31, Average of Twelve Months Ended December 31,
----------------------- -------------------------------------------
<S> <C> <C> <C> <C>
1998 1997 1996 1995
---- ---- ---- ----
Number of Days Delinquent Delinquent Delinquent Delinquent
Delinquent(1) Amount Percentage(2) Amount Percentage(2) Amount Perentage(2) Amount Percentage(2)
-------------- ---------- ------------- ---------- ------------- ---------- ------------ ---------- -------------
30 to 59 days..... $143,333 1.96% $144,731 2.02% $147,391 2.13% $139,161 2.16%
60 to 89 days..... $59,100 0.81% $65,403 0.91% 66,748 0.97% 57,749 0.90%
90 to 119 days.... $42,152 0.58% $48,919 0.68% 50,971 0.74% 44,388 0.69%
120 or more days.. $177,449 2.43% $194,086 2.71% 189,372 2.74% 171,706 2.67%
Total(3) ........ $422,034 5.78% $453,140 6.32% $454,481 6.58% $413,003 6.42%
</TABLE>
- -----------------
(1) Delinquency is measured as the number of days after a charge is first
included within an unpaid "Previous Balance" on any monthly billing
statement and is determined by reference to the payment status of each
Account as of the cycle billing date occurring during the applicable
month.
(2) Percentage is calculated by dividing delinquent amounts by the arithmetic
average of the month-end billed aggregate balances, inclusive of the
opening billed aggregate balance, for the appropriate period. Delinquent
amounts are the arithmetic average of the month-end billed delinquencies
by category, inclusive of the opening billed delinquent amount for the
appropriate period.
(3) Delinquent Amounts and Percentages may not total due to rounding.
S-17
<PAGE>
DESIGNATED ACCOUNTS
General
As of March 31, 1998, the Designated Accounts (excluding Accounts
charged off and Accounts closed at the Cardmembers' request) consisted of
10,240,876 Accounts. The Receivables in the Designated Accounts as of March
31, 1998, totaled $5,715,737,001 and the average Designated Account
Receivables balance was $558. As of March 31, 1998, approximately 88% of the
Designated Accounts by Receivable balance had been in existence for at least
five years. By Receivable balance, 14.30%, 12.71%, 9.32%, 8.21% and 7.20% of
the Designated Accounts have Cardmember billing addresses in New York,
California, Texas, Florida and New Jersey, respectively. The remainder of the
Designated Accounts have billing addresses in the remaining states of the
United States (including certain of its territories and possessions), none of
which represents more than 3.96% by Receivable balance of the Designated
Accounts. The following tables summarize the Designated Accounts by various
criteria as of March 31, 1998. Data presented below for the Designated
Accounts does not include (i) Accounts charged-off and (ii) Accounts closed at
the Cardmembers' request.
<TABLE>
Composition of Designated Accounts by Account Balance
Percentage of Percentage of
Number of Total Number of Receivables Total Receivables
Account Balance Range Accounts Accounts Outstanding(1) Outsanding
--------------------- --------- --------------- -------------- ------------------
<S> <C> <C> <C> <C>
Credit Balance................... 162,452 1.59% $ (44,337,752) -0.78%
No Balance....................... 4,570,346 44.63% 0 0.00%
$1 - $500........................ 3,172,888 30.98% 566,274,455 9.91%
$501 - $1,000.................... 913,998 8.92% 655,222,549 11.46%
$1,001 - $2,000.................. 710,571 6.94% 1,003,386,939 17.55%
$2,001 - $3,000.................. 285,112 2.78% 695,366,465 12.17%
$3,001 - $5,000.................. 228,632 2.23% 872,609,225 15.27%
Greater than $5,000.............. 196,877 1.92% 1,967,215,120 34.42%
---------- ----- ------------- -----
Total(2).................. 10,240,876 100.00% $5,715,737,001 100.00%
========== ====== ============== ======
</TABLE>
- -----------------
(1) Receivables Outstanding include amounts billed under the Privileged
Assets program, which amounts are not material.
(2) Percentages and Receivables Outstanding may not total due to rounding.
S-18
<PAGE>
<TABLE>
<CAPTION>
Composition of Designated Accounts by Payment Status
Percentage
of Total Percentage
Number of Total
Number of of Receivables Receivables
Payment Status(1) Accounts(2) Accounts Outstanding(3) Outstanding
----------------- ----------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
Current and less than 30 days 9,977,516 97.43% $5,426,605,157 94.94%
delinquent........................
30 to 59 days delinquent............. 142,485 1.39% 113,966,777 1.99%
60 to 89 days delinquent............. 41,546 0.41% 44,343,659 0.78%
90 to 119 days delinquent............ 19,933 0.19% 25,024,912 0.44%
120 or more days delinquent.......... 59,396 0.58% 105,796,496 1.85%
---------- ------ ------------- ------
Total(4)...................... 10,240,876 100.00% $5,715,737,001 100.00%
========== ====== ============= ======
</TABLE>
- -----------------
(1) Delinquency is measured as the number of days after a charge is first
included within an unpaid "Previous Balance" on any monthly billing
statement and is determined by reference to the payment status of each
Designated Account as of the cycle billing date occurring during March,
1998.
(2) The payment status of each Designated Account is based on the oldest
balance in such Account.
(3) Receivables Outstanding include amounts billed under the Privileged Assets
program, which amounts are not material.
(4) Percentages and Receivables Outstanding may not total due to rounding.
Composition of Designated Accounts by Age
<TABLE>
<CAPTION>
Percentage
of Total Percentage
Number of Total
Number of of Receivables Receivables
Age(1) Accounts Accounts Outstanding(2) Outstanding
------ --------- --------- -------------- -----------
<S> <C> <C> <C> <C>
Less than 12 months.................. 2,632 0.03% $ 2,287,328 0.04%
12-23 months......................... 1,337 0.01% 1,331,645 0.02%
24-35 months......................... 281,306 2.75% 159,140,249 2.78%
36-47 months......................... 414,598 4.05% 228,979,732 4.01%
48-59 months......................... 602,171 5.88% 287,876,925 5.04%
Greater than 59 months............... 8,938,832 87.29% 5,036,121,122 88.11%
---------- ------ ------------- -------
Total(3)...................... 10,240,876 100.00% $5,715,737,001 100.00%
========== ====== ============= ======
- -----------------
</TABLE>
(1) Determined by reference to date of initial Cardmembership.
(2) Receivables Outstanding include amounts billed under the Privileged
Assets program, which amounts are not material.
(3) Percentages and Receivables Outstanding may not total due to rounding.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates will be paid to
the Transferors. The Transferors will pay such proceeds to an affiliate in
exchange for a reduction of such affiliate's interest in the Exchangeable
Transferor Certificate.
S-19
<PAGE>
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS
The Agreement provides that the Class A Invested Amount is payable on
the Expected Final Payment Date (but may be distributable earlier upon the
occurrence of a Pay Out Event) to the extent funds are available therefor in
the Principal Funding Account. Although it is anticipated that accumulated
principal will be sufficient to pay the Class A Invested Amount on the
Expected Final Payment Date, no assurance can be given in that regard. If such
amounts are insufficient to pay the Class A Invested Amount on the Expected
Final Payment Date, thereafter the Class A Certificateholders will receive
distributions of Class A Monthly Principal and Class A Monthly Interest on
each Special Payment Date until the earlier of the date on which the Class A
Invested Amount has been paid in full or the Final Series 1998-1 Termination
Date. Even if the funds on deposit in the Principal Funding Account are
insufficient to pay the Class A Invested Amount in full, all such funds will
be distributed to the Class A Certificateholders on the Expected Final Payment
Date.
Deposits of Class A Monthly Principal will be made to the Principal
Funding Account on each Distribution Date occurring during the Accumulation
Period, in an amount equal to the lesser of (a) the Controlled Deposit Amount
and (b) the sum of (i) the Fixed Allocation Percentage of all Principal
Collections received during the Due Period immediately preceding such
Distribution Date, (ii) the amount of any Series Undistributed Principal
Collections on deposit in the Collection Account on such Distribution Date and
(iii) amounts available to pay the Investor Default Amount and reimburse Class
A Investor Charge-Offs and Class-B Investor Charge-Offs with respect to such
Distribution Date. Additionally, Excess Principal Collections allocable to the
Certificates may also be used to pay the Controlled Deposit Amount. Assuming
that: (a) the annualized Receivable Turnover Rate for the Designated Accounts
is not less than [ o ], (b) the Yield Factor equals 3.0%, (c) Receivables
remain constant at the amount outstanding as of March 31, 1998, and (d) a Pay
Out Event does not occur during the Accumulation Period, the Transferors
expect that on the Expected Final Payment Date there will be sufficient funds
on deposit in the Principal Funding Account to pay the Class A Invested Amount
in full. The annualized receivable turnover rate described above is less than
the lowest receivable turnover rate shown in the "Receivable Turnover Rates
for the Portfolio" table shown under "Domestic Consumer Charge Card
Business--Portfolio Experience." However, there can be no assurance that any
other Series issued prior to or concurrently with this Series with a revolving
period which ends after the Revolving Period for the Class A Certificates will
not enter into an amortization period prior to the Expected Final Payment
Date. Further, the actual rate of accumulation and payment of principal will
depend, among other factors, on the rate of repayment, the timing of the
receipt of such repayments, the Yield Factor, the Receivable Turnover Rate and
the rate of default by Cardmembers.
In the event of the occurrence of a Pay Out Event, the Early
Amortization Period will begin on the day on which such Pay Out Event occurs
or is deemed to have occurred. During the Early Amortization Period,
distributions of principal to Class A Certificateholders will not be limited
by the Controlled Deposit Amount. In the event of a sale, disposition or other
liquidation of the Receivables following an insolvency event as described
under "Description of the Class A Certificates and the Agreement--Pay Out
Events" or in connection with the Final Series 1998-1 Termination Date, Class
A Monthly Principal will be payable to Certificateholders on the following
Distribution Date. Although the Transferors believe that the likelihood of a
Pay Out Event occurring is remote, there can be no assurance that a Pay Out
Event will not occur. See "Description of the Class A Certificates and the
Agreement--Pay Out Events."
The amount of collections of Receivables may vary from month to month
due to seasonal variations, general economic conditions and payment habits of
individual Cardmembers. There can be no assurance that Principal Collections
with respect to the Trust Portfolio, and thus the rate at which the
Certificateholders could expect to receive or accumulate payments of principal
on their Certificates during an Early Amortization Period or the Accumulation
Period, or on the Expected Final Payment Date, as applicable, will be similar
to any historical experience set forth herein. If a Pay Out Event occurs, the
average life and maturity of the Class A Certificates could be significantly
reduced.
In addition, since the Trust, as a master trust, currently has seven
other series of certificates outstanding, and may issue additional Series from
time to time, there can be no assurance that the issuance of additional Series
or the Principal Terms of any other Series might not have an impact on the
timing and amount of payments received by Class A Certificateholders. Further,
if a Pay Out Event occurs, the average life and maturity of the Class A
Certificates could be significantly reduced.
S-20
<PAGE>
Because there may be a slow-down in the payment rate with respect to
the Designated Accounts or a Pay Out Event may occur (which would initiate an
Early Amortization Period), there can be no assurance that the final payment
of the Class A Invested Amount will occur on the Expected Final Payment Date.
There can be no assurance that future Cardmember monthly payment rate
experience will be similar to historical experience. See "Risk Factors" in the
Prospectus.
DESCRIPTION OF THE CLASS A
CERTIFICATES AND THE AGREEMENT
The Certificates will be issued pursuant to the Agreement and the
Series 1998-1 Supplement to the Agreement (the "Series 1998-1 Supplement")
among the Transferors, as the transferors of the Receivables, TRS, as Servicer
of the Designated Accounts and the Receivables and The Bank of New York, as
Trustee for the Certificateholders, substantially in the form filed as
exhibits to the Registration Statement of which the Prospectus is a part.
Pursuant to the Agreement, the Transferors may execute further Supplements
thereto among the Transferors and the Trustee in order to issue additional
Series. See "Description of the Certificates--Exchanges" in the Prospectus.
The Trustee will provide a copy of the Agreement (without exhibits or
schedules), including any Supplements, to Class A Certificateholders without
charge upon written request. The following summary describes certain terms of
the Agreement and the Series 1998-1 Supplement and is qualified in its
entirety by reference to the Agreement and the Series 1998-1 Supplement.
General
The Class A Certificates will represent undivided interests in the
Trust, including the right to receive the 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 Class A
Certificate Rate and the Class A 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 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, the Reserve Account and any other accounts established for
the benefit of any other Series (which other accounts will not be available to
Certificateholders), and payments made in respect of Enhancements issued with
respect to any other Series (the drawing on or payment of such Enhancement not
being available to Certificateholders). The Trust does not include the
Receivables from any Removed Accounts. On the date of issuance of the
Certificates (the "Closing Date"), the Trustee will authenticate the Class A
Certificates and the Class B Certificates and deliver such Class A
Certificates to the Transferors which will in turn deliver them to the
Underwriters against payment of the net proceeds of the sale of the Class A
Certificates. The Trustee will also deliver the Class B Certificates and the
reissued Exchangeable Transferor Certificate to the Transferors. The
Transferors will initially retain the Class B Certificates but may transfer
them under certain circumstances specified in the Series 1998-1 Supplement. As
of the Closing Date, the Class A Invested Amount was $[ o ] and the Class B
Invested Amount was $[ o ].
Interest will accrue on the unpaid principal amount of the Class A
Certificates at a per annum rate equal to the Class A Certificate Rate and,
except as otherwise provided herein, be distributed to the Class A
Certificateholders monthly on each Interest Payment Date, commencing June
15, 1998. Interest for any Interest Payment Date will include interest at the
Class A Certificate Rate from and including the preceding Interest Payment
Date or, in the case of the first Interest Payment Date, from and including
the Closing Date, to but excluding such Interest Payment Date. Interest will
be calculated on the basis of a 360-day year of twelve 30-day months.
No principal payments will be made to the Class A Certificateholders
until the Expected Final Payment Date or, upon the occurrence of a Pay Out
Event as described herein, until the first Special Payment Date. See "--Pay
Out Events." No principal payments will be made to the Class B
Certificateholders until the final principal payment has been made to the
Class A Certificateholders. With respect to the Revolving Period, Principal
Collections allocable to the Certificateholders' Interest will either be (i)
allocated to one or more Series which are in amortization, early amortization
or accumulation periods to cover principal payments due to the investor
S-21
<PAGE>
certificateholders of any such Series or (ii) if no such Series is then
amortizing or accumulating principal, paid to the Transferors to maintain the
Certificateholders' Interest or held as Undistributed Principal Collections.
Unless and until a Pay Out Event shall have occurred, on each
Distribution Date with respect the Accumulation Period on or prior to the
Expected Final Payment Date, all Principal Collections allocable to the
Certificateholders' Interest, certain other amounts comprising Class A Monthly
Principal and Excess Principal Collections allocated to the Certificates will
no longer be paid for the benefit of other Series or to the Transferors as
described above but instead an amount thereof up to the Controlled Deposit
Amount will be deposited in the Principal Funding Account. Any such Principal
Collections in excess of the Controlled Deposit Amount will be included as
Excess Principal Collections. The Controlled Accumulation Amount shall equal
$[ o ]. The funds deposited in the Principal Funding Account will be used to
pay the Class A Invested Amount on the Expected Final Payment Date. Amounts on
deposit in the Principal Funding Account will be invested at the direction of
the Servicer in Eligible Investments. See "--Principal Funding Account."
Although the Principal Funding Account will be held in a trust account in an
Eligible Institution and invested in Eligible Investments, the Class A
Certificateholders will bear the risk of loss of any amounts of principal on
deposit therein. Prior to the Expected Final Payment Date, the amount on
deposit in the Principal Funding Account subject to such risk could reach a
maximum [ o ]. Even if the funds on deposit in the Principal Funding Account
at such time are insufficient to pay the Class A Invested Amount in full, all
such funds will be distributed to the Class A Certificateholders on the
Expected Final Payment Date. On each Distribution Date thereafter the Class A
Certificateholders will receive distributions of Class A Monthly Principal and
Class A Monthly Interest until the Class A Invested Amount has been paid in
full or until the Final Series 1998-1 Termination Date.
Interest payments on the Class A Certificates will be made on each
Interest Payment Date and interest and principal payments on the Class A
Certificates will be made on the Expected Final Payment Date (or, if a Pay Out
Event occurs, on each Special Payment Date) to the Class A Certificateholders
in whose names the Class A Certificates were registered (expected to be Cede,
as nominee of DTC) at the close of business on the Record Date. The final
payment on the Class A Certificates will be made only upon presentation and
surrender of the Class A Certificates. Distributions will be made to DTC in
immediately available funds.
The Class A Certificates will initially be represented by one or more
Class A Certificates registered in the name of the nominee of DTC except as
set forth below. The interests of holders of beneficial interests in the Class
A Certificates ("Class A Certificate Owners") will be available for purchase
in denominations of $1,000 (representing [ o ] of the undivided interest of
the Class A Certificateholders in the Trust) 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 the Class A Certificates. Unless and until Definitive Certificates are
issued under the limited circumstances described herein, no Class A
Certificate Owner will be entitled to receive a certificate representing such
person's interest in the Class A Certificates. All references herein to
actions by Class A 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 Class A
Certificateholders shall refer to distributions, notices, reports and
statements to DTC or Cede, as the registered holder of the Class A
Certificates, as the case may be, for distribution to Class A Certificate
Owners in accordance with DTC procedures. See "Description of the
Certificates--Book-Entry Registration" and "--Definitive Certificates" in the
Prospectus.
Principal Funding Account
The Trustee will establish and maintain, or cause to be established
and maintained, for the benefit of the Certificateholders, in the name of the
Trustee, on behalf of the Trust, the Principal Funding Account (unless the
commencement of the Accumulation Period is postponed, in which case all
Principal Collections received with respect to the prior Due Period and
allocable to the Certificateholders' Interest plus Excess Principal
Collections, if any, from other Series allocable to the Certificates plus
certain amounts comprising Class A Monthly Principal will be distributed to
the Class A Certificateholders on the Expected Final Payment Date). If the
commencement of the Accumulation Period is not postponed, during the
Accumulation Period, Class A Monthly Principal plus Excess Principal
Collections, if any, from other Series allocable to the Certificates will be
deposited in the Principal Funding Account on each Distribution Date as
provided below under "--Distributions from the Collection Account"
S-22
<PAGE>
and "--Distributions to Class A Certificateholders"; provided, that if a Pay Out
Event occurs during the Accumulation Period, the amounts on deposit in the
Principal Funding Account shall be paid to the Class A Certificateholders on
the first Special Payment Date. All amounts deposited into the Principal
Funding Account prior to the Expected Final Payment Date will be invested by
the Trustee at the direction of the Servicer in Eligible Investments. On each
Distribution Date, all investment income earned (net of losses and expenses)
on amounts in the Principal Funding Account since the preceding Distribution
Date will be withdrawn from the Principal Funding Account and deposited into
the Collection Account.
On each Distribution Date with respect to the Accumulation Period the
interest and other investment income (net of investment expenses and losses)
earned on such investments (the "Principal Funding Investment Proceeds") will
be withdrawn from the Principal Funding Account and will be treated as Yield
Collections. If such investments with respect to any such Distribution Date
yield less than the Class A Certificate Rate, the Principal Funding Investment
Proceeds with respect to such Distribution Date will be less than the Covered
Amount for such Distribution Date. It is intended that any such shortfall will
be funded from Yield Collections (including a withdrawal from the Reserve
Account, if necessary, as described under "--Reserve Account"). The Available
Reserve Account Amount at any time will be limited and there can be no
assurance that sufficient funds will be available to fund any such shortfall.
The "Covered Amount" shall mean for any Distribution Date with respect to the
Accumulation Period or the first Special Payment Date, if such Special Payment
Date occurs prior to the payment in full of the Class A Invested Amount, an
amount equal to one-twelfth of the product of (i) the Class A Certificate Rate
and (ii) all amounts on deposit in the Principal Funding Account, if any, as
of the preceding Distribution Date.
Reserve Account
A trust account in the name of the Trustee for the benefit of the
Class A Certificateholders (the "Reserve Account") will be established. The
Reserve Account will be established to assure the subsequent distribution of
interest on the Class A Certificates as provided in this Prospectus Supplement
during the Accumulation Period. On each Distribution Date from and after the
Reserve Account Funding Date (as defined below), but prior to the termination
of the Reserve Account, the Trustee, acting pursuant to the Servicer's
instructions, will apply Excess Spread to increase the amount on deposit in
the Reserve Account (to the extent such amount is less than the Required
Reserve Account Amount). In addition, on each Distribution Date, the
Transferors will have the option, but will not be required, to make a deposit
in the Reserve Account to the extent that the amount on deposit in the Reserve
Account, after giving effect to any Excess Spread available to be deposited in
the Reserve Account on such Distribution Date, is less than the Required
Reserve Account Amount. The "Reserve Account Funding Date" will be the
Distribution Date with respect to the Due Period that commences three months
prior to the Distribution Date with respect to the first Due Period in the
Controlled Accumulation Period, or such earlier date as the Transferors may
determine. The "Required Reserve Account Amount" for any Distribution Date on
or after the Reserve Account Funding Date will be equal to [o]% of the Class A
Invested Amount as of the preceding Distribution Date, or any other amount
designated by the Transferors provided that the Transferors have received
written notice from each Rating Agency that such designation will not cause a
downgrade or withdrawal of such Rating Agency's then current rating of any
outstanding series. On each Distribution Date, after giving effect to any
deposit to be made to, and any withdrawal to be made from, the Reserve Account
on such Distribution Date, the Trustee will withdraw from the Reserve Account
an amount equal to the excess, if any, of the amount on deposit in the Reserve
Account over the Required Reserve Account Amount and shall distribute such
excess to the Transferors.
Provided that the Reserve Account has not terminated as described
below, all amounts on deposit in the Reserve Account on any Distribution Date
(after giving effect to any deposits to, or withdrawals from, the Reserve
Account to be made on such Distribution Date) will be invested until the
following Distribution Date by the Trustee at the direction of the Servicer in
Eligible Investments. The interest and other investment income (net of
investment expenses and losses) earned on such investments (the "Interest
Funding Investment Proceeds") will be retained in the Reserve Account (to the
extent the amount on deposit therein is less than the Required Reserve Account
Amount) or deposited in the Collection Account and treated as Yield
Collections.
On or before each Distribution Date with respect to the Accumulation
Period (on or prior to the Expected Final Payment Date) and on the first
Special Payment Date (if such Special Payment Date occurs on or prior to the
Expected Final Payment Date), a withdrawal will be made from the Reserve
Account, and the amount of such
S-23
<PAGE>
withdrawal will be deposited in the Collection Account and treated as Yield
Collections in an amount equal to the lesser of (a) the Available Reserve
Account Amount with respect to such Distribution Date or Special Payment Date
and (b) the excess, if any, of the Covered Amount with respect to such
Distribution Date or Special Payment Date over the Principal Funding Investment
Proceeds with respect to such Distribution Date or Special Payment Date;
provided that the amount of such withdrawal will be reduced to the extent that
funds otherwise would be available to be deposited in the Reserve Account on
such Distribution Date or Special Payment Date. On each Distribution Date, the
amount available to be withdrawn from the Reserve Account (the "Available
Reserve Account Amount") will be equal to the lesser of the amount on deposit
in the Reserve Account (before giving effect to any deposit to be made to the
Reserve Account on such Distribution Date) and the Required Reserve Account
Amount for such Distribution Date.
The Reserve Account will be terminated following the earlier to occur
of (a) the termination of the Trust pursuant to the Agreement, (b) the date on
which the Class A Certificates are paid in full and (c) if the Accumulation
Period has not commenced, the occurrence of a Pay Out Event or, if the
Accumulation Period has commenced, the earlier of the first Special Payment
Date and the Expected Final Payment Date. Upon the termination of the Reserve
Account, all amounts on deposit therein (after giving effect to any withdrawal
from the Reserve Account on such date as described above) will be distributed
to the Transferors. Any amounts withdrawn from the Reserve Account and
distributed to the Transferors as described above will not be available for
distribution to the Class A Certificateholders.
Allocation Percentages
Pursuant to the Agreement, during each Due Period the Servicer will
allocate among the Certificateholders' Interest, any other Series of
certificates issued by the Trust and the Transferor Interest all Yield
Collections, all Principal Collections and the amount of all Defaulted
Receivables. Yield Collections and the amount of Defaulted Receivables will be
allocated at all times and Principal Collections will be allocated during the
Revolving Period to the Class A Certificateholders and the Class B
Certificateholders based on the percentage equivalent of the ratio of the
Invested Amount on the last day of the immediately preceding Due Period to the
Trust Principal Component on the last day of the immediately preceding Due
Period (the "Floating Allocation Percentage"). During the initial Due Period,
the Floating Allocation Percentage will equal the percentage equivalent of the
ratio which the amount of the sum of the Class A Initial Invested Amount and
the Class B Initial Invested Amount bears to the Trust Principal Component on
the last day of the Due Period immediately preceding the Closing Date. To
maintain the Certificateholders' Interest during the Revolving Period, subject
to certain limitations, the Floating Allocation Percentage of all Principal
Collections will be reinvested in the Trust or treated as Excess Principal
Collections and applied as described below in "--Principal Collections for all
Series," and the Transferor Percentage of such Principal Collections will be
paid to the Transferors. During the Accumulation Period, any period after the
Expected Final Payment Date and during any Early Amortization Period, all
Principal Collections will be allocated to the Class A Certificateholders
based on the percentage equivalent of the ratio that the Invested Amount as of
the last day of the Revolving Period bears to the greater of (a) the Trust
Principal Component on the last day of the prior Due Period and (b) 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 (the "Fixed Allocation Percentage"). The remainder
of the Principal Collections will be allocated to the holders of other Series,
if any, and to the Transferor Interest.
As used herein, (a) "Class A Invested Amount" for any date means an
amount equal to (i) the initial principal balance of the Class A Certificates,
minus (ii) the amount of principal payments made to Class A Certificateholders
prior to such date, minus (iii) the aggregate amount of Class A Investor
Charge-Offs for the current and all prior Distribution Dates, and plus (iv)
the aggregate amount of Yield Collections and certain other amounts applied on
all prior Distribution Dates and to be applied on the current Distribution
Date for the purpose of reimbursing amounts deducted pursuant to the foregoing
clause (iii); (b) "Class A Adjusted Invested Amount" for any date means an
amount equal to the Class A Invested Amount minus the aggregate principal
amount on deposit in the Principal Funding Account; (c) "Class B Invested
Amount" for any date means a amount equal to (i) the initial principal balance
of the Class B Certificates, minus (ii) the amount of principal payments made
to Class B Certificateholders prior to such date, minus (iii) the aggregate
amount of Class Investor Charge-Offs for the current and all prior
Distribution Dates, and plus (iv) the aggregate amount of Yield Collections
applied on all prior Distribution Dates and to be applied on the current
Distribution Date for the purpose of reimbursing amounts deducted pursuant to
the foregoing clause (iii); (d) "Invested Amount" for any date means the sum
of the Class A
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Adjusted Invested Amount and the Class B Invested Amount; and (e) "Transferor
Percentage" means (i) when used with respect to Yield Collections and the amount
of Defaulted Receivables, 100% minus the sum of the applicable Floating
Allocation Percentages with respect to all Series of certificates then issued
and outstanding and (ii) when used with respect to Principal Collections during
the Accumulation Period and any Early Amortization Period, 100% minus the sum
of the Fixed Allocation Percentages with respect to all Series of certificates
then issued and outstanding.
As a result of the Floating Allocation Percentage, Yield Collections
and the portion of Defaulted Receivables allocated to the Certificateholders'
Interest will change each Due Period based on the relationship of the sum of
the Class A Adjusted Invested Amount and Class B Invested Amount to the Trust
Principal Component on the last day of the immediately preceding Due Period.
As a result of the Fixed Allocation Percentage, the percentage of Principal
Collections allocable to the Certificateholders' Interest during the
Accumulation Period or any Early Amortization Period will exceed the
percentage of Principal Collections which would have been allocable using the
Floating Allocation Percentage.
Principal Collections for all Series
Principal Collections for any Due Period allocated to the
Certificateholders' Interest will first be used to cover, with respect to the
Accumulation Period, required deposits to the Principal Funding Account or,
with respect to any Early Amortization Period, payments to the
Certificateholders. The Servicer will determine the amount of Principal
Collections for any Due Period allocated to the Certificateholders' Interest
remaining after covering required deposits to the Principal Funding Account
and payments to the Certificateholders and any similar amount remaining for
any other Series ("Excess Principal Collections"). During the Revolving
Period, all Principal Collections allocable to the Certificateholders'
Interest (including Yield Collections that are deemed to be Principal
Collections and treated as Excess Principal Collections) will be treated as
Excess Principal Collections. The Servicer will allocate the Excess Principal
Collections to cover any scheduled or permitted principal distributions to
Certificateholders and deposits to Principal Funding Accounts for any Series
which have not been covered out of the Principal Collections allocable to such
other Series and certain other amounts for such Series ("Principal
Shortfalls"). Excess Principal Collections will not be used to cover investor
charge-offs for any Series. If Principal Shortfalls exceed Excess Principal
Collections for any Due Period, Excess Principal Collections will be allocated
pro rata among the applicable Series based on the relative amounts of
Principal Shortfalls. To the extent that Excess Principal Collections exceed
Principal Shortfalls, the balance will, subject to certain limitations, be
paid to the Transferors.
Postponement of the Accumulation Period
Upon written notice to the Trustee, the Transferors and the Rating
Agency, the Servicer may elect to postpone the commencement of the
Accumulation Period, and extend the length of the Revolving Period, subject to
certain conditions including those set forth below. On the Determination Date
immediately preceding the [ o ] Distribution Date and thereafter on each
Determination Date until the date the Accumulation Period begins, the Servicer
will determine the "Accumulation Period Length" based on the lowest monthly
payment rate on the Receivables for the prior 12 months and the amount of
principal distributable to the certificateholders of all outstanding Series
which are not in their revolving period. If the Accumulation Period Length is
less than the length of the Accumulation Period initially provided under the
Agreement, the Servicer may, at its option, postpone the commencement of the
Accumulation Period such that the number of months included in the
Accumulation Period will be equal to or exceed the Accumulation Period Length.
The effect of the foregoing calculation is to permit the reduction of the
length of the Accumulation Period based on the invested amounts of certain
other Series which are scheduled to be in their revolving periods during the
Accumulation Period and on increases in the payment rate on the Receivables,
which, if continued, would result in a shorter Accumulation Period. The length
of the Accumulation Period will not be less than one month and will not be
shorter than the period determined as of the first date of determination
unless the Trust has issued another Series of Investor Certificates subsequent
to that date and such Series is in its revolving period. If the commencement
of the Accumulation Period is delayed in accordance with the foregoing, and if
a Pay Out Event occurs after the date originally scheduled as the commencement
of the Accumulation Period, then it is probable that holders of Investor
Certificates would receive some of their principal later than if the
Accumulation Period had not been delayed.
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Distributions from the Collection Account
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:
(a) An amount equal to the Floating Allocation Percentage of Yield
Collections deposited in the Collection Account for the Due Period immediately
preceding such Distribution Date plus, with respect to a Distribution
occurring during the Accumulation Period, Investment Earnings will be
allocated in the following priority:
(i) an amount equal to Class A Monthly Interest for such
Distribution Date, plus the amount of any Class A Monthly Interest
previously due but not paid to Class A Certificateholders on a prior
Distribution Payment Date, plus any additional interest at a rate per
annum equal to the Class A Certificate Rate plus 2% with respect to
interest amounts that were due but not paid on a prior Distribution
Payment Date, will be paid to the Class A Certificateholders;
(ii) an amount equal to Class B Monthly Interest for such
Distribution Date plus the amount of any Class B Monthly Interest
previously due but not paid to the Class B Certificateholders on a
prior Distribution Date, plus any additional interest at a rate per
annum equal to the Class B Certificate Rate plus 2% with respect to
interest amounts that were due but not paid on a prior Distribution
Date, will be paid to Class B Certificateholders;
(iii) an amount equal to the Monthly Servicing Fee for such
Distribution Date plus any Monthly Servicing Fee that was due but not
paid on a prior Distribution Date will be distributed to the Servicer
(unless such amount has been previously netted against deposits to
the Collection Account);
(iv) an amount equal to unreimbursed Class A Investor
Charge-Offs, if any, will be deemed to be Principal Collections and
treated as Excess Principal Collections during the Revolving Period
and will be treated as part of Class A Monthly Principal during the
Accumulation Period or any Early Amortization Period;
(v) an amount equal to the aggregate Investor Default Amount
for such Distribution Date will be deemed to be Principal Collections
and treated as Excess Principal Collections during the Revolving
Period and will be treated as part of Class A Monthly Principal
during the Accumulation Period or any Early Amortization Period;
(vi) an amount equal to the amount of interest which has
accrued with respect to the outstanding aggregate principal amount of
the Class B Certificates at the Class B Certificate Rate but has not
been paid to the Class B Certificateholders either on such
Distribution Date or on a prior Distribution Date, plus any
additional interest at a rate per annum equal to the Class B
Certificate Rate plus 2% with respect to such interest amounts that
were due but not paid to Class B Certificateholders on any previous
Distribution Date, will be paid to the Class B Certificateholders;
(vii) an amount equal to unreimbursed Class B Investor
Charge-Offs, if any, will be deemed to be Principal Collections and
treated as Excess Principal Collections during the Revolving Period
and will be treated as part of Class A Monthly Principal during the
Accumulation Period or any Early Amortization Period; and
(viii) any Yield Collections allocated to the
Certificateholders' Interest remaining after giving effect to the
above described distributions and allocations (with respect to such
Distribution Date, "Excess Spread") will be distributed to the
Transferors.
(b) For each Distribution Date with respect to the Accumulation
Period or any Early Amortization Period and thereafter, the remaining funds on
deposit in the Collection Account with respect to such Distribution
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Date including, in the case of clause (i) below, Excess Principal Collections,
if any, from other Series allocable to the Certificates will be allocated in the
following priority:
(i) an amount up to Class A Monthly Principal for such
Distribution Date, plus Excess Principal Collections, if any, from
other Series allocable to the Certificates will be deposited in the
Principal Funding Account;
(ii) an amount up to the Class B Invested Amount for any
Distribution Date on and after the Class A Certificates have been
paid in full, plus Excess Principal Collections, if any, from other
Series allocable to the Certificates, will be distributed to the
holders of the Class B Certificates; and
(iii) an amount equal to the balance of any such remaining
funds on deposit in the Collection Account will be treated as Excess
Principal Collections and distributed to other Series or to the
Transferors as provided in the Agreement.
"Class A Monthly Interest" with respect to any Distribution Date will
equal one-twelfth of the product of (i) the Class A Certificate Rate and (ii)
the outstanding principal balance of the Class A Certificates as of the
preceding Distribution Date or, with respect to the first Distribution Date,
[ o ] of the product of (i) the Class A Certificate Rate and (ii) the Class A
Initial Invested Amount.
"Class B Monthly Interest" with respect to any Distribution Date will
equal one-twelfth of the product of (i) the Class B Certificate Rate and (ii)
the Class B Invested Amount as of the preceding Distribution Date (after
giving effect to any increase or decrease in the Class B Invested Amount on
such preceding Distribution Date) or, with respect to the first Distribution
Date, [ o ] of the product of (i) the Class B Certificate Rate and (ii) the
Class B Initial Invested Amount.
"Class A Monthly Principal" with respect to any Distribution Date
relating to the Accumulation Period or an Early Amortization Period or any
Special Payment Date will equal the sum of (i) an amount equal to the Fixed
Allocation Percentage of all Principal Collections received during the Due
Period immediately preceding such Distribution Date or Special Payment Date
or, in the case of the Distribution Date immediately following the occurrence
of a Pay Out Event, received during the period from the day a Pay Out Event
occurred to the end of such Due Period, (ii) the amount, if any, equal to the
product of (a) a fraction, the numerator of which is equal to the sum of the
Class A Adjusted Invested Amount and the Class B Invested Amount and the
denominator of which is equal to the sum of the invested amounts of all Series
then accumulating or amortizing principal (less any amounts on deposit in any
principal funding accounts) and (b) Undistributed Principal Collections on
deposit in the Collection Account on such Distribution Date or Special Final
Payment Date ("Series Undistributed Principal Collections") and (iii) the
Investor Default Amount with respect to such Distribution Date or Special
Payment Date and any reimbursements of unreimbursed Class A Investor
Charge-Offs and Class B Investor Charge-Offs; provided, however, that for each
Distribution Date with respect to the Accumulation Period (unless and until a
Pay Out Event shall have occurred), Class A Monthly Principal may not exceed
the Controlled Deposit Amount for such Distribution Date; and provided
further, that with respect to any Distribution Date, Class A Monthly Principal
will not exceed the Class A Invested Amount.
"Controlled Deposit Amount" for any Distribution Date with respect to
the Accumulation Period shall mean an amount equal to the sum of the
Controlled Accumulation Amount and any existing Deficit Controlled
Accumulation Amount.
"Controlled Accumulation Amount" means [ o ], or, if the Servicer
elects to postpone the commencement of the Accumulation Period, an amount
sufficient so that the sum of the Controlled Accumulation Amounts for each
Distribution Date during the Accumulation Period equals the Class A Invested
Amount as of the Expected Final Payment Date.
"Deficit Controlled Accumulation Amount" shall mean, on the first
Distribution Date with respect to the Accumulation Period, the excess, if any,
of the Controlled Accumulation Amount over the amount deposited in the
Principal Funding Account as Class A Monthly Principal for such Distribution
Date and, on each subsequent
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Distribution Date with respect to the Accumulation Period, the excess, if any,
of the Controlled Accumulation Amount and any then existing Deficit Controlled
Accumulation Amount over the amount of Class A Monthly Principal deposited in
the Principal Funding Account on such Distribution Date.
"Termination Payment Date" shall mean the earlier of the Expected
Final Payment Date, the first Distribution Date following the liquidation or
sale of the Receivables as a result of an insolvency event as described under
"--Pay Out Events" and the occurrence of the Final Series 1998-1 Termination
Date.
Distributions to Class A Certificateholders
Payments to Class A Certificateholders will be made from the
Collection Account with respect to interest and from the Principal Funding
Account. In addition to the amounts deposited in the Collection Account or
Principal Funding Account as described above, the following amounts will be
deposited in the Collection Accounts or Principal Funding Account: (i)
investment income, if any, to the extent of the Class A Certificate Rate,
earned from investments made will be withdrawn from the Principal Funding
Account and deposited into the Collection Account on each Interest Payment
Date with respect to the Accumulation Period to be applied to payment of Class
A Monthly Interest and (ii) the proceeds of any optional repurchase of the
Class A Certificates by the Transferors deemed to be Principal Collections
will be withdrawn from the Collection Account and deposited in the Principal
Funding Account on the Distribution Date on which such purchase occurs.
The Servicer shall instruct the Trustee or the Paying Agent to make
the following distributions:
(a) on each Interest Payment Date, on each Special Payment Date and
on the Expected Final Payment Date, all amounts on deposit in the Collection
Account (other than any investment earnings thereon) shall be distributed to
Class A Certificateholders; and
(b) on each Special Payment Date and on the Expected Final Payment
Date, all amounts on deposit in the Principal Funding Account shall be
distributed to Class A Certificateholders up to a maximum amount on any such
date equal to the unpaid Class A Invested Amount on such date.
The Paying Agent shall have the revocable power to withdraw funds
from the Collection Account and the Principal Funding Account for the purpose
of making distributions to the Class A Certificateholders.
On each Distribution Date with respect to the Revolving Period, the
Servicer will pay to the Transferors any investment earnings (net of losses
and investment expenses) with respect to the Collection Account. On any
Distribution Date with respect to any Early Amortization Period, such
investment earnings (net of losses and investment expenses) will be considered
Yield Collections under the Agreement.
"Distribution Date" shall mean [ o ], 1998, and the 15th day of each
calendar month thereafter, or, if such 15th day is not a business day, the
next succeeding business day.
"Special Payment Date" shall mean each Distribution Date with respect
to any Early Amortization Period and each Distribution Date following the
Expected Final Payment Date.
Investor Charge-Offs
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 as described under clause (a)(v)
of "Distributions from the Collection Account", then the Class B Invested
Amount shall be reduced by the aggregate amount of such excess, but not more
than the Investor Default Amount for such Distribution Date (a "Class B
Investor Charge-Off"). The Class B Invested Amount will thereafter be
increased (but not in excess of the unpaid principal balance of the Class B
Certificates) on any Distribution Date by the amount of Yield Collections
allocated and available for that purpose as described under clause (a)(vii) of
"--Distributions from the Collection Account."
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In the event that any such reduction of the Class B Invested Amount
would cause the Class B Invested Amount to be a negative number, the Class B
Invested Amount will be reduced to zero, and the Class A Invested Amount will
be reduced by the amount by which the Class B Invested Amount would have been
reduced below zero, but not more than the Investor Default Amount for such
Distribution Date (a "Class A Investor Charge-Off"), which will have the
effect of slowing or reducing the return of principal to the Class A
Certificateholders. If the Class A Invested Amount has been reduced by the
amount of any Class A Investor Charge-Offs, it will be increased on any
Distribution Date (but not by an amount in excess of the aggregate Class A
Investor Charge-Offs) by the amount of Yield Collections allocated and
available for such purpose as described under clause (a)(iv) of
"--Distributions from the Collection Account."
Addition of Accounts
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 Transferor Amount as a percentage of the Trust
Principal Component (reduced, for the purpose of this calculation, by the
Privileged Assets Calculated Amount) is less than 15% or if, as of the end of
any Due Period, the Trust Principal Component (reduced as aforesaid) is less
than [ o ] (the "Series Minimum Trust Principal Component") plus any amounts
established with respect to other outstanding Series (the aggregate of the
Series Minimum Trust Principal Component and such amounts, the "Minimum Trust
Principal Component").
Final Payment of Principal; Termination of Trust
The Class A 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 $[ o ] (10% of the sum of the
Class A Initial Invested Amount and the Class B Initial Invested Amount),
unless certain events of bankruptcy, insolvency or receivership have occurred
with respect to one or both of the Transferors. The repurchase price will be
equal to the sum of the Class A Invested Amount plus accrued and unpaid
interest on the Class A Certificates and the Class B Invested Amount plus
accrued and unpaid interest on the Class B Certificates through the day
preceding the Distribution Date with respect to which the repurchase occurs.
Subject to prior termination as provided above, the Agreement
provides that the final distribution of principal and interest on the
Certificates will be made on [ o ], (the "Final Series 1998-1 Termination
Date"). In the event that the Invested Amount of the Certificates is greater
than zero on the Final Series 1998-1 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. The proceeds of
any such sale will treated as collections on the Receivables and applied as
provided above in "Description of the Certificates--Application of
Collections" in the Prospectus. Such proceeds will be allocated first to pay
amounts due to the Class A Certificateholders.
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 is zero or (b) [ o ] (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).
Pay Out Events
The Revolving Period will continue through the end of the [ o ] Due
Period and the Accumulation Period will begin at such time, unless a Pay Out
Event occurs or unless commencement of the Accumulation Period is postponed.
An Early Amortization Period will commence (i) on the day on which a Pay Out
Event occurs or is deemed to occur or (ii) on the Expected Final Payment Date
if the Class A Invested Amount is not paid in full on such date. A "Pay Out
Event" with respect to the Certificates refers to any of the following events:
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(i) failure on the part of a Transferor or TRS (a) to make
any payment or deposit on the date required under the Agreement, the
Series 1998-1 Supplement or the RFC Receivable Purchase Agreement, as
applicable (or within the applicable grace period which will not
exceed five business days), (b) duly to observe or perform in any
material respect the covenant of a Transferor not to sell, pledge,
assign or transfer to any person, or grant any prohibited lien on,
any Receivable, or (c) duly to observe or perform in any material
respect any other covenants or agreements of a Transferor in the
Agreement or, with respect to RFC, to the extent assigned to the
Trust, in the RFC Receivable Purchase Agreement, which in the case of
subclause (c) hereof, continues unremedied for a period of 60 days
after written notice to such Transferor or TRS, as applicable, and
continues to affect materially and adversely the interests of the
Certificateholders for such period (or, with respect to a failure
arising out of the creation of certain liens upon the Receivables or
the failure by such Transferor or the Servicer to comply with certain
covenants specified in the Agreement, immediately); provided,
however, that a Pay Out Event described in clause (b) or (c) shall
not be deemed to occur if such Transferor has accepted the transfer
of the related Receivable during such period (or such longer period
as the Trustee may specify not to exceed an additional 60 days) in
accordance with the provisions of the Agreement;
(ii) any representation or warranty made by a Transferor in
the Agreement or the Series 1998-1 Supplement or any representation
or warranty made by TRS in the RFC Receivable Purchase Agreement or
any information required to be given by a Transferor or the Servicer
to the Trustee to identify the Designated Accounts proves to have
been incorrect in any material respect when made and continues to be
incorrect in any material respect for a period of 60 days after
written notice and as a result of which the interests of the
Certificateholders are materially and adversely affected and which
continues to materially and adversely affect the interests of the
Certificateholders for such period; provided, however, that a Pay Out
Event described in this clause (ii) shall not be deemed to occur if a
Transferor has accepted the transfer of the related Receivable or all
such Receivables, if applicable, during such period (or such longer
period as the Trustee may specify not to exceed an additional 60
days) in accordance with the provisions of the Agreement;
(iii) certain events of bankruptcy or insolvency relating to
the Transferors or TRS;
(iv) there will have been three consecutive Distribution
Dates on which the Class B Invested Amount is less than the Initial
Class B Invested Amount;
(v) the Trust becomes an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;
(vi) after any applicable grace period, a failure by a
Transferor to convey Receivables in Additional Accounts to the Trust
when required by the Agreement;
(vii) any Servicer Default occurs which would have a
material adverse effect on the Certificateholders;
(viii) on any Determination Date the Class B Invested
Amount is less than 2% of the Class A Invested Amount; or
(ix) on any Determination Date the Transferor Amount as a
percentage of the Trust Principal Component as of the last day of the
prior Due Period (reduced, for the purpose of this calculation, by
the Privileged Assets Calculated Amount for such Due Period) was less
than 3%.
In the case of any event described in clause (i), (ii) or (vii), a
Pay Out Event will be deemed to have occurred with respect to any Series only
if, after any applicable grace period described in such clauses, either the
Trustee or certificateholders of such Series evidencing undivided interests
aggregating more than 50% of the invested amount of such Series, by written
notice to the Transferors and the Servicer (and to the Trustee, if given by
such certificateholders) declare that a Pay Out Event has occurred as of the
date of such notice. In the case of any event described in clause (iii), (v),
(vi) or (ix) a Pay Out Event with respect to all Series, and in the case of
any event
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described in clause (iv) or (viii), a Pay Out Event with respect to only the
Certificates, will be deemed to have occurred without any notice or other
action on the part of the Trustee or the Certificateholders or all
certificateholders, as appropriate, immediately upon the occurrence of such
event. The Early Amortization Period will commence on the day on which a Pay
Out Event occurs or is deemed to occur. Monthly distributions of principal to
the Certificateholders 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, 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 the appointment of a
receiver or bankruptcy trustee for a Transferor, the receiver or bankruptcy
trustee for such Transferor may have the power to delay or prevent
commencement of the Early Amortization Period.
In addition to the consequences of a Pay Out Event discussed above,
if TRS 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 a Transferor, on the day of such appointment TRS will immediately cease to
sell Receivables to RFC under the RFC Receivable Purchase Agreement and
promptly give notice to the Trustee of such appointment or 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 in a commercially reasonable manner and to the best
of its ability. Unless otherwise instructed within 90 days of the publication
of such notice by the Certificateholders representing undivided interests
aggregating more than 50% of the aggregate principal amount of each of the
Class A Certificates and the Class B Certificates (other than any holder who
is the subject of the bankruptcy or insolvency which resulted in the Pay Out
Event) and by holders representing undivided interests aggregating more than
50% of the Transferor Interest (other than any holder who is the subject of
the bankruptcy or insolvency which resulted in the Pay Out Event), the Trustee
will sell, dispose of or otherwise liquidate the portion of the Receivables
allocable to the Certificates and to other Series that did not vote 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. If the portion of such proceeds allocable to
the Certificateholders' Interest and the proceeds of any Collections in the
Collection Account are not sufficient to pay in full the remaining amount due
on the Class A Certificates, the Class A Certificateholders will suffer a
corresponding loss. If the Trustee is instructed not to sell the portion of
the Receivables allocable to the Certificateholders, as described above, then
the Trust shall continue with respect to the Series 1998-1 Certificates
pursuant to the terms of the Agreement and the Series 1998-1 Supplement. See
"Certain Legal Aspects of the Receivables--Certain Matters Relating to
Bankruptcy" in the Prospectus.
Servicing Compensation and Payment of Expenses
The Servicer's compensation for its servicing activities is a monthly
servicing fee (the "Servicing Fee") in an amount, on any Distribution Date,
equal to the sum of, with respect to all Series, one-twelfth of the sum for
each Series of the product of (a) the applicable servicing fee percentages
with respect to each Series and (b) the sum of an allocable portion of the
amount of the Transferor Interest and the aggregate invested amount with
respect to each Series with respect to the related Due Period. The Servicing
Fee will be allocated among the Transferor Interest, the Certificateholders
and certificateholders of all of the other Series. The portion of the
Servicing Fee allocable to the Certificateholders' Interest on each
Distribution Date (the "Monthly Servicing Fee") generally will be equal to
one-twelfth of the product of 2% per annum and the amount of the Class A
Adjusted Invested Amount and the Class B Invested Amount, on the last day of
the second preceding Due Period or, in the case of the first Distribution
Date, [ o ] of the product of 2% per annum and the initial principal amount of
the Class A Certificates and the Class B Certificates. 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 obligation 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 under "--Distributions from
the Collection Account" above.
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LEGAL MATTERS
Certain legal matters relating to the Class A 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.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement dated as of [ o ] 1998 (the "Underwriting Agreement") among the
Transferors and the underwriters named below (collectively, the
"Underwriters"), the Transferors have agreed to sell to each of the
Underwriters named below, and each of the Underwriters has severally agreed to
purchase, the principal amount of Class A Certificates as set forth opposite
its name:
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Principal
Amount of
Class A
Underwriters Certificates
------------ ------------
Lehman Brothers Inc. [ o ]
------------
Total [ o ]
============
The Transferors have been advised by the several Underwriters that the
several Underwriters propose initially to offer the Class A Certificates to the
public at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of .[ o ]% of the principal amount of the Class A Certificates. Underwriters may
allow and such dealers may reallow a concession not in excess of [ o ]% of such
principal amount. After the initial public offering, the public offering price
and such concessions may be changed.
Each Underwriter that is not a member of the National Association of
Securities Dealers, Inc. (the "NASD") is a foreign broker or dealer not
eligible for membership in the NASD which has agreed not to make any sales
within the United States, its territories or possessions or to persons who are
citizens thereof or residents therein (other than certain sales made by the
Underwriters as a group) except that each such Underwriter shall be permitted
to make sales to the other Underwriters or to their United States affiliates
provided that such sales are made in compliance with applicable rules under
the Exchange Act and in conformity with the Rules of Fair Practice of the
NASD.
Each Underwriter has represented and agreed that (a) it has complied
and will comply with all applicable provisions of the Financial Services Act
1986 with respect to anything done by it in relation to the Class A
Certificates in, from or otherwise involving the United Kingdom; (b) it has
only issued or passed on and will only issue or pass on to any person in the
United Kingdom any document received by it in connection with the issue of the
Class A Certificates, other than any document which consists of or any part of
listing particulars, supplementary listing particulars or any other document
required or permitted to be published by the listing rules under Part IV of
the Financial Services Act 1986, if that person is of a kind described in
Article 9(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1988 or is a person to whom the documents may otherwise
lawfully be issued or passed on; and (c) it will not offer or sell in the
United Kingdom, by means of any document, any Class A Certificates prior to
application for listing of the Class A Certificates being made in accordance
with Part IV of the Financial Services Act 1986, other than to Persons whose
ordinary business it is to buy or sell shares or debentures, whether as
principal or agent, or in circumstances which do not constitute an offer to
the public within the meaning of the Companies Act 1985.
The Underwriting Agreement provides that the Transferors will
indemnify the Underwriters against certain liabilities, including liabilities
under applicable securities laws, or contribute to payments the Underwriters
may be required to make in respect thereof.
S-33
<PAGE>
<TABLE>
<CAPTION>
GLOSSARY FOR PROSPECTUS SUPPLEMENT
Term Page(s)
- ---- -------
<S> <C>
Accumulation Period............................................................................................7
Accumulation Period Length....................................................................................24
Agreement......................................................................................................3
August 1993 Additional Accounts................................................................................3
Available Reserve Account Amount..............................................................................23
Certificateholders.............................................................................................6
Certificateholders' Interest...................................................................................4
Certificates...................................................................................................2
Class A Adjusted Invested Amount..............................................................................23
Class A Certificate Owners.................................................................................2, 21
Class A Certificate Rate.......................................................................................4
Class A Certificateholders.....................................................................................6
Class A Certificates........................................................................................1, 3
Class A Initial Invested Amount................................................................................6
Class A Invested Amount.......................................................................................23
Class A Investor Charge-Off...................................................................................28
Class A Monthly Interest......................................................................................26
Class A Monthly Principal.....................................................................................26
Class B Certificate Rate.......................................................................................5
Class B Certificateholders.....................................................................................6
Class B Certificates...........................................................................................2
Class B Initial Invested Amount................................................................................9
Class B Invested Amount.......................................................................................23
Class B Investor Charge-Off...................................................................................28
Class B Monthly Interest......................................................................................26
Closing Date..................................................................................................20
Controlled Accumulation Amount................................................................................26
Controlled Deposit Amount.....................................................................................26
Covered Amount................................................................................................22
Cut Off Date...................................................................................................3
Deficit Controlled Accumulation Amount........................................................................27
Designated Accounts.........................................................................................2, 3
Determination Date............................................................................................29
Distribution Date.............................................................................................27
DTC............................................................................................................6
Early Amortization Period......................................................................................8
ERISA.........................................................................................................11
Excess Principal Collections..................................................................................24
Excess Spread.................................................................................................25
Expected Final Payment Date.................................................................................2, 4
Final Series 1998-1 Termination Date......................................................................10, 28
Final Termination Date........................................................................................28
Fixed Allocation Percentage...................................................................................23
Floating Allocation Percentage................................................................................23
Interest Funding Investment Proceeds..........................................................................22
Interest Payment Date.......................................................................................2, 5
Invested Amount...............................................................................................24
Invested Percentage............................................................................................5
January 1996 Additional Accounts...............................................................................3
June 1992 Designated Accounts..................................................................................3
June 1994 Additional Accounts..................................................................................3
Minimum Trust Principal Component.............................................................................28
</TABLE>
S-34
<PAGE>
<TABLE>
<S> <C>
Monthly Servicing Fee.........................................................................................30
NASD..........................................................................................................32
Participants..................................................................................................21
Pay Out Event.................................................................................................29
Principal Funding Account......................................................................................7
Principal Funding Investment Proceeds.........................................................................22
Principal Shortfalls..........................................................................................24
Rating Agency.................................................................................................12
Receivables....................................................................................................1
Record Date....................................................................................................6
Required Reserve Account Amount...............................................................................22
Reserve Account...............................................................................................22
Reserve Account Funding Date..................................................................................22
Revolving Period...............................................................................................7
Series.........................................................................................................3
Series 1998-1 Supplement......................................................................................20
Series Minimum Trust Principal Component......................................................................28
Series Undistributed Principal Collections....................................................................26
Servicer.......................................................................................................1
Servicing Fee.................................................................................................30
Special Payment Date..........................................................................................27
Termination Payment Date......................................................................................27
Transferor.....................................................................................................1
Transferor Interest............................................................................................4
Transferor Percentage.........................................................................................24
TRS............................................................................................................1
Trust.......................................................................................................1, 3
Trust Principal Component......................................................................................8
Trustee........................................................................................................3
Underwriters..................................................................................................31
Underwriting Agreement........................................................................................31
</TABLE>
S-35
<PAGE>
ANNEX I
OTHER ISSUANCES OF INVESTOR CERTIFICATES
The tables below set forth the principal characteristics of the
American Express Master Trust Class A and Class B Accounts Receivable Trust
Certificates, Series 1992-2, the American Express Master Trust Class A and
Class B Accounts Receivable Trust Certificates, Series 1993-1, the American
Express Master Trust Class A and Class B Accounts Receivable Trust
Certificates, Series 1994-1 the American Express Master Trust Class A and
Class B Accounts Receivable Trust Certificates, Series 1994-2, the American
Express Master Trust Class A and Class B Accounts Receivable Trust
Certificates, Series 1994-3, the American Express Master Trust Class A and
Class B Accounts Receivable Trust Certificates, Series 1996-1, and the
American Express Master Trust Class A and Class B Accounts Receivable Trust
Certificates, Series 1996-2, the only other Series issued by the Trust which
are currently outstanding. For more specific information with respect to any
Series, any prospective investor should contact the Servicer at (212)
640-4405. The Servicer will provide, without charge, to any prospective
purchaser of the Series 1998-1 Class A Certificates, a copy of the Disclosure
Documents for any previous publicly-issued Series.
1. American Express Master Trust Class A and Class B
Accounts Receivable Trust Certificates, Series 1992-2
Class A Invested Amount.......................... $ 500,000,000
Class B Invested Amount.......................... $ 29,100,529
Class A Certificate Rate......................... 6.60% per annum
Class B Certificate Rate......................... 6.80% per annum
Class A Expected Final Payment Date.............. July 15, 1999
Series Servicing Fee Rate........................ 2.0% per annum
Series Termination Date.......................... May 15, 2000
Series Issuance Date............................. August 3, 1992
Series Minimum Trust Principal Component......... $569,000,000
2. American Express Master Trust Class A and Class B
Accounts Receivable Trust Certificates, Series 1993-1
Class A Invested Amount.......................... $ 600,000,000
Class B Invested Amount.......................... $ 34,920,635
Class A Certificate Rate......................... 5.375% per annum
Class B Certificate Rate......................... 5.50% per annum
Class A Expected Final Payment Date.............. September 15, 2000
Series Servicing Fee Rate........................ 2.0% per annum
Series Termination Date.......................... July 15, 2001
Series Issuance Date............................. September 22, 1993
Series Minimum Trust Principal Component......... $682,500,000
3. American Express Master Trust Class A and Class B Accounts
Receivable Trust Certificate 1994-1
Class A Invested Amount.......................... $ 300,000,000
Class B Invested Amount.......................... $ 17,460,317
Class A Certificate Rate......................... 7.15%
Class B Certificate Rate......................... 7.35%
Class A Expected Final Payment Date.............. September 15, 1998
Series Servicing Fee Rate........................ 2.0% per annum
Series Termination Date.......................... August 16, 1999
Series Issuance Date............................. September 23, 1994
Series Minimum Trust Principal Component......... $341,000,000
S-36
<PAGE>
4. American Express Master Trust Class A and Class B
Accounts Receivable Trust Certificates, Series 1994-2
Class A Invested Amount.......................... $ 300,000,000
Class B Invested Amount.......................... $ 17,460,317
Class A Certificate Rate......................... 7.60%
Class B Certificate Rate......................... 7.75%
Class A Expected Final Payment Date.............. September 17, 2001
Series Servicing Fee Rate........................ 2.0% per annum
Series Termination Date.......................... August 15, 2002
Series Issuance Date............................. September 23, 1994
Series Minimum Trust Principal Component......... $341,000,000
5. American Express Master Trust Class A and Class B
Accounts Receivable Trust Certificates, Series 1994-3
Class A Invested Amount........................... $ 300,000,000
Class B Invested Amount........................... $ 17,460,317
Class A Certificate Rate.......................... 7.85%
Class B Certificate Rate.......................... 7.95%
Class A Expected Final Payment Date............... September 15, 2004
Series Servicing Fee Rate......................... 2.0% per annum
Series Termination Date........................... August 15, 2005
Series Issuance Date.............................. September 23, 1994
Series Minimum Trust Principal Component.......... $341,000,000
6. American Express Master Trust Class A and Class B
Accounts Receivable Trust Certificates, Series 1996-1
Class A Invested Amount........................... $ 950,000,000
Class B Invested Amount........................... $ 77,027,027
Class A Certificate Rate......................... One-Month LIBOR
plus .15% per annum
Class B Certificate Rate.......................... 7.30% per annum
Class A Expected Final Payment Date............... September 15, 2003
Series Servicing Fee Rate......................... 2.0% per annum
Series Termination Date........................... August 16, 2004
Series Issuance Date.............................. September 18, 1996
Series Minimum Trust Principal Component.......... $1,104,500,000
7. American Express Master Trust Class A and Class B
Accounts Receivable Trust Certificates, Series 1996-2
Class A Invested Amount........................... $ 300,000,000
Class B Invested Amount........................... $ 24,324,324
Class A Certificate Rate........................ One-Month LIBOR plus
0.12% per annum
Class B Certificate Rate.......................... 7.10% per annum
Class A Expected Final Payment Date............... September 17, 2001
Series Servicing Fee Rate......................... 2.0% per annum
Series Termination Date........................... August 15, 2002
Series Issuance Date.............................. September 18, 1996
Series Minimum Trust Principal Component.......... $348,500,000
S-37
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD WITHOUT
THE DELIVERY OF A FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS 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.
PROSPECTUS SUPPLEMENT
(To Prospectus dated May , 1998)
$
AMERICAN EXPRESS MASTER TRUST
[ %] [Floating Rate] Class A Accounts Receivable Trust Certificates,
Series
-----------------
American Express Receivables Financing Corporation
American Express Centurion Bank
Transferors
-----------------
American Express Travel Related Services Company, Inc.
Servicer
-----------------
Each of the [ %] [Floating Rate] Class A Accounts Receivable Trust
Certificates, Series (collectively, the "Class A Certificates") offered hereby
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, 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
(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 herein and on page in the Prospectus.
-----------------
THE CLASS A CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY
AND DO NOT REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF AND
ARE NOT 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.
============================ ============= =============== ====================
Underwriting
Price to Discounts and Proceeds to
Public Commissions Transferor (1)(2)
- ---------------------------- ------------- --------------- --------------------
Per Class A Certificate..... % % %
- ---------------------------- ------------- --------------- --------------------
Total....................... $ $ $
============================ ============= =============== ====================
(1) Plus accrued interest, if any, at the Class A Certificate Rate.
(2) Before deducting expenses payable by the Transferors, expected to be
approximately $ .
-----------------
The Class A Certificates are offered when, as and if delivered to and
accepted by the Underwriters, subject to prior sale, withdrawal or
modification of the offer without notice, the approval of counsel and other
conditions. It is expected that the Class A Certificates will be delivered in
book-entry form on or about , , through the facilities of The Depository
Trust Company, Cedel Bank societe anonyme and the Euroclear System.
[LEHMAN BROTHERS]
[OTHER UNDERWRITER(S)]
,
<PAGE>
(continued from previous page)
portfolio of designated American Express(R) Card, American Express(R) Gold
Card and Platinum Card(R) 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, annual membership
fees and 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 RFC in the RFC Receivable Purchase Agreement. See
"Description of the Certificates--General" in the Prospectus.
Concurrently with the issuance of the Class A Certificates, the Trust
will issue $ aggregate initial amount of [ %] [Floating Rate] Class B
Accounts Receivable Trust Certificates, Series (the "Class B Certificates"; the
Class A Certificates and the Class B Certificates are herein collectively
referred to as the "Certificates"). The right of the Class B Certificateholders
to receive interest payments on the Class B Certificates each month will be
subordinated under all circumstances to the right of the Class A
Certificateholders to receive monthly allocations of interest with respect to
the Class A Certificates, and the right of the Class B Certificateholders to
receive principal payments on the Class B Certificates will be subordinated
under all circumstances to the right of the Class A Certificateholders to
receive all payments of principal on the Class A Certificates. See "Prospectus
Summary--Subordination of Class B Certificates" herein. The Transferors will
initially own the remaining interest in the Trust not allocable to the
Certificates or other outstanding series of certificates, and the Servicer will
be responsible for servicing the Receivables. Only the Class A Certificates are
being offered hereby.
Interest with respect to the Class A Certificates will accrue from ,
, and is payable on the 15th day of each month (or, if any such day is not a
business day, the next succeeding business day) (each an "Interest Payment
Date"), commencing , . The principal of the Class A Certificates is payable
in full on (the "Expected Final Payment Date"), unless a Pay Out Event has
occurred, in which case it shall be paid monthly to the extent available from
Principal Collections. Although it is anticipated that accumulated principal
will be sufficient to pay all principal due on the Class A Certificates on the
Expected Final Payment Date, if such accumulated principal is insufficient to
make payment in full of the principal due on the Class A Certificates,
thereafter principal will be paid monthly to the extent available from
Principal Collections. In such a case, the actual maturity of the Class A
Certificates would be later than the Expected Final Payment Date.
The Class A Certificates will be represented by one or more Class A
Certificates which will be registered in the name of Cede & Co., the nominee
of The Depository Trust Company. The interests of holders of beneficial
interests in the Class A Certificates ("Class A Certificate Owners") will be
represented by book-entries on the records of The Depository Trust Company and
participating members thereof. Definitive Certificates will be available to
Class A Certificate Owners only under the limited circumstances described
herein. See "Description of the Certificates--Definitive Certificates" in the
Prospectus.
Application will be made to list the Class A Certificates on the
Luxembourg Stock Exchange.
S-2
<PAGE>
There currently is no secondary market for the Series Certificates,
and there is no assurance that one will develop or, if one does develop, that
it will continue until the Series Certificates are paid in full.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS
A CERTIFICATES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
-------------
The Certificates offered hereby constitute a single Series of
Certificates being offered by the Transferors from time to time pursuant to
the Prospectus dated . This Prospectus Supplement does not contain complete
information about the offering of the Certificates. Additional information is
contained in the Prospectus and investors are urged to read both this
Prospectus Supplement and the Prospectus in full. Sales of the Certificates
may not be consummated unless the purchaser has received both this Prospectus
Supplement and the Prospectus.
S-3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Prospectus Supplement and
the accompanying Prospectus. Certain capitalized terms which are used herein
are defined elsewhere in this Prospectus Supplement and the accompanying
Prospectus. See "Glossary for Prospectus Supplement" and "Glossary for the
Prospectus." Unless the context otherwise requires, certain capitalized terms,
when used herein, only relate to the Certificates. Other Series issued
pursuant to other prospectus supplements or disclosure documents may also use
such capitalized terms in such prospectus supplements or documents. However,
in such cases, reference to such terms, unless the context otherwise requires,
is made only in the context of the issuance of such other Series.
Type of Security................. [ %][Floating Rate]Class A Accounts
Receivable Trust Certificates, Series (the
"Class A Certificates").
Issuer............................ American Express Master Trust (the "Trust"),
a trust created under the Amended and
Restated Master Pooling and Servicing
Agreement, dated as of , , as the same may
be amended 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 Class A
Certificates and the Class B Certificates
represent undivided interests in the Trust.
Only the Class A Certificates are being
offered hereby. The Trust, as a master
trust, has previously issued eight other
series of certificates, seven of which
remain outstanding. The Trust may issue
additional series of certificates from time
to time (each such series and Series , a
"Series"). See "Annex I" for a description
of certain terms of the Series of
Certificates previously issued by the
Trust.
Trustee........................... The Bank of New York (the "Trustee").
The Receivables................... TRS has sold to RFC and RFC has conveyed to
the Trust all its right, title and interest
in and to the Receivables existing as of
the close of business on June 30, 1992,
August 31, 1993, June 30, 1994 and January
17, 1996 (each, a "Cut Off Date") and
arising from time to time thereafter until
termination of the Trust in the Accounts
that were designated on the related Account
addition closing dates (the "June 1992
Designated Accounts", the "August 1993
Additional Accounts", the "June 1994
Additional Accounts" and the "January 1996
Additional Accounts", respectively, and
collectively the "Designated Accounts").
The June 1992 Designated Accounts met the
criteria provided in the Agreement applied
as of the close of business on the cycle
billing date for each Account occurring in
the period beginning on the close of
business on March 1, 1992 and ending at the
close of business on March 31, 1992 and,
with respect to certain selection criteria,
as of the applicable Cut Off Date. The
August 1993 Additional Accounts met the
criteria provided in the Agreement applied
as of the close of business on the cycle
billing date for each Account occurring in
the period beginning on the opening of
business on July 1, 1993 and ending at the
close of business on July 31, 1993 and,
with respect to certain selection criteria,
as of the applicable Cut Off Date. The June
1994 Additional Accounts met the criteria
provided in the Agreement applied as of the
close of business on the cycle billing date
for each Account occurring in the period
beginning on the opening of
S-4
<PAGE>
business on March 22, 1994 and ending at
the close of business on April 17, 1994
and, with respect to certain selection
criteria, as of the applicable Cut Off
Date. The January 1996 Additional Accounts
met the criteria provided in the Agreement
applied as of the close of business on the
cycle billing date for each Account
occurring in the period beginning on the
opening of business on November 1, 1995 and
ending at the close of business on November
30, 1995 and, with respect to certain
selection criteria, as of the applicable
Cut-Off Date.
As of the date hereof, all of the
Designated Accounts are owned 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 Designated Accounts will
be conveyed by TRS to Centurion Bank, at
which time Receivables existing and
thereafter arising in such Designated
Accounts will be conveyed by Centurion Bank
to the Trust.
The aggregate amount of Receivables in the
Designated Accounts (excluding Accounts
charged off and Accounts closed at the
Cardmembers' request) as of , was $ and as
of , was $ . 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 will
fluctuate as new Receivables are generated
and as existing Receivables are collected,
charged off as uncollectible or otherwise
adjusted.
Description of the Class A
Certificates................. Payments received on the Trust's assets will
be allocated among the Class A
Certificateholders and the Class B
Certificateholders (the
"Certificateholders' Interest"), the
interest of the holders of other
outstanding Series, and the interest of the
Transferors (the last being referred to as
the "Transferor Interest").
The Class A Certificates offered hereby
will evidence undivided interests in the
Trust assets allocated to the
Certificateholders' Interest and will
represent the right to receive from such
Trust assets funds up to (but not in excess
of) the amounts required to make payments
of interest at the rate set forth on the
cover hereof (the "Class A Certificate
Rate") payable monthly on each Distribution
Date. Unless a Pay Out Event shall have
occurred, principal will be payable in full
on (or if such day is not a business day,
on the next succeeding business day) (the
"Expected Final Payment Date"). Principal
will be payable monthly to Class A
Certificateholders prior to the Expected
Final Payment Date if a Pay Out Event
occurs, and, together with interest as
described below under "Prospectus
Summary--Interest," will be payable monthly
to Class A Certificateholders following the
Expected Final Payment Date to the extent
principal has not been paid in full on the
Expected Final Payment Date. In all
circumstances, principal is payable to the
extent of the Class A Invested Amount
(which may be less than the aggregate
unpaid principal balance of the Class A
Certificates, in certain circumstances, if
the Investor Default Amount exceeds
available Yield Collections and the Class B
Invested Amount is zero).
S-5
<PAGE>
The Class B Certificates will evidence
undivided interests in the Trust assets
allocated to the Certificateholders'
Interest and will represent the right to
receive from such Trust assets funds up to
(but not in excess of) the amounts required
to make payments of interest on the Class B
Certificates at the rate of % per annum
(the "Class B Certificate Rate"), payable
monthly on each Distribution Date, and the
payment of principal with respect to the
Class B Certificates following the final
principal payment with respect to the Class
A Certificates. The Class B Certificates
are not being offered hereby.
The Certificateholders' Interest will
include the right to receive (but only to
the extent needed to make required payments
under the Agreement) varying percentages of
Yield Collections and Principal Collections
during each Due Period. Yield Collections
and Defaulted Receivables will be allocated
at all times to the Certificateholders'
Interest based on the Floating Allocation
Percentage applicable during the related
Due Period. During the Revolving Period,
subject to certain limitations, all
Principal Collections allocable to the
Certificateholders' Interest will generally
be reinvested in the Trust or otherwise
used to maintain the Certificateholders'
Interest. During the Accumulation Period
and any Early Amortization Period,
Principal Collections will be allocated to
the Certificateholders' Interest based on
the Fixed Allocation Percentage. See
"Description of the Class A Certificates
and the Agreement--Allocation Percentages"
and "--Pay Out Events." The Floating
Allocation Percentage and the Fixed
Allocation Percentage are sometimes
referred to collectively herein as the
"Invested Percentage."
The Class A Certificates represent
undivided interests in the Trust only and
do not represent interests in or recourse
obligations of and are not guaranteed by
RFC, Centurion Bank, TRS, American Express
Company or any affiliate thereof.
Interest........................ Interest will accrue on the unpaid principal
amount of the Class A Certificates at a per
annum rate equal to the Class A Certificate
Rate and, except as otherwise provided
herein, be distributed to Class A
Certificateholders on , , and on the 15th
day of each month thereafter (or, if any
such day is not a business day, on the next
succeeding business day) and on the
Expected Final Payment Date (each an
"Interest Payment Date"). If (a) an Early
Amortization Period commences or (b) the
final principal payment on the Class A
Certificates is not made on the Expected
Final Payment Date, then thereafter
interest will be distributed to the Class A
Certificateholders monthly on each Special
Payment Date. Interest for any Interest
Payment Date will include accrued interest
at the Class A Certificate Rate from and
including the preceding Interest Payment
Date or, in the case of the first Interest
Payment Date, from and including the
Closing Date, to but excluding such
Interest Payment Date. Interest for any
Interest Payment Date or Special Payment
Date due but not paid on any Interest
Payment Date or Special Payment Date will
be due on the next succeeding Interest
Payment Date or Special Payment Date
together with, to the extent permitted by
applicable law, additional interest on such
amount at a per annum rate equal to the
Class A Certificate Rate plus 2% per annum.
Interest will be
S-6
<PAGE>
calculated on the basis of a 360-day year
comprised of twelve 30-day months. See
"Description of the Class A Certificates
and the Agreement--General" and
"--Distributions from the Collection
Account."
Principal........................ Unless a Pay Out Event shall have occurred, no
payment of principal will be made on the
Class A Certificates until the Expected
Final Payment Date, when principal on the
Class A Certificates will be payable in
full. To the extent that principal on the
Class A Certificates is not paid in full on
the Expected Final Payment Date, the total
amount of any such principal remaining to
be paid on the Class A Certificates after
the Expected Final Payment Date will be
payable monthly until all principal on the
Class A Certificates has been paid in full.
Beginning in the month following the
occurrence of a Pay Out Event, principal of
the Class A Certificates will be payable
monthly until paid in full. See
"Description of the Class A Certificates
and the Agreement--Distributions to Class A
Certificateholders."
Registration of the Class A
Certificates.................. The Class A Certificates will be issued in
book-entry form only in initial principal
amount of $ (the "Class A Initial Invested
Amount") and will initially be represented
by one or more Class A Certificates
registered in the name of Cede as the
nominee of Depository Trust Company
("DTC"). As used herein, the term "Class A
Certificateholders" refers to registered
holders of the Class A Certificates, the
term "Class B Certificateholders" refers to
registered holders of the Class B
Certificates and the term
"Certificateholders" refers to the Class A
Certificateholders and the Class B
Certificateholders collectively.
A Class 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.
In such event, interests in the Class A
Certificates will be available in
denominations of $1,000 and in integral
multiples thereof. All references herein to
Class A Certificateholders shall refer
Class A Certificate Owners, except as
otherwise specified herein. See "Description
of the Certificates--Definitive
Certificates" in the Prospectus.
Record Date...................... The last business day of the month immediately
preceding any Interest Payment Date or
Special Payment Date (each, a "Record
Date").
Revolving Period................. No principal will be payable to the Class A
Certificateholders until the Expected Final
Payment Date or, upon the occurrence of a
Pay Out Event as described herein, on the
first Special Payment Date. No principal
will be payable to the Class B
Certificateholders until the final
principal payment has been made to the
Class A Certificateholders. For each Due
Period during the period beginning on , ,
and ending on the day prior to the day on
which the earlier of the Accumulation
Period or the Early Amortization 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. See
"Description of the Class A Certificates
and the
S-7
<PAGE>
Agreement--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. In addition,
the Servicer, based on the payment rate of
the Receivables and the amount of principal
distributable to Certificateholders of all
outstanding Series, may postpone the
commencement of the Accumulation Period and
therefore extend the length of the
Revolving Period.
Accumulation Period and
Expected Final Payment Date... The aggregate principal amount of the Class A
Certificates will be payable on the
Expected Final Payment Date, but may be
distributable earlier on a monthly basis
upon the occurrence of a Pay Out Event and
the commencement of an Early Amortization
Period as described herein. See
"Description of the Class A Certificates
and the Agreement--Pay Out Events." Unless
and until a Pay Out Event shall have
occurred, for each Due Period beginning at
the close of business on , and ending on
(the "Accumulation Period"), on each
related Distribution Date all Principal
Collections allocable to the
Certificateholders' Interest plus Excess
Principal Collections, if any, from other
Series allocable to the Certificates plus
certain other amounts comprising Class A
Monthly Principal up to the Controlled
Deposit Amount, will be deposited in a
trust account that will be established in
the name of the Trustee for the benefit of
the Class A Certificateholders (the
"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
Accumulation Period will be treated as
Excess Principal Collections. See
"Description of the Class A Certificates
and the Agreement--Distributions from the
Collection Account." Unless and until a Pay
Out Event has occurred, or unless the
commencement of the Accumulation Period has
been postponed, all amounts in the
Principal Funding Account will be invested
from the date of deposit to the Expected
Final Payment Date by the Trustee at the
direction of TRS in Eligible Investments.
On each Distribution Date with respect to
the Accumulation Period, all investment
income in the Principal Funding Account
(other than any amounts in excess of the
Class A Certificate Rate) will be withdrawn
from the Principal Funding Account and
deposited into the Collection Account. See
"Description of the Class A Certificates
and the Agreement--Principal Funding
Account." For a description of the
circumstances under which the commencement
of the Accumulation Period may be
postponed, see "Description of the Class A
Certificates and the
Agreement--Postponement of the Accumulation
Period."
The funds on deposit in the Principal
Funding Account will be available to pay
the Class A Invested Amount on the Expected
Final Payment Date. Even if the funds
available for distribution to the Class A
Certificateholders on the Expected Final
Payment Date are insufficient to pay the
Class A Invested Amount in full, all such
funds will be distributed to the Class A
Certificateholders at such time.
Thereafter, principal and interest payments
will be made to Class A Certificateholders
monthly on each Special Payment Date.
S-8
<PAGE>
During either the Accumulation Period or
the Early Amortization Period, the amount
of Principal Collections allocable to the
Class A Certificateholders will 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
Percentages with respect to Principal
Collections for all Series of certificates
outstanding for the current Distribution
Date.
Early Amortization Period........ During the period beginning on the day on
which a Pay Out Event occurs or is deemed
to have occurred to the earlier of the date
on which the Class A Invested Amount and
the Class B Invested Amount have been paid
in full or the Final Series Termination
Date (the "Early Amortization Period"),
Principal Collections 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 Class A
Certificateholders and, following the final
principal payment to the Class A
Certificateholders, will be distributed as
principal payments to the Class B
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). See
"Description of the Class A Certificates
and the Agreement--Pay Out Events" for a
discussion of events which might lead to
the commencement of an Early Amortization
Period. Principal payments with respect to
the Class B Certificates will not be made
until the final principal payment has been
made to the Class A Certificateholders.
Application of Yield
Collections................... Yield Collections allocable to the
Certificateholders' Interest for any Due
Period will be applied in the following
order of priority:
(i) an amount equal to Class A Monthly
Interest and any overdue Class A
Monthly Interest (with interest
thereon) will be paid to the Class
A Certificateholders;
(ii) an amount equal to Class B Monthly
Interest and any overdue Class B
Monthly Interest (with interest
thereon) will be paid to the Class
B Certificateholders;
(iii) an amount equal to the Monthly
Servicing Fee plus any accrued
Monthly Servicing Fee that was due
but not paid on any prior
Distribution Date will be
distributed to the Servicer;
(iv) an amount equal to unreimbursed
Class A Investor Charge-Offs will
be reinvested in the Trust or
otherwise used to reinstate the
Certificateholders' Interest
during the Revolving Period or
deposited in the Principal Funding
Account and included in Class A
Monthly Principal during the
Accumulation Period or paid to
Class A Certificateholders during
any Early Amortization Period;
S-9
<PAGE>
(v) an amount equal to the Investor
Default Amount will be reinvested
in the Trust or otherwise used to
maintain the Certificateholders'
Interest during the Revolving
Period or deposited in the
Principal Funding Account and
included in Class A Monthly
Principal during the Accumulation
Period or paid to Class A
Certificateholders during any
Early Amortization Period;
(vi) an amount equal to the unpaid
accrued interest (with interest
thereon) on the outstanding
aggregate principal amount of the
Class B Certificates will be paid
to Class B Certificateholders;
(vii) an amount equal to unreimbursed
Class B Investor Charge-Offs will
be reinvested in the Trust or
otherwise used to reinstate the
Certificateholders' Interest
during the Revolving Period or
deposited in the Principal Funding
Account and included in Class A
Monthly Principal during the
Accumulation Period or paid to
Class A Certificateholders during
any Early Amortization Period; and
(viii) the remainder will be distributed
to the Transferors.
Subordination of Class B
Certificates.................. If Yield Collections allocable to the
Certificateholders' Interest for any Due
Period are insufficient to pay the Investor
Default Amount for such Due Period in
accordance with the priorities listed above
under "Application of Yield Collections,"
then the Class B Invested Amount will be
reduced by an amount equal to such
insufficiency. If the Class B Invested
Amount is reduced to zero, any further
insufficiency will reduce the Class A
Invested Amount, but not in excess of the
Investor Default Amount for such Due
Period, and the Class A Certificateholders
will bear directly the credit and other
risks associated with their undivided
interest in the Trust. The Class B Invested
Amount will initially be equal to $ (the
"Class B Initial Invested Amount") and will
be decreased or reinstated under certain
circumstances as described herein. See
"Description of the Class A Certificates
and the Agreement--Allocation Percentages."
Principal payments with respect to the
Class B Certificates will not be made until
the final principal payment has been made
with respect to the Class A
Certificateholders. Interest payments with
respect to the Class B Certificates will be
made monthly on each Distribution Date to
the extent of funds available from Yield
Collections for the related Due Period
after the deposit of Class A Monthly
Interest. See "Description of the Class A
Certificates and the
Agreement--Distributions from the
Collection Account."
Principal Collections; Certain
Allocations................... Principal Collections for any Due Period will
be allocated to the Certificateholders'
Interest on the basis of the Invested
Percentage 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, or deposited in the
Principal Funding Account with excess
amounts, if any, reinvested in the Trust or
otherwise used to maintain the
Certificateholders' Interest during the
S-10
<PAGE>
Accumulation Period or paid to the holders
of the Class A Certificates in respect of
the Class A Invested Amount during any
Early Amortization Period.
Other outstanding Series offered by the
Trust, as well as other Series that in the
future may be offered by the Trust, may or
may not have accumulation periods like the
Accumulation Period or amortization periods
like the Early Amortization Period for the
Class A Certificates, and such periods may
have different lengths or begin on
different dates than the Accumulation
Period or Early Amortization Period. Thus,
certain Series may be in their revolving
periods, while others are in periods in
which Principal Collections are distributed
to or accumulated for such Series. Under
certain circumstances, one or more Series
may be in their amortization periods, while
other Series are not. In addition, other
Series may allocate Principal Collections
based upon different invested percentages.
See "Description of the
Certificates--Exchanges" in the Prospectus
for a discussion of the potential terms of
other Series. See Annex I for a description
of the terms of Series , being all
previously issued and outstanding Series of
the Trust.
Final Payment of Principal;
Termination of the Trust..... The Class A Certificates and Class B
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 $ ( % of the sum
of the Class A Initial Invested Amount and
the Class B Initial Invested Amount), unless
certain events of bankruptcy, insolvency or
receivership have occurred with respect to
one or both of the Transferors. The
repurchase price will be equal to the sum of
the Class A Invested Amount plus accrued and
unpaid interest on the Class A Certificates
and the Class B Invested Amount plus accrued
and unpaid interest on the Class B
Certificates through the day preceding the
Distribution Date on which the repurchase
occurs. In any event, the final payment of
the principal of and interest on the Class A
Certificates will be no later than the
Distribution Date (the "Final Series
Termination Date"). See "Description of the
Class A Certificates and the
Agreement--Final Payment of Principal;
Termination of Trust." After such date,
neither the Trust nor the Transferors will
have any further obligation to pay the
principal of or interest on the Class A
Certificates.
Tax Status.................... In the opinion of special tax counsel to the
Transferors which is described in the
Prospectus, the Class A Certificates will be
characterized as debt for Federal income tax
purposes. Under the Agreement, the
Transferors, the Servicer, the Class A
Certificateholders and the Class A
Certificate Owners will agree to treat the
Class A Certificates as debt for federal,
state, and other tax purposes. See "Federal
Income Tax Consequences" in the prospectus
for additional information concerning the
application of federal income tax laws.
ERISA Considerations.......... Under the regulations issued by the Department
of Labor, the Trust's assets would not be
deemed "plan assets" of any employee benefit
plan holding interests in the Class A
Certificates if certain conditions are met,
including that interests in the Class
S-11
<PAGE>
A Certificates be held, upon completion of
the public offering being made hereby, by at
least 100 investors who are independent of
the issuer and one another. The Underwriters
expect, although no assurance can be given,
that interests in the Class A Certificates
will be held by at least 100 separately
named persons, and it is anticipated that
the other conditions of the regulations will
be met. If the Trust's assets were deemed to
be "plan assets" of such a plan, there is
uncertainty as to whether existing
exemptions from the "prohibited transaction"
rules of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Internal Revenue
Code of 1986, as amended (the "Code"), would
apply to all transactions involving the
Trust's assets. Accordingly, employee
benefit plans contemplating purchasing Class
A Certificates should consult their counsel
before making a purchase. See "ERISA
Considerations" in the Prospectus.
Rating........................ It is a condition to the issuance of the Class
A Certificates that they be rated in the
highest rating category by at least one
nationally recognized rating agency. The
rating of the Class A Certificates is based
primarily on the quality of the Receivables,
the continued ability of TRS and the
Transferors, as applicable, to generate and
transfer Receivables and the terms of the
subordination of the Class B Certificates.
See "Risk Factors--Rating of the Class A
Certificates."
S-12
<PAGE>
RISK FACTORS
Investors should consider, among other things, the following factors
in connection with an investment in the Class A Certificates.
Limited Liquidity. There is currently no market for the Class A
Certificates and there can be no assurance that a secondary market for the
Class A Certificates will develop, or if it does develop, that it will provide
Class A Certificateholders with liquidity of investment or will continue for
the life of the Class A Certificates. The Underwriters intend, but are not
obligated, to make a market in the Class A Certificates.
Limited Subordination. The amount of credit enhancement of the Class
A Certificates provided by the subordination of the Class B Certificates is
limited. Payment of interest on the Class B Certificates on each Distribution
Date is subordinated to the payment of interest on the Class A Certificates on
such Distribution Date and the payment in full of the Class B Certificates is
subordinated to the payment in full of the Class A Certificates. The Class B
Invested Amount will be reduced on any Distribution Date to the extent Yield
Collections allocable to pay the Investor Default Amount are insufficient
therefor, which reduction will result in the reduction of the amount of Yield
Collections allocable to the Certificateholders' Interest in future Due
Periods. If the Class B Invested Amount is reduced to zero, the Class A
Certificateholders will bear directly the credit and other risks associated
with their undivided interest in the Trust and the Class A Invested Amount may
be reduced.
Rating of the Class A Certificates. It is a condition to the issuance
of the Class A Certificates that they be rated in the highest rating category
by at least one nationally recognized rating agency (the rating agency or
rating agencies selected by the Transferors to rate the Class A Certificates
is herein referred to as the "Rating Agency"). The rating is based primarily
on the quality of the Receivables, the continued ability of TRS and the
Transferors, as applicable, to generate and transfer Receivables and the terms
of the subordination of the Class B Certificates. There is no assurance that
the rating will remain for any given period of time or that the rating will
not be lowered or withdrawn entirely by the Rating Agency, if in its judgment
circumstances in the future so warrant, including a change in the ability of
TRS and the Transferors, as applicable, to generate and transfer Receivables
or a reduction in the financial strength of American Express Company, TRS or
Centurion Bank. The rating is not a recommendation to purchase, hold or sell
Class A Certificates, inasmuch as such rating does not comment as to market
price or suitability for a particular investor. The rating of the Class A
Certificates does 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 Class A Certificates addresses the likelihood of
the ultimate payment of principal and interest on the Class A Certificates.
However, the Rating Agency does not evaluate, and the rating of the Class A
Certificates does not address, the likelihood that the outstanding principal
amount of the Class A Certificates will be paid by the Expected Final Payment
Date.
Book-Entry Registration. The Class A Certificates initially will be
represented by Class A Certificates registered in the name of Cede, the
nominee for DTC, and will not be registered in the names of the Class A
Certificate Owners or their nominees. Because of this, unless and until
Definitive Certificates are issued, Class A Certificate Owners will not be
recognized by the Trustee as Class A Certificateholders, as that term is used
in the Agreement. Hence, until such time, Class A Certificate Owners will only
be able to receive payments from, and exercise the rights of Class A
Certificateholders indirectly through, DTC, Cedel or Euroclear and the
respective participating organizations, and, unless a Class 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 Class A Certificate Owners by DTC, Cedel or
Euroclear and their respective participating organizations. In addition, the
ability of Class A Certificate Owners to pledge Class A Certificates to
persons or entities that do not participate in the DTC system, or otherwise to
take actions in respect of such Class A Certificates, may be limited due to
the lack of physical certificates for such Class A Certificates. See
"Description of the Class A Certificates and the Agreement--Book-Entry
Registration" and "--Definitive Certificates" in the Prospectus.
S-13
<PAGE>
DOMESTIC CONSUMER CHARGE CARD BUSINESS
Portfolio Experience
The following tables set forth the historical receivable turnover
rate, payment rate, loss experience, periodic yield computation and
delinquency experience for each of the periods shown for the entire Portfolio.
Because the Designated Accounts are only a portion of the Portfolio,
actual experience with respect to the Designated Accounts may have been
different from that of the Portfolio. Because the Designated Accounts have
been selected from the Portfolio in a manner not believed to be adverse to
Certificateholders and represent a sizable portion of the Portfolio, TRS and
the Transferors believe that the performance of the Portfolio reflected in the
following tables is indicative of the historical performance of the Designated
Accounts. Because the Designated Accounts are a fixed pool of Accounts,
receivable turnover rate, payment rate, loss experience, periodic yield
computation, delinquency experience and the rate of receivable growth with
respect to the Designated Accounts may be different from that of the Portfolio
in the future.
Receivable Turnover Rate and Payment Rate Experience. The Accounts
are designed for use as a method of payment for the purchase of merchandise
and services, and, except in the limited circumstances related to Recovery
Arrangements and described under "Domestic Consumer Charge Card
Business--Collection Efforts" in the Prospectus, account balances are due in
full each month. Therefore, Accounts cannot be used by Cardmembers for the
purpose of financing these purchases. In contrast to revolving credit plan
products which do not require payment in full each month, the requirement that
Account balances be paid in full each month creates a high monthly payment
rate and, therefore, Account balances which turn over rapidly relative to
charge volume. The following two tables illustrate this product characteristic
based on the historical Portfolio experience.
Receivable Turnover Rates for the Portfolio
(Dollars in Thousands)
Months Ended Years Ended December 31,
,
-------------- -----------------------------
-------------- --------- ---------- --------
Charge Volume and Fees(1)........ $ $ $ $
Average Receivables $ $ $ $
Outstanding(2).................
Receivables Turnover Rate(3)(4)..
- -----------------
(1) Charge Volume and Fees is the sum of (a) amounts charged by Cardmembers
for merchandise and services for each period shown and (b) all membership
and administrative fees billed to Accounts for each period shown. Charge
Volume and Fees includes amounts billed under the Privileged Assets
program, which amounts are not material.
(2) Average Receivables Outstanding is the arithmetic average of the month
end Portfolio balances including the opening Portfolio balance for each
period shown.
(3) Receivable Turnover Rate is calculated by dividing Charge Volume and Fees
by Average Receivables Outstanding for each period shown.
(4) The rate for the -month period ended , is annualized.
S-14
<PAGE>
Monthly Payment Rates for the Portfolio (1)
Months Ended
31, Years Ended December 31,
------------ --------------------------------
------------ -------- ----------- -----------
Average Monthly Rate............. % % % %
Highest Monthly Rate............. % % % %
Lowest Monthly Rate.............. % % % %
- -----------------
(1) Monthly Payment Rate is calculated by dividing total collections received
(excluding recoveries on charged-off receivables) during each month by
such month's opening billed balance.
There can be no assurance that the receivable turnover rate and the
monthly payment rate, and thus the rate at which Certificateholders can expect
principal to be paid on and after the Principal Commencement Date, including
on or following the Expected Final Payment Date or during any Early
Amortization Period, will be similar to the historical Portfolio experience
set forth above.
Periodic Yield Computation. Receivables originated under the
Accounts, consisting of amounts charged by Cardmembers for merchandise and
services, annual membership fees and certain other administrative fees billed
to Cardmembers on the Accounts, are not (except in the limited circumstances
related to Recovery Arrangements and described under "Domestic Consumer Charge
Card Business--Collection Efforts" in the Prospectus) 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 the Collections on the
Receivables in the Designated Accounts received in any Due 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.
The dollar amounts representing Computed Yield in the table below
have been derived by applying a Yield Factor of 3.0% (which is, as of the date
hereof, the Yield Factor under the Agreement) to historical monthly
collections of receivables (excluding recoveries on charged-off receivables)
in the Accounts for each period shown. Each of those dollar amounts is divided
by Charge Volume and Fees for the appropriate period to produce a Computed
Yield for the Portfolio. To the extent that Charge Volume and Fees did not
equal collections for any given period, there is a difference between the
Computed Yield as a Percentage of Charge Volume and Fees and the assumed Yield
Factor of 3.0%
Periodic Yield Computation for the
Portfolio Assuming a 3.0% Yield Factor (Dollars in Thousands)
Months Ended
31, Years Ended December 31,
------------ ----------------------------
------------ -------- --------- ---------
Computed Yield(1)................... $ $ $ $
Computed Yield as a Percentage of
Charge Volume and Fees(2)......... % % % %
- -----------------
(1) Computed Yield is the dollar amount equal to the product of the 3.0%
assumed Yield Factor and collections (excluding recoveries on charged-off
receivables) for each period shown.
(2) Computed Yield as a Percentage of Charge Volume and Fees may not equal
the 3.0% assumed Yield Factor because Charge Volume and Fees may not
equal collections (excluding recoveries on charged-off receivables) for
the periods shown.
S-15
<PAGE>
There can be no assurance that the yield experience for Receivables
in Designated Accounts will be similar to the periodic yield computation for
the Portfolio set forth in the table. The actual yield experience will vary
month to month due to variations in receivable turnover rates, payment rates
and Cardmember charge activity. The actual yield experience will also be
affected by any changes to the Yield Factor. Pursuant to the Agreement,
without notice to or the consent of certificateholders, the Transferors have
the ability to change the Yield Factor. The Transferors may not, however,
reduce the Yield Factor below 3.0% or increase it above 5.0%. Further, the
Transferors may not change the Yield Factor if a Pay Out Event has occurred
and is continuing, or, as a result of such change, their reasonable
expectation is that a Pay Out Event would occur. See "Risk Factors--Ability to
Change Yield Factor" in the Prospectus.
Loss Experience. The following table sets forth the Portfolio's
historical gross loss, recovery and net loss experience for the periods shown.
Due to the Portfolio's Receivable Turnover Rate and Monthly Payment Rate,
gross losses, recoveries and net losses are expressed as a percentage of
Charge Volume and Fees.
Loss Experience for the Portfolio
(Dollars in Thousands)
Months Ended
31, Years Ended December 31,
------------ ------------------------------
------------ --------- ---------- ---------
Gross Losses..................... $ $ $ $
Gross Losses as a Percentage
of Charge Volume and Fees...... % % % %
Recoveries....................... $ $ $ $
Recoveries as a Percentage
of Charge Volume and Fees...... % % % %
Net Losses....................... $ $ $ $
Net Losses as a Percentage
of Charge Volume and Fees...... % % % %
There can be no assurance that the loss experience for the Designated
Accounts in the future will be similar to the historical Portfolio experience
set forth above.
Periodic Net Yield Computation. Computed Net Yield is the dollar
amount equal to Computed Yield minus Net Losses. The table below sets forth
the Computed Net Yield for the periods shown.
Periodic Net Yield Computation for
the Portfolio Assuming a 3.0% Yield Factor
(Dollars in Thousands)
Months Ended
31, Years Ended December 31,
------------ ---------------------------
------------ ------- -------- ----------
Computed Net Yield................... $ $ $ $
Computed Net Yield as a Percentage
of Charge Volume and Fees.......... % % % %
The ability of the Trust to generate sufficient yield to pay interest
to Certificateholders and to pay the Monthly Servicing Fee with respect to
each Series depends upon the Monthly Payment Rate, the Yield Factor, Net
Losses and the generation of new Receivables. Based on the Portfolio
experience described in the foregoing tables, the following example
illustrates how these variables would interact to produce yield to the Trust.
For the year
S-16
<PAGE>
ended December 31, , the Computed Net Yield as a Percentage of Charge Volume
and Fees was % and the Receivable Turnover Rate (total Charge Volume and Fees
divided by Average Receivables Outstanding) was . The product of these two
variables results in a net yield as a percentage of Average Receivables
Outstanding of % for the year ended December 31, . There can be no assurance
that the experience for the Designated Accounts in the future will be similar to
the historical Portfolio experience set forth above.
Delinquency Experience. The table below sets forth the Portfolio's
delinquency experience for the periods shown.
Delinquency Experience for the Portfolio
(Dollars in Thousands)
<TABLE>
<CAPTION>
Average of Months
Ended 31, Average of Twelve Months Ended December 31,
------------------------- -------------------------------------------
------------------------- -------------------------------------------
Number of Days Delinquent Delinquent Delinquent Delinquent
Delinquent(1) Amount Percentage(2) Amount Percentage(2) Amount Percentage(2) Amount Percentage(2)
- --------------- ---------- ------------- ----------- ------------ ---------- ------------- ---------- -------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
30 to 59 days.... $ % $ % $ % $ %
60 to 89 days.... $ % $ % $ % $ %
90 to 119 days... $ % $ % $ % $ %
120 or more days. $ % $ % $ % $ %
- --------------- ---------- ------------- ----------- ------------ ---------- ------------- ---------- -------------
Total(3) ........ $ % $ % $ % $ %
========== ============= =========== ============ ========== ============= ========== =============
</TABLE>
- -----------------
(1) Delinquency is measured as the number of days after a charge is first
included within an unpaid "Previous Balance" on any monthly billing
statement and is determined by reference to the payment status of each
Account as of the cycle billing date occurring during the applicable
month.
(2) Percentage is calculated by dividing delinquent amounts by the arithmetic
average of the month-end billed aggregate balances, inclusive of the
opening billed aggregate balance, for the appropriate period. Delinquent
amounts are the arithmetic average of the month-end billed delinquencies
by category, inclusive of the opening billed delinquent amount for the
appropriate period.
(3) Delinquent Amounts and Percentages may not total due to rounding.
S-17
<PAGE>
DESIGNATED ACCOUNTS
General
As of , , the Designated Accounts (excluding Accounts charged off
and Accounts closed at the Cardmembers' request) consisted of Accounts. The
Receivables in the Designated Accounts as of , , totaled $ and the average
Designated Account Receivables balance was $ . As of , , approximately %
of the Designated Accounts by Receivable balance had been in existence for at
least five years. By Receivable balance, %, %, %, % and %
of the Designated Accounts have Cardmember billing addresses in New York,
California, Texas, Florida and New Jersey, respectively. The remainder of the
Designated Accounts have billing addresses in the remaining states of the
United States (including certain of its territories and possessions), none of
which represents more than % by Receivable balance of the Designated Accounts.
The following tables summarize the Designated Accounts by various criteria as
of , . Data presented below for the Designated Accounts does not include (i)
Accounts charged-off and (ii) Accounts closed at the Cardmembers' request.
Composition of Designated Accounts by Account Balance
Percentage of Percentage of
Number of Total Number Receivables Total Receivables
Account Balance Range Accounts of Accounts Outstanding(1) Outstanding
- ---------------------- --------- ------------- --------------- -----------------
Credit Balance........ % $ ( ) %
No Balance............ % 0 %
$1 - $500............. % %
$501 - $1,000......... % %
$1,001 - $2,000....... % %
$2,001 - $3,000....... % %
$3,001 - $5,000....... % %
Greater than $5,000... % %
--------- ------------- --------------- -----------------
Total(2)....... 100.00% $ 100.00%
========= ============= =============== =================
- -----------------
(1) Receivables Outstanding include amounts billed under the Privileged
Assets program, which amounts are not material.
(2) Percentages and Receivables Outstanding may not total due to rounding.
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Composition of Designated Accounts by Payment Status
Percentage
of Total Percentage
Number of Total
Number of of Receivables Receivables
Payment Status(1) Accounts(2) Accounts Outstanding(3) Outstanding
- ----------------------------- ---------- --------- -------------- -----------
Current and less than 30
days delinquent............ % $ %
30 to 59 days delinquent...... % $ %
60 to 89 days delinquent...... % $ %
90 to 119 days delinquent..... % $ %
120 or more days delinquent... % $ %
- ----------------------------- ---------- --------- -------------- -----------
Total(4)............... 100.00% $ 100.00%
============================= ========== ========= ============== ===========
- -----------------
(1) Delinquency is measured as the number of days after a charge is first
included within an unpaid "Previous Balance" on any monthly billing
statement and is determined by reference to the payment status of each
Designated Account as of the cycle billing date occurring during , .
(2) The payment status of each Designated Account is based on the oldest
balance in such Account.
(3) Receivables Outstanding include amounts billed under the Privileged Assets
program, which amounts are not material.
(4) Percentages and Receivables Outstanding may not total due to rounding.
Composition of Designated Accounts by Age
Percentage
of Total Percentage
Number of Total
Number of of Receivables Receivables
Age(1) Accounts(2) Accounts Outstanding(3) Outstanding
- ----------------------------- ---------- --------- -------------- -----------
Less than 12 months......... % $ %
12-23 months................ % $ %
24-35 months................ % $ %
36-47 months................ % $ %
48-59 months................ % $ %
Greater than 59 months...... % $ %
- ----------------------------- ---------- --------- -------------- -----------
Total(3)............. 100.00% $ 100.00%
============================= ========== ========= ============== ===========
- -----------------
(1) Determined by reference to date of initial Cardmembership.
(2) Receivables Outstanding include amounts billed under the Privileged
Assets program, which amounts are not material.
(3) Percentages and Receivables Outstanding may not total due to rounding.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates will be paid to
the Transferors. The Transferors will pay such proceeds to an affiliate in
exchange for a reduction of such affiliate's interest in the Exchangeable
Transferor Certificate.
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<PAGE>
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS
The Agreement provides that the Class A Invested Amount is payable on
the Expected Final Payment Date (but may be distributable earlier upon the
occurrence of a Pay Out Event) to the extent funds are available therefor in
the Principal Funding Account. Although it is anticipated that accumulated
principal will be sufficient to pay the Class A Invested Amount on the
Expected Final Payment Date, no assurance can be given in that regard. If such
amounts are insufficient to pay the Class A Invested Amount on the Expected
Final Payment Date, thereafter the Class A Certificateholders will receive
distributions of Class A Monthly Principal and Class A Monthly Interest on
each Special Payment Date until the earlier of the date on which the Class A
Invested Amount has been paid in full or the Final Series Termination Date.
Even if the funds on deposit in the Principal Funding Account are insufficient
to pay the Class A Invested Amount in full, all such funds will be distributed
to the Class A Certificateholders on the Expected Final Payment Date.
Deposits of Class A Monthly Principal will be made to the Principal
Funding Account on each Distribution Date occurring during the Accumulation
Period, in an amount equal to the lesser of (a) the Controlled Deposit Amount
and (b) the sum of (i) the Fixed Allocation Percentage of all Principal
Collections received during the Due Period immediately preceding such
Distribution Date, (ii) the amount of any Series Undistributed Principal
Collections on deposit in the Collection Account on such Distribution Date and
(iii) amounts available to pay the Investor Default Amount and reimburse Class
A Investor Charge-Offs and Class-B Investor Charge-Offs with respect to such
Distribution Date. Additionally, Excess Principal Collections allocable to the
Certificates may also be used to pay the Controlled Deposit Amount. Assuming
that: (a) the annualized Receivable Turnover Rate for the Designated Accounts
is not less than , (b) the Yield Factor equals 3.0%, (c) Receivables remain
constant at the amount outstanding as of , , and (d) a Pay Out Event does not
occur during the Accumulation Period, the Transferors expect that on the
Expected Final Payment Date there will be sufficient funds on deposit in the
Principal Funding Account to pay the Class A Invested Amount in full. The
annualized receivable turnover rate described above is less than the lowest
receivable turnover rate shown in the "Receivable Turnover Rates for the
Portfolio" table shown under "Domestic Consumer Charge Card
Business--Portfolio Experience." However, there can be no assurance that any
other Series issued prior to or concurrently with this Series with a revolving
period which ends after the Revolving Period for the Class A Certificates will
not enter into an amortization period prior to the Expected Final Payment
Date. Further, the actual rate of accumulation and payment of principal will
depend, among other factors, on the rate of repayment, the timing of the
receipt of such repayments, the Yield Factor, the Receivable Turnover Rate and
the rate of default by Cardmembers.
In the event of the occurrence of a Pay Out Event, the Early
Amortization Period will begin on the day on which such Pay Out Event occurs
or is deemed to have occurred. During the Early Amortization Period,
distributions of principal to Class A Certificateholders will not be limited
by the Controlled Deposit Amount. In the event of a sale, disposition or other
liquidation of the Receivables following an insolvency event as described
under "Description of the Class A Certificates and the Agreement--Pay Out
Events" or in connection with the Final Series Termination Date, Class A
Monthly Principal will be payable to Certificateholders on the following
Distribution Date. Although the Transferors believe that the likelihood of a
Pay Out Event occurring is remote, there can be no assurance that a Pay Out
Event will not occur. See "Description of the Class A Certificates and the
Agreement--Pay Out Events."
The amount of collections of Receivables may vary from month to month
due to seasonal variations, general economic conditions and payment habits of
individual Cardmembers. There can be no assurance that Principal Collections
with respect to the Trust Portfolio, and thus the rate at which the
Certificateholders could expect to receive or accumulate payments of principal
on their Certificates during an Early Amortization Period or the Accumulation
Period, or on the Expected Final Payment Date, as applicable, will be similar
to any historical experience set forth herein. If a Pay Out Event occurs, the
average life and maturity of the Class A Certificates could be significantly
reduced.
In addition, since the Trust, as a master trust, has previously
issued other Series, of which remain outstanding, and may issue additional
Series from time to time, there can be no assurance that the issuance of
additional Series or the Principal Terms of any other Series might not have an
impact on the timing and amount of payments received by Class A
Certificateholders. Further, if a Pay Out Event occurs, the average life and
maturity of the Class A Certificates could be significantly reduced.
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<PAGE>
Because there may be a slow-down in the payment rate with respect to
the Designated Accounts or a Pay Out Event may occur (which would initiate an
Early Amortization Period), there can be no assurance that the final payment
of the Class A Invested Amount will occur on the Expected Final Payment Date.
There can be no assurance that future Cardmember monthly payment rate
experience will be similar to historical experience. See "Risk Factors" in the
Prospectus.
DESCRIPTION OF THE CLASS A
CERTIFICATES AND THE AGREEMENT
The Certificates will be issued pursuant to the Agreement and the
Series Supplement to the Agreement (the "Series Supplement") among the
Transferors, as the transferors of the Receivables, TRS, as Servicer of the
Designated Accounts and the Receivables and The Bank of New York, as Trustee
for the Certificateholders, substantially in the form filed as exhibits to the
Registration Statement of which the Prospectus is a part. Pursuant to the
Agreement, the Transferors may execute further Supplements thereto among the
Transferors and the Trustee in order to issue additional Series. See
"Description of the Certificates--Exchanges" in the Prospectus. The Trustee
will provide a copy of the Agreement (without exhibits or schedules),
including any Supplements, to Class A Certificateholders without charge upon
written request. The following summary describes certain terms of the
Agreement and the Series Supplement and is qualified in its entirety by
reference to the Agreement and the Series Supplement.
General
The Class A Certificates will represent undivided interests in the
Trust, including the right to receive the 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 Class A
Certificate Rate and the Class A 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 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, the Reserve Account and any other accounts established for
the benefit of any other Series (which other accounts will not be available to
Certificateholders), and payments made in respect of Enhancements issued with
respect to any other Series (the drawing on or payment of such Enhancement not
being available to Certificateholders). The Trust does not include the
Receivables from any Removed Accounts. On the date of issuance of the
Certificates (the "Closing Date"), the Trustee will authenticate the Class A
Certificates and the Class B Certificates and deliver such Class A
Certificates to the Transferors which will in turn deliver them to the
Underwriters against payment of the net proceeds of the sale of the Class A
Certificates. The Trustee will also deliver the Class B Certificates and the
reissued Exchangeable Transferor Certificate to the Transferors. The
Transferors will initially retain the Class B Certificates but may transfer
them under certain circumstances specified in the Series Supplement. As of the
Closing Date, the Class A Invested Amount was $ and the Class B Invested
Amount was $ .
Interest will accrue on the unpaid principal amount of the Class A
Certificates at a per annum rate equal to the Class A Certificate Rate and,
except as otherwise provided herein, be distributed to the Class A
Certificateholders monthly on each Interest Payment Date, commencing 15, .
Interest for any Interest Payment Date will include interest at the Class A
Certificate Rate from and including the preceding Interest Payment Date or, in
the case of the first Interest Payment Date, from and including the Closing
Date, to but excluding such Interest Payment Date. Interest will be calculated
on the basis of a 360-day year of twelve 30-day months.
No principal payments will be made to the Class A Certificateholders
until the Expected Final Payment Date or, upon the occurrence of a Pay Out
Event as described herein, until the first Special Payment Date. See "--Pay
Out Events." No principal payments will be made to the Class B
Certificateholders until the final principal payment has been made to the
Class A Certificateholders. With respect to the Revolving Period, Principal
Collections allocable to the Certificateholders' Interest will either be (i)
allocated to one or more Series which are in amortization, early amortization
or accumulation periods to cover principal payments due to the investor
S-21
<PAGE>
certificateholders of any such Series or (ii) if no such Series is then
amortizing or accumulating principal, paid to the Transferors to maintain the
Certificateholders' Interest or held as Undistributed Principal Collections.
Unless and until a Pay Out Event shall have occurred, on each
Distribution Date with respect the Accumulation Period on or prior to the
Expected Final Payment Date, all Principal Collections allocable to the
Certificateholders' Interest, certain other amounts comprising Class A Monthly
Principal and Excess Principal Collections allocated to the Certificates will
no longer be paid for the benefit of other Series or to the Transferors as
described above but instead an amount thereof up to the Controlled Deposit
Amount will be deposited in the Principal Funding Account. Any such Principal
Collections in excess of the Controlled Deposit Amount will be included as
Excess Principal Collections. The Controlled Accumulation Amount shall equal $
. The funds deposited in the Principal Funding Account will be used to pay the
Class A Invested Amount on the Expected Final Payment Date. Amounts on deposit
in the Principal Funding Account will be invested at the direction of Servicer
in Eligible Investments. See "--Principal Funding Account." Although the
Principal Funding Account will be held in a trust account in an Eligible
Institution and invested in Eligible Investments, the Class A
Certificateholders will bear the risk of loss of any amounts of principal on
deposit therein. Prior to the Expected Final Payment Date, the amount on
deposit in the Principal Funding Account subject to such risk could reach a
maximum . Even if the funds on deposit in the Principal Funding Account at
such time are insufficient to pay the Class A Invested Amount in full, all
such funds will be distributed to the Class A Certificateholders on the
Expected Final Payment Date. On each Distribution Date thereafter the Class A
Certificateholders will receive distributions of Class A Monthly Principal and
Class A Monthly Interest until the Class A Invested Amount has been paid in
full or until the Final Series Termination Date.
Interest payments on the Class A Certificates will be made on each
Interest Payment Date and interest and principal payments on the Class A
Certificates will be made on the Expected Final Payment Date (or, if a Pay Out
Event occurs, on each Special Payment Date) to the Class A Certificateholders
in whose names the Class A Certificates were registered (expected to be Cede,
as nominee of DTC) at the close of business on the Record Date. The final
payment on the Class A Certificates will be made only upon presentation and
surrender of the Class A Certificates. Distributions will be made to DTC in
immediately available funds.
The Class A Certificates will initially be represented by one or more
Class A Certificates registered in the name of the nominee of DTC except as
set forth below. The interests of holders of beneficial interests in the Class
A Certificates ("Class A Certificate Owners") will be available for purchase
in denominations of $1,000 (representing of the undivided interest of the
Class A Certificateholders in the Trust) 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 the Class A Certificates. Unless and until Definitive Certificates are
issued under the limited circumstances described herein, no Class A
Certificate Owner will be entitled to receive a certificate representing such
person's interest in the Class A Certificates. All references herein to
actions by Class A 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 Class A
Certificateholders shall refer to distributions, notices, reports and
statements to DTC or Cede, as the registered holder of the Class A
Certificates, as the case may be, for distribution to Class A Certificate
Owners in accordance with DTC procedures. See "Description of the
Certificates--Book-Entry Registration" and "--Definitive Certificates" in the
Prospectus.
Principal Funding Account
The Trustee will establish and maintain, or cause to be established
and maintained, for the benefit of the Certificateholders, in the name of the
Trustee, on behalf of the Trust, the Principal Funding Account (unless the
commencement of the Accumulation Period is postponed, in which case all
Principal Collections received with respect to the prior Due Period and
allocable to the Certificateholders' Interest plus Excess Principal
Collections, if any, from other Series allocable to the Certificates plus
certain amounts comprising Class A Monthly Principal will be distributed to
the Class A Certificateholders on the Expected Final Payment Date). If the
commencement of the Accumulation Period is not postponed, during the
Accumulation Period, Class A Monthly Principal plus Excess Principal
Collections, if any, from other Series allocable to the Certificates will be
deposited in the Principal Funding Account on each Distribution Date as
provided below under "--Distributions from the Collection Account" and
"--Distributions to Class A Certificateholders"; provided, that if a Pay Out
Event occurs during the
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<PAGE>
Accumulation Period, the amounts on deposit in the Principal Funding Account
shall be paid to the Class A Certificateholders on the first Special Payment
Date. All amounts deposited into the Principal Funding Account prior to the
Expected Final Payment Date will be invested by the Trustee at the direction of
in Eligible Investments. On each Distribution Date, all investment income earned
(net of losses and expenses) on amounts in the Principal Funding Account since
the preceding Distribution Date will be withdrawn from the Principal Funding
Account and deposited into the Collection Account.
On each Distribution Date with respect to the Accumulation Period the
interest and other investment income (net of investment expenses and losses)
earned on such investments (the "Principal Funding Investment Proceeds") will
be withdrawn from the Principal Funding Account and will be treated as Yield
Collections. If such investments with respect to any such Distribution Date
yield less than the Class A Certificate Rate, the Principal Funding Investment
Proceeds with respect to such Distribution Date will be less than the Covered
Amount for such Distribution Date. It is intended that any such shortfall will
be funded from Yield Collections (including a withdrawal from the Reserve
Account, if necessary, as described under "--Reserve Account"). The Available
Reserve Account Amount at any time will be limited and there can be no
assurance that sufficient funds will be available to fund any such shortfall.
The "Covered Amount" shall mean for any Distribution Date with respect to the
Accumulation Period or the first Special Payment Date, if such Special Payment
Date occurs prior to the payment in full of the Class A Invested Amount, an
amount equal to one-twelfth of the product of (i) the Class A Certificate Rate
and (ii) all amounts on deposit in the Principal Funding Account, if any, as
of the preceding Distribution Date.
Reserve Account
A trust account in the name of the Trustee for the benefit of the
Class A Certificateholders (the "Reserve Account") will be established. The
Reserve Account will be established to assure the subsequent distribution of
interest on the Class A Certificates as provided in this Prospectus Supplement
during the Accumulation Period. On each Distribution Date from and after the
Reserve Account Funding Date (as defined below), but prior to the termination
of the Reserve Account, the Trustee, acting pursuant to the Servicer's
instructions, will apply Excess Spread to increase the amount on deposit in
the Reserve Account (to the extent such amount is less than the Required
Reserve Account Amount). In addition, on each Distribution Date, the
Transferors will have the option, but will not be required, to make a deposit
in the Reserve Account to the extent that the amount on deposit in the Reserve
Account, after giving effect to any Excess Spread available to be deposited in
the Reserve Account on such Distribution Date, is less than the Required
Reserve Account Amount. The "Reserve Account Funding Date" will be the
Distribution Date with respect to the Due Period that commences three months
prior to the Distribution Date with respect to the first Due Period in the
Controlled Accumulation Period, or such earlier date as the Transferors may
determine. The "Required Reserve Account Amount" for any Distribution Date on
or after the Reserve Account Funding Date will be equal to % of the Class A
Invested Amount as of the preceding Distribution Date, or any other amount
designated by the Transferors provided that the Transferors have received
written notice from each Rating Agency that such designation will not cause a
downgrade or withdrawal of such Rating Agency's then current rating of any
outstanding series. On each Distribution Date, after giving effect to any
deposit to be made to, and any withdrawal to be made from, the Reserve Account
on such Distribution Date, the Trustee will withdraw from the Reserve Account
an amount equal to the excess, if any, of the amount on deposit in the Reserve
Account over the Required Reserve Account Amount and shall distribute such
excess to the Transferors.
Provided that the Reserve Account has not terminated as described
below, all amounts on deposit in the Reserve Account on any Distribution Date
(after giving effect to any deposits to, or withdrawals from, the Reserve
Account to be made on such Distribution Date) will be invested until the
following Distribution Date by the Trustee at the direction of the Servicer in
Eligible Investments. The interest and other investment income (net of
investment expenses and losses) earned on such investments (the "Interest
Funding Investment Proceeds") will be retained in the Reserve Account (to the
extent the amount on deposit therein is less than the Required Reserve Account
Amount) or deposited in the Collection Account and treated as Yield
Collections.
On or before each Distribution Date with respect to the Accumulation
Period (on or prior to the Expected Final Payment Date) and on the first
Special Payment Date (if such Special Payment Date occurs on or prior to the
Expected Final Payment Date), a withdrawal will be made from the Reserve
Account, and the amount of such withdrawal will be deposited in the Collection
Account and treated as Yield Collections in an amount equal to the
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<PAGE>
lesser of (a) the Available Reserve Account Amount with respect to such
Distribution Date or Special Payment Date and (b) the excess, if any, of the
Covered Amount with respect to such Distribution Date or Special Payment Date
over the Principal Funding Investment Proceeds with respect to such Distribution
Date or Special Payment Date; provided that the amount of such withdrawal will
be reduced to the extent that funds otherwise would be available to be deposited
in the Reserve Account on such Distribution Date or Special Payment Date. On
each Distribution Date, the amount available to be withdrawn from the Reserve
Account (the "Available Reserve Account Amount") will be equal to the lesser of
the amount on deposit in the Reserve Account (before giving effect to any
deposit to be made to the Reserve Account on such Distribution Date) and the
Required Reserve Account Amount for such Distribution Date.
The Reserve Account will be terminated following the earlier to occur
of (a) the termination of the Trust pursuant to the Agreement, (b) the date on
which the Class A Certificates are paid in full and (c) if the Accumulation
Period has not commenced, the occurrence of a Pay Out Event or, if the
Accumulation Period has commenced, the earlier of the first Special Payment
Date and the Expected Final Payment Date. Upon the termination of the Reserve
Account, all amounts on deposit therein (after giving effect to any withdrawal
from the Reserve Account on such date as described above) will be distributed
to the Transferors. Any amounts withdrawn from the Reserve Account and
distributed to the Transferors as described above will not be available for
distribution to the Class A Certificateholders.
Allocation Percentages
Pursuant to the Agreement, during each Due Period the Servicer will
allocate among the Certificateholders' Interest, any other Series of
certificates issued by the Trust and the Transferor Interest all Yield
Collections, all Principal Collections and the amount of all Defaulted
Receivables. Yield Collections and the amount of Defaulted Receivables will be
allocated at all times and Principal Collections will be allocated during the
Revolving Period to the Class A Certificateholders and the Class B
Certificateholders based on the percentage equivalent of the ratio of the
Invested Amount on the last day of the immediately preceding Due Period to the
Trust Principal Component on the last day of the immediately preceding Due
Period (the "Floating Allocation Percentage"). During the initial Due Period,
the Floating Allocation Percentage will equal the percentage equivalent of the
ratio which the amount of the sum of the Class A Initial Invested Amount and
the Class B Initial Invested Amount bears to the Trust Principal Component on
the last day of the Due Period immediately preceding the Closing Date. To
maintain the Certificateholders' Interest during the Revolving Period, subject
to certain limitations, the Floating Allocation Percentage of all Principal
Collections will be reinvested in the Trust or treated as Excess Principal
Collections and applied as described below in "--Principal Collections for all
Series," and the Transferor Percentage of such Principal Collections will be
paid to the Transferors. During and after the Due Period preceding the
Expected Final Payment Date and during any Early Amortization Period, all
Principal Collections will be allocated to the Class A Certificateholders
based on the percentage equivalent of the ratio that the Invested Amount as of
the last day of the Revolving Period bears to the greater of (a) the Trust
Principal Component on the last day of the prior Due Period and (b) 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 (the "Fixed Allocation Percentage"). The remainder
of the Principal Collections will be allocated to the holders of other Series,
if any, and to the Transferor Interest.
As used herein, (a) "Class A Invested Amount" for any date means an
amount equal to (i) the initial principal balance of the Class A Certificates,
minus (ii) the amount of principal payments made to Class A Certificateholders
prior to such date, minus (iii) the aggregate amount of Class A Investor
Charge-Offs for the current and all prior Distribution Dates, and plus (iv)
the aggregate amount of Yield Collections and certain other amounts applied on
all prior Distribution Dates and to be applied on the current Distribution
Date for the purpose of reimbursing amounts deducted pursuant to the foregoing
clause (iii); (b) "Class A Adjusted Invested Amount" for any date means an
amount equal to the Class A Invested Amount minus the aggregate principal
amount on deposit in the Principal Funding Account; (c) "Class B Invested
Amount" for any date means a amount equal to (i) the initial principal balance
of the Class B Certificates, minus (ii) the amount of principal payments made
to Class B Certificateholders prior to such date, minus (iii) the aggregate
amount of Class Investor Charge-Offs for the current and all prior
Distribution Dates, and plus (iv) the aggregate amount of Yield Collections
applied on all prior Distribution Dates and to be applied on the current
Distribution Date for the purpose of reimbursing amounts deducted pursuant to
the foregoing clause (iii); (d) "Invested Amount" for any date means the sum
of the Class A Adjusted Invested Amount and the Class B Invested Amount; and
(e) "Transferor Percentage" means (i) when
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used with respect to Yield Collections and the amount of Defaulted Receivables,
100% minus the sum of the applicable Floating Allocation Percentages with
respect to all Series of certificates then issued an outstanding and (ii) when
used with respect to Principal Collections during the Accumulation Period and
any Early Amortization Period, 100% minus the sum of the Fixed Allocation
Percentages with respect to all Series of certificates then issued and
outstanding.
As a result of the Floating Allocation Percentage, Yield Collections
and the portion of Defaulted Receivables allocated to the Certificateholders'
Interest will change each Due Period based on the relationship of the sum of
the Class A Adjusted Invested Amount and Class B Invested Amount to the Trust
Principal Component on the last day of the immediately preceding Due Period.
As a result of the Fixed Allocation Percentage, the percentage of Principal
Collections allocable to the Certificateholders' Interest during the
Accumulation Period or any Early Amortization Period will exceed the
percentage of Principal Collections which would have been allocable using the
Floating Allocation Percentage.
Principal Collections for all Series
Principal Collections for any Due Period allocated to the
Certificateholders' Interest will first be used to cover, with respect to the
Accumulation Period, required deposits to the Principal Funding Account or,
with respect to any Early Amortization Period, payments to the
Certificateholders. The Servicer will determine the amount of Principal
Collections for any Due Period allocated to the Certificateholders' Interest
remaining after covering required deposits to the Principal Funding Account
and payments to the Certificateholders and any similar amount remaining for
any other Series ("Excess Principal Collections"). During the Revolving
Period, all Principal Collections allocable to the Certificateholders'
Interest (including Yield Collections that are deemed to be Principal
Collections and treated as Excess Principal Collections) will be treated as
Excess Principal Collections. The Servicer will allocate the Excess Principal
Collections to cover any scheduled or permitted principal distributions to
Certificateholders and deposits to Principal Funding Accounts for any Series
which have not been covered out of the Principal Collections allocable to such
other Series and certain other amounts for such Series ("Principal
Shortfalls"). Excess Principal Collections will not be used to cover investor
charge-offs for any Series. If Principal Shortfalls exceed Excess Principal
Collections for any Due Period, Excess Principal Collections will be allocated
pro rata among the applicable Series based on the relative amounts of
Principal Shortfalls. To the extent that Excess Principal Collections exceed
Principal Shortfalls, the balance will, subject to certain limitations, be
paid to the Transferors.
Postponement of the Accumulation Period
Upon written notice to the Trustee, the Transferors and the Rating
Agency, the Servicer may elect to postpone the commencement of the
Accumulation Period, and extend the length of the Revolving Period, subject to
certain conditions including those set forth below. On the Determination Date
immediately preceding the Distribution Date and thereafter on each
Determination Date until the date the Accumulation Period begins, the Servicer
will determine the "Accumulation Period Length" based on the lowest monthly
payment rate on the Receivables for the prior months and the amount of
principal distributable to the certificateholders of all outstanding Series
which are not in their revolving period. If the Accumulation Period Length is
less than the length of the Accumulation Period initially provided under the
Agreement, the Servicer may, at its option, postpone the commencement of the
Accumulation Period such that the number of months included in the
Accumulation Period will be equal to or exceed the Accumulation Period Length.
The effect of the foregoing calculation is to permit the reduction of the
length of the Accumulation Period based on the invested amounts of certain
other Series which are scheduled to be in their revolving periods during the
Accumulation Period and on increases in the payment rate on the Receivables,
which, if continued, would result in a shorter Accumulation Period. The length
of the Accumulation Period will not be less than one month and will not be
shorter than the period determined as of the first date of determination
unless the Trust has issued another Series of Investor Certificates subsequent
to that date and such Series is in its revolving period. If the commencement
of the Accumulation Period is delayed in accordance with the foregoing, and if
a Pay Out Event occurs after the date originally scheduled as the commencement
of the Accumulation Period, then it is probable that holders of Investor
Certificates would receive some of their principal later than if the
Accumulation Period had not been delayed.
S-25
<PAGE>
Distributions from the Collection Account
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:
(a) An amount equal to the Floating Allocation Percentage of Yield
Collections deposited in the Collection Account for the Due Period immediately
preceding such Distribution Date plus, with respect to a Distribution
occurring during the Accumulation Period, Investment Earnings will be
allocated in the following priority:
(i) an amount equal to Class A Monthly Interest for such
Distribution Date, plus the amount of any Class A Monthly Interest
previously due but not paid to Class A Certificateholders on a prior
Distribution Payment Date, plus any additional interest at a rate per
annum equal to the Class A Certificate Rate plus 2% with respect to
interest amounts that were due but not paid on a prior Distribution
Payment Date, will be paid to the Class A Certificateholders;
(ii) an amount equal to Class B Monthly Interest for such
Distribution Date plus the amount of any Class B Monthly Interest
previously due but not paid to the Class B Certificateholders on a
prior Distribution Date, plus any additional interest at a rate per
annum equal to the Class B Certificate Rate plus 2% with respect to
interest amounts that were due but not paid on a prior Distribution
Date, will be paid to Class B Certificateholders;
(iii) an amount equal to the Monthly Servicing Fee for such
Distribution Date plus any Monthly Servicing Fee that was due but not
paid on a prior Distribution Date will be distributed to the Servicer
(unless such amount has been previously netted against deposits to
the Collection Account);
(iv) an amount equal to unreimbursed Class A Investor
Charge-Offs, if any, will be deemed to be Principal Collections and
treated as Excess Principal Collections during the Revolving Period
and will be treated as part of Class A Monthly Principal during the
Accumulation Period or any Early Amortization Period;
(v) an amount equal to the aggregate Investor Default Amount
for such Distribution Date will be deemed to be Principal Collections
and treated as Excess Principal Collections during the Revolving
Period and will be treated as part of Class A Monthly Principal
during the Accumulation Period or any Early Amortization Period;
(vi) an amount equal to the amount of interest which has
accrued with respect to the outstanding aggregate principal amount of
the Class B Certificates at the Class B Certificate Rate but has not
been paid to the Class B Certificateholders either on such
Distribution Date or on a prior Distribution Date, plus any
additional interest at a rate per annum equal to the Class B
Certificate Rate plus 2% with respect to such interest amounts that
were due but not paid to Class B Certificateholders on any previous
Distribution Date, will be paid to the Class B Certificateholders;
(vii) an amount equal to unreimbursed Class B Investor
Charge-Offs, if any, will be deemed to be Principal Collections and
treated as Excess Principal Collections during the Revolving Period
and will be treated as part of Class A Monthly Principal during the
Accumulation Period or any Early Amortization Period; and
(viii) any Yield Collections allocated to the
Certificateholders' Interest remaining after giving effect to the
above described distributions and allocations (with respect to such
Distribution Date, "Excess Spread") will be distributed to the
Transferors.
(b) For each Distribution Date with respect to the Accumulation
Period or any Early Amortization Period and thereafter, the remaining funds on
deposit in the Collection Account with respect to such Distribution
S-26
<PAGE>
Date including, in the case of clause (i) below, Excess Principal Collections,
if any, from other Series allocable to the Certificates will be allocated in the
following priority:
(i) an amount up to Class A Monthly Principal for such
Distribution Date, plus Excess Principal Collections, if any, from
other Series allocable to the Certificates will be deposited in the
Principal Funding Account;
(ii) an amount up to the Class B Invested Amount for any
Distribution Date on and after the Class A Certificates have been
paid in full, plus Excess Principal Collections, if any, from other
Series allocable to the Certificates, will be distributed to the
holders of the Class B Certificates; and
(iii) an amount equal to the balance of any such remaining
funds on deposit in the Collection Account will be treated as Excess
Principal Collections and distributed to other Series or to the
Transferors as provided in the Agreement.
"Class A Monthly Interest" with respect to any Distribution Date will
equal one-twelfth of the product of (i) the Class A Certificate Rate and (ii)
the outstanding principal balance of the Class A Certificates as of the
preceding Distribution Date or, with respect to the first Distribution Date,
of the product of (i) the Class A Certificate Rate and (ii) the Class A
Initial Invested Amount.
"Class B Monthly Interest" with respect to any Distribution Date will
equal one-twelfth of the product of (i) the Class B Certificate Rate and (ii)
the Class B Invested Amount as of the preceding Distribution Date (after
giving effect to any increase or decrease in the Class B Invested Amount on
such preceding Distribution Date) or, with respect to the first Distribution
Date, of the product of (i) the Class B Certificate Rate and (ii) the Class B
Initial Invested Amount.
"Class A Monthly Principal" with respect to any Distribution Date
relating to the Accumulation Period or an Early Amortization Period or any
Special Payment Date will equal the sum of (i) an amount equal to the Fixed
Allocation Percentage of all Principal Collections received during the Due
Period immediately preceding such Distribution Date or Special Payment Date
or, in the case of the Distribution Date immediately following the occurrence
of a Pay Out Event, received during the period from the day a Pay Out Event
occurred to the end of such Due Period, (ii) the amount, if any, equal to the
product of (a) a fraction, the numerator of which is equal to the sum of the
Class A Adjusted Invested Amount and the Class B Invested Amount and the
denominator of which is equal to the sum of the invested amounts of all Series
then accumulating or amortizing principal (less any amounts on deposit in any
principal funding accounts) and (b) Undistributed Principal Collections on
deposit in the Collection Account on such Distribution Date or Special Final
Payment Date ("Series Undistributed Principal Collections") and (iii) the
Investor Default Amount with respect to such Distribution Date or Special
Payment Date and any reimbursements of unreimbursed Class A Investor
Charge-Offs and Class B Investor Charge-Offs; provided, however, that for each
Distribution Date with respect to the Accumulation Period (unless and until a
Pay Out Event shall have occurred), Class A Monthly Principal may not exceed
the Controlled Deposit Amount for such Distribution Date; and provided
further, that with respect to any Distribution Date, Class A Monthly Principal
will not exceed the Class A Invested Amount.
"Controlled Deposit Amount" for any Distribution Date with respect to
the Accumulation Period shall mean an amount equal to the sum of the
Controlled Accumulation Amount and any existing Deficit Controlled
Accumulation Amount.
"Controlled Accumulation Amount" means , or, if the Servicer elects
to postpone the commencement of the Accumulation Period, an amount sufficient
so that the sum of the Controlled Accumulation Amounts for each Distribution
Date during the Accumulation Period equals the Class A Invested Amount as of
the Expected Final Payment Date.
"Deficit Controlled Accumulation Amount" shall mean, on the first
Distribution Date with respect to the Accumulation Period, the excess, if any,
of the Controlled Accumulation Amount over the amount deposited in the
Principal Funding Account as Class A Monthly Principal for such Distribution
Date and, on each subsequent
S-27
<PAGE>
Distribution Date with respect to the Accumulation Period, the excess, if any,
of the Controlled Accumulation Amount and any then existing Deficit Controlled
Accumulation Amount over the amount of Class A Monthly Principal deposited in
the Principal Funding Account on such Distribution Date.
"Termination Payment Date" shall mean the earlier of the Expected
Final Payment Date, the first Distribution Date following the liquidation or
sale of the Receivables as a result of an insolvency event as described under
"--Pay Out Events" and the occurrence of the Final Series Termination Date.
Distributions to Class A Certificateholders
Payments to Class A Certificateholders will be made from the
Collection Account with respect to interest and from the Principal Funding
Account. In addition to the amounts deposited in the Collection Account or
Principal Funding Account as described above, the following amounts will be
deposited in the Collection Accounts or Principal Funding Account: (i)
investment income, if any, to the extent of the Class A Certificate Rate,
earned from investments made will be withdrawn from the Principal Funding
Account and deposited into the Collection Account on each Interest Payment
Date with respect to the Accumulation Period to be applied to payment of Class
A Monthly Interest and (ii) the proceeds of any optional repurchase of the
Class A Certificates by the Transferors deemed to be Principal Collections
will be withdrawn from the Collection Account and deposited in the Principal
Funding Account on the Distribution Date on which such purchase occurs.
The Servicer shall instruct the Trustee or the Paying Agent to make
the following distributions:
(a) on each Interest Payment Date, on each Special Payment Date and
on the Expected Final Payment Date, all amounts on deposit in the Collection
Account (other than any investment earnings thereon) shall be distributed to
Class A Certificateholders; and
(b) on each Special Payment Date and on the Expected Final Payment
Date, all amounts on deposit in the Principal Funding Account shall be
distributed to Class A Certificateholders up to a maximum amount on any such
date equal to the unpaid Class A Invested Amount on such date.
The Paying Agent shall have the revocable power to withdraw funds
from the Collection Account and the Principal Funding Account for the purpose
of making distributions to the Class A Certificateholders.
On each Distribution Date with respect to the Revolving Period, the
Servicer will pay to the Transferors any investment earnings (net of losses
and investment expenses) with respect to the Collection Account. On any
Distribution Date with respect to any Early Amortization Period, such
investment earnings (net of losses and investment expenses) will be considered
Yield Collections under the Agreement.
"Distribution Date" shall mean , , and the 15th day of each calendar
month thereafter, or, if such 15th day is not a business day, the next
succeeding business day.
"Special Payment Date" shall mean each Distribution Date with respect
to any Early Amortization Period and each Distribution Date following the
Expected Final Payment Date.
Investor Charge-Offs
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 as described under clause (a)(v)
of "Distributions from the Collection Account", then the Class B Invested
Amount shall be reduced by the aggregate amount of such excess, but not more
than the Investor Default Amount for such Distribution Date (a "Class B
Investor Charge-Off"). The Class B Invested Amount will thereafter be
increased (but not in excess of the unpaid principal balance of the Class B
Certificates) on any Distribution Date by the amount of Yield Collections
allocated and available for that purpose as described under clause (a)(vii) of
"--Distributions from the Collection Account."
S-28
<PAGE>
In the event that any such reduction of the Class B Invested Amount
would cause the Class B Invested Amount to be a negative number, the Class B
Invested Amount will be reduced to zero, and the Class A Invested Amount will
be reduced by the amount by which the Class B Invested Amount would have been
reduced below zero, but not more than the Investor Default Amount for such
Distribution Date (a "Class A Investor Charge-Off"), which will have the
effect of slowing or reducing the return of principal to the Class A
Certificateholders. If the Class A Invested Amount has been reduced by the
amount of any Class A Investor Charge-Offs, it will be increased on any
Distribution Date (but not by an amount in excess of the aggregate Class A
Investor Charge-Offs) by the amount of Yield Collections allocated and
available for such purpose as described under clause (a)(iv) of
"--Distributions from the Collection Account."
Addition of Accounts
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 Transferor Amount as a percentage of the Trust
Principal Component (reduced, for the purpose of this calculation, by the
Privileged Assets Calculated Amount) is less than 15% or if, as of the end of
any Due Period, the Trust Principal Component (reduced as aforesaid) is less
than (the "Series Minimum Trust Principal Component") plus any amounts
established with respect to other outstanding Series (the aggregate of the
Series Minimum Trust Principal Component and such amounts, the "Minimum Trust
Principal Component").
Final Payment of Principal; Termination of Trust
The Class A 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 sum of the Class A
Initial Invested Amount and the Class B Initial Invested Amount), unless
certain events of bankruptcy, insolvency or receivership have occurred with
respect to one or both of the Transferors. The repurchase price will be equal
to the sum of the Class A Invested Amount plus accrued and unpaid interest on
the Class A Certificates and the Class B Invested Amount plus accrued and
unpaid interest on the Class B Certificates through the day preceding the
Distribution Date with respect to which the repurchase occurs.
Subject to prior termination as provided above, the Agreement
provides that the final distribution of principal and interest on the
Certificates will be made on , (the "Final Series Termination Date"). In the
event that the Invested Amount of the Certificates is greater than zero on the
Final 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. The proceeds of any such sale will
treated as collections on the Receivables and applied as provided above in
"Description of the Certificates--Application of Collections" in the
Prospectus. Such proceeds will be allocated first to pay amounts due to the
Class A Certificateholders.
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 is zero or (b) (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).
Pay Out Events
The Revolving Period will continue through the end of the Due Period
and the Accumulation Period will begin at such time, unless a Pay Out Event
occurs or unless commencement of the Accumulation Period is postponed. An
Early Amortization Period will commence (i) on the day on which a Pay Out
Event occurs or is deemed to occur or (ii) on the Expected Final Payment Date
if the Class A Invested Amount is not paid in full on such date. A "Pay Out
Event" with respect to the Certificates refers to any of the following events:
S-29
<PAGE>
(i) failure on the part of a Transferor or TRS (a) to make
any payment or deposit on the date required under the Agreement, the
Series Supplement or the RFC Receivable Purchase Agreement, as
applicable (or within the applicable grace period which will not
exceed five business days), (b) duly to observe or perform in any
material respect the covenant of a Transferor not to sell, pledge,
assign or transfer to any person, or grant any prohibited lien on,
any Receivable, or (c) duly to observe or perform in any material
respect any other covenants or agreements of a Transferor in the
Agreement or, with respect to RFC, to the extent assigned to the
Trust, in the RFC Receivable Purchase Agreement, which in the case of
subclause (c) hereof, continues unremedied for a period of 60 days
after written notice to such Transferor or TRS, as applicable, and
continues to affect materially and adversely the interests of the
Certificateholders for such period (or, with respect to a failure
arising out of the creation of certain liens upon the Receivables or
the failure by such Transferor or the Servicer to comply with certain
covenants specified in the Agreement, immediately); provided,
however, that a Pay Out Event described in clause (b) or (c) shall
not be deemed to occur if such Transferor has accepted the transfer
of the related Receivable during such period (or such longer period
as the Trustee may specify not to exceed an additional 60 days) in
accordance with the provisions of the Agreement;
(ii) any representation or warranty made by a Transferor in
the Agreement or the Series Supplement or any representation or
warranty made by TRS in the RFC Receivable Purchase Agreement or any
information required to be given by a Transferor or the Servicer to
the Trustee to identify the Designated Accounts proves to have been
incorrect in any material respect when made and continues to be
incorrect in any material respect for a period of 60 days after
written notice and as a result of which the interests of the
Certificateholders are materially and adversely affected and which
continues to materially and adversely affect the interests of the
Certificateholders for such period; provided, however, that a Pay Out
Event described in this clause (ii) shall not be deemed to occur if a
Transferor has accepted the transfer of the related Receivable or all
such Receivables, if applicable, during such period (or such longer
period as the Trustee may specify not to exceed an additional 60
days) in accordance with the provisions of the Agreement;
(iii) certain events of bankruptcy or insolvency relating to
the Transferors or TRS;
(iv) there will have been three consecutive Distribution
Dates on which the Class B Invested Amount is less than the Initial
Class B Invested Amount;
(v) the Trust becomes an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;
(vi) after any applicable grace period, a failure by a
Transferor to convey Receivables in Additional Accounts to the Trust
when required by the Agreement;
(vii) any Servicer Default occurs which would have a
material adverse effect on the Certificateholders;
(viii) on any Determination Date the Class B Invested Amount
is less than 2% of the Class A Invested Amount; or
(ix) on any Determination Date the Transferor Amount as a
percentage of the Trust Principal Component as of the last day of the
prior Due Period (reduced, for the purpose of this calculation, by
the Privileged Assets Calculated Amount for such Due Period) was less
than 3%.
In the case of any event described in clause (i), (ii) or (vii), a
Pay Out Event will be deemed to have occurred with respect to any Series only
if, after any applicable grace period described in such clauses, either the
Trustee or certificateholders of such Series evidencing undivided interests
aggregating more than 50% of the invested amount of such Series, by written
notice to the Transferors and the Servicer (and to the Trustee, if given by
such certificateholders) declare that a Pay Out Event has occurred as of the
date of such notice. In the case of any event described in clause (iii), (v),
(vi) or (ix) a Pay Out Event with respect to all Series, and in the case of
any event
S-30
<PAGE>
described in clause (iv) or (viii), a Pay Out Event with respect to only the
Certificates, will be deemed to have occurred without any notice or other action
on the part of the Trustee or the Certificateholders or all certificateholders,
as appropriate, immediately upon the occurrence of such event. The Early
Amortization Period will commence on the day on which a Pay Out Event occurs or
is deemed to occur. Monthly distributions of principal to the Certificateholders
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, 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 the appointment of a receiver or bankruptcy trustee for a
Transferor, the receiver or bankruptcy trustee for such Transferor may have the
power to delay or prevent commencement of the Early Amortization Period.
In addition to the consequences of a Pay Out Event discussed above,
if TRS 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 a Transferor, on the day of such appointment TRS will immediately cease to
sell Receivables to RFC under the RFC Receivable Purchase Agreement and
promptly give notice to the Trustee of such appointment or 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 in a commercially reasonable manner and to the best
of its ability. Unless otherwise instructed within 90 days of the publication
of such notice by the Certificateholders representing undivided interests
aggregating more than 50% of the aggregate principal amount of each of the
Class A Certificates and the Class B Certificates (other than any holder who
is the subject of the bankruptcy or insolvency which resulted in the Pay Out
Event) and by holders representing undivided interests aggregating more than
50% of the Transferor Interest (other than any holder who is the subject of
the bankruptcy or insolvency which resulted in the Pay Out Event), the Trustee
will sell, dispose of or otherwise liquidate the portion of the Receivables
allocable to the Certificates and to other Series that did not vote 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. If the portion of such proceeds allocable to
the Certificateholders' Interest and the proceeds of any Collections in the
Collection Account are not sufficient to pay in full the remaining amount due
on the Class A Certificates, the Class A Certificateholders will suffer a
corresponding loss. If the Trustee is instructed not to sell the portion of
the Receivables allocable to the Certificateholders, as described above, then
the Trust shall continue with respect to the Series Certificates pursuant to
the terms of the Agreement and the Series Supplement. See "Certain Legal
Aspects of the Receivables--Certain Matters Relating to Bankruptcy" in the
Prospectus.
Servicing Compensation and Payment of Expenses
The Servicer's compensation for its servicing activities is a monthly
servicing fee (the "Servicing Fee") in an amount, on any Distribution Date,
equal to the sum of, with respect to all Series, one-twelfth of the sum for
each Series of the product of (a) the applicable servicing fee percentages
with respect to each Series and (b) the sum of an allocable portion of the
amount of the Transferor Interest and the aggregate invested amount with
respect to each Series with respect to the related Due Period. The Servicing
Fee will be allocated among the Transferor Interest, the Certificateholders
and certificateholders of all of the other Series. The portion of the
Servicing Fee allocable to the Certificateholders' Interest on each
Distribution Date (the "Monthly Servicing Fee") generally will be equal to
one-twelfth of the product of 2% per annum and the amount of the Class A
Adjusted Invested Amount and the Class B Invested Amount, on the last day of
the second preceding Due Period or, in the case of the first Distribution
Date, of the product of 2% per annum and the initial principal amount of the
Class A Certificates and the Class B Certificates. 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 obligation 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 under "--Distributions from
the Collection Account" above.
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<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
[Characterization of the Certificates as Indebtedness
Based on the application of existing law to the facts as set forth in
the Agreement and other relevant documents, Orrick, Herrington & Sutcliffe
LLP, special counsel to the Transferors, has advised the Transferors based on
the analysis set forth in "Federal Income Tax Consequences" in the Prospectus
that the Certificates will be treated as indebtedness for federal income tax
purposes. See "Federal Income Tax Consequences" in the Prospectus.]
ERISA CONSIDERATIONS
In addition, the Transferors or their affiliates may be considered to
be a party in interest or a fiduciary with respect to some Benefit Plans.
Accordingly, an investment by a Benefit Plan in Class A Certificates may be a
prohibited transaction under ERISA and the Code unless such investment is
subject to a statutory or administrative exemption.
In light of the foregoing, fiduciaries of a Benefit Plan considering
the purchase of Class A Certificates should consult their own counsel as to
whether the assets of the Trust which are represented by the Class
Certificates would be considered plan assets, the consequences that would
apply if the Trust's assets were considered plan assets and the applicability
of exemptive relief from the prohibited transaction rules.
Moreover, each Benefit Plan fiduciary should determine whether, under
the general fiduciary standards of investment prudence and diversification, an
investment in the Class A Certificates is appropriate for the Benefit Plan,
taking into account the overall investment policy of the Benefit Plan and the
composition of the Benefit Plan's investment portfolio.
LEGAL MATTERS
Certain legal matters relating to the Class A 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.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement dated as of (the "Underwriting Agreement") among the Transferors and
the underwriters named below (collectively, the "Underwriters"), the
Transferors have agreed to sell to each of the Underwriters named below, and
each of the Underwriters has severally agreed to purchase, the principal
amount of Class A Certificates as set forth opposite its name:
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<PAGE>
Principal
Amount of
Class A
Underwriters Certificates
------------ ------------
Lehman Brothers Inc.
------------
Total
============
The Transferors have been advised by the several Underwriters that the
several Underwriters propose initially to offer the Class A Certificates to the
public at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of % of the principal amount of the Class A Certificates. Underwriters may allow
and such dealers may reallow a concession not in excess of % of such principal
amount. After the initial public offering, the public offering price and such
concessions may be changed.
Each Underwriter that is not a member of the National Association of
Securities Dealers, Inc. (the "NASD") is a foreign broker or dealer not eligible
for membership in the NASD which has agreed not to make any sales within the
United States, its territories or possessions or to persons who are citizens
thereof or residents therein (other than certain sales made by the Underwriters
as a group) except that each such Underwriter shall be permitted to make sales
to the other Underwriters or to their United States affiliates provided that
such sales are made in compliance with applicable rules under the Exchange Act
and in conformity with the Rules of Fair Practice of the NASD.
Each Underwriter has represented and agreed that (a) it has complied
and will comply with all applicable provisions of the Financial Services Act
1986 with respect to anything done by it in relation to the Class A Certificates
in, from or otherwise involving the United Kingdom; (b) it has only issued or
passed on and will only issue or pass on to any person in the United Kingdom any
document received by it in connection with the issue of the Class A
Certificates, other than any document which consists of or any part of listing
particulars, supplementary listing particulars or any other document required or
permitted to be published by the listing rules under Part IV of the Financial
Services Act 1986, if that person is of a kind described in Article 9(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988
or is a person to whom the documents may otherwise lawfully be issued or passed
on; and (c) it will not offer or sell in the United Kingdom, by means of any
document, any Class A Certificates prior to application for listing of the Class
A Certificates being made in accordance with Part IV of the Financial Services
Act 1986, other than to Persons whose ordinary business it is to buy or sell
shares or debentures, whether as principal or agent, or in circumstances which
do not constitute an offer to the public within the meaning of the Companies Act
1985.
The Underwriting Agreement provides that the Transferors will indemnify
the Underwriters against certain liabilities, including liabilities under
applicable securities laws, or contribute to payments the Underwriters may be
required to make in respect thereof.
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GLOSSARY FOR PROSPECTUS SUPPLEMENT
Term Page(s)
Term Page(s)
<PAGE>
Accumulation Period.................................................8
Accumulation Period Length.........................................25
Agreement...........................................................4
August 1993 Additional Accounts.....................................4
Available Reserve Account Amount...................................24
Certificateholders..................................................7
Certificateholders' Interest........................................5
Certificates........................................................2
Class A Adjusted Invested Amount...................................24
Class A Certificate Owners......................................2, 22
Class A Certificate Rate............................................5
Class A Certificateholders..........................................7
Class A Certificates.............................................1, 4
Class A Initial Invested Amount.....................................7
Class A Invested Amount............................................24
Class A Investor Charge-Off........................................28
Class A Monthly Interest...........................................27
Class A Monthly Principal..........................................27
Class B Certificate Rate............................................6
Class B Certificateholders..........................................7
Class B Certificates................................................2
Class B Initial Invested Amount....................................10
Class B Invested Amount............................................24
Class B Investor Charge-Off........................................28
Class B Monthly Interest...........................................27
Closing Date.......................................................21
Controlled Accumulation Amount.....................................27
Controlled Deposit Amount..........................................27
Covered Amount.....................................................23
Cut Off Date........................................................4
Deficit Controlled Accumulation Amount.............................27
Designated Accounts..............................................2, 4
Determination Date.................................................30
Distribution Date..................................................28
DTC.................................................................7
Early Amortization Period...........................................9
ERISA..............................................................12
Excess Principal Collections.......................................25
Excess Spread......................................................26
Expected Final Payment Date......................................2, 5
Final Series 1998-1 Termination Date...........................11, 29
Final Termination Date.............................................29
Fixed Allocation Percentage........................................24
Floating Allocation Percentage.....................................24
Interest Funding Investment Proceeds...............................23
Interest Payment Date............................................2, 6
Invested Amount....................................................24
Invested Percentage.................................................6
January 1996 Additional Accounts....................................4
June 1992 Designated Accounts.......................................4
S-34
<PAGE>
June 1994 Additional Accounts.......................................4
Minimum Trust Principal Component..................................29
Monthly Servicing Fee..............................................31
NASD...............................................................33
Participants.......................................................22
Pay Out Event......................................................29
Principal Funding Account...........................................8
Principal Funding Investment Proceeds..............................23
Principal Shortfalls...............................................25
Rating Agency......................................................13
Receivables.........................................................1
Record Date.........................................................7
Required Reserve Account Amount....................................23
Reserve Account....................................................23
Reserve Account Funding Date.......................................23
Revolving Period....................................................7
Series..............................................................4
Series Supplement...........................................21
Series Minimum Trust Principal Component...........................29
Series Undistributed Principal Collections.........................27
Servicer............................................................1
Servicing Fee......................................................31
Special Payment Date...............................................28
Termination Payment Date...........................................28
Transferor..........................................................1
Transferor Interest.................................................5
Transferor Percentage..............................................24
TRS.................................................................1
Trust............................................................1, 4
Trust Principal Component...........................................9
Trustee.............................................................4
Underwriters.......................................................32
Underwriting Agreement.............................................32
S-35
<PAGE>
ANNEX I
OTHER ISSUANCES OF INVESTOR CERTIFICATES
The tables below set forth the principal characteristics of the
American Express Master Trust Certificates, Series , the only other Series
issued by the Trust which are currently outstanding. For more specific
information with respect to any Series, any prospective investor should contact
the Servicer at (212) 640-4405. The Servicer will provide, without charge, to
any prospective purchaser of the Series Class A Certificates, a copy of the
Disclosure Documents for any previous publicly-issued Series.
. American Express Master Trust Class A and Class B Accounts
Receivable Trust Certificates, Series
Class A Invested Amount..............................
Class B Invested Amount..............................
Class A Certificate Rate.............................
Class B Certificate Rate.............................
Class A Expected Final Payment Date..................
Series Servicing Fee Rate............................
Series Termination Date..............................
Series Issuance Date.................................
Series Minimum Trust Principal Component.............
S-36
<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........................................ $ 885,000
Printing and Engraving.................................. 75,000
Trustee's Fees.......................................... 10,000
Legal Fees and Expenses................................. 100,000
Blue Sky Fees and Expenses.............................. 20,000
Accountants' Fees and Expenses.......................... 50,000
Rating Agency Fees...................................... 170,000
Miscellaneous Fees...................................... 50,000
----------
Total.................................................. $1,360,000
==========
* Actual
Item 15. Indemnification of Directors and Officers.
American Express Centurion Bank
American Express Centurion Bank ("Centurion") may indemnify, in accordance
with and to the full extent permitted by the laws of the State of Utah and
regulations promulgated by the Federal Deposit Insurance Corporation as in
effect at the time of the adoption of Article VIII of Centurion's Bylaws or as
such laws may be amended from time to time, and shall so indemnify to the full
extent permitted by such laws, any person (and the heirs and legal
representatives of any such person) made or threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person is or was a director, officer, employee, agent or fiduciary of
Centurion or of any constituent corporation absorbed in any consolidation or
merger, or serves as such with another corporation, or with a partnership,
joint venture, trust, employee benefit plan, or other enterprise at the
request of Centurion or any such constituent corporation provided, however,
such indemnification shall not cover any such indemnified party for actions
undertaken by such party in bad faith or involving their deliberate dishonesty
or personal gain.
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 (incorporated by reference to
Registration Statement No. 33-8484, filed on October 6, 1994).
4.1 - Form of Pooling and Servicing Agreement.
4.2 - Form of Series Supplement, including form of Asset Backed
Certificate (incorporated by reference to Registration Statement
No. 33-8484, filed on October 6, 1994).
5.1 - Opinion of American Express Centurion Bank with respect to
legality.
5.2 - Opinion of American Express Receivables Financing Corporation with
regard 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 American Express Centurion Bank (included in its opinion
filed as Exhibit 5.1).
23.2 - Consent of American Express Receivables Financing Corporation
(included in its opinion filed as Exhibit 5.2).
23.3 - Consent of Orrick, Herrington & Sutcliffe LLP (included in its
opinion filed as Exhibit 8.1).
24.1 - Power of Attorney of American Express Centurion Bank
24.2 - Power of Attorney of American Express Receivables
Financing Corporation (including Resolutions of the Board of
Directors authorizing such Power of Attorney).*
- ---------------
* Previously filed.
(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
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 he signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on May
12, 1998.
AMERICAN EXPRESS CENTURION BANK
as originator of the Trust and Registrant
By: /s/ Gilbert E. Ahye
--------------------------------------
Name: Gilbert E. Ahye
Title: Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on May 12, 1998 by the following
persons in the capacities indicated.
Signature
- ---------
- ------------------------------------------
Name: Phillip S. Riese
Title: Director and Chairman of the Board
/s/ Gilbert E. Ahye*
- ------------------------------------------
Name: Gilbert E. Ahye
Title: Director
/s/ Maria J. Garciaz*
- ------------------------------------------
Name: Maria S. Garciaz
Title: Director
/s/ Ashwini Gupta*
- ------------------------------------------
Name: Ashwini Gupta*
Title: Director
- ------------------------------------------
Name: Peter A. Lefferts
Title: Director
/s/ John J. P. McDonnell*
- ------------------------------------------
Name: John J.P. McDonnell
Title: Director
/s/ Raymond F. Pettit*
- ------------------------------------------
Name: Raymond F. Pettit
Title: Director
<PAGE>
/s/ David E. Poulsen*
- ------------------------------------------
Name: David E. Poulsen
Title: Director, President and
Chief Credit Officer
/s/ Frank L. Skillern*
- ------------------------------------------
Name: Frank L. Skillern
Title: Director and Chief Executive Officer
(Principal Executive Officer)
/s/ Roslyn M. Watson*
- ------------------------------------------
Name: Roslyn M. Watson
Title: Director
/s/ Jim F. Welch*
- ------------------------------------------
Name: Jim F. Welch
Title: Director
/s/ Rhonda M. Halpern*
- ------------------------------------------
Name: Rhonda M. Halpern*
Title: Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
- -----------------
* By: /s/ Robert D. Kraus
----------------------
Attorney-in-Fact
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 May 12, 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 May 12, 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 (incorporated by reference to
Registration Statement No. 33-8484, filed on October 6, 1994).
4.1 - Form of Pooling and Servicing Agreement.
4.2 - Form of Series Supplement, including form of Asset Backed
Certificate (incorporated by reference to Registration Statement
No. 33-8484, filed on October 6, 1994).
5.1 - Opinion of American Express Centurion Bank with respect to
legality.
5.2 - Opinion of American Express Receivables Financing Corporation with
regard 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 American Express Centurion Bank (included in its opinion
filed as Exhibit 5.1).
23.2 - Consent of American Express Receivables Financing Corporation
(included in its opinion filed as Exhibit 5.2).
23.3 - Consent of Orrick, Herrington & Sutcliffe LLP (included in its
opinion filed as Exhibit 8.1).
24.1 - Power of Attorney of American Express Centurion Bank
24.2 - Power of Attorney of American Express Receivables Finaning Corporation
(including Resolutions of the Board of Directors authorizing such
Power of Attorney).*
</TABLE>
- ---------------
* Previously filed.
<PAGE>
EXHIBIT 4.1
================================================================================
AMERICAN EXPRESS RECEIVABLES FINANCING
CORPORATION
and
AMERICAN EXPRESS CENTURION BANK
Transferors
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
Servicer
and
THE BANK OF NEW YORK
Trustee
on behalf of the Certificateholders
of the American Express Master Trust
----------------------------
AMENDED AND RESTATED MASTER POOLING AND SERVICING AGREEMENT
Dated as of May 1, 1998
----------------------------
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C> <C>
Article I DEFINITIONS................................................................................1
Section 1.01 Definitions..................................................................1
Section 1.02 Other Definitional Provisions...............................................16
Article II APPOINTMENT OF TRUSTEE; CONVEYANCE OF RECEIVABLES ISSUANCE OF CERTIFICATES................18
Section 2.01 Appointment of Trustee; Conveyance of Receivables...........................18
Section 2.02 Acceptance by Trustee.......................................................19
Section 2.03 Representations and Warranties..............................................20
Section 2.04 Representations and Warranties of the Transferors Relating
to the Agreement and any Supplement and the Receivables.....................22
Section 2.05 Covenants of the Transferors................................................27
Section 2.06 Addition of Accounts........................................................29
Section 2.07 Removal of Accounts.........................................................32
Article III ADMINISTRATION AND SERVICING OF RECEIVABLES...............................................34
Section 3.01 Acceptance of Appointment and Other Matters Relating to
the Servicer................................................................34
Section 3.02 Servicing Compensation......................................................35
Section 3.03 Representations, Warranties and Covenants of the Servicer...................36
Section 3.05 Annual Servicer's Certificate...............................................40
Section 3.07 Tax Treatment...............................................................40
Section 3.08 Adjustments.................................................................41
Section 3.09 Remittance Processing Procedures............................................42
Article IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS................43
Section 4.01 Establishment of Collection Account and Special Funding
Account and Allocations with Respect to the Exchangeable Transferor's
Certificates................................................................43
Article V [ARTICLE V IS RESERVED AND MAY BE SPECIFIED IN ANY SUPPLEMENT WITH RESPECT TO ANY
SERIES]...................................................................................47
Article VI THE CERTIFICATES..........................................................................48
Section 6.01 The Certificates............................................................48
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Section 6.02 Authentication of Certificates..............................................48
Section 6.03 Registration of Transfer and Exchange of Certificates.......................49
Section 6.04 Mutilated, Destroyed, Lost, or Stolen Certificates..........................52
Section 6.05 Persons Deemed Owners.......................................................52
Section 6.06 Appointment of Paying Agent.................................................53
Section 6.07 Access to List of Certificateholders' Names and Addresses...................53
Section 6.08 Authenticating Agent........................................................54
Section 6.09 Tender of Exchangeable Transferor Certificate...............................55
Section 6.10 Global Certificate; Euro Certificate Exchange Date..........................56
Section 6.11 Book-Entry Certificates.....................................................58
Section 6.12 Notices to Clearing Agency..................................................59
Section 6.13 Definitive Certificates.....................................................59
Section 6.14 Meetings of Certificateholders..............................................59
Article VII OTHER MATTERS RELATING TO THE TRANSFERORS.................................................62
Section 7.01 Liability of the Transferors................................................62
Section 7.02 Merger or Consolidation of, or Assumption of the
Obligations of, a Transferor................................................62
Section 7.03 Limitation on Liability of the Transferors..................................62
Section 7.04 Liabilities.................................................................63
Article VIII OTHER MATTERS RELATING TO THE SERVICER....................................................64
Section 8.01 Liability of the Servicer...................................................64
Section 8.02 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer................................................64
Section 8.03 Limitation on Liability of the Servicer and Others..........................64
Section 8.04 Indemnification of the Trust and the Trustee................................65
Section 8.05 The Servicer Not to Resign..................................................65
Section 8.06 Access to Certain Documentation and Information
Regarding the Receivables...................................................66
Section 8.07 Delegation of Duties........................................................66
Section 8.08 Examination of Records......................................................66
Article IX PAY OUT EVENTS............................................................................67
Section 9.01 Pay Out Events..............................................................67
Section 9.02 Additional Rights Upon the Occurrence of Certain Events.....................67
ii
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Article X SERVICER DEFAULTS.........................................................................70
Section 10.01 Servicer Defaults...........................................................70
Section 10.02 Trustee to Act; Appointment of Successor....................................72
Section 10.03 Notification to Certificateholders..........................................73
Section 10.04 Waiver of Past Defaults.....................................................73
Article XI THE TRUSTEE...............................................................................75
Section 11.01 Duties of Trustee...........................................................75
Section 11.02 Certain Matters Affecting the Trustee.......................................76
Section 11.03 Trustee Not Liable for Recitals in Certificates.............................78
Section 11.04 Trustee May Own Certificates................................................79
Section 11.05 The Servicer to Pay Trustee's Fees and Expenses.............................79
Section 11.06 Eligibility Requirements for Trustee........................................79
Section 11.07 Resignation or Removal of Trustee...........................................79
Section 11.08 Successor Trustee...........................................................80
Section 11.09 Merger or Consolidation of Trustee..........................................80
Section 11.10 Appointment of Co-Trustee or Separate Trustee...............................81
Section 11.11 Tax Returns.................................................................82
Section 11.12 Trustee May Enforce Claims Without Possession of
Certificates................................................................82
Section 11.13 Suits for Enforcement.......................................................82
Section 11.14 Rights of Certificateholders to Direct Trustee..............................83
Section 11.15 Representations and Warranties of Trustee...................................83
Section 11.16 Maintenance of Office or Agency.............................................83
Section 11.17 Indemnification of the Trustee..............................................83
Article XII TERMINATION...............................................................................85
Section 12.01 Termination of Trust........................................................85
Section 12.02 Optional Purchase; Final Termination Date of Investor
Certificates of any Series..................................................85
Section 12.03 Final Payment with Respect to any Series....................................86
Section 12.04 Transferor's Termination Rights.............................................87
Article XIII MISCELLANEOUS PROVISIONS..................................................................89
Section 13.01 Amendment...................................................................89
Section 13.02 Protection of Right, Title and Interest to Trust............................90
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C> <C>
Section 13.03 Limitation on Rights of Certificateholders..................................91
Section 13.04 Governing Law...............................................................92
Section 13.05 Notices.....................................................................92
Section 13.06 Severability of Provisions..................................................93
Section 13.07 Assignment..................................................................93
Section 13.08 Certificates Nonassessable and Fully Paid...................................93
Section 13.09 Further Assurances..........................................................94
Section 13.10 No Waiver; Cumulative Remedies..............................................94
Section 13.11 Counterparts................................................................94
Section 13.12 Third-Party Beneficiaries...................................................94
Section 13.13 Actions by Certificateholders...............................................94
Section 13.14 Merger and Integration......................................................94
Section 13.15 Headings....................................................................95
Section 13.16 Certificates and Opinions of Counsel........................................95
Section 13.17 Effect of Amendment No. 3...................................................95
EXHIBITS
Exhibit A: Form of Exchangeable Transferor Certificate
Exhibit B: Form of Assignment of Receivables in Additional
Accounts
Exhibit C: Form of Reassignment of Receivables
Exhibit D: Form of Initial Report
Exhibit E: Form of Monthly Servicer's Certificate
Exhibit F: Form of Annual Servicer's Certificate
Exhibit G: Form of Opinion of Counsel with Respect to the Pooling
and Servicing Agreement and Additional Accounts
Exhibit H: Form of Annual Opinion of Counsel
Exhibit I: Account Receivables
Exhibit J: Form of Depositary Agreement (Letter of Representations)
Exhibit K: Form of Lock Box Letter
Exhibit L: Form of Opinion of Counsel with Respect to Servicer
Deposit of Collateral
SCHEDULES
Schedule 1: List of Accounts
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C> <C>
Schedule 2: Collection Account
Schedule 3: Fees and Charges included in Receivables
Schedule 4: List of Lock Box Banks
</TABLE>
v
<PAGE>
AMENDED AND RESTATED MASTER POOLING AND SERVICING AGREEMENT,
dated as of May 1, 1998, among AMERICAN EXPRESS RECEIVABLES FINANCING
CORPORATION, a Delaware corporation, and AMERICAN EXPRESS CENTURION BANK, a
Utah-chartered industrial loan company, as Transferors, and AMERICAN EXPRESS
TRAVEL RELATED SERVICES COMPANY, INC., a corporation organized under the laws of
the State of New York, as Servicer and THE BANK OF NEW YORK, a banking
corporation organized under the laws of New York, as Trustee.
Reference is made to that certain Master Pooling and Servicing
Agreement, dated as of June 30, 1992 (the "Original Pooling Agreement"), among
American Express Receivables Financing Corporation, as Transferor; American
Express Travel Related Services Company, Inc., as Servicer; and The Bank of New
York, as Trustee. The parties hereto wish to amend and restate the Original
Pooling Agreement in its entirety in order to, among other things, provide for
the addition of American Express Centurion Bank, a Utah-chartered industrial
loan company, as a Transferor thereunder.
Therefore, for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree, for
the benefit of each other and for the benefit of the Certificateholders and the
Enhancement Providers, to amend and restate Article I through and including
Article XIII of the Original Pooling Agreement in their entirety to read as
follows:
ARTICLE I
DEFINITIONS
Section 1. Definitions. Whenever used in this Agreement, the following words
and phrases shall have the following meanings:
"Account" shall mean the portion of each American Express(R)
Card, American Express(R) Gold Card and Platinum Card(R) account, the full
receivable balance of which is due upon receipt of a monthly billing statement,
established pursuant to an Account Agreement between an Account Originator and
any Person, and in each case identified by account number and by the Receivable
balance as of the applicable Cut-Off Date or Additional Account Cut-Off Date in
each computer file or microfiche list delivered to the Trustee by the Servicer
on behalf of the Transferors on the Closing Date and pursuant to Section 2.01
and Section 2.06, as applicable. The definition of Account shall include any
account or accounts (each, a "Related Account") having the following
characteristics: (a) (i) such Related Account was originated in accordance with
the Account Guidelines; (ii) the obligor with respect to such Related Account is
the same Person as the Obligor of the Account related to such Related Account;
(iii) such Related Account is originated as a result of the card associated with
an Account being lost or stolen or as a result of conversions from one type of
Account from or into another type of Account or as a result of the consolidation
of an Obligor's accounts with either of the Account Originators into one
account; and (iv) such Related Account can be traced to, or identified with an
Account identified by account number on the computer file or microfiche list
delivered to the Trustee pursuant to Section 2.01 or 2.06, by reference to or
by way of the computer or other records of a Transferor or (b) (i) such
Related Account is an Account with respect to which a new account number has
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been issued under circumstances not requiring standard application and credit
evaluation procedures under the Account Guidelines; and (ii) such Related
Account can be traced or identified as an account into which an Account has been
transferred by reference to or by way of the computer file or microfiche list
delivered to the Trustee pursuant to Sections 2.01 or 2.06. The term "Account"
shall be deemed to refer to an Additional Account only from and after the
Additional Account Closing Date with respect thereto, and the term "Account"
shall be deemed to refer to any Removed Account only prior to the Removal Date
with respect thereto.
"Account Agreements" shall mean the Agreements attached as
Exhibit I, as such agreements may be amended from time to time.
"Account Guidelines" shall mean, with respect to the Accounts
of each Account Originator, the policies and procedures of such Account
Originator, relating to the operation of its consumer charge card businesses,
including, without limitation, the policies and procedures for determining the
creditworthiness of customers, the extension of privileges and relating to the
maintenance of accounts and collection of receivables, as such policies and
procedures may be amended from time to time.
"Account Originator" shall mean each of TRS and Centurion
Bank.
"Accumulation Period" with respect to any Series, the period
following the Revolving Period which shall be the Controlled Accumulation Period
or the Early Accumulation Period (each as defined in the related Supplement).
"Additional Account Closing Date" shall mean each date on
which Additional Accounts will be included as Accounts pursuant to Section 2.06.
"Additional Account Cut-Off Date" shall mean with respect to
any Additional Account the last day of the Due Period preceding the Additional
Account Closing Date.
"Additional Account Selection Date" shall have the meaning set
forth in Section 2.06.
"Additional Accounts" shall have the meaning set forth in
Section 2.06.
"Adjustment Payment" shall have the meaning specified in
Section 3.08(a).
"Affiliate" of any Person shall mean any other Person directly
or indirectly controlling, controlled by or under common control with such
Person.
"Aggregate Invested Amount" shall mean with respect to any
date of determination the sum of the Invested Amounts with respect to all Series
of Investor Certificates then outstanding.
"Aggregate Invested Percentage" shall mean with respect to any
date of determination the sum of the applicable Invested Percentages with
respect to all Series of Investor Certificates then outstanding.
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"Agreement" shall mean the Original Pooling Agreement, as (i)
with respect to each Series, supplemented by each related Supplement and (ii)
amended by this Amended and Restated Master Pooling and Servicing Agreement and
as the same may be further amended, supplemented or otherwise modified from time
to time.
"Amortization Period" shall mean, with respect to any Series,
the period following the Revolving Period which shall be the Controlled
Amortization Period, Early Amortization Period or Rapid Amortization Period
(each as defined in any related Supplement).
"Annual Membership Fees" shall mean any annual fees specified
in the various Account Agreements as they may, from time to time be amended.
"Applicants" shall have the meaning specified in Section 6.07.
"Appointment Day" shall have the meaning specified in Section
9.02.
"Authorized Newspaper" shall mean one or more newspapers of
general circulation in the Borough of Manhattan, The City of New York printed in
the English language and customarily published on each Business Day, whether or
not published on Saturdays, Sundays and holidays.
"Average Monthly Privileged Assets Billed Amount" shall mean
for any calendar month, the average amount billed for such month under the
Privileged Assets Program to all American Express Cardmembers who are enrolled
in the Privileged Assets Program, whether or not their related Accounts are
included in the Trust.
"Bearer Certificates" shall mean any certificates issued in
bearer form.
"Bearer Rules" shall mean the provisions of the Internal
Revenue Code, in effect from time to time, governing the treatment of bearer
obligations, including sections 163(f), 871, 881, 1441, 1442 and 4701, and any
regulations thereunder including, to the extent applicable to any Series
proposed or temporary regulations.
"Book-Entry Certificates" shall mean beneficial interests in
the Investor Certificates, ownership and transfers of which shall be evidenced
or made through book entries by a Clearing Agency as described in Section 6.10;
provided, that after the occurrence of a condition whereupon book-entry
registration and transfer are no longer permitted and Definitive Certificates
are issued to the Certificate Owners, such Definitive Certificates shall
replace Book-Entry Certificates.
"Business Day" shall mean (i) any day other than (a) a
Saturday or Sunday or (b) any other day on which national banking associations
or state banking institutions in New York, New York, or any other State in which
the principal executive offices of RFC, Centurion Bank, the Trustee, or other
Account Owner, as the case may be, are located, are authorized or obligated by
law, executive order or governmental decree to be closed or (c) for purposes of
any particular Series, any other day specified in the applicable Series
Supplement and (ii) with respect to the determination of LIBOR, a London
business Day.
"Cardmember" shall mean the Obligor of an American Express
Card account.
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"Cedel" shall mean Cedel Bank, societe anonyme, or any
successor thereto.
"Centurion Bank" shall mean American Express Centurion Bank, a
Utah-chartered industrial loan company and its successors.
"Certificate" shall mean one of any Series of the Investor
Certificates or the Exchangeable Transferor Certificates.
"Certificateholder" or "Holder" shall mean the Person in whose
name a Certificate is registered in the Certificate Register.
"Certificate Interest" shall mean interest payable with
respect to the applicable Series of Investor Certificates pursuant to Section
4.06.
"Certificate Owner" shall mean, with respect to a Book-Entry
Certificate, the Person who is the beneficial owner of such Book-Entry
Certificate, as reflected on the books of the Clearing Agency, or on the books
of a Person maintaining an account with such Clearing Agency (directly or as an
indirect participant, in accordance with the rules of such Clearing Agency).
"Certificate Principal" shall mean principal payable with
respect to the applicable Series of Investor Certificates pursuant to the
applicable Supplement.
"Certificate Rate" shall mean, with respect to any Series of
Certificates, the percentage (or formula on the basis of which such rate shall
be determined) stated in the applicable Supplement; provided that, unless
otherwise provided in the applicable Supplement, in each case such rate shall be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
"Certificate Register" shall mean the register maintained
pursuant to Section 6.03, providing for the registration of the applicable
Certificates and transfers and exchanges thereof.
"Clearing Agency" shall mean an organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended, or any successor provision thereto.
"Clearing Agency Participant" shall mean a broker, dealer,
bank, other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities deposited
with the Clearing Agency.
"Closing Date" shall mean, with respect to any Series, the
date of issuance of such Series of Certificates, as specified in the related
Supplement.
"Collection Account" shall have the meaning specified in
Section 4.01.
"Collections" shall mean all payments (excluding Recoveries)
received by the Servicer with respect to the Receivables, in the form of cash,
checks, wire transfers, ATM transfers or other form of payment in accordance
with the related Account Agreement in effect from time to time on any
Receivable.
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"Common Depositary" shall mean the Person appointed as such as
specified in the related Supplement, in its capacity as common depositary for
the respective accounts of a Foreign Clearing Agency.
"Controlled Accumulation Period" with respect to any Series,
shall have the meaning specified in the applicable Supplement.
"Controlled Amortization Period" with respect to any Series,
shall have the meaning specified in the applicable Supplement.
"Conveyance" shall have the meaning set forth in Section 7.05.
"Corporate Trust Office" shall mean the principal office of
the Trustee in The City of New York at which at any particular time its
corporate business shall be administered, which office at the date of the
execution of this Agreement is located at 101 Barclay Street, New York, New York
10286, Attention: Corporate Trust Division.
"CRC" shall mean Credco Receivables Corp., a Delaware
corporation, and its successors.
"Cut-Off Date" shall mean, for each Account, other than
Additional Accounts, the close of business on June 30, 1992.
"Date of Processing" shall mean, with respect to any
transaction, the Business Day after such transaction is first output in written
form under the Servicer's customary and usual servicing practices, from the
Servicer's computer file of Accounts (without regard to the effective date of
such recordation).
"Default Amount" shall mean, for any Due Period, the product
of (a) the amount of the Receivables in all Accounts which became Defaulted
Accounts during such Due Period at the time such Accounts became Defaulted
Accounts plus any Receivables created in such Due Period on Defaulted Accounts
minus Recoveries, if any, received in such Due Period and (b) one minus the
Yield Factor.
"Defaulted Account" shall mean each Account with respect to
which, in accordance with the Account Guidelines pursuant to which such Account
is governed or the customary and usual servicing procedures of the Servicer for
servicing receivables comparable to the Receivables, the Servicer has charged
off the Receivables in such Account as uncollectible; in any event, an Account
shall be deemed a Defaulted Account no later than when such Account becomes 360
days past due from the date of the initial billing statement. Notwithstanding
any other provision hereof, any Receivables in a Defaulted Account which are
Ineligible Receivables shall be treated as Ineligible Receivables rather than
Receivables in Defaulted Accounts.
"Definitive Certificates" shall have the meaning specified in
Section 6.11.
"Definitive Euro-Certificates" shall have the meaning
specified in Section 6.10.
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"Depository Agreement" shall mean the agreement among the
Transferor, the Trustee and the initial Clearing Agency, dated as of the Initial
Closing Date, in the form attached hereto as Exhibit J.
"Determination Date" shall mean the fifth Business Day prior
to each Distribution Date.
"Distribution Date" shall mean, with respect to the Series
1992-1 Certificates and the 1992-2 Certificates, September 15, 1992 and the
fifteenth day of each calendar month thereafter, or, if such fifteenth day is
not a Business Day, the next succeeding Business Day and, with respect to any
other Series of Certificates, the date specified in the applicable Supplement.
"Due Period" shall mean, unless otherwise provided in a
Supplement, with respect to each Distribution Date, (i) prior to the May 1998
Distribution Date the period from and including the first day of a calendar
month and ending at the close of business on the last day of such calendar
month, (ii) for the June 1998 Distribution Date, the period from and including
May 1, 1998 to and including May 27, 1998, and (iii) commencing with the July
1998 Distribution Date, the period (a) from and including the day following the
last day of the eighth billing cycle applicable to the Accounts ending during
the second preceding calendar month (b) to and including the last day of the
eighth billing cycle applicable to the Accounts ending in the calendar month
immediately preceding the month in which such Distribution Date shall occur;
provided, however, that the initial Due Period with respect to any Series will
commence on the Closing Date with respect to such Series.
"Early Accumulation Period" with respect to any Series, shall
have the meaning specified in the applicable Supplement.
"Early Amortization Period" with respect to any Series, shall
have the meaning specified in the applicable Supplement.
"Eligible Account" shall mean each Account which as of its
Selection Date (or, with respect to Additional Accounts, as of the relevant
Additional Account Selection Date) (i) is an Account and was in existence and
owned by an Account Originator at the close of business on its Selection Date
and whose billed balance is payable in full each month, (ii) is payable in
United States dollars, (iii) is not classified by such Account Originator as
fraudulent, (iv) the card or cards related to which have not been reported lost
or stolen, (v) was created or purchased in accordance with or under underwriting
and credit standards no less stringent than those generally applied by such
Account Originator, (vi) has not 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 or insolvency, (vii) is not classified by such Account
Originator as having been charged off, (viii) the Obligor of which is a
natural person and (ix) has not been identified by such Account Originator as
having been charged off.
Notwithstanding 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 related
Obligor 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 balance of all Receivables included in such Accounts is reflected on the
books and records of the Account Originator (and is treated for purposes of this
Agreement) as "zero", and (b)
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charging privileges with respect to all such Accounts have been cancelled in
accordance with the Account Guidelines applicable thereto.
"Eligible Institution" shall mean 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, the deposits
in which are insured by the FDIC and which at all times has a short-term
unsecured debt rating of at least A-l+ or P-1 by the applicable Rating Agency;
provided, however, that 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 shall not be required to meet the foregoing rating
requirements, and need only at all times have a long-term unsecured debt rating
of at least Baa3 by Moody's so long as Moody's is a Rating Agency.
"Eligible Investments" shall mean (a) negotiable instruments
or securities represented by instruments in bearer or registered or in
book-entry form which evidence (i) obligations fully guaranteed by the United
States of America; (ii) time deposits in, or bankers acceptances issued by, any
depositary institution or trust company incorporated under the laws of the
United States of America or any state thereof and subject to supervision and
examination by Federal or state banking or depositary institution authorities,
provided, however, that at the time of the Trust's investment or contractual
commitment to invest therein, the certificates of deposit or short-term
deposits, if any, or long-term unsecured debt obligations (other than such
obligation whose rating is based on collateral or on the credit of a Person
other than such institution or trust company) of such depositary institution or
trust company shall have a credit rating from Moody's and Standard & Poor's of
P-1 and A-l+, respectively, in the case of the certificates of deposit or
short-term deposits, or a rating not lower than one of the two highest
investment categories granted by Moody's and AAA by Standard & Poor's in the
case of long-term unsecured debt obligations; (iii) certificates of deposit
having, at the time of the Trust's investment or contractual commitment to
invest therein, a rating from Moody's and Standard & Poor's of P-1 and A-l+
respectively; (iv) investments in money market funds rated in the highest
investment category (in case of Standard & Poor's, such rating category being
AAAm or AAAm-G) or otherwise approved in writing by the applicable Rating
Agencies, (b) demand deposits in the name of the Trust or the Trustee on behalf
of the Trust in any depositary institution or trust company referred to in
(a)(ii) above, (c) commercial paper (having original or remaining maturities of
no more than 270 days) having, at the time of the Trust's investment or
contractual commitment to invest therein, a credit rating from Moody's and
Standard & Poor's of P-1 and A-l+, respectively, (d) Eurodollar time deposits
having a credit rating from Moody's and Standard & Poor's of P-1 and A-1+,
respectively, and (e) repurchase agreements involving any of the Eligible
Investments described in clauses (a)(i) , (a)(iii) and (d) hereof so long as the
other party to the repurchase agreement has at the time of the Trust's
investment therein a rating from Moody's and Standard & Poor's of P-1 and A-1+,
respectively.
"Eligible Receivable" shall 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 an agreement which complies with all requirements of law in
either case the
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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 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 subsection 2.05(b));
(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 to the extent set forth in Section
9-306 of the UCC as in effect in the Relevant UCC State), effective until the
termination of the Trust;
(vi) which will at all times be the legal, valid and
binding payment obligation of the Obligor thereof enforceable against such
Obligor in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws, now or hereafter in effect, affecting the enforcement of
creditors' rights in general and except as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in equity);
(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
the Relevant UCC State;
(viii) which, at the time of its transfer to the Trust,
has not been waived or modified except as permitted hereunder;
(ix) which is not subject to any right of rescission, setoff,
counterclaim or other defense (including the defense of usury), other than
defenses arising out of applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
in general;
(x) as to which the related Account Originator and
Transferor have satisfied all obligations to be fulfilled at the time it is
transferred to the Trust; and
(xi) as to which the related Account Originator and
Transferor have done nothing, at the time of its transfer to the Trust, to
impair the rights of the Trust or Certificateholders therein.
"Enhancement" shall mean, with respect to any Series or class
of Certificates within a Series, any letter of credit, guaranteed rate
agreement, maturity guaranty facility, cash collateral account, cash collateral
guaranty, tax protection agreement, interest rate swap, interest
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rate cap or other contract or agreement for the benefit of Certificateholders of
such Series or class, as applicable.
"Enhancement Provider" shall mean, with respect to any Series,
that Person designated as such in the applicable Supplement.
"Estimated Trust Privileged Assets Billed Amounts" shall mean,
for any calendar month, the product of (i) the number of Accounts that were
enrolled in the Privileged Assets Program at the end of such calendar month,
(ii) the Average Monthly Privileged Assets Billed Amount for such month and
(iii) 1.25; provided, that if the Servicer has modified its computer programs
such that it can determine the actual Privileged Assets Billed Amounts billed
with respect to the Accounts, such actual amounts shall constitute the Estimated
Trust Privileged Assets Billed Amounts.
"Euro-Certificate Exchange Date" shall mean with respect to
any Series, the date specified in the applicable Supplement.
"Euroclear Operator" shall mean Morgan Guaranty Trust Company
of New York, Brussels office as operator of the Euroclear System or any
successor thereto.
"Excess Allocation Series" shall mean any Series that,
pursuant to the Supplement related to such Series, is entitled to receive
certain excess Yield Collections as more fully described in such Supplement.
"Excess Principal Collections" shall mean, with respect to a
Distribution Date, the aggregate amount for all outstanding Series of Principal
Collections which the related Supplements specify are to be treated as "Excess
Principal Collections" for such Distribution Date.
"Exchange" shall mean the procedure described under Section
6.09.
"Exchangeable Transferor Certificate" shall mean the
certificate executed by the Transferors and authenticated by the Trustee,
substantially in the form of Exhibit A and exchangeable as provided in Section
6.09 for one or more Series of Investor Certificates and the reissued
Exchangeable Transferor Certificate.
"Exchange Date" shall have the meaning, with respect to any
Series issued pursuant to an Exchange, specified in Section 6.09.
"Exchange Notice" shall have the meaning, with respect to any
Series issued pursuant to an Exchange, specified in Section 6.09.
"FDC" shall mean First Data Corporation, a Delaware
corporation, or any of its subsidiaries.
"FDIC" shall mean the Federal Deposit Insurance Corporation,
or any successor thereto.
"Final Termination Date" shall have the meaning specified in
subsection 12.01(a).
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"Foreign Clearing Agency" shall mean with respect to any
Series, Cedel or the Euroclear Operator or any other established clearing agency
for securities outside the United States designated in the applicable
Supplement.
"Global Certificate" shall have the meaning set forth in
subsection 6.10(a).
"Governmental Authority" shall mean the United States of
America, any state or other political subdivision thereof and any United States
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Ineligible Receivable" shall have the meaning specified in
subsection 2.04(d).
"Initial Closing Date" shall mean August 3, 1992.
"Initial Invested Amount" shall mean, with respect to any
Series, the amount stated in the applicable Supplement.
"Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
"Invested Amount" shall mean, with respect to any Series, the
meaning specified in the applicable Supplement.
"Invested Percentage" shall have, with respect to each Series,
the meaning set forth in the applicable Supplement.
"Investor Certificate" shall mean any one of the certificates
executed by (i) prior to May 1, 1998, the Transferor or (ii) after May 1, 1998,
the Transferors and, in each case, authenticated by the Trustee and
substantially in the form attached to the applicable Supplement.
"Investor Certificateholder" shall mean the holder of record
of an Investor Certificate.
"Investor Charge-Offs" shall have, with respect to each
Series, the meaning specified in the applicable Supplement.
"Investor Default Amount" shall mean, with respect to each
Series for any Due Period, an amount equal to the product of (a) the Default
Amount and (b) the related Floating Allocation Percentage for such Due Period.
"Investor Monthly Servicing Fee" shall have, with respect to
each Series, the meaning specified in Section 3.02.
"Lien" shall mean any mortgage, deed of trust, pledge,
hypothecation, assignment, participation, deposit arrangement, encumbrance, lien
(statutory or other), preference, priority right or interest or other security
agreement or preferential arrangement of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing and the filing of any financing statement under the Uniform
Commercial Code
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(other than any such financing statement filed for informational purposes only)
or comparable law of any jurisdiction to evidence any of the foregoing;
provided, however, that any assignment pursuant to Section 7.02 hereof shall not
be deemed to constitute a Lien.
"Lock Box Letters" shall mean such letters, in substantially
the form of Exhibit K hereto, delivered by TRS as Servicer to the Trustee
pursuant to Section 3.09 hereof.
"Manager" shall mean the managing underwriter of any Series.
"Minimum Transferor Percentage" shall mean, with respect to
any Due Period with respect to any Series, the percentage specified in the
applicable Supplement.
"Minimum Trust Principal Component" shall mean the aggregate
of the amounts set forth in each Supplement for each outstanding Series as the
"Minimum Trust Principal Component" for such Series.
"Monthly Servicing Fee" shall have the meaning specified in
Section 3.02.
"Moody's" shall mean Moody's Investors Service, Inc.
"Obligor" shall mean, with respect to any Account, the Person
or Persons obligated to make payments with respect to such Account, including
any guarantor thereof.
"Officer's Certificate" shall mean a certificate signed by any
Vice President or more senior officer of either of the Transferor or the
Servicer and delivered to the Trustee.
"Opinion of Counsel" shall mean a written opinion of
independent counsel, who may be counsel for either of the Transferors, and which
shall be reasonably acceptable to the Trustee.
"Original Pooling Agreement" shall mean the Master Pooling and
Servicing Agreement, dated as of June 30, 1992, among RFC, TRS and the Trustee
related to the establishment of the Trust, as supplemented by any Supplement.
"PA Removal Date" means the Determination Date on which
designated Accounts are removed pursuant to subsection 2.07(c).
"Paying Agent" shall mean any paying agent appointed pursuant
to Section 6.06 and shall initially be the Trustee.
"Payment Service Centers" shall mean the service centers
operated by TRS for the purpose of receiving and processing Cardmember
remittances in respect of Accounts, currently located in Chicago, Illinois and
any additional service centers operated by TRS or any agent of TRS from time to
time. TRS agrees to provide prompt notice to the Trustee of any additional
Payment Service Centers.
"Pay Out Event" shall have, with respect to each Series, the
meaning specified in Section 9.01.
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"Person" shall mean any legal person, including any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, Governmental Authority or other
entity of similar nature.
"Principal Collections" shall mean Collections other than
Yield Collections.
"Principal Funding Account" shall have, with respect to each
Series, the meaning, if any, specified in the applicable Supplement.
"Principal Shortfalls" shall mean, with respect to a
Distribution Date, the aggregate amount for all outstanding Series which the
related Supplements specify are "Principal Shortfalls" for such Distribution
Date.
"Principal Terms" shall have the meaning, with respect to any
Series issued pursuant to an Exchange, specified in Section 6.09.
"Privileged Assets Applied Dilution Factor" for a Due Period
shall mean the percentage equal to (i) the highest Privileged Assets Monthly
Dilution Rate for the rolling 12 month period ending with the calendar month in
which the last day of such Due Period occurs plus (ii) the product of the
Standard Deviation Factor and 3. The Standard Deviation Factor shall mean the
square root of the result of (a) the sum of the square of the differences
between the Privileged Assets Monthly Dilution Rate for each month occurring in
such 12 month period and the average Privileged Assets Monthly Dilution Rate for
such 12 month period divided by (b) 12.
"Privileged Assets Billed Amounts" shall mean amounts billed
under the Privileged Assets Program to Cardmembers enrolled in such Program.
"Privileged Assets Calculated Amount" shall mean, for a Due
Period, the product of (i) one minus the Yield Factor, (ii) the Estimated Trust
Privileged Assets Billed Amounts for the calendar month in which the last day of
the preceding Due Period occurs and (iii) the Privileged Assets Applied Dilution
Factor for such preceding Due Period.
"Privileged Assets Monthly Dilution Rate" for a calendar month
shall mean one minus the Privileged Assets Monthly Payment Rate for such month;
provided, that for this purpose the Privileged Assets Monthly Payment Rate shall
be capped at 100%.
"Privileged Assets Monthly Payment Rate" for a calendar month
shall be calculated by dividing the total remittances received under the entire
Privileged Assets Program during such calendar month by the total Privileged
Assets Billed Amounts for the prior month.
"Privileged Assets Program" shall mean the program offered by
an Account Originator in conjunction with one or more of its affiliated
insurance subsidiaries, currently called "Privileged Assets", pursuant to which
Cardmembers who enter into an annuity contract with the insurance affiliate can
choose a monthly contribution amount, which amount is billed to their American
Express(R) Card, American Express(R) Gold Card or Platinum Card(R) Accounts.
Payment of such billed contribution amounts is voluntary.
"Rapid Amortization Period" with respect to any Series, shall
have the meaning specified in the applicable Supplement.
"Rating Agency" shall mean, with respect to any Series, each
statistical rating agency or agencies selected by the Transferors to rate the
Investor Certificates of such Series.
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"Receivable" shall mean any amount owing by the Obligor under
an Account (including Defaulted Accounts), including any Related Account or
Additional Account, from time to time (including, without limitation, amounts
owing for the payment of merchandise and services and Annual Membership Fees)
and the administrative fees and charges described on Schedule 3 hereto). In
calculating the aggregate amount of Receivables on any day, the amount of
Receivables shall be reduced by the aggregate amount of credit balances, and
other adjustments stated in Section 3.08 hereof, in the Accounts on such day.
Any Receivables which the Transferor is unable to transfer as provided in
subsection 2.05(d) shall not be included in calculating the aggregate amount of
Receivables. For purposes of the computer file or microfiche list to be
delivered to the Trustee pursuant to Section 2.01 and 2.06, for purposes of
Schedule 1 to this Agreement and Schedule 1 to each Assignment of Receivables in
Additional Accounts in the form of Exhibit B to this Agreement and for purposes
of calculating the amount of the Receivables on any day, including without
limitation, in the reports to be delivered pursuant to Section 3.04(c), to
calculate the amount of Receivables transferred to the Trust and for purposes of
any calculation using the term "Receivables", the Privileged Assets Billed
Amounts may be treated in the same manner as Receivables and included in all
such calculations and reports, subject to the requirements provided in the
definition of "Trust Principal Component" and Section 2.07(c). Privileged Assets
Billed Amounts shall not constitute Receivables but shall be treated as
aforesaid, and the Transferor and Servicer representations and warranties shall
not apply to the Privileged Assets Billed Amounts. Receivables in a Defaulted
Account will cease to be included as Receivables at such time as they are sold
as part of the Servicer's collection efforts.
"Receivable Purchase Agreement" shall mean the receivable
purchase agreement, dated as of June 30, 1992, between RFC, as purchaser, and
TRS as seller as amended from time to time.
"Record Date" shall mean, unless otherwise specified with
respect to a Series in the applicable Supplement, with respect to any
Distribution Date, the last Business Day of the immediately preceding calendar
month.
"Recoveries" shall mean all amounts received with respect to
Receivables in Defaulted Accounts, net of expenses allocable thereto, including
the net proceeds of any sale of such Receivables.
"Related Account" shall have the meaning specified for such
term contained in the definition of the term "Account" herein.
"Relevant UCC State" shall mean all jurisdictions where UCC
filing is required to perfect and maintain the security interest of the Trustee.
"Remittance Banks" shall mean the institutions holding
accounts into which TRS shall deposit payments received through the Payment
Service Centers from Cardmembers in respect of Accounts.
"Removal Date" shall mean the date on which the Receivables in
certain designated Removed Accounts will be reassigned by the Trustee to a
Transferor.
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"Removal Notice Date" shall mean the tenth Business Day prior
to a Removal Date.
"Removed Accounts" shall have the meaning set forth in
Section 2.07.
"Removed PA Accounts" means the Accounts that are designated
for deletion and removal on the PA Removal Date pursuant to subsection 2.07(c)
"Repurchase Terms" shall mean, with respect to any Series
issued pursuant to an Exchange, the terms and conditions under which the
Transferors may repurchase such Series of Certificates pursuant to Section
12.02.
"Requirements of Law" for any Person shall mean the
certificate of incorporation or articles of association and by-laws or other
organizational or governing documents of such Person, and any law, treaty, rule
or regulation, or determination of an arbitrator or Governmental Authority, in
each case applicable to or binding upon such Person or to which such Person is
subject, whether Federal, state or local (including, without limitation, usury
laws, the Federal Truth in Lending Act and Regulation Z and Regulation B of the
Board of Governors of the Federal Reserve System).
"Responsible Officer" shall mean any officer of the Trustee
assigned by it to administer its corporate trust matters.
"Revolving Period" shall mean, with respect to each Series,
the period from and including the date of initial issuance of the Investor
Certificates of such Series to, but not including, the day on which an
Amortization Period or an Accumulation Period for such Series commences.
"RFC" shall mean American Express Receivables Financing
Corporation, a Delaware corporation, and its successors.
"Selection Date" shall mean, for each Account, the close of
business on the cycle billing date for such Account occurring in the monthly
period beginning on the close of business on March 1, 1992 and ending at the
close of business on March 31, 1992.
"Series" shall mean any Series of Investor Certificates, each
as designated in the applicable Supplement.
"Series Factor" shall mean, unless any Series is issued in
more than one class as stated in any related Supplement with respect to any
Series and any Due Period, a number carried out to eight decimals (and rounded
to seven decimals) representing the ratio of the applicable Invested Amount as
of the end of the last day of the preceding Due Period to the applicable Initial
Invested Amount.
"Servicer" shall mean initially TRS and thereafter any Person
appointed as successor as herein provided to service the Receivables.
"Servicer Default" shall have the meaning specified in Section
10.01.
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"Service Transfer" shall have the meaning specified in Section
10.01.
"Servicing Fee Percentage" shall mean, with respect to any
Series, the percentage specified in the applicable Supplement.
"Servicing Officer" shall mean any officer of the Servicer
involved in, or responsible for, the administration and servicing of the
Receivables whose name appears on a list of servicing officers furnished to the
Trustee by the Servicer, as such list may from time to time be amended.
"Special Funding Account" shall have the meaning set forth in
Section 4.01.
"Standard & Poor's" shall mean Standard & Poor's, a division
of the McGraw-Hill Company, or any successor thereto.
"Stated Series Termination Date" shall mean, with respect to
any Series, the date stated in the applicable Supplement as the termination date
for such Series.
"Successor Servicer" shall have the meaning specified in
Section 10.02.
"Supplement" shall mean, with respect to any Series, a
supplement to this Agreement complying with the terms of Section 6.09, executed
in conjunction with any issuance of any Series.
"Termination Notice" shall have, with respect to any Series,
the meaning specified in Section 10.01.
"Transferee's Certificate" shall have the meaning set forth in
Section 7.05.
"Transfer Agent and Registrar" shall have the meaning
specified in Section 6.03 and shall initially be the Trustee.
"Transferor Amount" shall mean, on any date of determination,
the Trust Principal Component at the end of the day immediately prior to such
date of determination, minus the Aggregate Invested Amount at the end of such
day and plus the principal amount on deposit in the Special Funding Account and
in any principal funding account at the end of such day.
"Transferor Interest" shall have the meaning specified in
Section 4.01(a).
"Transferor Percentage" shall mean, on any date of
determination, when used with respect to Principal Collections, Yield
Collections and Receivables in Defaulted Accounts or otherwise, one hundred
percent minus the sum for all Outstanding Series of the Invested Percentages
calculated on such date with respect to such categories of Receivables as
calculated by the Servicer.
"Transferor" shall mean either RFC or Centurion Bank, in each
case, as a transferor of Receivables.
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"TRS" shall mean American Express Travel Related Services
Company, Inc., a New York corporation and its successors and assigns.
"Trust" shall mean the trust created by this Agreement, the
corpus of which shall consist of the Trust Property.
"Trust Average Monthly Payment Rate" for a Due Period means
Collections on Receivables, excluding Recoveries for such Due period, divided by
the aggregate amount of billed Receivables as of the beginning of such Due
Period.
"Trustee" shall mean the institution executing this Agreement
as trustee, or its successor in interest, or any successor trustee appointed as
herein provided.
"Trust Principal Component" shall mean, for any Due Period,
the product of the aggregate amount of Receivables at the end of the prior Due
Period and one minus the Yield Factor or, for any other date of determination,
the product of the aggregate amount of Receivables as of the date so specified
in this Agreement and one minus the Yield Factor; provided, however, that there
shall be subtracted from each such product the Privileged Assets Calculated
Amount for the prior Due Period for the purpose of calculating (A) the
Transferor Amount as a percentage of the Trust Principal Component pursuant to
Section 2.06(a)(1), (B) the Trust Principal Component pursuant to Section
2.06(a)(2), (C) the Transferor Amount as a percentage of the Trust Principal
Component pursuant to Section 2.07(a) and 2.07(b)(iii), (D) the Trust Principal
Component and the Transferor Amount as a percentage of the Trust Principal
Component pursuant to Section 2.07(c), (E) the Transferor Amount as a percentage
of the Trust Principal Component pursuant to the fourth sentence of Section
3.08(a), (F) the Transferor Amount as a percentage of the Trust Principal
Component pursuant to Section 4.01(f), (G) the Trust Principal Component
pursuant to Section 6.09(b), (H) the Transferor Amount as a percentage of the
Trust Principal Component pursuant to Section 9.01(d) and (I) any amount for any
other purpose with respect to a Series as specified in the related Supplement.
"Trust Property" shall have the meaning specified in Section
2.01.
"UCC" shall mean the Uniform Commercial Code, as amended from
time to time, as in effect in any specified jurisdiction.
"Undistributed Principal Collections" shall have the meaning
specified in subsection 4.01(f).
"Undivided Interest" shall mean the undivided interest of any
Certificateholder in the Trust.
"Yield Collections" shall mean an amount equal to Collections
received with respect to each Account multiplied by the Yield Factor.
"Yield Factor" shall mean, initially, 3.0% and thereafter such
amount as is determined pursuant to subsection 2.05(g).
Section 1.02 Other Definitional Provisions.
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(a) All terms defined in any Supplement or this Agreement shall have
the defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions of
all terms defined herein shall include the singular as well as the plural form
of such terms and the masculine of such terms as well as the feminine and neuter
genders of such terms.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.01, and accounting terms partly defined in Section 1.01 to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles on the date of determination. To the extent that
the definitions of accounting terms herein are inconsistent with the meanings of
such terms under generally accepted accounting principles, the definitions
contained herein shall control.
(c) The agreements and representations and warranties of TRS in this
Agreement in its capacity as Servicer, shall be deemed to be the agreements,
representations and warranties of TRS solely in such capacity for so long as it
acts in such capacity under this Agreement.
(d) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to any Supplement or this
Agreement as a whole and not to any particular provision of such Supplement or
this Agreement, as the case may be; Section, subsection, Schedule and Exhibit
references contained in this Agreement or any Supplement are references to
Sections, subsections, Schedules and Exhibits in or to this Agreement or any
Supplement unless otherwise specified; and the word "including" means including
without limitation.
[END OF ARTICLE I]
<PAGE>
ARTICLE II
APPOINTMENT OF TRUSTEE;
CONVEYANCE OF RECEIVABLES
ISSUANCE OF CERTIFICATES
Section 2.01 Appointment of Trustee; Conveyance of Receivables. (a) The
Transferors appoint and authorize The Bank of New York to act as Trustee as
provided herein and to exercise such powers under this Agreement as are
delegated to the Trustee by the terms hereof together with all such powers
as are reasonably incidental thereto. The Trustee hereby accepts such
appointment and agrees to exercise such powers and perform such functions on
behalf of the Certificateholders from time to time as are specifically delegated
to the Trustee by the terms hereof.
(b) RFC does hereby transfer, assign, set-over, and otherwise convey to the
Trust for the benefit of the Certificateholders, without recourse, all right,
title and interest of RFC in and to the Receivables, now existing and hereafter
created, all monies due or to become due with respect thereto (including
Recoveries) on and after the Cut-Off Date, all proceeds of such Receivables, and
all right, title and interest of RFC in, to and under the Receivable Purchase
Agreement. Centurion Bank does hereby transfer, assign, set-over, and otherwise
convey to the Trust for the benefit of the Certificateholders, without recourse,
all right, title and interest of Centurion Bank in and to the Receivables, now
existing and hereafter created, all monies due or to become due with respect
thereto (including Recoveries) on and after the Cut-Off Date and all proceeds of
such Receivables. The property described in the two immediately preceding
sentences, together with all monies as are from time to time deposited in the
Collection Account, the Special Funding Account and any other account or
accounts maintained for the benefit of the Certificateholders and all monies as
are from time to time available under any Enhancement for any Series for payment
to Certificateholders shall constitute the property of the Trust (the "Trust
Property"). The foregoing transfers, assignments, set-overs and conveyances do
not constitute and are not intended to result in a creation or an assumption by
the Trust, the Trustee or any Certificateholder of any obligation of the
Servicer, either Transferor or any other Person in connection with the Accounts,
the Receivables or under any agreement or instrument relating thereto including,
without limitation, any obligation to any Obligors, merchant service
establishments or insurers.
In connection with such transfer, each Transferor agrees to
record and file, at its own expense, financing statements (and continuation
statements with respect to such financing statements when applicable) with
respect to the Receivables now existing and hereafter created for the transfer
of accounts and general intangibles (both as defined in the UCC in effect in the
Relevant UCC State) meeting the requirements of applicable state law in such
manner and in such jurisdictions as are necessary to perfect the transfers and
assignments of the Receivables by such Transferor to the Trust, and to deliver a
file-stamped copy of such financing statements or other evidence of such filings
to the Trustee on or prior to the Closing Date.
In connection with such transfer, the Servicer agrees, on
behalf of the Transferors, at its own expense, to indicate clearly and
unambiguously in its computer files that the Receivables created in connection
with the Accounts (other than any Additional Account) have been transferred to
the Trust pursuant to this Agreement for the benefit of the Certificateholders.
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On behalf of the Transferors, the Servicer further agrees to deliver to the
Trustee (a) a computer file or microfiche list containing a true and complete
list of all such Accounts, identified by account number and by Receivables
balance as of the applicable Cut-Off Date and (b) within twenty Business Days of
any request by the Trustee, a new computer file or microfiche list containing a
true and complete list of all Accounts identified as described in the preceding
clause (a). Such files or lists shall be marked as Schedule 1 to this Agreement,
delivered to the Trustee as confidential and proprietary, and are hereby
incorporated into and made a part of this Agreement. The Servicer agrees, on
behalf of the Transferors, at its own expense, by the end of the Due Period in
which any Related Accounts have been originated to indicate clearly and
unambiguously in its computer files that the Receivables created in connection
with the Related Accounts have been transferred to the Trust pursuant to this
Agreement for the benefit of the Certificateholders.
Each Transferor hereby grants to the Trustee a first priority
perfected security interest in all of such Transferor's right, title and
interest in and to the Receivables, now existing and hereafter created, all
monies due or to become due with respect thereto on and after the Cut-Off Date
applicable to the Receivables conveyed to the Trust by such Transferor
(including Recoveries), all proceeds of such Receivables, such funds as are from
time to time deposited in the Collection Account, the Special Funding Account
and any other account or accounts maintained for the benefit of
Certificateholders, and the benefits of any Enhancement for any Series for
payment to Certificateholders. This Agreement shall constitute a security
agreement under applicable law.
Pursuant to the request of the Transferors, the Trustee has
caused Certificates in authorized denominations evidencing the entire interest
in the Trust to be duly authenticated and delivered to or upon the order of the
Transferor pursuant to Section 6.02,
Section 2.02 Acceptance by Trustee. (a) The Trustee hereby
acknowledges its acceptance, to the extent validly transferred, assigned, set
over or otherwise conveyed to the Trust as provided in subsection 2.01(b)
hereof, on behalf of the Trust, of all right, title and interest previously held
by each Transferor in and to the Receivables, now existing and hereafter
created, all monies due or to become due with respect thereto on and after the
Cut-Off Date applicable to the Receivables conveyed to the Trust by such
Transferor (including Recoveries), all proceeds of such Receivables, such funds
as are from time to time deposited in the Collection Account, the Special
Funding Account, and any other account or accounts maintained for the benefit of
Certificateholders, and benefits of any Enhancement for any Series and declares
that it shall hold such right, title and interest, upon the trust herein set
forth, and subject to the terms hereof for the benefit of all
Certificateholders. The Trustee further acknowledges that, prior to or
simultaneously with the execution and delivery of this Agreement, the Servicer
delivered to the Trustee, on behalf of the Transferors, the computer files or
microfiche lists represented by the Servicer to be the computer files or
microfiche lists described in the fourth paragraph of Section 2.01.
(b) The Trustee hereby agrees not to disclose to any Person (including
any Certificateholder or Certificate Owner) any of the account numbers or other
information contained in the computer files or microfiche lists delivered to the
Trustee by the Servicer on behalf of the Transferors pursuant to Sections 2.01
and 2.06, except as is required in connection with the performance of its duties
hereunder or in enforcing the rights of the Certificateholders or
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to a successor Servicer appointed pursuant to Sections 8.05 or 10.02 or a
successor Trustee appointed pursuant to Section 11.08. The Trustee agrees to
take such measures as shall be reasonably requested by the Transferors to
protect and maintain the security and confidentiality of such information, and,
in connection therewith, shall allow the Transferor or the Servicer on behalf of
the Transferor to inspect the Trustee's security and confidentiality
arrangements from time to time during normal business hours. The Trustee shall
provide the Transferors with written notice five Business Days prior to any
disclosure pursuant to this subsection 2.02(b).
(c) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.
Section 2. Except as otherwise provided below, each Transferor hereby
severally represents and warrants to the Trustee, on behalf of the Trust, with
respect to any Series of Certificates, as of the date of any Supplement and the
related Closing Date, unless otherwise stated in such Supplement that:
(i) Organization and Good Standing. As to RFC, that RFC is a
corporation duly organized and validly existing in good standing under the laws
of the State of Delaware, and has 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 this Agreement, any Supplement and the
Receivable Purchase Agreement and to execute and deliver to the Trustee the
Certificates pursuant hereto. As to Centurion Bank, that Centurion Bank is a
Utah-chartered industrial loan company, duly organized and validly existing in
good standing under the laws of the State of Utah, and has 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 this Agreement and any
Supplement and to execute and deliver to the Trustee the Certificates pursuant
hereto.
(ii) Due Qualification. Such Transferor is duly qualified to do
business and is in good standing as a foreign corporation, and has obtained all
necessary licenses and approvals, in each jurisdiction in which failure to so
qualify or to obtain such licenses and approvals would have a material adverse
effect on the conduct of its business or render any Receivable unenforceable;
provided, however, that no representation or warranty is made with respect to
any qualifications, licenses or approvals which the Trustee would have to obtain
to do business in any state in which the Trustee seeks to enforce any
Receivable.
(iii) Due Authorization. As to RFC, that the execution and delivery
of this Agreement, any Supplement and the Receivable Purchase Agreement and the
execution and delivery to the Trustee of the Certificates and the consummation
of the transactions provided for in this Agreement, any Supplement and the
Receivable Purchase Agreement have been duly authorized by RFC by all necessary
corporate action on the part of RFC. As to Centurion Bank, that the execution
and delivery of this Agreement and any Supplement and the execution and delivery
to the Trustee of the Certificates and the consummation of the transactions
provided for in this Agreement and any Supplement have been duly authorized by
Centurion Bank by all necessary corporate action on the part of Centurion Bank.
(iv) No Violation. As to RFC, that the execution and delivery of
this Agreement, any Supplement, the Receivable Purchase Agreement and the
Certificates, the performance of the transactions contemplated by this
Agreement, any Supplement and the Receivable Purchase Agreement and the
fulfillment of the terms hereof will not conflict with, violate or result in any
breach of any of the material terms and provisions of, or constitute (with or
without notice or lapse of time or both) a material default under, any
Requirement of Law applicable to RFC or any material indenture, contract,
agreement, mortgage, deed of trust, or other instrument to which RFC is a party
or by which it or any of its properties are bound. As to Centurion Bank, the
execution and delivery of this Agreement, any Supplement and the Certificates,
the performance of the transactions contemplated by this Agreement and any
Supplement and the fulfillment of the terms hereof will not conflict with,
violate or result in any breach of any of the material terms and provisions of,
or constitute (with or without notice or lapse of time or both) a material
default under, any Requirement of Law applicable to Centurion Bank or any
material indenture, contract, agreement, mortgage, deed of trust, or other
instrument to which Centurion Bank is a party or by which it or any of its
properties are bound.
(v) No Proceedings. As to RFC, there are no proceedings or
investigations pending or, to the best knowledge of RFC, threatened against RFC,
before any court, regulatory body, administrative agency, arbitrator or other
tribunal or governmental instrumentality (i) asserting the invalidity of this
Agreement, any Supplement, the Receivable Purchase Agreement or the
Certificates, (ii) seeking to prevent the issuance of the Certificates or the
consummation of any of the transactions contemplated by this Agreement, any
Supplement, the Receivable Purchase Agreement or the Certificates, (iii) seeking
any determination or ruling that, in the reasonable judgment of RFC, would
materially and adversely affect the performance by RFC of its obligations under
this Agreement, any Supplement or the Receivable Purchase Agreement, (iv)
seeking any determination or ruling that would materially and adversely affect
the validity or enforceability of this Agreement, any Supplement, the Receivable
Purchase Agreement or the Certificates or (v) seeking to affect adversely the
Federal or State of New York income tax attributes of the Trust. There are no
proceedings or investigations pending or, to the best knowledge of Centurion
Bank, threatened against Centurion Bank, before any court, regulatory body,
administrative agency, arbitrator or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement, any Supplement,
or the Certificates, (ii) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by this Agreement, any
Supplement, or the Certificates, (iii) seeking any determination or ruling that,
in the reasonable judgment of Centurion Bank, would materially and adversely
affect the performance by Centurion Bank of its obligations under this Agreement
or any Supplement, (iv) seeking any determination or ruling that would
materially and adversely affect the validity or enforceability of this
Agreement, any Supplement, or the Certificates or (v) seeking to affect
adversely the Federal or State of New York income tax attributes of the Trust.
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(vi) Eligibility of Accounts. As of the Selection Date applicable to
each Account, such Account was an Eligible Account.
(vii) All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or of any Governmental Authority required
to be obtained on or prior to the date as of which this representation is being
made in connection with the execution and delivery of this Agreement, any
Supplement, the Receivable Purchase Agreement and the Certificates, the
performance of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof, have been obtained.
(viii) Amount of Receivables; Computer File. As of the June 30, 1992
Cut-Off Date, the amount of Receivables was $2,433,528,576. The computer files
or microfiche lists delivered pursuant to Section 2.01 hereof, at the time of
their delivery, were complete and accurately reflected the information regarding
the Receivables under the Accounts in all material respects.
The representations and warranties set forth in this Section
2.03 shall survive the transfer and assignment of the Receivables to the Trust,
and termination of the rights and obligations of the Servicer pursuant to
Section 10.01. Upon discovery by any of the Transferors, the Servicer or the
Trustee of a breach of any of the foregoing representations and warranties, the
party discovering such breach shall give prompt written notice to the others.
Section 2.03 Representations and Warranties of the Transferors Relating to
the Agreement and any Supplement and the Receivables.
(a) Binding Obligation; Valid Transfer And Assignment. Each Transferor
hereby severally represents and warrants to the Trustee, on behalf of the Trust,
with respect to any Series of Certificates, as of the date of any Supplement and
the related Closing Date, unless otherwise stated in such Supplement that:
(i) As to RFC, each of this Agreement, any Supplement and the
Receivable Purchase Agreement, constitutes a legal, valid and binding
obligation of RFC, enforceable against RFC, in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect affecting the enforcement of
creditors' rights and except as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in
equity). As to Centurion, each of this Agreement and any Supplement to
which Centurion Bank shall be a party constitutes a legal, valid and
binding obligation of Centurion Bank, enforceable against Centurion Bank,
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(ii) This Agreement constitutes either (A) a valid transfer and
assignment to the Trust of all right, title and interest of such Transferor
in and to the Receivables now existing and hereafter created, all monies
due or to become due with respect thereto on and after the Cut-Off Date
applicable to the Receivables conveyed by such Transferor to
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<PAGE>
the Trust, Recoveries, and all proceeds (as defined in the UCC as in effect
in the Relevant UCC State) of such Receivables, such funds as are from time
to time deposited in the Collection Account, Special Funding Account and
any other account or accounts maintained for the benefit of
Certificateholders and the benefits of any Enhancement, and such
Receivables and all proceeds thereof will be held by the Trust free and
clear of any Lien of any Person claiming through or under such Transferor
or any of its Affiliates except for (x) Liens permitted under subsection
2.05(b), (y) the interest of such Transferor as a holder of the
Exchangeable Transferor Certificate and (z) any right of the holder of the
Exchangeable Transferor Certificate to receive interest accruing on, and
investment earnings with respect to, the Collection Account or any other
account or accounts maintained for the benefit of Certificateholders as
provided in this Agreement and any Supplement or (B) a grant of a security
interest (as defined in the UCC as in effect in the Relevant UCC State) in
such property to the Trustee on behalf of the Trust, which is enforceable
with respect to existing Receivables (other than Receivables in Additional
Accounts) and the proceeds thereof to the extent set forth in Section 9-306
of the UCC in effect in the Relevant UCC State upon execution and delivery
of this Agreement, and which will be enforceable with respect to such
Receivables thereafter created, and the proceeds thereof to such extent,
upon such creation. If this Agreement constitutes the grant of a security
interest to the Trust in such property, upon the filing of the applicable
financing statements and in the case of the Receivables hereafter created
and proceeds thereof upon such creation, the Trust shall have a first
priority perfected security interest in such property to the extent set
forth in Section 9-306 of the UCC in effect in the Relevant UCC State
relating to such Receivables, except for Liens permitted under subsection
2.05(b) hereunder. Neither such Transferor nor any Person claiming through
or under such Transferor shall have any claim to or interest in the
Collection Account or any other account or accounts maintained for the
benefit of Certificateholders, except for any right of the Transferors to
receive interest accruing on, and investment earnings with respect to, any
such account as provided in this Agreement and any Supplement and, if this
Agreement constitutes the grant of a security interest in such property,
except for the interest of such Transferor in such property as a debtor for
purposes of the UCC as in effect in the Relevant UCC State. The Receivable
Purchase Agreement constitutes a transfer to RFC of all right, title and
interest of TRS in and to the Receivables purported to be sold thereunder,
whether then existing or thereafter created in the applicable Accounts and
the proceeds thereof.
(b) Eligibility of Receivables. Each Transferor hereby severally
represents and warrants to the Trustee, on behalf of the Trust as of the
Cut-Off Date applicable to the Receivables conveyed by such Transferor to
the Trust and on each Additional Account Cut-Off Date applicable to
Receivables to be conveyed by it to the Trust that (i) each such Receivable
then existing is an Eligible Receivable, (ii) all material information with
respect to the Accounts and Receivables provided to the Trustee by such
Transferor was true and correct in all material respects as of the
Selection Date or the related Additional Account Selection Date, (iii) each
Receivable then existing has been conveyed to the Trust free and clear of
any Lien of any Person claiming through or under such Transferor or any of
its Affiliates (other than Liens permitted under subsection 2.05(b)) and in
compliance, in all material respects, with all Requirements of Law
applicable to such Transferor, (iv) with respect to each such Receivable
then existing, all consents, licenses, approvals or authorizations of or
registrations or declarations with any Governmental Authority required to
be obtained, effected or given by such Transferor, in connection with the
conveyance of such Receivable to the Trust have been duly obtained,
effected or given and are in full force and effect, (v) as of the Initial
Closing Date, and, as of the applicable Additional Account Cut-Off Date
with respect to Additional Accounts, Schedule 1 to this Agreement is and
will be an accurate and complete listing of all the Accounts in all
material respects as of such Cut-Off Date or applicable Additional Account
Cut-Off Date, as the case may be, and the information contained therein
with respect to the identity of such Accounts and the Receivables existing
thereunder is and will be true and correct in all material respects as of
such applicable Cut-Off Date or Additional Account Cut-Off Date and (vi) no
selection procedure believed by such Transferor to be adverse to the
interests of the Investor Certificateholders have been used in selecting
the initial Accounts. On each day on which any new Receivable is created,
such Transferor shall be deemed to represent and warrant to the Trust that
(A) each Receivable created on such day is an Eligible Receivable, (B) each
Receivable created on such day has been conveyed to the Trust in
compliance, in all material respects, with all Requirements of Law
applicable to such Transferor, (C) with respect to each such Receivable,
all consents, licenses, approvals or authorizations of or registrations or
declarations with any Governmental Authority required to be obtained,
effected or given by such Transferor, in connection with the conveyance of
such Receivable to the Trust have been duly obtained, effected or given and
are in full force and effect and (D) the representations and warranties set
forth in subsection 2.04(a) are true and correct with respect to each
Receivable created on such day as if made on such day.
(c) Notice of Breach. The representations and warranties set forth in
this Section 2.04 shall survive the transfer and assignment of the
Receivables to the Trust and the termination of the rights and obligations
of the Servicer pursuant to Section 10.01. Upon discovery by either
Transferor, the Servicer or the Trustee of a breach of any of the
representations and warranties set forth in this Section 2.04, the party
discovering such breach shall give prompt written notice to the others.
(d) Transfer of Ineligible Receivables.
(i) Automatic Removal. In the event of a breach with respect to a
Receivable of any of the representations and warranties set forth in
subsection 2.04(b)(iii) or in the event that a Receivable is not an
Eligible Receivable as a result of the failure to satisfy the conditions
set forth in clause (iv) of the definition of an Eligible Receivable, and
either of the following two conditions is met:
(A) the Lien upon the subject Receivable (1) ranks prior to the Lien
created pursuant to this Agreement, (2) arises in favor of the United States of
America or any state or any agency or instrumentality thereof or involves taxes
or liens arising under Title IV of the Employee Retirement Income Security Act
of 1974, or (3) has been consented to by TRS or either Transferor; or
(B) the Lien on the subject Receivable is not of the types described in
clause (A) above, and as a result of such breach or event such Receivable
becomes a Receivable in a Defaulted Account, or the related Transferor's or the
Trust's rights in, to or under such Receivable or its proceeds are materially
impaired or the proceeds of such Receivable are not available for any reason to
the Trust free and clear of any Lien except Liens permitted pursuant to
subsection 2.05(b);
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then, upon the earlier to occur of the discovery of such breach or event by such
Transferor or the Servicer or receipt by the Transferors or the Servicer of
written notice of such breach or event given by the Trustee, each such
Receivable or, at the option of such Transferor, all such Receivables with
respect to the related Account shall be automatically removed from the Trust on
the terms and conditions set forth below in subsection 2.04(d)(iii).
(ii) Removal after Cure Period. In the event of a breach of any of the
representations and warranties set forth in subsection 2.04(b)(i), (ii),
(iv) or (v) with respect to a Receivable (other than in the event that a
Receivable is not an Eligible Receivable as a result of the failure to
satisfy the conditions set forth in clause (iv) of the definition of
Eligible Receivable), and as a result of such breach or event such
Receivable becomes a Receivable which is not an Eligible Receivable, the
Account related to such Receivable becomes a Defaulted Account or the
Trust's rights in, to or under such Receivable or its proceeds are
materially impaired or the proceeds of such Receivable are not available
for any reason to the Trust free and clear of any Lien except Liens
permitted pursuant to subsection 2.05(b), then, upon the expiration of 60
days or any longer period agreed upon by the Trustee (not to exceed an
additional 60 days) from the earlier to occur of the discovery of any such
event by the Transferors or the Servicer, or receipt by the Transferors or
the Servicer of written notice of any such event given by the Trustee, each
such Receivable or, at the option of the Transferors, all such Receivables
with respect to the related Account, shall be removed from the Trust on the
terms and conditions set forth in subsection 2.04(d)(iii); provided,
however, that no such removal shall be required to be made if, on any day
within such applicable period, (A) such representations and warranties with
respect to such Receivable shall then be true and correct in all material
respects as if such Receivable had been created on such day, and (B) such
Receivable is an Eligible Receivable, the related Account is no longer a
Defaulted Account as the result of the breach of such representation and
warranty (including those implied by law), and the Trust's rights in, to or
under such Receivable or its proceeds are no longer impaired as the result
of the breach of such representation and warranty, and the proceeds of such
Receivable have become available to the Trust free and clear of all Liens
resulting in the breach of such representation or warranty, as applicable.
(iii) Removal Terms and Conditions. When required or permitted with
respect to a Receivable (an "Ineligible Receivable") by the provisions of
subsection 2.04(d)(i) or subsection 2.04(d)(ii) above, the Transferors
shall remit to the Servicer, for deposit into the Special Funding Account,
the balance of such Receivable within two Business Days of the date on
which such Receivable became an Ineligible Receivable. Any such deposit
into the Special Funding Account in connection with the reassignment of an
Ineligible Receivable shall be considered a payment in full of the
Ineligible Receivable and such deposit shall be applied in accordance with
the provisions of Article IV. Upon the reassignment to the Transferors of
an Ineligible Receivable, the Trust shall, without further action be deemed
to transfer, assign, set-over and otherwise convey to the Transferors,
without recourse, representation or warranty (including those implied by
law), all the right, title and interest of the Trust in and to such
Ineligible Receivable, all monies due or to become due with respect thereto
and all proceeds thereof. The Trustee shall execute such documents and
instruments of transfer or assignment and take such other actions as shall
reasonably be requested by the Transferors to effect the conveyance
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of such Ineligible Receivable pursuant to this subsection and as shall be
specified in an Opinion of Counsel delivered to the Trustee to the effect
that such documents and instruments comply herewith. In the event that on
any day within 60 days, or any longer period agreed upon by the Trustee
(not to exceed an additional 60 days), of the date on which the removal of
Receivables which are not Eligible Receivables from the Trust pursuant to
this Section is effected, (A) the applicable representations and warranties
with respect to such Receivable shall be true and correct in all material
respects on such date and (B) the Receivable is an Eligible Receivable, the
Account corresponding to the Receivable is no longer a Defaulted Account
and the Trust's rights in, to or under such Receivable or its proceeds are
no longer impaired as a result of the breach of such representation or
warranty and the proceeds of such Receivable are available to the Trust
free and clear of all Liens resulting in the breach of such representation
and warranty, or (C) either Transferor has cured the breach of the
representation or warranty, as applicable, the Transferors may, but shall
not be required to, direct the Servicer to include such Receivable in the
Trust. Upon reinclusion of a Receivable in the Trust pursuant to this
subsection, the Transferors shall have been deemed to have made the
applicable representations and warranties in subsection 2.04(b) as of the
date of such addition, as if the Receivable had been created on such date,
and shall execute all such necessary documents and instruments of transfer
or assignment and take such other actions as shall be necessary to effect
and perfect the reconveyance of such Receivable to the Trust. The
obligation of the Transferors set forth in this subsection shall constitute
the sole remedy respecting any breach of the representations and warranties
set forth in the above-referenced subsections with respect to such
Receivable available to Certificateholders or the Trustee on behalf of
Certificateholders.
Notwithstanding any other provision of this subsection
2.04(d), a reassignment of an Ineligible Receivable shall not occur if the
Transferors fail to make the deposit required by this subsection 2.04(d) with
respect to such Ineligible Receivable.
(iv) No Impairment. For the purposes of subsections 2.04(d)(i) and
2.04(d)(ii) above, proceeds of a Receivable shall not be deemed to be
impaired hereunder solely because such proceeds are held by the Servicer
for more than the applicable period under Section 9-306(3) of the UCC as in
effect in the Relevant UCC State.
(e) Reassignment of Trust Portfolio. In the event of (1) a breach of
any of the representations or warranties set forth in subsection 2.03(i) or
2.04(a) or (2) a material amount of Receivables are not Eligible Receivables,
and in either case such event has a material adverse effect on Investor
Certificateholders, either the Trustee or the Holders of Investor Certificates
evidencing Undivided Interests aggregating more than 50% of the Aggregate
Invested Amount, by notice then given in writing to the Transferors (and to the
Trustee and the Servicer, if given by the Investor Certificateholders), may
direct the Transferors to accept reassignment of all Receivables within 60 days
of such notice, or within such longer period as may be specified in such notice
(not to exceed an additional 60 days) and the Transferors shall be obligated to
accept such reassignment on a Distribution Date specified by the Transferors
occurring within such applicable period on the terms and conditions set forth
below; provided, however, that no such reassignment shall be required to be made
if, on the Business Day prior to such Distribution Date the representations and
warranties contained in subsection 2.03(i) and 2.04(a) shall then be true and
correct in all material respects, or there shall no longer be a material amount
of Receivables
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which are not Eligible Receivables, as the case may be. The Transferors shall
deposit on the Business Day prior to the Distribution Date (in immediately
available funds) an amount equal to the reassignment deposit amount for such
Receivables in the Collection Account for distribution to the Investor
Certificateholders pursuant to Section 12.03. The deposit amount for such
reassignment shall be equal to the Aggregate Invested Amount on the Record Date
related to the applicable Distribution Date on which such deposit is made (less
the aggregate principal amount on deposit in any principal funding account) plus
an amount equal to all accrued but unpaid interest on the Certificates of all
Series at the applicable certificate rates through the end of the interest
accrual periods of such Series. Payment of the reassignment deposit amount and
all other amounts in the Collection Account in respect of the preceding Due
Period shall be considered a prepayment in full of all such Receivables. On the
Distribution Date with respect to which such amount has been deposited in full
into the Collection Account, the Receivables and all monies due or to become due
with respect thereto and all proceeds relating thereto shall be released to the
Transferors and the Trustee shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, representation or
warranty, as shall be reasonably requested by the Transferors to vest in the
Transferors or their designees or assignees, all right, title and interest of
the Trust in and to the Receivables, all monies due or to become due with
respect thereto and all proceeds thereof and as shall be specified in an Opinion
of Counsel delivered to the Trustee to the effect that such documents and
instruments comply herewith. If the Trustee or the Investor Certificateholders
give a notice directing the Transferors to accept reassignment as provided
herein, the obligation of the Transferors to accept reassignment of the
Receivables pursuant to this subsection 2.04(e) shall constitute the sole remedy
respecting a breach of the representations and warranties contained in
subsection 2.03(i) or 2.04(a) or there being a material amount of Receivables
which are not Eligible Receivables available to the Investor Certificateholders
or the Trustee on behalf of the Investor Certificateholders.
(f) Nothing contained in this Section 2.04 shall create an obligation
on the part of the Trustee to verify the accuracy or continued accuracy of the
representations or warranties contained in this Section 2.04. The Trustee shall
have no obligation to give any notice pursuant to this Section 2.04 unless it
has actual knowledge of facts which would permit the giving of such notice.
Section 2.05 Covenants of the Transferors. Each Transferor hereby severally
covenants that:
(a) Receivables Not to be Evidenced by Promissory Notes or Chattel
Paper. Such Transferor will take no action to cause any Receivable to be
evidenced by any instrument (as defined in the UCC as in effect in the Relevant
UCC State). Each Receivable shall be payable pursuant to a contract which does
not create a Lien on any goods purchased thereunder.
(b) Security Interests. Except for the conveyances hereunder, such
Transferor will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien on any Receivable,
whether now existing or hereafter created, or any interest therein; such
Transferor will notify the Trustee of the existence of any Lien on any
Receivable transferred by such Transferor immediately upon discovery thereof;
and such Transferor will defend the right, title and interest of the Trust in,
to and under the Receivables, whether now existing or hereafter created, against
all claims of third parties claiming through or under such Transferor; provided,
however, that nothing in this subsection 2.05(b) shall prevent or
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be deemed to prohibit TRS or either Transferor from suffering to exist upon any
of the Receivables any Liens for municipal or other local taxes and other
governmental charges if such taxes or governmental charges shall not at the time
be due and payable or if TRS or such Transferor shall currently be contesting
the validity thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves with respect thereto; provided, further,
that nothing in this subsection shall prohibit the Transferors from
participating an interest in the Exchangeable Transferor Certificate pursuant to
subsection 6.03(b) hereof.
(c) Account Agreements and Guidelines. Such Transferor shall cause the
Account Originators to comply with and perform its obligations under the
applicable Account Agreements relating to the Accounts and the Account
Guidelines except insofar as any failure so to comply or perform would not
materially and adversely affect the rights of the Trust or the Investor
Certificateholders hereunder or under the Certificates. Subject to compliance
with all Requirements of Law the failure to comply with which would have a
material adverse effect on the Investor Certificateholders, an Account
Originator may change the terms and provisions of its Account Agreements or its
Account Guidelines in any respect (including, without limitation, the
calculation of the amount, or the timing, of Charge-Offs) as follows: (a) if
such Account Originator owns a comparable segment of accounts then such change
shall be made applicable to such comparable segment of the accounts owned and
serviced by it that have characteristics the same as, or substantially similar
to, the Accounts that are the subject of such change, and (b) if such Account
Originator does not own such a comparable segment, then it will not make any
such change with the intent to materially benefit itself, or any Transferor over
the Investor Certificateholders.
(d) Account Allocations. In the event that such Transferor is unable
for any reason to transfer Receivables to the Trust in accordance with the
provisions of this Agreement (including, without limitation, by reason of the
application of the provisions of Section 9.02 or an order of any court of
competent jurisdiction that such Transferor not transfer any additional
Receivables to the Trust) then, in any such event, (A) such Transferor agrees
(except as prohibited by any such order) to allocate and pay to the Trust, after
the date of such inability, all Principal Collections, and all amounts which
would have constituted Principal Collections but for such Transferor's inability
to transfer such Receivables (up to an aggregate amount equal to the amount of
Trust Principal Component in the Trust on such date); (B) such Transferor agrees
to have such amounts applied as Collections in accordance with Article IV, and
(C) for only so long as the allocation and application of all Collections and
all amounts which would have constituted Collections are made in accordance with
clauses (A) and (B) above, Principal Collections and all amounts which would
have constituted Principal Collections but for such Transferor's inability to
transfer Receivables to the Trust which are charged off as uncollectible in
accordance with this Agreement shall continue to be allocated in accordance with
the related Supplement, and all amounts which would have constituted Principal
Collections but for such Transferor's inability to transfer Receivables to the
Trust shall be deemed to be Principal Collections for the purpose of calculating
the applicable Invested Percentage thereunder. If such Transferor is unable
pursuant to any Requirement of Law to allocate Collections as described above,
such Transferor agrees that it shall, in any such event, allocate, after the
date that it becomes unable to do so, payments on each Account with respect to
the balance of such Account first to the oldest receivable in such Account and
to have such payments applied as Collections in accordance with Article IV.
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(e) Delivery of Collections. In the event that such Transferor receives
Collections, such Transferor agrees to pay to the Servicer all payments received
by it with respect to Collections on the Receivables as soon as practicable
after receipt thereof by it, but in no event later than two Business Days after
the receipt by it thereof.
(f) Notice of Liens. Such Transferor shall notify the Trustee promptly
after becoming aware of any Lien on any Receivable other than the conveyances
hereunder.
(g) Change in Yield Factor. Provided that no Pay Out Event shall have
occurred and be continuing, without notice to or the consent of
Certificateholders of any Series, the Transferors may, upon ten Business Days
prior written notice to the Servicer and the Trustee, require that the Yield
Factor be changed from and after the close of business on the date set forth in
such notice as of the effective date of such change. The Transferors may not
increase the Yield Factor above 5.0%. Any such change shall be subject to the
satisfaction of the following conditions:
(i) Such change in the Yield Factor shall not, in the reasonable belief
of the Transferors cause a Pay Out Event to occur or an event which, with
notice or the lapse of time or both would constitute a Pay Out Event.
(ii) Such change in the Yield Factor shall not cause the Yield Factor
to be reduced below the initial Yield Factor.
(iii) The Rating Agencies shall have received ten Business Days' notice
of such proposed change and the Transferors shall have received written
confirmation that such proposed change shall not cause the downgrade or
withdrawal of any rating assigned to any outstanding Series by Moody's (if
Moody's shall then be a Rating Agency).
(iv) Each Transferor shall deliver to the Trustee an Officer's
Certificate confirming the items set forth in paragraphs (i) through (iii)
above and the Trustee may conclusively rely on such Officer's Certificates,
shall have no duty to make inquiries with regard to the matters set forth
therein and shall incur no liability in so relying.
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. If the Servicer is then required to make daily deposits of
Collections in the Collection Account at the time of such change, the
Transferors may specify that the date upon which all of the conditions
specified in this subsection 2.05(g) have been complied with is the
effective date of this change.
Section 2.06 Addition of Accounts.
(a) If, (1) as of the end of any two consecutive Due Periods, the
Transferor Amount as a percentage of the Trust Principal Component is less than
the Minimum Transferor Percentage, the Transferors shall designate additional
Eligible Accounts (the "Additional Accounts") to be included as Accounts in a
sufficient amount such that the Transferor Amount as a percentage of the Trust
Principal Component after giving effect to such addition at least equals
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the Minimum Transferor Percentage, or (2) as of the end of any Due Period, the
Trust Principal Component is less than the Minimum Trust Principal Component,
then the Transferor shall designate Additional Accounts to be included as
Accounts in a sufficient amount such that the Trust Principal Component will be
equal to or greater than the Minimum Trust Principal Component. Receivables from
such Additional Accounts shall be transferred to the Trust, in the case of
subclause (i), on or before 15 days following the Determination Date related to
the second of such Due Periods and, in the case of subclause (2), on or before
15 days following such Determination Date (the "Additional Account Closing
Date").
(b) In addition to its obligation under subsection 2.06(a), the
Transferors may, but shall not be obligated to, designate from time to time
Additional Accounts to be included as Accounts.
(c) The Transferors agree that any such transfers of Receivables from
Additional Accounts under subsection 2.06(a) or (b) shall satisfy the following
conditions:
(i) On or before the tenth Business Day prior to the Additional
Account Closing Date, the Transferors shall give the Trustee and the
Servicer written notice that such Additional Accounts will be included
and specifying the approximate aggregate amount of the Receivables to
be transferred;
(ii) On or prior to the Additional Account Closing Date, the
Transferors shall have delivered to the Trustee a written assignment (and
the Trustee shall have accepted such assignment on behalf of the Trust for
the benefit of the Investor Certificateholders and any Enhancement
Provider) in substantially the form of Exhibit B (the "Assignment") and
shall have clearly indicated in their respective computer files that the
Receivables created in connection with the Additional Accounts have been
transferred to the Trust and the Servicer shall have delivered to the
Trustee a computer file or microfiche list represented by the Servicer to
contain a true and complete list of all Additional Accounts identified by
account number and by Receivable balance in such Additional Accounts as of
the Additional Account Cut-Off Date, which computer file or microfiche list
shall be as of the date of such Assignment incorporated into and made a
part of such Assignment and this Agreement;
(iii) The Transferors shall severally represent and warrant that (x)
each Additional Account was, as of the date of its selection (the
"Additional Account Selection Date"), an Eligible Account, (y) no selection
procedures believed by the Transferors to be materially adverse to the
interests of any Series of Investor Certificates or any Enhancement
Provider were utilized in selecting the Additional Accounts from the
available Eligible Accounts in each Transferor's portfolio; and (z) as of
the Additional Account Closing Date, neither Transferor is insolvent or
will be made insolvent by the transfer of the Receivables of such
Additional Accounts;
(iv) The Transferors shall represent and warrant, that, as of the
Additional Account Closing Date, the Assignment constitutes either (x) a
valid transfer and assignment to the Trust of all right, title and interest
of the Transferors in and to the Receivables then existing and thereafter
created in the Additional Accounts, all monies due or to become due with
respect thereto on and after the Additional Account Cut-Off
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Date, Recoveries and all proceeds of such Receivables to the extent set
forth in Section 9-306 of the UCC as in effect in the Relevant UCC State,
and such Receivables and all proceeds thereof will be conveyed to the Trust
free and clear of any Lien of any Person claiming through or under either
Transferor or any of its Affiliates, except for (i) Liens permitted under
subsection 2.05(b) hereunder, (ii) the interest of the holder of the
Exchangeable Transferor Certificate and (iii) any right of the holder of
the Exchangeable Transferor Certificate to receive interest accruing on,
and investment earnings with respect to, the Collection Account and any
other account or accounts maintained for the benefit of Certificateholders
as provided in this Agreement and any Supplement or (y) a grant of a
security interest (as defined in the UCC as in effect in the Relevant UCC
State) in such property to the Trustee on behalf of the Trust, which is
enforceable with respect to then existing Receivables of the Additional
Accounts, and the proceeds thereof to the extent set forth in Section 9-306
of the UCC as in effect in the Relevant UCC State upon the conveyance of
such Receivables to the Trust, and which will be enforceable with respect
to the Receivables thereafter created in respect of Additional Accounts,
and the proceeds (to the extent set forth in Section 9-306 of the UCC as in
effect in the Relevant UCC State) thereof upon such creation; and (z) if
the Assignment constitutes the grant of a security interest to the Trust in
such property, upon the filing of financing statements as described in
Section 2.01 with respect to such Additional Accounts and in the case of
such Receivables of Additional Accounts thereafter created and the proceeds
thereof to the extent set forth in Section 9-306 of the UCC in effect in
the Relevant UCC State, upon such creation, the Trust shall have a first
priority perfected security interest in such property, except for Liens
permitted under subsection 2.05(b) hereunder;
(v) Each Transferor shall deliver to the Trustee (with a copy to the
Rating Agencies) an Officer's Certificate confirming the items set forth in
paragraphs (ii), (iii) and (iv) above and (vii) below and the Trustee may
conclusively rely on such Officer's Certificate, shall have no duty to make
inquiries with regard to the matters set forth therein and shall incur no
liability in so relying;
(vi) The Transferors shall deliver to the Trustee and each Rating
Agency an Opinion of Counsel with respect to the Receivables in the
Additional Accounts substantially in the form of Part One of Exhibit G; and
(vii) The Rating Agencies shall have received ten (10) Business Days'
notice of such proposed addition of Additional Accounts; in the event that
Additional Accounts are being added pursuant to subsection 2.06(b), the
Transferors shall have received written confirmation from Moody's (if
Moody's shall then be a Rating Agency) that such addition would not result
in a downgrade or withdrawal of its then current rating of any outstanding
Series of Investor Certificates; and, in the event that the number of
Additional Accounts designated with respect to any three consecutive Due
Periods would exceed 15% of the number of Accounts as of the first day of
the calendar year during which such Due Periods commence or the number of
Additional Accounts designated during any such calendar year would exceed
20% of the number of Accounts as of the first day of such calendar year,
the Transferors shall have received written confirmation from Standard &
Poor's, (if Standard & Poor's shall then be a Rating Agency) that such
addition would not result in a downgrade or withdrawal of its then current
rating of any outstanding Series of Investor Certificates.
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Section 2.07 Removal of Accounts.
(a) Subject to the conditions set forth below, on each Determination
Date on which the Transferor Amount as a percentage of the Trust Principal
Component exceeds 20% at the end of the related Due Period, the Transferors may,
but shall not be obligated to, designate, from time to time, Accounts for
deletion and removal ("Removed Accounts") from the Accounts; provided, however,
that the Transferors shall not make more than one such designation in any Due
Period. On or before the tenth Business Day (the "Removal Notice Date") prior to
the date on which the designated Removed Accounts will be reassigned by the
Trustee to the Transferors (the "Removal Date"), the Transferors shall give the
Trustee and the Servicer written notice that the Receivables from such Removed
Accounts are to be reassigned to the Transferors.
(b) The Transferors shall be permitted to designate and require
reassignment to them of Receivables from Removed Accounts only upon satisfaction
of the following conditions:
(i) On or prior to the Removal Date, the Transferors shall have
delivered to the Trustee for execution a written instrument of reassignment
in substantially the form of Exhibit C (the "Reassignment") and a computer
file or microfiche list containing a true and complete list of all Removed
Accounts identified by account number and by the aggregate balance of the
Receivables in such Removed Accounts as of the Removal Notice Date, which
computer file or microfiche list shall as of the Removal Date modify and
amend and be made a part of this Agreement;
(ii) The Transferors shall severally represent and warrant that no
selection procedures believed by the Transferors to be materially adverse
to the interests of any outstanding Series of Investor Certificates or any
Enhancement Provider were utilized in selecting the Removed Accounts to be
removed from the Trust;
(iii) The removal of any Receivables of any Removed Accounts on any
Removal Date shall not, (a) in the reasonable belief of the Transferors,
cause a Pay Out Event to occur or an event, which with notice or lapse of
time or both would constitute a Pay Out Event, to occur and (b) cause the
Transferor Amount as a percentage of the Trust Principal Component to be
less than the Minimum Transferor Percentage on such Removal Date;
(iv) The Rating Agencies shall have received ten Business Days'
notice of such proposed removal of Accounts and the Transferors shall have
received written notice from the Rating Agencies that such removal would
not result in a downgrade or withdrawal of the then current rating of any
outstanding Series of the Investor Certificates; and
(v) Each Transferor shall have delivered to the Trustee and the
Rating Agencies an Officer's Certificate confirming the items set forth in
(i) through (iv) above. The Trustee may conclusively rely on such Officer's
Certificates, shall have no duty to make inquiries with regard to the
matters set forth therein and shall incur no liability in so relying.
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Upon satisfaction of the above conditions, the Trustee shall
execute and deliver the Reassignment to the Transferors, and the Receivables
from the Removed Accounts shall no longer constitute a part of the Trust.
(c) The Transferors shall be required to designate Accounts for
deletion and removal from the Accounts and to require the Trustee to reassign
the designated Accounts to the Transferor on a Determination Date (the "PA
Removal Date") no later than 120 days after the first Determination Date in
which:
(i) Estimated Trust Privileged Assets Billed Amounts for the month in
which the last day of the second preceding Due Period occurs exceed 1% of
Trust Principal Component for the Due Period immediately preceding such
Determination Date, unless the Transferor Amount as a percentage of the
Trust Principal Component for such immediately preceding Due Period equals
or exceeds 17%; or
(ii) The average of the Privileged Assets Monthly Payment Rates for the
six month period ending on the last day of the second preceding Due Period
does not equal at least 110% of the Trust Average Monthly Payment Rate for
the Due Period immediately preceding such Determination Date, unless the
Transferor Amount as a percentage of the Trust Principal Component for such
immediately preceding Due Period equals or exceeds 17%.
The Accounts that shall be designated for deletion and removal pursuant
to this Subsection 2.07(c) (the "Removed PA Accounts") shall consist of all
Accounts that are enrolled in the Privileged Assets Program as of a date 60 days
or less prior to the PA Removal Date; provided, that the Transferors shall not
be required to designate for removal more Accounts than is necessary to reduce
the Estimated Trust Privileged Assets Billed Amounts determined under Section
2.07(c)(i) to 0.50% of the Trust Principal Component.
Upon satisfaction of the requirements of subsection 2.07(b)(i) with
respect to the PA Removed Accounts and the delivery by the Transferors to the
Trustee and the Rating Agencies of an Officer's Certificate confirming such
item, the Trustee shall execute and deliver the Reassignment to the Transferors,
and the Receivables from the Removed PA Accounts shall no longer constitute a
part of the Trust. The Trustee may conclusively rely on such Officer's
Certificate, shall have no duty to make inquiries with regard to the matters set
forth therein and shall incur no liability in so relying.
[END OF ARTICLE II]
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ARTICLE III
ADMINISTRATION AND SERVICING
OF RECEIVABLES
Section 3.01 Acceptance of Appointment and Other Matters Relating to the
Servicer.
(a) TRS has agreed to act, and has acted, as the Servicer under the
Original Pooling Agreement, and TRS hereby agrees to act as the Servicer under
this Agreement. Investor Certificateholders by their acceptance of the Investor
Certificates shall be deemed to consent to TRS acting as Servicer.
(b) The Servicer shall service and administer the Receivables and shall
collect payments due under the Receivables in accordance with its customary and
usual servicing procedures for servicing consumer charge card receivables
comparable to the Receivables and in accordance with the applicable Account
Guidelines and shall have full power and authority, acting alone or through any
party properly designated by it hereunder, to do any and all things in
connection with such servicing and administration which it may deem necessary or
desirable. Without limiting the generality of the foregoing and subject to
Section 10.01, the Servicer is hereby authorized and empowered (i) to make
withdrawals and payments and to instruct the Trustee to make withdrawals and
payments from the Collection Account, the Special Funding Account or any other
account or accounts maintained for the benefit of the Certificateholders as set
forth in this Agreement and any Supplement, (ii) unless such power and authority
is revoked by the Trustee on account of the occurrence of a Servicer Default
pursuant to Section 10.01 of the Agreement to instruct the Trustee to take any
action permitted or required under any Enhancement at such time as set forth in
this Agreement and any Supplement (iii) to execute and deliver, on behalf of the
Trust for the benefit of the Certificateholders, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Receivables and, after the
delinquency of any Receivable and to the extent permitted under and in
compliance with applicable law and regulations, to commence enforcement
proceedings with respect to such Receivables, (iv) to make any filings, reports,
notices of applications, or registrations with, and to seek any consents or
authorizations from, the Securities and Exchange Commission and any state
securities laws authority on behalf of the Trust as may be necessary or
advisable to comply with any Federal or state securities laws or reporting
requirements and (v) to delegate its servicer, collection, enforcement and
administrative duties hereunder with respect to the Accounts and the Receivables
to FDC or other Person who agrees to conduct such duties in accordance with the
Account Guidelines; provided, however, that the Servicer shall notify each
Rating Agency in writing of any significant delegation of its duties to a Person
other than FDC and which is not in the ordinary course of the Servicer's
business. No such delegation will relieve the Servicer of its liability and
responsibility with respect to such duties. The Trustee shall promptly follow
the written instructions of the Servicer to withdraw funds from the Collection
Account, the Special Funding Account and any other account or accounts
maintained for the benefit of Certificateholders and with regard to any
Enhancement. The Trustee shall furnish the Servicer with any powers of attorney
and other documents necessary or appropriate to enable the Servicer to carry out
its servicing and administrative duties hereunder and the Trustee shall not be
held responsible for any act or omission by the Servicer in its use of such
powers of attorney.
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(c) In the event that a Transferor is unable for any reason to transfer
Receivables to the Trust in accordance with the provisions of this Agreement
(including, without limitation, by reason of the application of the provisions
of Section 9.02 or the order of any court of competent jurisdiction that such
Transferor not transfer any additional Receivables to the Trust) then, in any
such event, (A) the Servicer agrees to allocate, after such date, all Principal
Collections, and all amounts which would have constituted Principal Collections
but for such Transferor's inability to transfer such Receivables (up to an
aggregate amount equal to the Trust Principal Component in the Trust as of such
date) in accordance with subsection 2.05(d) and to apply such amounts as
Collections in accordance with Article IV and (B) for only so long as all
Collections and all amounts which would have constituted Collections are
allocated and applied in accordance with clause (A) above, Principal Collections
and all amounts which would have constituted Principal Collections but for such
Transferor's inability to transfer Receivables to the Trust which are charged
off as uncollectible in accordance with this Agreement shall continue to be
allocated in accordance with Article IV and all amounts which would have
constituted Principal Collections but for such Transferor's inability to
transfer Receivables to the Trust shall be deemed to be Principal Collections
for the purpose of calculating the applicable Invested Percentage thereunder;
provided, that if the Servicer is unable pursuant to any Requirement of Law to
allocate payments on the Accounts as described above, the Servicer agrees that
it shall, in any such event, allocate, after the date that the Transferor
becomes unable to do so, payments on the Accounts with respect to the
receivables in such Accounts first to the oldest receivables in such Accounts.
(d) The Servicer shall not be obligated to use separate servicing
procedures, offices, employees or accounts for servicing the Receivables from
the procedures, offices, employees and accounts used by the Servicer in
connection with servicing other consumer charge card receivables.
(e) The Servicer shall maintain fidelity bond coverage insuring against
losses through wrongdoing of its officers and employees who are involved in the
servicing of Receivables covering such actions with such insurers and in such
amounts as the Servicer believes to be reasonable from time to time.
(f) The Servicer shall apply payments received by the Servicer in
respect of Accounts to Receivables and to Privileged Assets Billed Amounts in
accordance with the applicable guidelines provided in the authorization
agreement pursuant to which Cardmembers enroll in the Privileged Assets Program
or as otherwise determined by the Servicer pursuant to a Cardmember request in
accordance with the Servicer's practices for the Privileged Assets Program;
provided, that in no event shall payments be applied as annuity contributions
under the Privileged Assets Program in priority to past due card charges.
Section 3.02 Servicing Compensation. As compensation for its servicing
activities hereunder and reimbursement for its expenses as set forth in the
immediately following paragraph, the Servicer shall be entitled to receive a
monthly servicing fee in respect of any Due Period (or portion thereof) prior to
the termination of the Trust pursuant to Section 12.01 (the "Monthly Servicing
Fee"), payable in arrears on each Distribution Date in an amount equal to the
sum of, with respect to all Series then outstanding, one-twelfth of the product
of the applicable Servicing Fee Percentages and the sum of an allocable portion
of the Transferor Amount and the Invested Amount of each Series each as of the
last day of the second preceding Due Period. The
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share of the Monthly Servicing Fee allocable to each Series of Investor
Certificateholders with respect to any Due Period (or portion thereof) shall be
equal to one-twelfth of the product of (A) the Servicing Fee Percentage for such
Series and (B) the Invested Amount of such Series (after subtracting from the
Invested Amount the aggregate amount of any deposits previously made into any
principal funding account) on the last day of the second preceding Due Period
(or, in the case of the first Distribution Date, the Initial Invested Amount)
with respect to any such Series, the "Investor Monthly Servicing Fee") and shall
be paid to the Servicer pursuant to the applicable Supplement. The remainder of
the Monthly Servicing Fee shall be paid by the Transferor and in no event shall
the Trust, the Trustee or the Investor Certificateholders be liable for the
share of the Monthly Servicing Fee to be paid by the Transferors. In the case of
the first Due Period, the Monthly Servicing Fee and the Investor Monthly
Servicing Fee shall accrue from the initial Cut-Off Date.
The Servicer's expenses include the amounts due to the Trustee
pursuant to Section 11.05 and the reasonable fees and disbursements of
independent accountants and all other expenses incurred by the Servicer in
connection with its activities hereunder, and include, without limitation, all
other fees and expenses of the Trust provided for in Section 8.04 hereof;
provided, that the Servicer shall not be liable for any liabilities, costs or
expenses of the Trust, the Investor Certificateholders or the Certificate owners
arising under any tax law, including without limitation any Federal, state or
local income or franchise taxes or any other tax imposed on or measured by
income (or any interest or penalties with respect thereto or arising from a
failure to comply therewith), except to the extent incurred as a result of the
Servicer's violation of the provisions of this Agreement. The Servicer shall be
required to pay such expenses for its own account and shall not be entitled to
any payment therefor other than the Monthly Servicing Fee.
Section 3.03 Representations, Warranties and Covenants of the Servicer.
TRS, as initial Servicer, hereby makes, and any successor Servicer by its
appointment hereunder shall make, the following representations, warranties and
covenants with respect to any Series of Certificates, as of the date of the
related Supplement and its Closing Date unless otherwise stated in such
Supplement, on which the Trustee has relied in accepting the Receivables and the
other property conveyed pursuant to Section 2.01 in trust and in authenticating
the Certificates:
(a) Organization and Good Standing. The Servicer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, and has 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 this Agreement and any Supplement.
(b) Due Qualification. The Servicer is duly qualified to do business
and is in good standing (or is exempt from such requirements) as a foreign
corporation in any state where such qualification is necessary in order to
service the Receivables as required by this Agreement and any Supplement and has
obtained all necessary licenses and approvals as required under Federal and
state law, and if the Servicer shall be required by any Requirement of Law to so
qualify or register or obtain such license or approval, then it shall do so
except where the failure to obtain such license or approval does not materially
affect the Servicer's ability to perform its obligations hereunder or the
enforceability of any Receivable.
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(c) Due Authorization. The execution, delivery, and performance of this
Agreement and any Supplement, and the consummation of the transactions provided
in this Agreement and any Supplement have been duly authorized by the Servicer
by all necessary corporate action on the part of the Servicer.
(d) Binding Obligation. This Agreement and any Supplement constitute a
legal, valid and binding obligation of the Servicer, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereinafter in effect, affecting the
enforcement of creditors' rights in general and as such enforceability may be
limited by general principles of equity (whether considered in a proceeding at
law or in equity).
(e) No Violation. The execution and delivery of this Agreement and any
Supplement by the Servicer, and the performance of the transactions contemplated
by this Agreement and any Supplement and the fulfillment of the terms hereof
applicable to the Servicer, will not conflict with, violate, result in any
breach of any of the material terms and provisions of, or constitute (with or
without notice or lapse of time or both) a material default under, any
Requirement of Law applicable to the Servicer or any material indenture
contract, agreement, mortgage, deed of trust or other instrument to which the
Servicer is a party or by which it is bound.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the best knowledge of the Servicer, threatened against the Servicer
before any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by this Agreement or
any Supplement, seeking any determination or ruling that, in the reasonable
judgment of the Servicer, would materially and adversely affect the performance
by the Servicer of its obligations under this Agreement or any Supplement, or
seeking any determination or ruling that would materially and adversely affect
the validity or enforceability of this Agreement or any Supplement.
(g) Compliance with Requirements of Law. The Servicer shall duly
satisfy its obligations in all material respects on its part to be fulfilled
under or in connection with each Receivable and the corresponding Account, will
maintain in effect all material qualifications required under Requirements of
Law in order to service properly each Receivable and the corresponding Account
and will comply in all material respects with all other Requirements of Law in
connection with servicing each Receivable and the related Account the failure to
comply with which would have a material adverse effect on the
Certificateholders.
(h) No Rescission or Cancellation. Except in connection with an
Adjustment Payment pursuant to Section 3.08, the Servicer shall not permit any
rescission or cancellation of any Receivable except as ordered by a court of
competent jurisdiction or other Governmental Authority.
(i) Protection of Certificateholders' Rights. The Servicer shall take
no action which, nor omit to take any action the omission of which, would impair
the rights of Certificateholders in any Receivable or the rights of any
Enhancement Provider, nor shall it
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reschedule, revise, waive or defer payments due on any Receivable except in
accordance with the applicable Account Guidelines.
(j) All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or of any Governmental Authority required
in connection with the execution and delivery by the Servicer of this Agreement,
the performance by the Servicer of the transactions contemplated by this
Agreement and the fulfillment by the Servicer of the terms hereof, have been
obtained, except such as are required by state securities or "Blue Sky" laws in
connection with the distribution of any Series.
(k) Receivables Not to be Evidenced by Promissory Notes or Chattel
Paper. The Servicer will take no action to cause any Receivable to be evidenced
by any instrument (as defined in the UCC as in effect in the Relevant UCC
State). Each Receivable shall be payable pursuant to a contract which does not
create a Lien on any merchandise purchased thereunder.
In the event of a breach of any of the representations and
warranties set forth in subsection 3.03(g), (h), (i) or (j) with respect to a
Receivable, and such breach has a material adverse effect on the
Certificateholders' Interest in such Receivable then, upon the expiration of 60
days or any longer period agreed upon by the Trustee (not to exceed an
additional 60 days) from the earlier to occur of the discovery of any such event
by the Servicer, or receipt by the Servicer of written notice of any such event
given by the Trustee, each such Receivable or, at the option of the Transferors,
all such Receivables with respect to the related Account, shall be assigned and
transferred to the Servicer upon the deposit on the Business Day preceding the
Distribution Date related to the Due Period in which such assignment obligation
arose by the Servicer in the Collection Account of an amount equal to the
balance of any such Receivable provided, however, that if the Servicer is then
required pursuant to subsection 4.01(g) to deposit funds into the Collection
Account more frequently than monthly, the Servicer shall make such deposit no
later than two Business Days after the obligation to accept such assignment
arose. Any such deposit into the Collection Account in connection with any such
assignment of a Receivable shall be considered a payment in full of such
Receivable and such deposit shall be applied in accordance with the provisions
of Article IV. Upon the assignment to the Servicer of such a Receivable, the
Trust shall, without further action be deemed to transfer, assign, set-over and
otherwise convey to the Servicer, without recourse, representation or warranty
(including those implied by law), all the right, title and interest of the Trust
in and to such Receivable, all monies due or to become due with respect thereto
and all proceeds thereof. The Trustee shall execute such documents and
instruments of transfer or assignment and take such other actions as shall
reasonably be requested by the Servicer to effect the conveyance of any such
Receivable pursuant to this Section and as shall be specified in an Opinion of
Counsel delivered to the Trustee to the effect that such documents and
instruments comply herewith. The obligation of the Servicer set forth in this
Section shall constitute the sole remedy respecting any breach of the
representations and warranties set forth in the above referenced subsections
with respect to such Receivable available to Certificateholders or the Trustee
on behalf of Certificateholders. Notwithstanding any other provision of this
Section 3.03, no assignment of a Receivable to the Servicer pursuant to this
Section 3.03 shall occur if the Servicer fails to make the deposit required by
this Section 3.03 with respect to such Receivable.
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Section 3.04 Reports and Records for the Trustee.
(a) Initial Report. On the day on which a Series of the Investor
Certificates are issued (the "Closing Date"), the Servicer shall prepare and
deliver, as provided in Section 13.05, to the Trustee and the Rating Agencies,
an Officer's Certificate substantially in the form of Exhibit D setting forth
the Trust Principal Component as of the end of the Due Period immediately
preceding the Closing Date.
(b) Daily Reports. For so long as deposits of Collections are required
to be made daily by the Servicer pursuant to Section 4.01(g), on each Business
Day commencing on the Closing Date the Servicer shall prepare, and make
available for inspection by the Trustee and maintain at the office of the
Servicer a record setting forth the aggregate amount of Collections processed by
the Servicer on the immediately preceding Business Day.
(c) Monthly Servicer's Certificate. On each Determination Date the
Servicer shall forward, as provided in Section 13.05, to the Trustee, the Paying
Agent and the Rating Agencies, an Officer's Certificate signed by a Servicing
officer substantially in the form of Exhibit E (with the Monthly
Certificateholder's Statement required pursuant to the applicable Supplement
attached) setting forth the following information (which, in the case of clauses
(iii) , (iv) and (v) below, will be stated on the basis of an original principal
amount of $1,000 per Certificate): (i) the aggregate amount of Collections
processed for the Due Period for such Determination Date and the aggregate
amount of Yield Collections and the aggregate amount of Principal Collections
processed during such Due Period; (ii) the Invested Percentage on the last day
of the preceding Due Period of each Series of Certificates with respect to
Principal Collections, the Invested Percentage on the last day of the preceding
Due Period of each Series of Certificates with respect to Yield Collections and
Defaulted Receivables; (iii) for each Series and for each class within any such
Series, the total amount to be distributed to Investor Certificateholders on the
next succeeding Distribution Date; (iv) for each Series and for each class
within any such Series, the amount of such distribution allocable to principal;
(v) for each Series and for each class within any such Series, the amount of
such distribution allocable to interest; (vi) the aggregate outstanding balance
of the Accounts which were delinquent by 30 to 59, 60 to 89, 90 to 119 and by
120 days or more as of the close of business on the last day of the Due Period
immediately preceding such Distribution Date (calculated from the day a charge
is first included within an unpaid "Previous Balance" on any monthly billing
statement and is determined by reference to each such Account's billing cycle
closing date occurring immediately prior to such last day); (vii) for each
Series and each class within a Series, the Investor Default Amount for the
immediately preceding Due Period; (viii) for each Series and each class within a
Series, the amount of the Investor Charge-Offs and the amount of the
reimbursements of Investor Charge-Offs for such Distribution Date; (ix) for each
Series, the Investor Monthly Servicing Fee for such Distribution Date; (x) for
each Series, the existing Deficit Controlled Amortization Amount, if applicable;
(xi) 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; (xii) for
each Series, the Invested Amount at the close of business on the last day of the
Due Period immediately preceding such Distribution Date; (xiii) the available
amount of any Enhancement for each Series; (xiv)for each Series and each class
within a Series, the Series Factor as of the end of the related Due Period; (xv)
the Yield Factor or Yield Factors applicable with respect to the related Due
Period; (xvi) whether a Pay Out Event with respect to any Series shall have
occurred during or with respect to the related Due Period; and (xvii) the
Special Funding Account balance, if any. The
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Trustee shall be under no duty to recalculate, verify or recompute the
information supplied to it under this Section 3.04.
Section 3.05 Annual Servicer's Certificate. The Servicer will deliver,
as provided in Section 13.05, to the Trustee and the Rating Agencies on or
before March 31 of each calendar year, beginning with 1993, an Officer's
Certificate substantially in the form of Exhibit F stating (a) that a review of
the activities of the Servicer during the preceding calendar year and of its
performance under this Agreement was made under the supervision of the officer
signing such certificate and (b) that, to the best of such officer's knowledge,
based on such review, either there has occurred no event which, with the giving
of notice or passage of time or both, would constitute a Servicer Default and
the Servicer has fully performed all its obligations under this Agreement
throughout such year, or, if there has occurred such event or a Pay Out Event,
specifying each such event known to such officer and the nature and status
thereof. A copy of such officer's Certificate may be obtained by any Investor
Certificateholder or Certificate Owner by a request in writing to the Trustee
addressed to the Corporate Trust Office.
Section 3.06 Annual Independent Public Accountants' Servicing Report.
(a) On or before March 31 of each calendar year, beginning with 1993,
the Servicer shall cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer or the
Transferor) to furnish, as provided in Section 13.05, a report to the Trustee,
the Rating Agencies and, as required, any Enhancement Provider to the effect
that such firm has applied certain procedures agreed upon with the Servicer to
certain documents and records relating to the administration and servicing of
Accounts under this Agreement and any Supplement, and that, based upon such
agreed upon procedures such firm will provide a report stating that the
servicing was conducted in compliance with Article III and IV and Section 8.08
of this Agreement and any Supplement, except for such exceptions or errors as
they believe to be immaterial and such other exceptions as shall be set forth in
such statement. A copy of such report may be obtained by any Investor
Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
(b) On or before March 31 of each calendar year, beginning with 1993
the Servicer shall cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer or Transferor)
to furnish, as provided in Section 13.05, a report prepared using generally
accepted auditing standards to the Trustee, any Enhancement Provider, as
required, and the Rating Agencies to the effect that they have compared the
mathematical calculations of each amount set forth in the monthly certificates
forwarded by the Servicer pursuant to subsection 3.04(c) during the period
covered by such report (which shall be the period from January 1 of the
preceding calendar year to and including December31 of such calendar year) with
the Servicer's computer reports which were the source of such amounts and that
on the basis of such comparison, such accountants are of the opinion that such
amounts are in agreement, except for such exceptions as they believe to be
immaterial and such other exceptions as shall be set forth in such statement. A
copy of such report may be obtained by any Investor Certificateholder or
Certificate Owner by a request in writing to the Trustee addressed to the
Corporate Trust Office.
Section 3.07 Tax Treatment. The Transferors have structured this
Agreement and the Investor Certificates (other than any Investor Certificates
held by the Transferors) have been (or
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will be) issued with the intention that such Investor Certificates will qualify
under applicable tax law as indebtedness of the Transferors, and the
Transferors, any entity acquiring any direct or indirect interest in the
Exchangeable Transferor Certificate and each Investor Certificateholder (or
Certificate Owner) by acceptance of its Certificate (or, in the case of a
Certificate Owner by virtue of such Certificate Owner's acquisition of a
beneficial interest therein) agree to treat such Investor Certificates (or
beneficial interest therein) for purposes of Federal, state and local income or
franchise taxes and any other tax imposed on or measured by income as
indebtedness. Each Certificateholder agrees that it will cause any Certificate
Owner acquiring an interest in a Certificate through it to comply with this
Agreement as to treatment as indebtedness for certain tax purposes.
Section 3.08 Adjustments. (a) If the Servicer adjusts downward the
amount of any Receivable because of a rebate, refund, unauthorized charge or
billing error to an Obligor, because such Receivable was created in respect of
merchandise which was refused or returned by an Obligor, or if the Servicer
otherwise adjusts downward the amount of any Receivable without receiving
Collections therefor or without charging off such amount as uncollectible, then,
in any such case, the amount of the Trust Principal Component used to calculate
the Transferor Amount, the Transferor Interest and the Floating Allocation
Percentage and the Fixed Allocation Percentage applicable to any Series will be
reduced by the product of one minus the Yield Factor and the amount of such
adjustment. Similarly, the amount of the Trust Principal Component used to
calculate the Transferor Amount, the Transferor Interest and the Floating
Allocation Percentage and the Fixed Allocation Percentage applicable to any
Series will be reduced by the product of one minus the Yield Factor and the
amount of any Receivable which was discovered as having been created through a
fraudulent or counterfeit charge or with respect to which the covenant contained
in subsection 2.05(b) was breached. Any adjustment required pursuant to either
of the two preceding sentences shall be made on or prior to the end of the Due
Period in which such adjustment obligation arises. In the event that, following
any such exclusion, the Transferor Amount as a percentage of the Trust Principal
Component would be less than 3%, within two Business Days of the date on which
such adjustment obligation arises, the Transferor shall pay to the Servicer, for
deposit into the Special Funding Account, in immediately available funds in an
amount equal to the amount by which the Transferor Amount would be reduced below
the product of 3% and the Trust Principal Component. Any amount deposited into
the Special Funding Account in connection with the adjustment of a Receivable
(an "Adjustment Payment") shall be applied in accordance with Article IV and the
terms of each Supplement. In the event that the Servicer adjusts upwards the
amount of any Receivable, the Trust Principal Component shall be increased by
the product of such upward adjustment and one minus the Yield Factor.
(b) If (i) the Servicer makes a deposit into the Special Funding
Account in respect of a Collection of a Receivable and such Collection was
received by the Servicer in the form of a check which is not honored for any
reason or (ii) the Servicer makes a mistake with respect to the amount of any
Collection and deposits an amount that is less than or more than the actual
amount of such Collection, the Servicer shall appropriately adjust the amount
subsequently deposited into the Special Funding Account to reflect such
dishonored check or mistake. Any Receivable in respect of which a dishonored
check is received shall be deemed not to have been paid. Notwithstanding the
first two sentences of this paragraph, no adjustments shall be made
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pursuant to this paragraph that will change any amount of Collections previously
reported pursuant to Section 3.04(c).
(c) Any Privileged Assets Billed Amounts that remain unpaid 60 days
after the date of their initial billing statement shall be treated by the
Servicer in the same manner as a Receivable which the Servicer has adjusted
downward without receiving Collections therefor or without charging off such
amount as uncollectible in accordance with Section 3.08(a), and such adjustment
shall be made on or prior to the end of the Due Period in which such adjustment
obligation arises.
Section 3.09 Remittance Processing Procedures. (a) TRS, as initial
Servicer, hereby represents and warrants to the Trustee (it being acknowledged
that the Trustee has relied on such representation and warranty in accepting the
Receivables and the other property conveyed pursuant to Section 2.01 in trust
and in authenticating the Certificates) that the Remittance Banks listed on
Schedule 4 hereto are, as of the original Cut-Off Date, the only institutions
holding any accounts into which TRS deposits payments received through the
Payment Service Centers from Obligors in respect of Accounts. TRS shall be
permitted to replace or delete banks from any new schedule and shall promptly
provide a revised schedule to the Trustee, and prior to depositing any payments
received from Obligors in respect of Accounts with any new bank, it shall
deliver to the Trustee the Lock Box Letter referred to in Section 3.09(b) below
executed by TRS and acknowledged by such bank (each such bank, a "Lock Box
Bank").
(a) TRS covenants and agrees that, for the term of this Agreement,
unless otherwise agreed to by the Trustee, it shall deposit all payments
received through the Payment Service Centers from Obligors in respect of
Accounts only into accounts maintained at banks which are Remittance Banks. TRS
agrees to provide prompt notice to the Trustee of any additional Payment Service
Centers.
(b) Within ninety (90) days of the Initial Closing Date, TRS, as
initial Servicer, shall deliver to the Trustee, with respect to all accounts
maintained at Lock Box Banks into which payments from Obligors in respect of
Accounts are deposited, Lock Box Letters in substantially the form of Exhibit K
attached hereto, each of which shall be executed on behalf of TRS and
acknowledged by the respective Lock Box Bank.
(c) The Trustee, on behalf of Certificateholders, acknowledges that the
accounts maintained by TRS at the Lock Box Banks will contain funds in addition
to payments made by Obligors in respect of Accounts and that the conduct of TRS'
business as presently conducted will depend on the prompt receipt by TRS of such
funds. The Trustee shall have no right, title or interest in any funds on
deposit in such accounts to the extent that such funds do not represent payments
made by Obligors in respect of Accounts and to the extent the Trustee is
exclusively responsible for instructions to the Lock Box Banks, the Trustee
shall instruct the Lock Box Banks to immediately remit such funds to the
Transferors.
[END OF ARTICLE III]
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ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS
Section 4.01 Establishment of Collection Account and Special Funding
Account and Allocations with Respect to the Exchangeable Transferor's
Certificates.
(a) The Collection Account. The Trustee, for the benefit of the
Certificateholders, shall establish and maintain or cause to be established and
maintained in the name of the Trustee, on behalf of the Trust, with an Eligible
Institution a segregated account (the "Collection Account"), bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Certificateholders. The Trustee shall possess all right, title
and interest in all funds on deposit from time to time in the Collection Account
and in all proceeds thereof. The Collection Account shall be under the sole
dominion and control of the Trustee for the benefit of the Investor
Certificateholders. If, at any time, the institution holding the Collection
Account ceases to be an Eligible Institution, the Trustee (or the Servicer on
its behalf) shall within five Business Days establish a new Collection Account
meeting the conditions specified above with an Eligible Institution, transfer
any cash and/or any investments to such new Collection Account and from the date
such new Collection Account is established, it shall be the Collection Account.
Pursuant to the authority granted to the Servicer in subsection 3.01(b), the
Servicer shall have the power, revocable by the Trustee, to make withdrawals and
payments from the Collection Account and to instruct the Trustee to make
withdrawals and payments from the Collection Account for the purposes of
carrying out the Servicer's or Trustee's duties hereunder.
Each Series of Investor Certificates shall represent interests in the
Trust, including the benefits of any Enhancement to be provided by an
Enhancement Provider issued with respect to such Series as indicated in the
Supplement relating to such Series and the right to receive Collections and
other amounts at the times and in the amounts specified in this Article IV to be
deposited in the Collection Account and any other accounts maintained for the
benefit of the Certificateholders or paid to the Investor Certificateholders.
The Exchangeable Transferor Certificates shall represent the interest in the
Trust not represented by any Series of Investor Certificates then outstanding,
including the right to receive Collections and other amounts at the times and in
the amounts specified in this Article IV to be paid to the Transferors (the
"Transferor Interest"), provided, however, that such Exchangeable Transferor
Certificate shall not represent any interest in the Collection Account and any
other accounts maintained for the benefit of the Certificateholders or the
benefits of any Enhancement to be provided by an Enhancement Provider issued
with respect to any Series, except as specifically provided in this Article IV.
(b) Administration of the Collection Account. At the written direction
of the Servicer, funds on deposit in the Collection Account to be so invested
shall be invested by the Trustee in Eligible Investments. All such Eligible
Investments shall be held by the Trustee for the benefit of the
Certificateholders. Investments of funds representing Collections collected
during any Due Period shall be invested in Eligible Investments that will mature
so that such funds will be available before 11:00 a.m. (New York City time) on
the Distribution Date related to such Due Period. Any funds on deposit in the
Collection Account to be so invested shall be
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invested solely in Eligible Investments. All Eligible Investments shall be held
to maturity. The Trustee shall maintain possession of the negotiable instruments
or securities, if any, evidencing the Eligible Investments described in clause
(a) of the definition thereof from the time of purchase thereof until the time
of maturity. On each Distribution Date, all interest and other investment
earnings (net of losses and investment expenses) on funds on deposit in the
Collection Account shall be paid to the Holder of the Exchangeable Transferor
Certificate, provided, however, that for Distribution Dates with respect to any
Rapid Amortization Period or Early Amortization Period such interest and
earnings shall be considered Yield Collections hereunder.
(c) Identification of Account. Schedule 2, which is hereby incorporated
into and made a part of this Agreement, identifies the Collection Account by
setting forth the account number of such account, the account designation of
such account and the name of the institution with which such account has been
established.
(d) Allocations For the Exchangeable Transferor Certificate. Throughout
the existence of the Trust, the Servicer shall allocate to the Holder of the
Exchangeable Transferor Certificate an amount equal to the product of (A) the
Transferor Percentage and (B) the aggregate amount of such Collections allocated
to Principal Collections and Yield Collections, respectively, in respect of such
Due Period. Notwithstanding anything to the contrary in subsection 4.01(g),
unless specified in any Supplement, the Servicer need not deposit this amount,
and any other amounts so allocated to the Exchangeable Transferor Certificate
pursuant to any Supplement, into the Collection Account and shall pay such
amounts as collected to the Holder of the Exchangeable Transferor Certificate.
(e) Allocations of Collections Between Yield Collections and Principal
Collections. At all times and for all purposes of this Agreement and any
Supplement, the Servicer shall allocate all Collections received for any period
between Yield Collections and Principal Collections. Such Collections shall be
allocated such that the product of (i) such Collections and (ii) the Yield
Factor in effect with respect to such period shall be considered Yield
Collections and the remainder of such Collections shall be considered Principal
Collections.
(f) Undistributed Principal Collections. On each Distribution Date, (A)
the Servicer shall allocate Excess Principal Collections to each Series as set
forth in the related Supplement and (B) the Servicer shall withdraw from the
Collection Account and pay to the Transferors (i) an amount equal to the excess,
if any, of (x) the aggregate amount for all outstanding Series of Principal
Collections which the related Supplements specify are to be treated as "Excess
Principal Collections" for such Distribution Date over (y) the aggregate amount
for all outstanding Series which the related Supplements specify are "Principal
Shortfalls" for such Distribution Date and, without duplication, (ii) the
aggregate amount for all outstanding Series of that portion of Principal
Collections which the related Supplements specify are to be allocated and paid
to the Transferors with respect to such Distribution Date; provided, however,
that such amounts shall be paid to the Transferors only if the Transferor Amount
(determined after giving effect to any Receivables transferred to the Trust on
such date) exceeds 3% of the Trust Principal Component. The amount held in the
Collection Account as a result of the proviso in the preceding sentence
("Undistributed Principal Collections") shall be paid to the Transferors at the
time the Transferor Amount as a percentage of the Trust Principal Component
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exceeds 3%; provided, however, that any Undistributed Principal Collections on
deposit in the Collection Account at any time during which any Series is in its
Amortization Period or Accumulation Period shall be allocated and distributed in
accordance with the terms of each Supplement.
(g) Collections. All payments received by the Servicer in respect of
Accounts and applied by the Servicer to payment of Privileged Assets Billed
Amounts shall be treated in the same manner as Collections with respect to the
Receivables for purposes of this Agreement. The Servicer will apply all
Collections with respect to the Receivables for each Due Period as described in
this Article IV and each Supplement. Except as otherwise provided below, the
Servicer shall deposit Collections into the Collection Account on the Date of
Processing of such Collections. Subject to the express terms of any Supplement,
but notwithstanding anything else in this Agreement to the contrary, for so long
as, and only so long as, TRS or an Affiliate of TRS shall be the Servicer
hereunder and (i) maintain a short-term credit rating (which may be an implied
rating) of P-1 by Moody's and of A-1 by Standard & Poor's, or (ii) obtain a
guarantee with respect to the Servicer's deposit and payment obligations
hereunder pursuant to a guaranty in form and substance acceptable to each Rating
Agency provided the guarantor maintains a short-term credit rating of P-1 by
Moody's and of A-1+ by Standard & Poor's, 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 two Business Days following any
reduction of either such rating or failure to satisfy the conditions of either
clause (ii) or (iii), the Servicer may, but need not, deposit Collections or
amounts received from the Transferors pursuant to subsection 2.04(d)(iii) or
subsection 3.08(a) into the Collection Account or make payments to the holder of
the Exchangeable Transferor Certificate prior to the close of business on the
Date of Processing, but rather may make a single deposit in the Collection
Account in immediately available funds on the Business Day prior to each
Distribution Date in an amount equal to the sum of amounts received from the
Transferors pursuant to subsection 2.04(d)(iii) and subsection 3.08(a) with
respect to the Due Period for each such Distribution Date and the Collections
with respect to the Due Period for each such Distribution Date to the extent
such amounts and Collections are allocated to the Investor Certificateholders in
accordance with Article IV. Collections shall not be required to be invested in
Eligible Investments until such time as they are deposited into the Collection
Account. The Servicer shall notify the Trustee of any downgrade or withdrawal of
its short-term credit rating.
Should the Servicer be required to make daily deposits of Collections
into the Collection Account pursuant to this subsection, during any Amortization
Period or Accumulation Period, the Servicer may cease depositing Principal
Collections received in any Due Period and allocable to a Series in any
Amortization Period or Accumulation Period at such time as an amount of
Principal Collections allocable to such Series and deposited into the Collection
Account or Principal Funding Account, as applicable, equals the amount of
principal scheduled or permitted to be paid or deposited on the next succeeding
Distribution Date with respect to such Series. Principal Collections allocable
to such Series in excess of such amount shall, subject to the provisos in
subsection 4.01(f) and the next succeeding paragraph, be distributed on a daily
basis as they are collected to the Transferors.
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Should the Servicer be required to make daily deposits of Collections
into the Collection Account pursuant to this subsection, during any Amortization
Period or Accumulation Period, the Servicer may cease depositing Excess
Principal Collections received with respect to a Due Period at such time as such
Excess Principal Collections deposited into the Collection Account or Principal
Funding Account, as applicable, with respect to each Series in an Amortization
Period or Accumulation Period together with Principal Collections allocable to
such Series and deposited into the Collection Account with respect to such Due
Period equals the amount of principal scheduled or permitted to be paid or
deposited with respect to such Series on the next succeeding Distribution Date.
Should the Servicer be required to make daily deposits of Collections
in the Collection Account or Principal Funding Account pursuant to this
subsection, Excess Principal Collections in excess of amounts allocable to
Series which are in their Amortization Period or Accumulation Period and
deposited in the Collection Account or Principal Funding Account, as applicable,
pursuant to the preceding sentence shall, subject to the provisos in subsection
4.01(f), be distributed to the Transferors on a daily basis.
(h) The Special Funding Account. The Trustee, for the benefit of the
Certificateholders, shall establish and maintain or cause to be established and
maintained in the name of the Trustee, on behalf of the Trust, with an Eligible
Institution a segregated account (the "Special Funding Account"), bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Certificateholders. The Trustee shall possess all right, title
and interest in all funds on deposit from time to time in the Special Funding
Account and in all proceeds thereof. The Special Funding Account shall be under
the sole dominion and control of the Trustee for the benefit of the Investor
Certificateholders. If, at any time, the institution holding the Special Funding
Account ceases to be an Eligible Institution, the Trustee (or the Servicer on
its behalf) shall within five Business Days establish a new Special Funding
Account meeting the conditions specified above with an Eligible Institution,
transfer any cash and/or any investments to such new Special Funding Account and
from the date such new Special Funding Account is established, it shall be the
Special Funding Account. Pursuant to the authority granted to the Servicer in
subsection 3.01(b), the Servicer shall have the power, revocable by the Trustee,
to make withdrawals and payments from the Special Funding Account and to
instruct the Trustee to make withdrawals and payments from the Special Funding
Account for the purposes of carrying out the Servicer's or Trustee's duties
hereunder.
(i) Administration of the Special Funding Account. At the written
direction of the Servicer, funds on deposit in the Special Funding Account to be
so invested shall be invested by the Trustee in Eligible Investments. All such
Eligible Investments shall be held by the Trustee for the benefit of the
Certificateholders. Investments of funds representing Collections collected
during any Due Period shall be invested in Eligible Investments that will mature
so that such funds will be available before 11:00 a.m. (New York City time) on
the Distribution Date related to such Due Period. Any funds on deposit in the
Special Funding Account to be so invested shall be invested solely in Eligible
Investments. All Eligible Investments shall be held to maturity. The Trustee
shall maintain possession of the negotiable instruments or securities, if any,
evidencing the Eligible Investments described in clause (a) of the definition
thereof from the time of purchase thereof until the time of maturity. On each
Distribution Date, all interest and other investment earnings (net of losses and
investment expenses) on funds on deposit in the Special Funding Account shall be
paid to the Holder of the Exchangeable Transferor Certificate,
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provided, however, that for Distribution Dates with respect to any Rapid
Amortization Period or Early Amortization Period such interest and earnings
shall be considered Yield Collections hereunder. The Servicer shall deposit all
amounts received from the Transferors pursuant to subsection 2.04(d)(iii) and
all Adjustment Payments received from the Transferors pursuant to subsection
3.08(a) in the Special Funding Account on the Date of Processing of such
payments.
The Transferors may, at their option, instruct the Trustee to deposit
into the Special Funding Account Trust Excess Principal Collections which are
otherwise payable to the Transferors pursuant to the provisions set forth above.
On each Business Day on which funds are on deposit in the Special Funding
Account and on which no Series is in an Early Accumulation Period or Early
Amortization Period, the Servicer shall determine the amount (if any) by which
the Transferor Amount as a percentage of the Trust Principal Component exceeds
the Minimum Transferor Percentage on such date and may instruct the Trustee to
withdraw any such excess from the Special Funding Account and pay such amount to
the Transferors; provided, however, that, if an Accumulation Period or
Amortization Period has commenced and is continuing with respect to one or more
outstanding Series, any funds on deposit in the Special Funding Account shall be
treated as Trust Excess Principal Collections and shall be allocated and
distributed in accordance with this Article IV and the terms of each Supplement.
Schedule 2 identifies the Special Funding Account by setting forth the
account number of such account, the account designation of such account and the
name of the institution with which such account has been established.
[THE REMAINDER OF ARTICLE IV IS RESERVED
AND MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]
ARTICLE V
[ARTICLE V IS RESERVED AND
MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO ANY SERIES]
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ARTICLE VI
THE CERTIFICATES
Section 6.01 The Certificates. Subject to Sections 6.10 and 6.11, the
Investor Certificates of each Series and any class thereof may be issued in
bearer form (the "Bearer Certificates") with attached interest coupons and a
special coupon (collectively, the "Coupons") or in fully registered form (the
"Registered Certificates"), and shall be substantially in the form of the
exhibits with respect thereto attached to the applicable Supplement. The
Exchangeable Transferor Certificate shall be substantially in the form of
Exhibit A. The Investor Certificates and the Exchangeable Transferor Certificate
shall, upon issue pursuant hereto or to Section 6.09 or Section 6.11, be
executed and delivered by the Transferors to the Trustee for authentication and
redelivery as provided in Section 6.02. Any Investor Certificates shall be
issued in minimum denominations of $1,000 and in integral multiples of $1,000 in
excess thereof, unless otherwise specified in any Supplement. If specified in
the related Supplement for any Series, the Investor Certificates shall be issued
upon initial issuance as a single certificate in an original principal amount
equal to the Initial Invested Amount as described in Section 6.10. The
Exchangeable Transferor Certificate may also be issued in two or more
certificates. Each Certificate shall be executed by manual or facsimile
signature on behalf of the Transferors by their respective Chairman of the
Board, President, Vice Chairman of the Board or any Vice President. Certificates
bearing the manual or facsimile signature of the individual who was, at the time
when such signature was affixed, authorized to sign on behalf of each such
Transferor or the Trustee shall not be rendered invalid, notwithstanding that
such individual has ceased to be so authorized prior to the authentication and
delivery of such Certificates or does not hold such office at the date of such
Certificates. No Certificate shall be entitled to any benefit under this
Agreement or any applicable Supplement or be valid for any purpose unless there
appears on such Certificate a certificate of authentication substantially in the
form provided for herein executed by or on behalf of the Trustee by the manual
signature of a duly authorized signatory, and such certificate upon any
Certificate shall be conclusive evidence, and the only evidence that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication, except Bearer
Certificates which shall be dated the Issuance Date.
Section 6.02 Authentication of Certificates. Contemporaneously with the
assignment and transfer of the Receivables, whether now existing or hereafter
created, and the other Trust Property to the Trust, the Trustee shall
authenticate and deliver the initial Series of Investor Certificates that is
issued upon original issuance, upon the order of the Transferors, to the
underwriters, The Trustee shall authenticate and deliver the Exchangeable
Transferor Certificate to the Transferors simultaneously with its delivery of
the initial Series of Investor Certificates. Upon an Exchange as provided in
Section 6.09 of the Agreement and the satisfaction of certain other conditions
specified therein, the Trustee shall authenticate and deliver the Investor
Certificates of additional Series (with the designation provided in the
applicable Supplement), upon the order of the Transferors, to the Persons
designated in such Supplement. Upon the order of the Transferors, the
Certificates of any Series shall be duly authenticated by or on behalf of the
Trustee, in authorized denominations equal to (in the aggregate) the Initial
Invested Amount of such Series of Investor Certificates. If specified in the
related Supplement for any Series, the Trustee shall authenticate and deliver
outside the United States the Global Certificate that is
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issued upon original issuance thereof, upon the written order of the
Transferors, to the Common Depositary as provided in Section 6.10 against
payment of the purchase price therefor. If specified in the related Supplement
for any Series, the Trustee shall authenticate Book-Entry Certificates that are
issued upon original issuance thereof, upon the written order of the
Transferors, to a Clearing Agency or its nominee as provided in Section 6.11
against payment of the purchase price thereof.
Section 6.03 Registration of Transfer and Exchange of Certificates.
(a) The Trustee shall cause to be kept at the office or agency to be
maintained by a transfer agent and registrar (which may be the Trustee) (the
"Transfer Agent and Registrar") in accordance with the provisions of subsection
6.03(c) of the Agreement a register (the "Certificate Register") in which,
subject to such reasonable regulations as it may prescribe, the Transfer Agent
and Registrar shall provide for the registration of the Registered Certificates
and of transfers and exchanges of the Registered Certificates as herein
provided. The Trustee is hereby initially appointed Transfer Agent and Registrar
for the purpose of registering the Registered Certificates and transfers and
exchanges of the Registered Certificates as herein provided. The Trustee shall
be permitted to resign as Transfer Agent and Registrar upon 30 days' written
notice to the Transferors and the Servicer; provided, however, that such
resignation shall not be effective and the Trustee shall continue to perform the
duties of Transfer Agent and Registrar until the Transferors have appointed a
successor Transfer Agent and Registrar acceptable to the Transferors and the
Trustee. If specified in the related Supplement for any Series of Certificates,
the Transferors shall appoint any co-transfer agent and co-registrar chosen by
the Transferors, and acceptable to the Trustee, including, if and so long as the
Registered Certificates are listed on the Luxembourg Stock Exchange or other
stock exchange and such exchange shall so require, a co-transfer agent and
co-registrar in Luxembourg or the location required by such other stock
exchange. If specified in such related Supplement, so long as the Registered
Certificates relating to such Supplement are outstanding, the Transferors shall
maintain a co-transfer agent and co-registrar in New York City or any other city
designated in such Supplement and any reference in this Agreement to the
Transfer Agent and Registrar shall include any co-transfer agent and
co-registrar unless the context requires otherwise.
Upon surrender for registration of transfer of any Registered
Certificate at any office or agency of the Transfer Agent and Registrar
maintained for such purpose, the Transferors shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferee one or more new Registered Certificates in authorized denominations
of the same Series representing like aggregate Undivided Interests in the Trust;
provided, however, that the provisions of this paragraph shall not apply to
Bearer Certificates.
At the option of any Registered Certificateholder, Registered
Certificates may be exchanged for other Registered Certificates of the same
Series in authorized denominations of like aggregate Undivided Interests in the
Trust, upon surrender of the Registered Certificates to be exchanged at any
office or agency of the Transfer Agent and Registrar maintained for such
purpose. At the option of a Bearer Certificateholder, subject to applicable laws
and regulations, Bearer Certificates may be exchanged for other Bearer
Certificates or Registered Certificates of the same Series in authorized
denominations of like aggregate Undivided Interests in the Trust, upon surrender
of the Bearer Certificates to be exchanged at an office or agency of the
Transfer Agent and Registrar located outside the United States, Each Bearer
Certificate surrendered
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pursuant to this Section 6.03 shall have attached thereto all unmatured Coupons,
provided that any Bearer Certificate so surrendered after the close of business
on the Record Date preceding the relevant Distribution Date after the related
Series Termination Date need not have attached the Coupon relating to such
Distribution Date.
The preceding provisions of this Section 6.03 notwithstanding the
Trustee or the Transfer Agent and Registrar, as the case may be, shall not be
required to register the transfer of or exchange of any Certificate of any
Series for a period of 15 days preceding the due date for any payment with
respect to the Certificates of such Series.
Whenever any Investor Certificates of any Series are so surrendered for
exchange, the Transferors shall execute, and the Trustee shall authenticate and
the Transfer Agent and Registrar shall deliver (in the case of Bearer
Certificates, outside the United States), the Investor Certificates of such
Series which the Certificateholder making the exchange is entitled to receive.
Every Investor Certificate presented or surrendered for registration of transfer
or exchange shall be accompanied by a written instrument of transfer in a form
satisfactory to the Trustee and the Transfer Agent and Registrar duly executed
by the Certificateholder thereof or his attorney duly authorized in writing.
Except as provided in any Supplement, no service charge shall be made
for any registration of transfer or exchange of Investor Certificates, but the
Transfer Agent and Registrar and the Trustee or any co-transfer agent and
co-registrar or co-trustee may require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any transfer
or exchange of Investor Certificates.
All Investor Certificates (together with any Coupons attached to Bearer
Certificates) surrendered for registration of transfer or exchange shall be
cancelled by the Transfer Agent and Registrar and disposed of in a manner
satisfactory to the Trustee and the Transferors. The Trustee shall cancel and
mutilate the Global Certificate upon its exchange in full for Definitive
Certificates and shall deliver such cancelled and mutilated Global Certificate
to the Transferors. The Trustee shall also forward to the Transferors a copy of
each certificate of each Foreign Clearing Agency to the effect referred to in
Section 6.10 of the Agreement which was received by the Trustee with respect to
each portion of the Global Certificate exchanged for Definitive Certificates.
The Transferors shall execute and deliver to the Trustee or the
Transfer Agent and Registrar, as applicable, Bearer Certificates and Registered
Certificates in such amounts and at such times as are necessary to enable the
Trustee to fulfill its responsibilities under this Agreement and the
Certificates.
(b) Except as provided in Sections 6.09 and 7.02, the Transferors'
interest in the Exchangeable Transferor Certificate shall not be sold,
transferred, assigned, exchanged, pledged, participated or otherwise conveyed,
unless (A) (i) the Servicer has delivered to the Trustee an Officer's
Certificate stating that such sale, transfer, assignment, exchange, pledge or
conveyance will not, while any Series of Certificates remains outstanding,
reduce the Transferors' retained interest in the Exchangeable Transferor
Certificate below the Minimum Transferor Percentage for any Series then
outstanding and (ii) the Trustee receives prior to such sale, transfer,
assignment, exchange, pledge, participation or conveyance written confirmation
from each
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Rating Agency that such transfer, assignment, exchange, pledge, participation
or conveyance will not result in such Rating Agency's reducing or withdrawing
its rating on any then outstanding Series rated by it or (B) such transfer,
assignment, exchange, pledge or conveyance is made to CRC and, in the case of
(A), the Trustee receives prior thereto an Opinion of Counsel to the effect
that (x) the conveyed interest in the Transferor Exchangeable Certificate will
be treated as either debt or an interest in a partnership for Federal income
tax purposes and that the conveyance of such interest will not 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 or
applicable state income taxation of any outstanding Series of Investor
Certificates or any Certificate Owner and (y) such transfer will not cause a
taxable event for federal income tax purposes to any Investor Certificateholder.
(c) The Transfer Agent and Registrar will maintain at its expense in
the Borough of Manhattan, the City of New York (and, if specified in the related
Supplement for any Series, Luxembourg (or subject to Section 6.03(a) of the
Agreement any other city designated in such Supplement)), an office or offices
or agency or agencies where Investor Certificates may be surrendered for
registration of transfer or exchange (except that Bearer Certificates may not be
surrendered for exchange at any such office or agency in the United States).
(d) Unless otherwise provided in any related Supplement, registration
of transfer of Registered Certificates containing a legend relating to the
restrictions on transfer of such Registered Certificates (which legend shall
be set forth in the Supplement relating to such Investor Certificates) shall
be effected only if:
(i) (a) the sale is of at least U.S $500,000 principal amount of such
Certificates and (b) a letter from the purchaser satisfactory to counsel to
the Servicer is executed and received; or
(ii) (a) the Registered Certificates are transferred in compliance with
Rule 144 (or any amendment thereto) or Rule 144A (or any amendment thereto)
under the United States Securities Act of 1933, as amended, and (b) a
letter from the purchaser satisfactory to counsel to the Servicer is
executed and received; or
(iii) the Registered Certificates are sold or otherwise transferred in
any other transaction that does not require registration under the United
States Securities Act of 1933 as amended, and, if the Transferor, the
Servicer, the Trustee, the Transfer Agent or Registrar so request, an
Opinion of Counsel satisfactory to it, in form and substance satisfactory
to it, is furnished to such effect.
Registered Certificates issued upon registration of transfer of, or
Registered Certificates issued in exchange for, Registered Certificates bearing
the legend referred to above shall also bear such legend unless the Transferor,
the Servicer, the Trustee and the Transfer Agent and Registrar receive an
Opinion of Counsel satisfactory to each of them, to the effect that such legend
may be removed.
Whenever a Registered Certificate containing the legend set forth in
the related Supplement is presented to the Transfer Agent and Registrar for
registration of transfer, the Transfer Agent and Registrar shall promptly seek
written instructions from the Servicer
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regarding such transfer. The Transfer Agent and Registrar and the Trustee shall
be entitled to receive written instructions signed by a Servicing Officer prior
to registering any such transfer or authenticating new Retired Certificates, as
the case may be. The Servicer hereby agrees to indemnify the Transfer Agent and
Registrar and the Trustee and to hold each of them harmless against any loss,
liability or expense incurred without bad faith on their part arising out of or
in connection with actions taken or omitted by them in reliance on and in
accordance with any such written instructions furnished pursuant to this
subsection 6.03(d).
Section 6.04 Mutilated, Destroyed, Lost, or Stolen Certificates. If (a) any
mutilated Certificate (together, in the case of Bearer Certificates, with all
unmatured Coupons (if any) appertaining thereto) is surrendered to the Transfer
Agent and Registrar, or the Transfer Agent and Registrar receives evidence to
its satisfaction of the destruction, loss or theft of any Certificate and (b)
there is delivered to the Transfer Agent and Registrar, the Trustee and the
Transferors such security or indemnity as may be required by them to save each
of them harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Transferors shall
execute and the Trustee shall authenticate and the Transfer Agent and Registrar
shall deliver (in the case of Bearer Certificates, outside the United States),
in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like tenor and aggregate Undivided Interest,
if applicable, In connection with the issuance of any new Certificate under this
Section 6.04, the Trustee or the Transfer Agent and Registrar may require the
payment by the Certificateholder of a sum sufficient to cover any tax or other
governmental expenses (including the fees and expenses of the Trustee and
Transfer Agent and Registrar) connected therewith. Any duplicate Certificate
issued pursuant to this Section 6.04 shall constitute complete and indefeasible
evidence of ownership in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Certificate shall be found at any time.
Section 6.05 Persons Deemed Owners. Prior to due presentation of a
Certificate (other than a Bearer Certificate) for registration of transfer, the
Trustee, the Paying Agent, the Transfer Agent and Registrar and any agent of any
of them may treat the person in whose name any Certificate is registered as the
owner of such Certificate for the purpose of receiving distributions pursuant to
Article IV hereof and for all other purposes whatsoever, and neither the
Trustee, the Paying Agent, the Transfer Agent and Registrar nor any agent of
any of them shall be affected by any notice to the contrary. In the case of a
Bearer Certificate, the Trustee, the Paying Agent, the Transfer Agent and
Registrar and any agent of any of them may treat the bearer of a Bearer
Certificate or Coupon as the owner of such Bearer Certificate or Coupon for the
purpose of receiving distributions pursuant to Article IV and for all other
purposes whatsoever, and neither the Trustee, the Paying Agent, the Transfer
Agent and Registrar nor any agent of any of them shall be affected by any notice
to the contrary. Notwithstanding the foregoing provisions of this Section 6.05,
in determining whether the holders of the requisite interests have given any
request, demand, authorization, direction, notice, consent or waiver hereunder
Certificates owned by the Transferor, the Servicer or any affiliate thereof (as
defined in Rule 405 under the Securities Act of 1933, as amended), shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Certificates which the
Trustee knows to be so owned shall be so disregarded. Certificates so owned
which have been pledged in good faith shall not be disregarded and may be
regarded as
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outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Certificates and that the pledgee
is not the United States, the Servicer or an affiliate thereof (as defined
above).
Section 6.06 Appointment of Paying Agent. The Paying Agent shall make
distributions to Investor Certificateholders from the Collection Account (or any
other account or accounts maintained for the benefit of Certificateholders as
specified in the related Supplement for any Series) pursuant to Articles IV and
V hereof. Any Paying Agent shall have the revocable power to withdraw funds from
the Collection Account (or any other account or accounts maintained for the
benefit of Certificateholders as specified in the related Supplement for any
Series) for the purpose of making distributions referred to above. The Trustee
may revoke such power and remove the Paying Agent if the Trustee determines in
its sole discretion that the Paying Agent shall have failed to perform its
obligations under this Agreement in any material respect. The Paying Agent shall
initially be the Trustee and any co-paying agent chosen by the Transferors and
acceptable to the Trustee, including, if and so long as any Series of Investor
Certificates is listed on the Luxembourg Stock Exchange or other stock exchange
and such exchange so requires, a co-paying agent in Luxembourg or the location
of such other stock exchange. The Trustee shall be permitted to resign as Paying
Agent upon 30 days' written notice to the Servicer and the Transferors. The
Transferors shall notify the Rating Agencies of any resignation or replacement
of the Paying Agent. In the event that the Trustee shall no longer be the Paying
Agent, the Transferors shall appoint a successor to act as Paying Agent and such
successor shall be acceptable to the Trustee. The Trustee shall cause the
initial Paying Agent and each successor Paying Agent or any additional Paying
Agent appointed by the Transferors to execute and deliver to the Trustee an
instrument in which such initial or successor Paying Agent or additional Paying
Agent shall agree with the Trustee that, as Paying Agent, such initial or
successor Paying Agent or additional Paying Agent will hold all sums, if any,
held by it for payment to the Investor Certificateholders in trust for the
benefit of the Investor Certificateholders entitled thereto until such sums
shall be paid to such Certificateholders. The Paying Agent shall return all
unclaimed funds to the Trustee and upon removal of a Paying Agent shall also
return all funds in its possession to the Trustee. The provisions of Sections
11.01, 11.02 and 11.03 of the Agreement shall apply to the Trustee also in its
role as Paying Agent, for so long as the Trustee shall act as Paying Agent. Any
reference in this Agreement to the Paying Agent shall include any co-paying
agent unless the context requires otherwise.
If specified in the related Supplement for any Series, so long as the
Investor Certificates of such Series are outstanding, the Transferors shall, if
the Paying Agent is not located in New York City, appoint a co-paying agent in
New York City (for Registered Certificates only) acceptable to the Trustee or
any other city designated in such Supplement which, if and so long as any Series
of Investor Certificates is listed on the Luxembourg Stock Exchange or other
stock exchange and such exchange so requires, shall be in Luxembourg or the
location required by such other stock exchange.
Section 6.07 Access to List of Certificateholders' Names and Addresses. The
Trustee will furnish or cause to be furnished by the Transfer Agent and
Registrar to the Servicer or the Paying Agent (or any agent thereof), within
five Business Days after receipt by the Trustee of a request therefor from the
Servicer or the Paying Agent, respectively, in writing, a list in the form
maintained by the Trustee, of the names and addresses of the Investor
Certificateholders (other than Bearer Certificateholders). If Holders
representing Undivided Interests in the Trust
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aggregating not less than 10% of the Invested Amount of the Investor
Certificates of such Series (the "Applicants") apply in writing to the Trustee,
and such application states that the Applicants desire to communicate with other
Investor Certificateholders of such Series with respect to their rights under
this Agreement or under the Investor Certificates and is accompanied by a copy
of the communication which such Applicants propose to transmit, then the
Trustee, after having been adequately indemnified by such Applicants for its
costs and expenses, shall afford or shall cause the Transfer Agent and Registrar
to either afford such Applicants access during normal business hours to the most
recent list of Certificateholders (other than Bearer Certificateholders) held by
the Trustee, or mail or cause to be mailed such list within five Business Days
after the receipt of such application. Such list shall be as of a date no more
than 45 days prior to the date of receipt of such Applicants' request.
Every Certificateholder, by receiving and holding a Certificate agrees
with the Trustee that neither the Trustee, the Transfer Agent and Registrar, nor
any of their respective agents shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the
Certificateholder, (other than Bearer Certificateholders) hereunder, regardless
of the sources from which such information was derived.
Section 6.08 Authenticating Agent.
(a) The Trustee may appoint one or more authenticating agents with
respect to the Certificates which shall be authorized to act on behalf of the
Trustee in authenticating the Certificates in connection with the issuance,
delivery, registration of transfer, exchange or repayment of the Certificates.
Whenever reference is made in this Agreement to the authentication of
Certificates by the Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication on behalf of the Trustee by
an authenticating agent and a certificate of authentication executed on behalf
of the Trustee by an authenticating agent. Each authenticating agent must be
reasonably acceptable to the Transferors.
(b) Any institution succeeding to the corporate agency business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any paper or any further act on the part of the Trustee
or such authenticating agent.
(c) An authenticating agent may at any time resign by giving written
notice of resignation to the Trustee and to the Transferor. The Trustee may at
any time terminate the agency of an authenticating agent by giving notice of
termination to such authenticating agent and to the Transferors. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
an authenticating agent shall cease to be acceptable to the Trustee or the
Transferors, the Trustee promptly may appoint a successor authenticating agent.
Any successor authenticating agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an authenticating agent.
No successor authenticating agent shall be appointed unless acceptable to the
Trustee and the Transferors.
(d) The Servicer agrees to pay, on behalf of the Trust, to each
authenticating agent from time to time reasonable compensation for its services
under this Section 6.08.
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(e) The provisions of Sections 11.01, 11.02 and 11.03 of the Agreement
shall be applicable to any authenticating agent.
(f) Pursuant to an appointment made under this Section 6.08, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication, in substantially the
following form:
This is one of the Certificates described in the Master Pooling and
Servicing Agreement.
------------------------------------------
------------------------------------------
as Authenticating Agent
for the Trustee,
By:_______________________________________
Authorized Officer
Section 6.09 Tender of Exchangeable Transferor Certificate.
(a) Upon any Exchange, the Trustee shall issue to the Transferors under
Section 6.01 of the Agreement for execution and redelivery to the Trustee for
authentication under Section 6.02 of the Agreement one or more new Series of
Investor Certificates. Any such Series of Investor Certificates shall be
substantially in the form specified in the applicable Supplement and shall bear,
upon its face, the designation for such Series to which it belongs so selected
by the Transferors. Except as specified in any Supplement for a related Series,
all Investor Certificates of any Series shall be equally and ratably entitled as
provided herein to the benefits hereof without preference, priority or
distinction on account of the actual time or times of authentication and
delivery, all in accordance with the terms and provisions of this Agreement and
the applicable Supplement.
(b) The Transferors may tender the Exchangeable Transferor Certificate
to the Trustee in exchange for (i) one or more newly issued Series of Investor
Certificates and (ii) a reissued Exchangeable Transferor Certificate (any such
tender an "Exchange"). The Transferors may perform an Exchange by notifying the
Trustee, in writing at least three days in advance (an "Exchange Notice") of the
date upon which the Exchange is to occur (an "Exchange Date"). Any Exchange
Notice shall state the designation of any Series to be issued on the Exchange
Date and, with respect to each such Series: (x) its Initial Invested Amount (or
the method for calculating such Initial Invested Amount), if any, which, in the
aggregate, at any time, may not be greater than the current principal amount of
the Exchangeable Transferor Certificate less the product of the Minimum
Transferor Percentage and the Trust Principal Component at such time, and (y)
its Certificate Rate (or the method for allocating interest payments or other
cash flow to such Series), if any. On the Exchange Date, the Trustee shall only
authenticate and deliver any such Series upon delivery to it of the following:
(A) a Supplement in form satisfactory to the Trustee executed by the Transferors
and specifying the Principal Terms of such Series, (B) the applicable
Enhancement, if any, (C) an opinion of Counsel to the effect that the newly
issued Series of Investor Certificates will be characterized as either
indebtedness or an interest in a partnership
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under existing law for Federal income tax purposes and that the issuance of the
newly issued Series of Investor Certificates will not have any material adverse
impact on the Federal income tax characterization of any outstanding Series of
Investor Certificates that have been the subject of a previous opinion of tax
counsel, (D) an agreement, if any, pursuant to which the Enhancement Provider
agrees to provide Enhancement, (E) written confirmation from each Rating Agency
that the Exchange will not result in such Rating Agency's reducing or
withdrawing its rating on any then outstanding Series rated by it and (F) the
existing Exchangeable Transferor Certificate. Upon satisfaction of such
conditions, the Trustee shall cancel the existing Exchangeable Transferor
Certificate and issue, as provided above, such Series of Investor Certificates
and new Exchangeable Transferor Certificate, dated the Exchange Date.
(c) In conjunction with an Exchange, the parties hereto shall execute a
Supplement, which shall specify the relevant terms with respect to any Series of
Investor Certificates, which may include, without limitation: (i) its name or
designation, (ii) an Initial Invested Amount or the method of calculating the
Initial Invested Amount, (iii) a Certificate Rate (or formula for the
determination thereof), (iv) the rights of the Holders of the Exchangeable
Transferor Certificate that have been transferred to the Holders of such Series
pursuant to such Exchange (including any rights to allocations of Yield
Collections and Principal Collections), (v) the interest payment date or dates
and the date or dates from which interest shall accrue, (vi) the method of
allocating Principal Collections for such Series and, if applicable, with
respect to other Series and the method by which the principal amount of Investor
Certificates of such Series shall amortize or accrete and the method for
allocating Yield Collections and Receivables in Defaulted Accounts, (vii) the
names of any accounts to be used by such Series and the terms governing the
operation of any such account, (viii) the Servicing Fee Percentage, (ix) the
Minimum Transferor Percentage, (x) the Minimum Trust Principal Component, (xi)
the Series Termination Date, (xii) the terms of any Enhancement, (xiii) the
Enhancement Provider, (xiv) the base rate, if any, (xv) the Repurchase Terms or
the terms on which the Certificates of such Series may be remarketed to other
investors, (xvi) any deposit into any account provided for such Series, (xvii)
the number of Classes of such Series, and if more than one Class, the rights and
priorities of each such Class, (xviii) the extent to which the Investor
Certificates will be issuable in temporary or permanent global form, and in such
case, the depository 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, (xix) whether the
Certificates may be issued in bearer form and any limitations imposed thereon,
(xx) the priority of any Series with respect to any other Series, (xxi) whether
such Series will be an Excess Allocation Series, and (xxii) any other relevant
terms of such Series (all such terms, the "Principal Terms" of such Series). If
on the date of the issuance of such Series there is issued and outstanding no
Series of Investor Certificates which is currently rated by a Rating Agency,
then as a condition to such Exchange a nationally recognized investment banking
firm or commercial bank shall also deliver to the Trustee an officer's
certificate stating, in substance, that the Exchange will not have an adverse
effect on the timing or distribution of payments to such other Series of
Investor Certificates then issued and outstanding.
Section 6.10 Global Certificate; Euro Certificate Exchange Date.
(a) If specified in the related Supplement for any Series, the Investor
Certificates may be initially issued in the form of a single temporary Global
Certificate (the "Global
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Certificate") in bearer form, without interest coupons, in the denomination of
the Initial Invested Amount and substantially in the form attached to the
applicable Supplement. Unless otherwise specified in the applicable Supplement,
the provisions of this Section 6.10 shall apply to such Global Certificate. The
Global Certificate will be authenticated by the Trustee upon the same
conditions, in substantially the same manner and with the same effect as the
Definitive Certificates, The Global Certificate may be exchanged as described
below for Bearer and/or Registered Certificates in definitive form (the
"Definitive Euro-Certificates"). Notwithstanding the foregoing, no Certificates
shall be issued in bearer form unless the Transferors have determined, and
deliver an Opinion of Counsel to the Trustee substantially to the effect that,
the terms and procedures governing issuance and transfer of such Certificates
result in favorable treatment to Investor Certificateholders under the Bearer
Rules.
(b) The Manager shall, upon its determination of the date of completion
of the distribution of the Certificates, so advise the Trustee, the Transferors,
the Common Depositary, and each Foreign Clearing Agency in writing forthwith.
Without unnecessary delay, but prior to the Euro-Certificate Exchange Date, the
Transferors will execute and deliver to the Trustee at its office or designated
agent outside the United States definitive Bearer Certificates in an aggregate
principal amount equal to the Initial Invested Amount. All Bearer Certificates
so issued and delivered will have Coupons attached. The Global Certificate may
be exchanged for an equal aggregate principal amount of Definitive
Euro-Certificates only on or after the Euro-Certificate Exchange Date.
Notwithstanding the preceding sentence, a United States institutional investor
may at any time exchange the portion of the Global Certificate beneficially
owned by it for an equal aggregate principal amount of Registered Certificates
bearing the applicable legend set forth in the related Supplement and having, a
minimum denomination of $500,000, which may be in temporary form if the
Transferors so elect. A United States institutional investor will be required to
deliver to the Transferors, the Trustee and the Manager at the time of its
purchase of Registered Certificates a signed certificate substantially in the
form attached to the Supplement for the related Series. Upon any demand for
exchange for Definitive Certificates in accordance with this paragraph, the
Transferors shall cause the Trustee to authenticate and deliver the Definitive
Certificates to the Holder (x) outside the United States, in the case of Bearer
Certificates, and (y) according to the instructions of the Holder, in the case
of Registered Certificates, but only upon presentation to the Trustee of a
written statement, substantially in the form attached to the Supplement for the
related Series with respect to the Global Certificate or portion thereof being
exchanged, signed by a Foreign Clearing Agency, to the effect that it has
received in writing or by tested telex a certification substantially in the form
of (i) in the case of beneficial ownership of the Global Certificate or a
portion thereof being exchanged by a United States institutional investor
pursuant to the second preceding sentence, the certificate attached to the
Supplement for the related Series signed by the Manager (which sold the relevant
Certificates) or (ii) in all other cases, the alternative certificate attached
to the Supplement for the related Series, the alternative certificate referred
to in this clause (ii) being dated no earlier than 15 days prior to the
Euro-Certificate Exchange Date and signed by or on behalf of the person
appearing in the records of a Foreign Clearing Agency as the beneficial owner of
the Global Certificate or portion thereof being exchanged. Upon receipt of such
certification, the Trustee shall cause the Global Certificate to be endorsed in
accordance with paragraph (d) below. Unless otherwise provided in the applicable
Supplement, any exchange as provided in this subsection 6.10(b) shall be made
free of charge to the holders and the beneficial owners of the Global
Certificate and to the beneficial owners of the Definitive Euro-Certificates
issued in
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exchange, except that a person receiving Definitive Euro-Certificates must bear
the cost of insurance, postage, transportation and the like in the event that
such person does not receive such Definitive Euro-Certificates in person at the
offices of a Foreign Clearing Agency.
(c) The delivery to the Trustee by a Foreign Clearing Agency of any
written statement referred to above may be relied upon by the Transferor and the
Trustee as conclusive evidence that a corresponding certification or
certifications has or have been delivered to such Foreign Clearing Agency,
pursuant to the terms of this Agreement.
(d) Upon any such exchange of all or a portion of the Global
Certificate for a Definitive Euro-Certificate or Certificates, such Global
Certificate shall be endorsed by or on behalf of the Trustee to reflect the
reduction of its principal amount by an amount equal to the aggregate principal
amount of such Definitive Euro-Certificate or Certificates. Until so exchanged
in full, such Global Certificate shall in all respects be entitled to the same
benefits under this Agreement as Definitive Euro-Certificates authenticated and
delivered hereunder except that the beneficial owners of such Global Certificate
shall not be entitled to receive payments of interest on the Certificates until
they have exchanged their beneficial interests in such Global Certificate for
Definitive Euro-Certificates.
Section 6.11 Book-Entry Certificates. Unless otherwise provided in any
related Supplement, the Investor Certificates, upon original issuance, will be
issued in the form of the requisite number of typewritten Certificates
representing the Book-Entry Certificates, to be delivered to The Depository
Trust Company, the initial Clearing Agency, by, or on behalf of the Transferors.
The Investor Certificates shall initially be registered on the Certificate
Register in the name of CEDE & Co., the nominee of the Clearing Agency, and no
Certificate owner will receive a definitive certificate representing such
Certificate owner's interest in the Investor Certificates, except as provided in
Section 6.13 of the Agreement. Unless and until definitive, fully registered
Investor Certificates (the "Definitive Certificates") have been issued to
Certificate Owners pursuant to Section 6.13 of the Agreement:
(i) the provision of this Section 6.11 shall be in full force and
effect;
(ii) the Transferor, the Servicer, the Paying Agent, the Transfer Agent
and Registrar and the Trustee may deal with the Clearing Agency and the
Clearing Agency Participants for all purposes (including the making of
distributions on the Investor Certificates) as the authorized
representatives of the Certificate Owners;
(iii) to the extent that the provisions of this Section 6.11 conflict
with any other provisions of this Agreement, the provisions of this Section
6.11 shall control;
(iv) the rights of Certificate Owners shall be exercised only through
the Clearing Agency and the Clearing Agency Participants and shall be
limited to those established by law and agreements between such Certificate
Owners and the Clearing Agency and/or the Clearing Agency Participants.
Pursuant to the Depository Agreement, unless and until Definitive
Certificates are issued pursuant to Section 6.13 of the Agreement, the
initial Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit distributions of principal and
interest on the Investor Certificates to such Clearing Agency Participants;
and
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(v) whenever this Agreement requires or permits actions to be taken
based upon instructions or directions of a specified percentage of the
Invested Amount of any or all Series of Certificates outstanding, the
Clearing Agency shall be deemed to represent such percentage only to the
extent that it has received instructions to such effect from Certificate
Owners and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in
Investor Certificates.
Section 6.12 Notices to Clearing Agency. Whenever notice or other
communication to the Investor Certificateholders is required under this
Agreement, unless and until Definitive Certificates shall have been issued to
Certificate Owners pursuant to Section 6.13 of the Agreement, the Trustee, the
Servicer and the Paying Agent shall give all such notices and communications
specified herein to be given to Holders of the Investor Certificates to the
Clearing Agencies.
Section 6.13 Definitive Certificates. If Book-Entry Certificates have been
issued pursuant to Section 6.11 and if (i)(A) the Transferors advise the Trustee
in writing that the Clearing Agency is no longer willing or able to discharge
properly its responsibilities under the Depository Agreement, and (B) the
Trustee or the Transferors are unable to locate a qualified successor, (ii) the
Transferors at their option, advise the Trustee in writing that they elects to
terminate the book-entry system through the Clearing Agency with respect to the
Certificates or (iii) after the occurrence of a Servicer Default, Certificate
Owners representing beneficial interests aggregating more than 50% of the
Invested Amount, of any Series advise the Trustee and the Clearing Agency
through the Clearing Agency Participants in writing that the continuation of a
book-entry system through the Clearing Agency is no longer in the best interests
of the Certificate Owners, the Trustee shall notify all Certificate Owners,
through each applicable Clearing Agency, of the occurrence of any such event and
of the availability of Definitive Certificates to Certificate Owners requesting
the same. Upon surrender to the Trustee of the Investor Certificates by the
Clearing Agency, accompanied by registration instructions from the Clearing
Agency for registration the Trustee shall issue the Definitive Certificates.
Neither the Transferors, the Transfer Agent and Registrar nor the Trustee shall
be liable for any delay in delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such instructions. Upon the
issuance of Definitive Certificates all references herein to obligations imposed
upon or to be performed by the Clearing Agency shall be deemed to be imposed
upon and performed by the Trustee to the extent applicable with respect to such
Definitive Certificates and the Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder.
Section 6.14 Meetings of Certificateholders
(a) Unless not permitted by the Supplement for any Series issued in
whole or in part in Bearer Certificates, the Transferors, the Servicer or the
Trustee may at any time call a meeting of the Certificateholders of such Series
or of all Series, to be held at such time and at such place as the Transferors,
the Servicer or the Trustee, as the case may be, shall determine, for the
purpose of approving a modification of or amendment to, or obtaining a waiver
of, any covenant or condition set forth in this Agreement with respect to such
Series or in the Certificates of such Series, subject to Section 13.01 of the
Agreement. References in this Section to Certificateholders shall be deemed to
refer to the Exchangeable Transferor Certificates and only those Series of
Investor Certificates for which this Section 6.14 is applicable. Notice of any
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meeting of Certificateholders, setting forth the time and place of such meeting
and in general terms the action proposed to be taken at such meeting, shall be
given in accordance with Section 13.05 of the Agreement and at least once in an
Authorized Newspaper and, if and for so long as the Certificates are listed on
the Luxembourg Stock Exchange or other stock exchange and such exchange so
requires, in a newspaper of general circulation in Luxembourg (which newspaper
shall be printed in the English or French language and customarily published on
each business day in Luxembourg) or the location required by such other stock
exchange, the first publication to be not less that 20 nor more than 180 days
prior to the date fixed for the meeting. To be entitled to vote at any meeting
of Certificateholders, a person shall be (i) a Holder of one or more
Certificates of the applicable Series or (ii) a person appointed by an
instrument in writing as proxy by the Holder of one or more Certificates. The
only Persons who shall be entitled to be present or to speak to any meeting of
Certificateholders shall be the Persons entitled to vote at such meeting and
their counsel and any representatives of the Transferors, the Servicer and the
Trustee and their respective counsels.
(b) At a meeting of Investor Certificateholders, persons entitled to
vote Investor Certificates evidencing Undivided Interests aggregating a majority
of the Invested Amount of the applicable Series or all outstanding Series, as
the case may be, shall constitute a quorum. No business shall be transacted in
the absence of a quorum, unless a quorum is present when the meeting is called
to order. In the absence of a quorum at any such meeting, the meeting may be
adjourned for a period of not less than 10 days; in the absence of a quorum at
any such adjourned meeting, such adjourned meeting may be further adjourned for
a period of not less than 10 days; at the reconvening of any meeting further
adjourned for lack of a quorum, the Persons entitled to vote at least 25% in
Undivided Interest of the applicable Series or all outstanding Series, as the
case may be, shall constitute a quorum for the taking of any action set forth in
the notice of the original meeting. Notice of the reconvening of any adjourned
meeting shall be given as provided above except that such notice must be given
not less than five days prior to the date on which the meeting is scheduled to
be reconvened. Notice of the reconvening of an adjourned meeting shall state
expressly the percentage of the aggregate principal amount of the outstanding
Investor Certificates which shall constitute a quorum.
(c) Any Certificateholder who has executed an instrument in writing
appointing a person as proxy shall be deemed to be present for the purposes of
determining a quorum and be deemed to have voted; provided that such
Certificateholder shall be considered as present or voting only with respect to
the matters covered by such instrument in writing. Subject to the provisions of
Section 13.01 of the Agreement, any resolution passed or decision taken at any
meeting of Investor Certificateholders duly held in accordance with this Section
6.14 shall be binding on all the Investor Certificateholders whether or not
present or represented at the meeting.
The holding of Bearer Certificates shall be proved by the production of such
Bearer Certificates or by a certificate, satisfactory to the Servicer and the
Trustee, executed by any bank, trust company or recognized securities dealer,
wherever situated, satisfactory to the Servicer and the Trustee. Each such
certificate shall be dated and shall state that on the date thereof a Bearer
Certificate bearing a specified serial number was deposited with or exhibited to
such bank, trust company or recognized securities dealer by the person named in
such certificate. Any such certificate may be issued in respect of one or more
Bearer Certificates specified therein. The holding by the person named in any
such certificate of any Bearer Certificate specified therein
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shall be presumed to continue for a period of one year from the date of such
certificate unless at the time of any determination of such holding (i) another
certificate bearing a later date issued in respect of the same Bearer
Certificate shall be produced, (ii) the Bearer Certificate specified in such
certificate shall be produced by some other person or (iii) the Bearer
Certificate specified in such certificate shall have ceased to be outstanding.
The appointment of any proxy shall be proved by having the signature of the
person executing the proxy guaranteed by any bank, trust company or recognized
securities dealer satisfactory to the Trustee. The holding of Registered
Certificates shall be proved by the Certificate Register or by a certificate or
certificates of the Transfer Agent and Registrar.
The Trustee shall appoint a temporary chairman of the meeting. A permanent
chairman and a permanent secretary of the meeting shall be elected by vote of
the holders of a majority in Undivided Interest of the Certificates of such
Series represented at the meeting. No vote shall be cast or counted at any
meeting in respect of any Certificate challenged as not outstanding and ruled by
the chairman of the meeting to be not outstanding, The chairman of the meeting
shall have no right to vote except as a Certificateholder or proxy. Any meeting
of Certificateholders duly called at which a quorum is present may be adjourned
from time to time, and the meeting may be held as so adjourned without further
notice.
(d) The vote upon any resolution submitted to any meeting of
Certificateholders shall be by written ballot on which shall be subscribed the
signatures of the Certificateholders or proxies and on which shall be inscribed
the serial number or numbers of the Certificates held or represented by them.
The permanent chairman of the meeting shall appoint two inspectors of votes who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record in duplicate of
the proceedings of each meeting of Certificateholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts setting forth a
copy of the notice of the meeting and showing that said notice was published as
provided above. The record shall be signed and verified by the permanent
chairman and secretary of the meeting and one of the duplicates shall be
delivered to the Servicer and the other to the Trustee to be preserved by the
Trustee, the latter to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the matters
therein stated.
[END OF ARTICLE VI]
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ARTICLE VII
OTHER MATTERS RELATING TO THE TRANSFERORS
Section 7.01 Liability of the Transferors. Each Transferor shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken by such Transferor.
Section 7.02 Merger or Consolidation of, or Assumption of the Obligations
of, a Transferor. Neither Transferor shall consolidate with or merge into any
other corporation or convey or transfer its properties and assets substantially
as an entirety to any Person, unless:
(i) the corporation formed by such consolidation or into which such
Transferor is merged or the Person which acquires by conveyance or transfer
the properties and assets of such Transferor substantially as an entirety
shall be organized and existing under the laws of the United States of
America or any State or the District of Columbia, and if such Transferor is
not the surviving entity, shall expressly assume, by an agreement
supplemental hereto, executed and delivered to the Trustee, in form
satisfactory to the Trustee, the performance of every covenant and
obligation of such Transferor, as applicable hereunder and shall benefit
from all the rights granted to such Transferor, as applicable hereunder.
(To the extent that any right, covenant or obligation of such Transferor,
is inapplicable to the successor entity, such successor entity shall be
subject to such covenant or obligation, or benefit from such right, as
would apply, to the extent practicable, to such successor entity.);
(ii) such Transferor has delivered to the Trustee an Officer's
Certificate signed by a Vice President of such Transferor and an Opinion of
Counsel each stating that such consolidation, merger, conveyance or
transfer and such supplemental agreement comply with this Section 7.02 and
that all conditions precedent herein provided for relating to such
transaction have been complied with; and
(iii) the Rating Agencies have advised the Transferors and the Trustee
that the rating of the Certificates, after giving effect to such assignment
and succession, will not be lowered or withdrawn.
(b) The obligations of each Transferor hereunder shall not be
assignable nor shall any Person succeed to the obligations of either
Transferor hereunder except in each case in accordance with the provisions
of the foregoing paragraph.
Section 7.03 Limitation on Liability of the Transferors. The directors,
officers, employees or agents of the Transferors shall not be under any
liability to the Trust, the Trustee, the Certificateholders or any other Person
hereunder or pursuant to any document delivered hereunder, it being expressly
understood that all such liability is expressly waived and released as a
condition of, and as consideration for, the execution of this Agreement and any
Supplement and the issuance of the Certificates; provided, however, that this
provision shall not protect the officers, directors, employees or agents of the
Transferors against any liability which would
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otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder. Except as provided in
Section 7.04, neither Transferor will be under any liability to the Trust, the
Trustee, the Certificateholders or any other Person for any action taken or
for refraining from the taking of any action in its capacity as a Transferor
pursuant to this Agreement or any Supplement whether arising from express or
implied duties under this Agreement or any Supplement; provided, however, that
this provision shall not protect a Transferor against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder. Each Transferor may rely in good
faith on any document of any kind prima facie properly executed and submitted
by any Person respecting any matters arising hereunder.
Section 7.04 Liabilities. Notwithstanding Section 7.03, by entering into
this Agreement, each of RFC and Centurion Bank, jointly and severally, agrees to
be liable, directly to the injured party, for the entire amount of any losses,
claims, damages or liabilities (other than those incurred by a Certificateholder
in the capacity of an investor in the Investor Certificates) arising out of or
based on the arrangement created by this Agreement and the actions of the
Servicer taken pursuant hereto as though this Agreement created a partnership
under the Uniform Partnership Act. Each of RFC and Centurion Bank, jointly and
severally, agrees to pay, indemnify and hold harmless each Investor
Certificateholder against and from any and all such losses, claims, damages and
liabilities except to the extent that they arise from any action by such
Investor Certificateholder. Subject to Sections 8.03 and 8.04, in the event of a
Service Transfer, the Successor Servicer will indemnify and hold harmless RFC
and Centurion Bank for any losses, claims, damage and liabilities of RFC or
Centurion Bank, as applicable, as described in this Section 7.04 arising from
the actions or omissions of such Successor Servicer. The amount of each
Transferor's liability under this Section 7.04 shall be subordinate to the
security interest of the Trust in the Receivables and shall be payable from the
assets of such Transferor at the time such liability is asserted and at any time
thereafter.
[END OF ARTICLE VII]
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ARTICLE VIII
OTHER MATTERS RELATING TO THE SERVICER
Section 8.01 Liability of the Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer in such capacity herein.
Section 8.02 Merger or Consolidation of, or Assumption of the Obligations
of, the Servicer. The Servicer shall not consolidate with or merge into any
other corporation or convey or transfer its properties and assets substantially
as an entirety to any Person, unless:
(i) the corporation formed by such consolidation or into which the
Servicer is merged or the Person which acquires by conveyance or transfer
the properties and assets of the Servicer substantially as an entirety
shall be a corporation organized and existing under the laws of the United
States of America or any State or the District of Columbia, and if the
Servicer is not the surviving entity, shall expressly assume, by an
agreement supplemental hereto, executed and delivered to the Trustee, the
performance of every covenant and obligation of the Servicer hereunder. (To
the extent that any right, covenant or obligation of the Transferor, is
inapplicable to the successor entity, such successor entity shall be
subject to such covenant or obligation, or benefit from such right, as
would apply, to the extent practicable, to such successor entity); and
(ii) the Servicer has delivered to the Trustee an officer's Certificate
and an Opinion of Counsel each stating that such consolidation,, merger,
conveyance or transfer and such supplemental agreement comply with this
Section 8.02 and that all conditions precedent herein provided for relating
to such transaction have been complied with. The Servicer shall promptly
advise the Rating Agencies in writing of any such merger, consolidation,
conveyance or transfer.
Section 8.03 Limitation on Liability of the Servicer and Others. The
directors, officers, employees or agents of the Servicer shall not be under any
liability to the Trust, the Transferors, the Trustee, the Certificateholders, or
any other Person hereunder or pursuant to any document delivered hereunder, it
being expressly understood that all such liability is expressly waived and
released as a condition of, and as consideration for, the execution of this
Agreement and any Supplement and the issuance of the Certificates; provided,
however, that this provision shall not protect the directors, officers,
employees and agents of the Servicer against any liability which would otherwise
be imposed by reason of willful misfeasance, bad faith or gross negligence in
the performance of duties hereunder or by reason of reckless disregard of
obligations and duties hereunder. Except as provided in Section 8.04, the
Servicer shall not be under any liability to the Trust, the Trustee, the
Certificateholders or any other Person for any action taken or for refraining
from the taking of any action in its capacity as Servicer pursuant to this
Agreement or any Supplement whether arising from express or implied duties under
this Agreement or any Supplement; provided, however, that this provision shall
not protect the Servicer against any liability which would otherwise be imposed
by reason of willful misfeasance, bad faith or gross negligence in the
performance of duties hereunder or by reason of
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reckless disregard of obligations and duties hereunder. The Servicer may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The Servicer
shall not be under any obligation to appear in, prosecute or defend any legal
action which is not incidental to its duties to service the Receivables in
accordance with this Agreement or any Supplement which in its reasonable opinion
may involve it in any expense or liability.
Section 8.04 Indemnification of the Trust and the Trustee. The Servicer
shall indemnify and hold harmless the Trust, for the benefit of the
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 this Agreement or any Supplement,
including but not limited to any judgment, award, settlement, reasonable
attorneys' fees and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim; provided,
however, that the Servicer shall not indemnify the Trust, the Trustee or its
officers, directors or employees or the Investor Certificateholders for any
liability, cost or expense of the Trust or the Trustee or its officers,
directors or employees if any such claims, actions or proceedings relate to any
action taken by the Trustee at the request of the Investor Certificateholders or
any Federal, state or local income or franchise taxes (or any interest or
penalties with respect thereto) required to be paid by the Trustee or the
Investor Certificateholders in connection herewith to any taxing authority.
Subject to Sections 7.01 and 7.04 and subsection 10.02(b) of the Agreement, any
indemnification pursuant to this Section shall only be from the assets of the
Servicer. The provisions of this indemnity shall run directly to and be
enforceable by an injured party subject to the limitations hereof and shall
survive the termination of the Agreement and payment in full of the
certificates.
Section 8.05. The Servicer Not to Design. The Servicer shall not resign
from the obligations and duties hereby imposed on it as such except (a) upon
determination that (i) the performance of its duties hereunder is or will become
impermissible under applicable law, regulation or order and (ii) there is no
reasonable action which the Servicer could take to make the performance of its
duties hereunder permissible under applicable law, or (b) upon the satisfaction
of the following conditions, (i) the assumption, by an agreement supplemental
hereto, executed by and delivered to the Trustee, of the obligations and duties
of the Servicer hereunder by the proposed successor Servicer, (ii) the written
confirmation by the Rating Agencies that the then rating of any Series of
Certificates then outstanding will not, solely as a result of such transfer, be
reduced or withdrawn, (iii) the delivery to the Trustee of an Opinion of Counsel
substantially to the effect that (A) such transfer will not adversely affect the
treatment of any Series of Certificates then outstanding after such transfer as
debt for Federal and state income tax purposes, and (B) such transfer will not
have any material adverse impact on the federal or state income taxation of the
Trust or an Investor Certificateholder or any Certificate Owner, and (iv) 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. Any determination pursuant to clause (a) of this Section permitting
the resignation of the Servicer shall be evidenced as to clause (a)(i) of this
Section by an Opinion of Counsel to such effect delivered to the Trustee.
Notwithstanding anything in this Agreement or any Supplement to the contrary,
any Successor Servicer appointed under clause (b) of this Section shall be
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deemed to be a Successor Servicer as defined hereunder. No such resignation
shall become effective until the Trustee or its duly appointed agent (which may
not be the outgoing Servicer) or a Successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section
10.02 hereof. If the Trustee is unable within 120 days of the date of such
determination to appoint a Successor Servicer pursuant to subsection 10.02(a),
the Trustee or its duly appointed agent (which may not be the outgoing Servicer)
shall serve as Successor Servicer hereunder but the Trustee shall have continued
authority to appoint another Person as Successor Servicer.
Section 8.06 Access to Certain Documentation and Information Regarding the
Receivables. The Servicer shall provide to the Trustee access to the
documentation regarding the Accounts and the Receivables in such cases where the
Trustee is required in connection with the enforcement of the rights of the
Investor Certificateholders, or by applicable statutes or regulations, to review
such documentation such access being afforded without charge but only (i) upon
reasonable request, (ii) during normal business hours, (iii) subject to such
security and confidentiality procedures as the Servicer may deem reasonably
necessary and (iv) at offices designated by the Servicer. Nothing in this
Section 8.06 shall derogate from the obligation of the Transferors, the Trustee
or the Servicer to observe any applicable law prohibiting disclosure of
information regarding the Obligors and the failure of the Servicer to provide
access as provided in this Section 8.06 as a result of such obligation shall not
constitute a breach of this Section 8.06.
Section 8.07 Delegation of Duties. It is understood and agreed by the
parties hereto that the Servicer may delegate its duties hereunder to any Person
who agrees to conduct such duties in accordance with the applicable Account
Guidelines. The fees of any Person to whom such duties are delegated are, and
shall continue to be, for the account of the Servicer. Any such delegations do
not and shall not relieve the Servicer of its liability and responsibility with
respect to such duties, and do not and shall not constitute a resignation within
the meaning of Section 8.05 hereof. If any such additional delegation is to a
Person other than FDC or a subsidiary of FDC or American Express Company or
otherwise is not in the ordinary course of business, notification thereof shall
be given to each Rating Agency.
Section 8.08 Examination of Records. The Transferors and the Servicer shall
clearly and unambiguously identify each Account (including any Additional
Account designated pursuant to Section 2.06) in its computer or other records to
reflect that the Receivables arising in such Account have been conveyed to the
Trust pursuant to this Agreement. The Transferors and the Servicer shall, prior
to the sale or transfer to a third party of any receivable held in its custody,
examine its computer and other records to determine that such receivable is not
a Receivable.
[END OF ARTICLE VIII]
<PAGE>
ARTICLE IX
PAY OUT EVENTS
Section 9.01 Pay Out Events. Unless modified with respect to any Series of
Investor Certificates by any related Supplement, if any one of the following
events shall occur:
(a) any of RFC, Centurion Bank or TRS shall consent to the appointment
of a conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshaling of assets and liabilities or similar proceedings of or
relating to it or relating to all or substantially all of its property, or
a decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling
of assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against any of RFC,
Centurion Bank or TRS and such decree or order shall have remained in force
undischarged or unstayed for a period of 60 days; or any of RFC, Centurion
Bank or TRS shall admit in writing its inability to pay its debts generally
as they become due, file a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the benefit of
its creditors or voluntarily suspend payment of its obligations; or either
Transferor shall become unable for any reason to transfer Receivables to
the Trust in accordance with the provisions of this Agreement;
(b) the Trust shall become an "investment company" within the meaning
of the Investment Company Act of 1940, as amended;
(c) after any applicable grace period, a failure by either Transferor
to convey the Receivables in Additional Accounts to the Trust when
required; and
(d) on any Determination Date, the Transferor Amount as of the last
day of the prior Due Period was less than 3.0% of the Trust Principal
Component as of the last day of the prior Due Period;
then, a Pay Out Event with respect to all Series of Certificates then
outstanding shall occur with out any notice or other action on the part of the
Trustee or all Investor Certificateholders immediately upon the occurrence of
such event. The Trustee shall advise the Rating Agencies in writing of the
occurrence of any Pay Out Event.
Section 9.02 Additional Rights Upon the Occurrence of Certain Events.
(a) If any of RFC, Centurion Bank or TRS voluntarily goes into
liquidation or consents to the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings of or relating to any of RFC, Centurion Bank
or TRS or of or relating to all or substantially all their respective property,
or a decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshaling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against any of RFC, Centurion Bank or TRS; or
any of RFC, Centurion Bank or TRS shall admit in writing its inability to pay
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its debts generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors or voluntarily suspend payment of its obligations; or
either Transferor shall become unable for any reason to transfer Receivables to
the Trust in accordance with the provisions of this Agreement (such voluntary
liquidation, appointment entering of such decree, admission, filing, making,
suspension or inability, a "Dissolution Event"), the Transferors or TRS shall
promptly give notice of such event to the Trustee, and TRS shall on the day of
such appointment, voluntary liquidation, entering of such decree, admission,
filing, making, suspension or inability, as the case may be (the "Appointment
Day"), immediately cease to sell Receivables to RFC under the Receivable
Purchase Agreement and the Transferors will immediately cease to transfer
Receivables to the Trust hereunder. Within 15 days of the receipt by the Trustee
of the notice of a Dissolution Event, the Trustee shall (i) publish a notice in
an Authorized Newspaper that a Dissolution Event has occurred and that the
Trustee intends to sell, dispose of or otherwise liquidate the Receivables in a
commercially reasonable manner and (ii) send written notice to the Investor
Certificateholders describing the provisions of this Section 9.02 and requesting
instructions from such Holders, which notice shall request each Investor
Certificateholder to advise the Trustee in writing that it elects one of the
following options: (A) the Investor Certificateholder wishes the Trustee to
instruct the Servicer not to sell, dispose of or otherwise liquidate the
Receivables, or (B) the Investor Certificateholder wishes the Trustee to
instruct the Servicer to sell, dispose of or otherwise liquidate the Receivables
and to instruct the Servicer to reconstitute the Trust upon the same terms and
conditions set forth herein, or (C) the Investor Certificateholder refuses to
advise the Trustee as to the specific action the Trustee shall instruct the
Servicer to take. If after 90 days from the day notice pursuant to clause (i)
above is first published (the "Publication Date"), the Trustee shall not have
received written instructions of Holders of Investor Certificates representing
Undivided Interests aggregating in excess of 50% of the related Invested Amount
of each Series (or in the case of a series having more than one class of
investor certificates, each class of such series) to the effect that the Trustee
shall not instruct the Servicer to sell, dispose of, or otherwise liquidate the
Receivables and to instruct the Servicer to reconstitute the Trust upon the same
terms and conditions as set forth herein, the Trustee shall instruct the
Servicer to proceed to sell, dispose of, or otherwise liquidate the Receivables
in a commercially reasonable manner and on commercially reasonable terms, which
shall include the solicitation of competitive bids and the Servicer shall
proceed to consummate the sale, liquidation or disposition of the Receivables as
provided above with the highest bidder for the Receivables. If, however, with
respect to the portion of the Receivables allocable to any outstanding Series,
the holders of more than 50% of the principal amount of each class of such
Series instruct the Trustee not to sell the portion of the Receivables allocable
to such Series, the Trust shall continue with respect to such Series pursuant to
the terms of the Agreement and the Supplement. The portion of the Receivables
allocable to any Series shall be determined in the same manner as such
determination would be made pursuant to Section 12.02(c). The Transferors or any
of their respective Affiliates shall be permitted to bid for the Receivables. In
addition the Transferors or any of their respective Affiliates shall have the
right to match any bid by a third person and be granted the right to purchase
the Receivables at such matched bid price. The Trustee may obtain a prior
determination from the conservator or receiver that the terms and manner of any
proposed, sale, disposition or liquidation are commercially reasonable. The
provisions of Sections 9.01 and 9.02 shall not be deemed to be mutually
exclusive.
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(b) The proceeds from the sale, disposition or liquidation of the
Receivables pursuant to subsection (a) above shall be treated as Collections on
the Receivables and shall be allocated and deposited in accordance with the
provisions of Article IV; provided that the Trustee shall determine conclusively
without liability for such determination the amount of such proceeds which are
allocable to Yield Collections and the amount of such proceeds which are
allocable to Principal Collections. On the day following the Distribution Date
on which such proceeds are distributed to the Investor Certificateholders, the
Trust shall terminate.
[END OF ARTICLE IX]
<PAGE>
ARTICLE X
SERVICER DEFAULTS
Section 10.01 Servicer Defaults. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer to make any payment, transfer or
deposit or to give instructions or notice to the Trustee to make such payment,
transfer or deposit or to give notice to the Trustee as to any required drawing
or payment under any Enhancement on or before the date occurring five Business
Days after the date such payment, transfer, deposit or drawing or such
instruction or notice is required to be made or given, as the case may be, under
the terms of this Agreement or any Supplement; 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 of such failure or otherwise becoming aware
of such failure;
(b) failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in this Agreement or any
Supplement, which has a material adverse effect on the Certificateholders of any
Series then outstanding and which continues unremedied for a period of 60 days
after the date on which the written notice of such failure requiring the same to
be remedied shall have been given to the Servicer and which continues to
materially adversely affect the rights of the Holders of Investor Certificates
of any Series; the Servicer shall delegate its duties under this Agreement,
except as permitted by Section 8.07;
(c) any representation, warranty or certification made by the Servicer
in this Agreement or any Supplement or in any certificate delivered pursuant to
this Agreement or any Supplement shall prove to have been incorrect when made,
which has a material adverse effect on the rights of the Certificateholders of
any Series then outstanding and which continues to be incorrect in any material
respect and which continues to affect materially and adversely the rights of the
Certificateholders of any Series for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied, shall have
been given to the Servicer by the Trustee, or to the Servicer and the Trustee by
the Holders of Investor Certificates evidencing Undivided Interests aggregating
more than 50% of the Invested Amount of any Series adversely affected thereby;
or
(d) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings of or relating to the Servicer or
of or relating to all or substantially all of its property, or a decree or order
of a court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs, shall
have been entered against the Servicer and such decree or order shall have
remained in force undischarged or unstayed for a period of 60 days; or the
Servicer shall admit in writing its inability to pay its debts generally as they
become due, file a petition to take advantage of any applicable insolvency or
reorganization statute, make any assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations;
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then, so long as such Servicer Default shall not have been remedied, either the
Trustee or the Holders of Investor Certificates evidencing Undivided Interests
aggregating more than 50% of the Aggregate Invested Amount, by notice then
given in writing to the Servicer (and to the Trustee if given by the Investor
Certificateholders) (a "Termination Notice"), may terminate all of the rights
and obligations of the Servicer as Servicer under this Agreement and in and
to the Receivables and the proceeds thereof and appoint a new Servicer (a
"Service Transfer"). The rights and interests of the Transferor Interest will
not be affected by any Service Transfer. The Trustee, upon giving or receiving a
Termination Notice shall immediately notify the Rating Agencies and any
Enhancement Provider of such notice. After receipt by the Servicer of such
Termination Notice, and on the date that a Successor Servicer shall have been
appointed by the Trustee pursuant to Section 10.02, all authority and power of
the Servicer under this Agreement shall pass to and be vested in a Successor
Servicer; and, without limitation, the Trustee is hereby authorized and
empowered (upon the failure of the Servicer to cooperate) to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all
documents and other instruments upon the failure of the Servicer to execute or
deliver such documents or instruments, and to do and accomplish all other acts
or things necessary or appropriate to effect the purposes of such Service
Transfer. The Servicer agrees to cooperate with the Trustee and such Successor
Servicer in effecting the termination of the responsibilities and rights of the
Servicer to conduct servicing hereunder, including, without limitation, the
transfer to such Successor Servicer of all authority of the Servicer to service
the Receivables provided for under this Agreement, including, without
limitation, all authority over all Collections which shall on the date of
transfer be held by the Servicer for deposit, or which have been deposited by
the Servicer, in the Collection Account, or which shall thereafter be received
with respect to the Receivables, and in assisting the Successor Servicer and in
enforcing all rights to Recoveries. The Servicer shall promptly transfer its
electronic records relating to the Receivables to the Successor Servicer in such
electronic form as the Successor Servicer may reasonably request and shall
promptly transfer to the Successor Servicer all other records, correspondence
and documents necessary for the continued servicing of the Receivables in the
manner and at such times as the Successor Servicer shall reasonably request. To
the extent that compliance with this Section 10.01 shall require the Servicer to
disclose to the Successor Servicer information of any kind which the Servicer
reasonably deems to be confidential, the Successor Servicer shall be required to
enter into such customary licensing and confidentiality agreements as the
Servicer shall deem necessary to protect its interest.
Notwithstanding the foregoing, a delay in or failure of performance
referred to in subsection 10.01(a) for a period of 10 Business Days after the
applicable grace period or under subsection 10.01(b) or (c) 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 be prevented by the exercise of
reasonable diligence by the Servicer and such delay or failure was caused by an
act of God or the public enemy, acts of declared or undeclared war, public
disorder, rebellion, riot or sabotage, epidemics, landslides, lightning, fire,
hurricanes, tornadoes, earthquakes, nuclear disasters or meltdowns, floods,
power outages or similar causes. The preceding sentence shall not relieve the
Servicer from using its best efforts to perform its obligations in a timely
manner in accordance with the terms of this Agreement and the Servicer shall
provide the Trustee, any Enhancement Provider, the Transferors and the Holders
of Investor Certificates with an Officer's Certificate giving prompt notice of
such failure or delay by it, together with a description of the cause of such
failure or delay and its efforts so to perform its obligations. The Servicer
shall immediately notify the Trustee in writing of any Servicer Default.
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Section 10.02 Trustee to Act; Appointment of Successor.
(a) On and after the receipt by the Servicer of a Termination Notice
pursuant to Section 10.01, the Servicer shall continue to perform all servicing
functions under this Agreement until the date specified in the Termination
Notice or otherwise specified by the Trustee in writing or, if no such date is
specified in such Termination Notice, or otherwise specified by the Trustee,
until a date mutually agreed upon by the Servicer and Trustee (not to exceed 90
days from the date of delivery of such notice). The Trustee shall as promptly as
possible after the giving of a Termination Notice appoint a successor servicer
(the "Successor Servicer"), with the consent of any Enhancement Provider, and
such Successor Servicer shall accept its appointment by a written assumption in
a form acceptable to the Trustee, the Transferors and any Enhancement Provider.
The Transferors shall have the right to nominate to the Trustee the name of a
potential successor servicer which nominee shall be selected by the Trustee as
the Successor Servicer, subject to the consent of any Enhancement Provider. The
Trustee may obtain bids from any potential successor servicer. If the Trustee is
unable to obtain any bids from any potential successor servicer and the Servicer
delivers an Officer's Certificate to the effect that it cannot in good faith
cure the Servicer Default which gave rise to a transfer of servicing, then the
Trustee shall offer the Transferors the right to accept reassignment of all the
Receivables; provided, however, that no such reassignment shall occur unless the
Transferors shall deliver to the Trustee and the Rating Agencies an Opinion of
Counsel reasonably acceptable to the Trustee that such reassignment would not
constitute a fraudulent conveyance by the Transferor. The reassignment deposit
amount for such a reassignment shall be equal to the Aggregate Invested Amount
(less the aggregate principal amount on deposit in any principal funding
account), plus (i) accrued interest thereon, at the applicable Certificate Rate
(through the end of the Due Period for the subsequent Distribution Date of
reassignment), and (ii) any unpaid amounts payable to any Enhancement Provider
under the applicable Enhancement agreement. In the event that a Successor
Servicer has not been appointed and has not accepted its appointment at the time
when the Servicer ceases to act as Servicer, the Trustee (as trustee hereunder)
without further action shall automatically be appointed the Successor Servicer.
Notwithstanding the above, the Trustee shall, if it is legally unable so to act,
petition a court of competent jurisdiction to appoint any established financial
institution having a net worth of not less than $50,000,000 and whose regular
business includes the servicing of charge card or revolving credit receivables
as the Successor Servicer hereunder. Notwithstanding anything to the contrary in
this Agreement, the entire amount of the reassignment deposit amount shall be
distributed to the Investor Certificateholders of the related Series on the
subsequent Distribution Date for such Series pursuant to Section 12.03 (except
for the applicable Repayment Amount and other amounts payable to any Enhancement
Provider under the applicable Enhancement agreement, which amounts shall be
distributed to such Enhancement Provider.)
(b) Upon its appointment., the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing functions
under this Agreement and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be
deemed to refer to the Successor Servicer; provided, however, that, the outgoing
Servicer shall not be relieved of any liability hereunder for its actions prior
to the transfer of servicing hereunder; and provided further, that, (i) the
outgoing Servicer shall not indemnify the Trust or the Trustee under Section
8.04 for acts, omissions or alleged acts or omissions by a Successor
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Servicer and (ii) the outgoing Servicer shall not pay or reimburse the Trustee
pursuant to Section 11.05 for any expense, disbursement or advance of the
Trustee related to or arising as a result of the negligence or bad faith of
the Successor Servicer. Any Successor Servicer, by its acceptance of its
appointment, will automatically agree to be bound by the terms and provisions of
any applicable Enhancement agreement.
(c) In connection with such appointment and assumption, the Trustee
shall be entitled to such compensation, or may make such arrangements for the
compensation of the Successor Servicer out of Collections, as it and such
Successor Servicer shall agree; provided, however, that no such compensation
shall be in excess of the Monthly Servicing Fee permitted to the Servicer
pursuant to Section 3.02.
(d) All authority and power granted to the Successor Servicer under
this Agreement shall automatically cease and terminate upon termination of the
Trust pursuant to Section 12.01 and shall pass to and be vested in the
Transferors and, without limitation, the Transferors are hereby authorized and
empowered to execute and deliver, on behalf of the Successor Servicer, as
attorney-in-fact or otherwise, all documents and other instruments, and to do
and accomplish all other acts or things necessary or appropriate to effect the
purposes of such transfer of servicing rights. The Successor Servicer agrees to
cooperate with the Transferors in effecting the termination of the
responsibilities and rights of the Successor Servicer to conduct servicing on
the Receivables. The Successor Servicer shall transfer its electronic records
relating to the Receivables to the Transferors in such electronic form as the
Transferors may reasonably request and shall transfer all other records,
correspondence and documents to the Transferors in the manner and at such times
as the Transferors shall reasonably request. To the extent that compliance with
this Section 10,02 shall require the Successor Servicer to disclose to the
Transferors information of any kind which the Successor Servicer deems to be
confidential, the Transferors shall be required to enter into such customary
licensing and confidentiality agreements as the Successor Servicer shall deem
necessary to protect its interests,
Section 10.03 Notification to Certificateholders. Upon the occurrence of
any Servicer Default, the Servicer shall give prompt written notice thereof to
the Trustee, the Rating Agencies and any Enhancement Provider, and the Trustee
shall give notice to the Investor Certificateholders at their respective
addresses appearing in the Certificate Register. Upon any termination or
appointment of a Successor Servicer pursuant to this Article X, the Trustee
shall give prompt written notice thereof to Investor Certificateholders at their
respective addresses appearing in the Certificate Register, the Rating Agencies
and to any Enhancement Provider. Notice to Holders of Bearer Certificates shall
be given by publication in the manner described in Section 13.05 of the
Agreement.
Section 10.04 Waivering of Past Defaults. The Holders of Investor
Certificates evidencing Undivided Interests aggregating more than 66-2/3% of the
Invested Amount of any Series then outstanding affected by any default by the
Servicer or either Transferor may, on behalf of all Holders of Certificates of
such affected Series, waive any default by the Servicer or such Transferor in
the performance of their respective obligations hereunder and its consequences,
except a default in the failure to make any required deposits or payments of
interest or principal with respect to any Series of Certificates. Upon any such
waiver of a past default, such default shall cease to exist, and any default
arising therefrom shall be deemed to have been remedied for
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every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereon except to the extent
expressly so waived.
[END OF ARTICLE X]
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ARTICLE XI
THE TRUSTEE
Section 11.01 Duties of Trustee.
(a) The Trustee, prior to the occurrence of a Servicer Default or Pay
Out Event and after the curing or waiving of all Servicer Defaults or Pay Out
Events which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement. If a Servicer Default or
Pay Out Event has occurred (which has not been cured or waived), the Trustee (as
trustee and not Successor Servicer) shall exercise such of the rights and powers
vested in it by this Agreement or any Supplement, and use the same degree of
care and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement or any Supplement, shall examine them to determine
whether they conform as to form to the requirements of this Agreement or any
Supplement, but shall not be required to verify the accuracy of any information,
calculations or conclusions stated therein. The Trustee shall give prompt
written notice to the Certificateholders (or, in the case of Holders of Bearer
Certificates, notice by publication in the manner described in Section 13.05 of
the Agreement) of any material lack of conformity of any such instrument to the
applicable requirements of this Agreement or any Supplement discovered by the
Trustee which would entitle a specified percentage of the Investor
Certificateholders to take any action pursuant to this Agreement or any
Supplement.
(c) Subject to Section 11.01(a) of this Agreement, no provision of this
Agreement or any Supplement shall be construed to relieve the Trustee from
liability for its own negligent action, its own negligent failure to act or its
own willful misconduct; provided, however, that:
(i) the Trustee shall not be liable for an error of judgment made in
good faith by a Responsible Officer or Responsible Officers of the Trustee,
unless it shall be proved that the Trustee was negligent in ascertaining
the pertinent facts;
(ii) the Trustee shall not be personally liable with respect to any
action taken, suffered or omitted to be taken by it in good faith in
accordance with the direction of the Holders of Investor Certificates
evidencing Undivided Interests aggregating more than 50% of the Invested
Amount of any Series adversely affected thereby relating to the time,
method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred upon the Trustee,
under this Agreement or any Supplement;
(iii) the Trustee shall not be charged with knowledge of any failure by
the Servicer (other than the Trustee, in its capacity as Successor
Servicer) to comply with the obligations of the Servicer referred to in
clauses (a), (b) and (c) of Section 10.01 unless a Responsible Officer of
the Trustee obtains actual knowledge of such failure (it being
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understood that knowledge of the Servicer, in its capacity as agent for
the Trustee, is not attributable to the Trustee) or the Trustee receives
written notice of such failure from the Servicer or any Holders of
Investor Certificates evidencing Undivided Interests aggregating more than
50% of the Invested Amount of any Series adversely affected thereby;
(iv) in making a determination of any material and adverse effect upon
Certificateholders, the Investor Certificates, the Trustee may, as to
matters of law, rely exclusively upon an Opinion of Counsel.
(d) The Trustee (in its capacity as such) shall not be required to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if there is reasonable ground for believing that the repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it, and none of the provisions contained in this Agreement
or any Supplement shall in any event require the Trustee to perform, or be
responsible for the manner of performance of, any of the obligations of the
Servicer or the Successor Servicer under this Agreement or any Supplement except
during such time, if any, as the Trustee shall be the Successor Servicer in
accordance with the terms of this Agreement or any Supplement.
(e) Except for actions expressly authorized by this Agreement or any
Supplement, the Trustee shall take no action reasonably likely to impair the
interests of the Trust in any Receivable now existing or hereafter created or to
impair the value of any Receivable now existing or hereafter created.
(f) Except as specifically provided in this Agreement, the Trustee
shall have no power to vary the corpus of the Trust.
(g) In the event that the Paying Agent or the Transfer Agent and
Registrar shall not be the Trustee and fail to perform any obligation,
duty or agreement in the manner or on the day required to be performed by
the Paying Agent or the Transfer Agent and Registrar, as the case may be,
under this Agreement, the Trustee shall be obligated promptly upon its
knowledge thereof to perform such obligation, duty or agreement in the manner so
required but shall not be required to make a payment out of its own funds.
(h) Any action, suit or proceeding brought in respect of one or more
particular Series shall have no effect on the Trustee's rights, duties and
obligations hereunder with respect to any one or more Series not the subject of
such action, suit or proceeding.
Section 11.02 Certain Matters Affecting the Trustee. Except as otherwise
provided in Section 11.01:
(a) the Trustee may request, rely on and shall be protected in acting
on, or in refraining from acting in accord with, any resolution, Officer's
Certificate, Opinion of Counsel, certificate of independent public accountants
or any other certificate statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document, including,
without limitation, any request or instruction by the Servicer or the Transferor
to make any deposit or payment or any draw on any Enhancement or to transfer any
Receivables or
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Accounts, believed by it to be genuine and to have been signed or presented to
it pursuant to this Agreement or any Supplement by the proper party or parties;
(b) the Trustee may consult with counsel as to matters of law and any
Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in good faith
and in accordance with such Opinion of Counsel as to any actions required to be
taken or withheld hereunder;
(c) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement or any Supplement, or to
institute, conduct or defend any litigation hereunder or in relation hereto, at
the request, order or direction of any of the Certificateholders or Certificate
Owners, pursuant to the provisions of this Agreement or any Supplement, unless
such Certificateholders or Certificate Owners, shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby; nothing contained herein shall,
however, relieve the Trustee (as Trustee but not as Successor Servicer) of the
obligations, upon the occurrence of any Servicer Default (which has not been
cured or waived), to exercise such of the rights and powers vested in it by this
Agreement or any Supplement, and to use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the circumstances
in the conduct of such person's own affairs;
(d) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement or any
Supplement;
(e) the Trustee shall not be bound to make any investigation into the
facts of matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other paper
or document, except to the extent specifically requested in writing so to do by
Holders of Investor Certificates evidencing Undivided Interests aggregating more
than 50% of the Invested Amount of any Series which could be adversely affected
if the Trustee does not perform such acts and the Trustee is reasonably
indemnified therefor;
(f) the Trustee (in its capacity as such) may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or a custodian, and the Trustee (in its capacity as
such) shall not be responsible for any misconduct or negligence on the part of
any such agent, attorney or custodian appointed with due care by it hereunder;
(g) except as may be required by subsection 11.01(a) or 11.01(b)
hereof, the Trustee shall not be required to make any initial or periodic
examination of any documents or records related to the Receivables or the
Accounts for the purpose of establishing the presence or absence of defects, the
compliance by the Transferor or Servicer with their representations, warranties
or covenants or for any other purpose;
(h) whether or not therein expressly so provided, every provision of
this Agreement or any Supplement relating to the conduct or affecting the
eligibility of or affording
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protection to the Trustee (in its capacity as such) shall be subject to the
provisions of Sections 11.01, 11.02 and 11.03;
(i) the permissive right of the Trustee to take actions enumerated in
this Agreement or any Supplement shall not be construed as a duty;
(j) whenever in the administration of this Agreement or any Supplement,
the Trustee shall deem it desirable that a matter be proved or established prior
to taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officer's Certificate;
(k) no implied covenants or obligations shall be read into this
Agreement against the Trustee;
(l) without limiting the generality of this Section or Section 11.01,
the Trustee shall have no duty (i) to see to any recording, filing, or
depositing of the Agreement or any agreement referred to therein or any
financing statement or continuation statement evidencing a security interest in
the Receivables or the Accounts, or to see to the maintenance of any such
recording, filing or depositing or any rerecording, refiling or redepositing of
any thereof, or (ii) to confirm or verify the contents of any reports or
certificates of the Servicer delivered to the Trustee pursuant to the Agreement
believed by the Trustee to be genuine and to have been signed or presented by
the proper party or parties; and
(m) the Trustee shall not be deemed to be a fiduciary for the
Enhancement Provider, if any, in its capacity as such, and the Trustee's sole
responsibility with respect to the Enhancement Provider in its capacity as such,
shall be to perform those duties with respect to the Enhancement Provider as are
specifically set forth in the Agreement and no implied covenants shall be read
into the Agreement against the Trustee with respect to the Enhancement Provider.
Section 11.03 Trustee Not Liable for Recitals in Certificates. The Trustee
assumes no responsibility for the correctness of the recitals contained herein
and in the Certificates (other than the certificates of authentication on the
Certificates). Except as set forth in Section 11.15, the Trustee makes no
representations as to (i) the validity or sufficiency of this Agreement or any
Supplement or of the Certificates (other than the certificates of authentication
on the Certificates), (ii) the existence or validity of any Receivable, (iii)
the validity of any transfer or assignment of any Receivable to the Trust, (iv)
the validity of any grant of a security interest to the Trust in any Receivable,
(v) the perfection of any security interest (whether as of the date hereof or at
any future time) in any Receivable, (vi) the maintenance of or the taking of any
action to maintain such perfection, (vii) the receipt by the Trustee or the
Servicer of any Receivable, (viii) the performance or enforcement of any
Receivable, (ix) the compliance by the Transferor or the Servicer with any
covenant or representation, (x) the breach by the Transferor or the Servicer of
any warranty or representation made hereunder or in any related document or the
accuracy of any such warranty or representation or (xi) any action taken by the
Servicer in the name of the Trustee. The Trustee shall not be accountable for
the use or application by the Transferor of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Transferors in respect of the Receivables or deposited in or withdrawn
from the Collection Account or other Accounts now or hereafter established to
effectuate the transactions contemplated herein and in accordance with the terms
hereof.
Section 1l.04. Trustee May Own Certificates. The Trustee in its individual
or any other capacity may become the owner or pledgee of Investor Certificates
with the same rights as it would have if it were not the Trustee.
Section 11.05 The Servicer to Pay Trustee's Fees and Expenses. The
Servicer covenants and agrees to pay to the Trustee from time to time, and the
Trustee shall be entitled to receive, reasonable compensation (which shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust) for all services rendered by it in the execution of the trust
hereby created and in the exercise and performance of any of the powers and
duties hereunder of the Trustee, and, subject to Section 8.04, the Servicer will
pay or reimburse the Trustee (without reimbursement from the Collection Account
or otherwise) upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any of the
provisions of this Agreement or any Supplement (including the reasonable fees
and expenses of its agents and counsel) except any such expense, disbursement or
advance as may arise from its negligence or bad faith and except as provided in
the following sentence. If the Trustee is appointed Successor Servicer pursuant
to Section 10.02, the provisions of this Section 11.05 shall not apply to
expenses, disbursements and advances made or incurred by the Trustee in its
capacity as Successor Servicer; provided that the Transferors will indemnify,
defend and save harmless the Trustee for any loss, liability or expense incurred
by it as Successor Servicer which is not otherwise reimbursed hereunder, except
to the extent such loss, liability or expense is due to its negligence or bad
faith as Successor Servicer.
The obligations of the Servicer and the Transferor under this Section
11.05, Section 7.04, Section 8.04 and Section 11.17 shall survive the
termination of the Trust and the resignation or removal of the Trustee or the
Servicer.
Section 11.06. Eligibility Requirements for Trustee. The Trustee hereunder
shall at all times be a corporation or national banking association organized
and doing business under the laws of the United States of America or any state
thereof authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000, a rating as to its
long-term unsecured debt obligations of at least Baa3 by Moody's (if Moody's
shall then be a Rating Agency) and a rating as to its short-term deposits or
long-term unsecured debt obligations that satisfies the rating requirement of
any other applicable Rating Agency and subject to supervision or examination by
Federal or state authority. If such corporation or national banking association
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purpose of this Section 11.06, the combined capital and surplus of such
corporation or national banking association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 11.06, the Trustee shall resign
immediately in the manner and with the effect specified in Section 11.07.
Section 11.07 Resignation or Removal of Trustee.
(a) The Trustee may at any time resign as Trustee and be discharged
from the trust hereby created by giving written notice thereof to the
Transferors and the Servicer. Upon receiving such notice of resignation, the
Transferors shall promptly appoint a successor trustee
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by written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the successor trustee. If no
successor trustee shall have been so appointed and have accepted within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee.
(b) If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 11.06 hereof and shall fail to resign after
written request therefor by the Transferors, or if at any time the Trustee shall
be legally unable to act, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Transferor may, but shall not be required to, remove the Trustee and promptly
appoint a successor trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the Trustee so removed and one copy to
the successor trustee and shall promptly pay all fees owed to the outgoing
Trustee.
(c) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 11.07 shall
not become effective until acceptance of appointment by the successor trustee as
provided in Section 11.08 hereof and payment of all fees and expenses owed to
the outgoing Trustee. Any such liability of the Trustee arising hereunder shall
survive such appointment of a successor trustee.
Section 11.08 Successor Trustee.
(a) Any successor trustee appointed as provided in Section 11.07 hereof
shall execute, acknowledge and deliver to the Transferors and to its predecessor
Trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder and under any Supplement, with like effect as if
originally named as Trustee herein. The predecessor Trustee shall upon payment
of its fees and expenses deliver to the successor trustee all documents held by
it hereunder, and the Transferors and the predecessor Trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties and obligations.
(b) No successor trustee shall accept appointment as provided in this
Section 11.08 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 11.06 hereof.
(c) Upon acceptance of appointment by a successor trustee as provided
in this Section 11.08 hereof, such successor trustee shall mail notice of such
succession hereunder to all Certificateholders (other than Holders of Bearer
Certificates) at their addresses as shown in the Certificate Register. Notice to
Holders of Bearer Certificates shall be given by publication in the manner
described in Section 13.05 of the Agreement.
Section 11.09 Merger or Consolidation of Trustee. Any Person into which
the Trustee may be merged or converted or with which it may be consolidated,
or any Person resulting from
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any merger, conversion or consolidation to which the Trustee shall be a party,
or any Person succeeding to the corporate trust business of the Trustee, shall
be the successor of the Trustee hereunder provided such Person shall be eligible
under the provisions of Section 11.06 hereof, without the execution or filing of
any paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
Section 11.10 Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provision of this Agreement or any
Supplement, at any time, for the purpose of meeting any legal requirements of
any jurisdiction in which any part of the Trust may at the time be located, the
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee, or separate trustee, of all
or any part of the Trust, and to vest in such Person, in such capacity and for
the benefit of the Certificateholders, such title to the trust, or any part
thereof, and, subject to the other provisions of this Section 11.10, such
powers, duties, obligations, rights and trusts as the Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
11.06 and no notice to Certificateholders of the appointment of any co-trustee
or separate trustee shall be required under Section 11.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any laws of any jurisdiction in which any
particular act or acts are to be performed (whether as Trustee hereunder or
as successor to the Servicer hereunder), the Trustee shall be incompetent
or unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the Trust
or any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at the
direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder appointed with due care; and
(iii) the Trustee may at any time accept the resignation of or remove
any separate trustee or co-trustee,
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article XI. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement or any
Supplement, specifically including
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every provision of this Agreement or any Supplement relating to the conduct of,
affecting the liability of, or affording protection to, the Trustee. Every such
instrument shall be filed with the Trustee and a copy thereof given to the
Servicer.
(d) Any separate trustee or co-trustee may at any time appoint the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect to this
Agreement or any Supplement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 11.11 Tax Returns. In the event the Trust shall be required to file
tax returns, the Servicer shall prepare or cause to be prepared and is
authorized hereunder to sign any tax returns required to be filed by the Trust
and, to the extent possible, shall file such returns at least five days before
such returns are due to be filed. The Servicer shall prepare or shall cause to
be prepared all tax information required by law to be distributed to
Certificateholders and Certificate Owners and shall deliver such information to
the Paying Agent at least five days prior to the date it is required by law to
be distributed to Certificateholders and Certificate Owners. The Servicer will
furnish to the Trustee an opinion of Counsel as to the preparation of all tax
returns of the Trust. In no event shall the Trustee, the Paying Agent, the
Transferors or the Servicer be liable for any liabilities, costs or expenses of
the Trust, the Investor Certificateholders or the Certificate Owners arising
under any tax law, including without limitation, Federal, state or local income
or excise taxes or any other tax imposed on or measured by income (or any
interest or penalty with respect thereto or arising from a failure to comply
therewith), except to the extent that such tax is imposed as a result of a
violation by such Person of the provisions of this Agreement or any Supplement.
Section 11.12 Trustee May Enforce Claims Without Possession of
Certificates All rights of action and claims under this Agreement or any
Supplement or the Certificates may be prosecuted and enforced by the Trustee
without the possession of any of the Certificates or the production thereof in
any proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee. Any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been obtained.
Section 11.13 Suits for Enforcement If a Servicer Default shall occur and
be continuing, the Trustee, in its discretion may, subject to the provisions of
Section 10.01, proceed to protect and enforce its rights and the rights of the
Certificateholders under this Agreement or any Supplement, by such suit, action
or proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this Agreement or any
Supplement or in aid of the execution of any power granted in this Agreement or
any Supplement or for the enforcement of any other legal, equitable or other
remedy as the Trustee, being advised by counsel, shall deem effectual to protect
and enforce any of the rights of the Trustee or the Certificateholders.
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Section 11.14 Rights of Certificateholders to Director Trustee. Holders of
Investor Certificates evidencing Undivided Interests aggregating more than 50%
of the Invested Amount of any Series affected by the conduct of any proceeding
or the exercise of any right conferred on the Trustee shall have the right to
direct the times, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee; provided, however, that, subject to Section 11.01, the Trustee shall
have the right to decline to follow any such direction if the Trustee being
advised by counsel determines that the action so directed may not lawfully be
taken, or if the Trustee in good faith shall, by a Responsible Officer or
Responsible Officers of the Trustee, determine that the proceedings so directed
would be illegal or involve it in personal liability or be unduly prejudicial to
the rights of Certificateholders not parties to such direction; and provided
further that nothing in this Agreement or any Supplement shall impair the right
of the Trustee to take any action deemed proper by the Trustee and which is not
inconsistent with such direction.
Section 11.15. Representations and Warranties of Trustee. The Trustee
represents and warrants that:
(i) The Trustee is a banking corporation, organized, existing and in
good standing under the laws of the State of New York;
(ii) The Trustee has full power, authority and right to execute,
deliver and perform this Agreement and any Supplement, and has taken all
necessary action to authorize the execution, delivery and performance by it
of this Agreement and any Supplement; and
(iii) This Agreement and any Supplement has been duly executed and
delivered by the Trustee, and assuming due execution and delivery by the
other parties thereto constitutes a legal, valid and binding obligation of
the Trustee enforceable against the Trustee in accordance with its terms.
Section 11.16 Maintenance of Office or Agency. The Trustee will maintain
at its expense in the Borough of Manhattan, The City of New York, an office or
offices or agency or agencies where notices and demands to or upon the Trustee
in respect of the Certificates and this Agreement may be served. The Trustee
initially appoints its Corporate Trust Office as its office for such purposes in
New York. The Trustee will give prompt written notice (or in the case of Holders
of Bearer Certificates, notice by publication in the manner described in Section
13.05 of the Agreement) to the Servicer and to Certificateholders of any change
in the location of the Certificate Register or any such office or agency.
Section 11.17 Indemnification of the Trustee. The Transferors shall
indemnify the Trustee for, and hold it harmless against, any loss, liability or
expense incurred without negligence or willful misconduct on the part of the
Trustee arising out of any third-party claim or alleged third-party claim in
connection with the exercise or performance of any of its powers or duties under
this Agreement, The Trustee shall have a lien on any and all amounts which are
payable to the Transferors with respect to amounts due and owing to the Trustee
pursuant to this Section 11.17. The amount of the Transferors' liability under
this Section 11.17 shall be subordinate to the security interest of the Trust in
the Receivables and shall be payable from the assets of the Transferors at the
time such liability is asserted and at any time thereafter.
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[END OF ARTICLE XI]
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ARTICLE XII
TERMINATION
Section 12.01 Termination of Trust.
(a) The respective obligations and responsibilities of each Transferor,
the Servicer, the Paying Agent and the Trustee and their agents hereunder
created hereby (other than the obligation of the Trustee to make payments to
Certificateholders as hereafter set forth) shall terminate, except with respect
to the duties described in Sections and subsections 2.04(c), 7.04, 8.04, 11.05,
11.17 and 12.03(b), upon the earlier of (i) the day following the date on which
funds shall have been deposited in the Collection Account sufficient to pay the
Aggregate Invested Amount plus applicable Certificate Interest accrued through
the last day of the interest accrual period preceding such Distribution Date in
full on all Series of Investor Certificates and (ii) July 15, 2092 (the "Final
Termination Date") provided, however, that in no event shall the trust created
by this Agreement continue beyond the expiration of 21 years from the death of
the last survivor of the descendants of Joseph P. Kennedy, formerly United
States representative at the Court of St. James, of the Commonwealth of
Massachusetts, living on the date of this Agreement.
(b) If on the Distribution Date in the month immediately preceding the
month in which the Final Termination Date occurs (after giving effect to all
transfers, withdrawals, deposits and drawings to occur on such date and the
payment of principal on any Series of Certificates to be made on such
Distribution Date pursuant to Article IV) the Invested Amount of any Series
would be greater than zero, the Servicer shall sell on or prior to the
succeeding Distribution Date all of the Receivables in a commercially reasonable
manner and on commercially reasonable terms which shall include the solicitation
of competitive bids and shall consummate the sale with the highest bidder for
the Receivables. Each of the Transferors or any of their respective Affiliates
shall be permitted to bid for the Receivables. In addition, each of the
Transferors or their respective Affiliates shall have the right to match any bid
by a third Person and be granted the right to purchase the Receivables at such
matched bid price. The proceeds of any such sale shall be treated as Collections
on the Receivables and shall be allocated in accordance with Article IV;
provided, however, that the Trustee shall determine conclusively the amount of
such proceeds which are allocable to Yield Collections and the amount of such
proceeds which are allocable to Principal Collections. Prior to such sale of
Receivables, the Servicer shall continue to collect Collections on the
Receivables and allocate such payments in accordance with the provisions of
Article IV.
Section 12.02 Optional Purchase; Final Termination Date of Investor
Certificates of any Series.
(a) If provided in any Supplement with respect to a Series on any
Distribution Date either or both of the Transferors may, but shall not be
obligated to, purchase any such Series of Investor Certificates by depositing
into the Collection Account, on the Distribution Date, an amount equal to the
Invested Amount thereof plus interest accrued and unpaid thereon at the
applicable Certificate Rate through the interest accrual period related to such
Distribution
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Date on which the purchase will be made; provided, however, that no
such purchase of any Series of Investor Certificates shall occur unless the
Transferors shall deliver to the Trustee and the Rating Agencies an Opinion of
Counsel reasonably acceptable to the Trustee that such purchase of any Series of
Investor Certificates would not constitute a fraudulent conveyance of any
Transferor. Nothing herein limits the right of TRS or any Affiliate to purchase
Investor Certificates on the open market and submit them to the Trustee for
cancellation.
(b) The amount deposited pursuant to subsection 12.02(a) of the
Agreement shall be paid to the Investor Certificateholders of the related Series
pursuant to Article IV on the Distribution Date following the date of such
deposit. All Certificates of a Series which are purchased by either or both of
the Transferors pursuant to subsection 12.02(a) of the Agreement shall be
delivered by the Transferors upon such purchase to, and be cancelled by, the
Transfer Agent and Registrar and be disposed of in a manner satisfactory to the
Trustee and the Transferors.
(c) All principal or interest with respect to any Series of Investor
Certificates shall be due and payable no later than the Stated Series
Termination Date with respect to such Series. Unless otherwise provided in a
Supplement, in the event that the Invested Amount of any Series of Certificates
is greater than zero on its Stated Series Termination Date (after giving effect
to all transfers, withdrawals, deposits and drawings to occur on such date and
the payment of principal to be made on such Series on such date), the Trustee
will sell or cause to be sold, and pay the proceeds to all Certificateholders of
such Series pro rata in final payment of all principal of and accrued interest
on such Series of Certificates, an amount of Receivables or interests in
Receivables up to 110% of the Invested Amount of such Series at the close of
business on such date (but not more than an amount of Receivables equal to the
sum of (1) the product of (A) the Transferor Percentage, (B) the Trust Principal
Component and (C) a fraction the numerator of which is the related Invested
Percentage of Yield Collections and the denominator of which is the sum of all
Invested Percentages with respect to Yield Collections of all Series outstanding
and (2) the Invested Amount of such Series). The Trustee shall conduct the sale
of Receivables in a commercially reasonable manner and on commercially
reasonable terms which shall include the solicitation of competitive bids and
shall consummate the sale with the highest bidder for the Receivables. The
Transferors or any of their respective Affiliates shall be permitted to bid for
the Receivables. In addition, the Transferors or any of their respective
Affiliates shall have the right to match any bid by a third Person and be
granted the right to purchase the Receivables at such matched bid price, Any
proceeds of such sale in excess of such principal and interest paid shall be
paid to the Holder of the Exchangeable Transferor Certificate. Upon such Stated
Series Termination Date with respect to the applicable Series of Certificates,
final payment of all amounts allocable to any Investor Certificates of such
Series shall be made in the manner provided in Section 12.03 of the Agreement.
Section 12.03 Final Payment with Respect to any Series.
(a) Written notice of any termination, specifying the Distribution Date
upon which the Investor Certificateholders of any Series may surrender their
Certificates for payment of the final distribution with respect to such Series
and cancellation, shall be given (subject to at least two Business Days' prior
notice from the Servicer to the Trustee) by the Trustee to Investor
Certificateholders of such Series mailed not later than the fifth day of the
month of such final distribution (or in the case of the Holders of Bearer
Certificates by the publication by the Trustee
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of a notice at least once in a newspaper of general circulation in Luxembourg
(which newspaper shall be printed in the English language and customarily
published on each business day in Luxembourg) and, so long as the Investor
Certificates are listed on the Luxembourg Stock Exchange or other stock exchange
and such exchange so requires, in Luxembourg or the location required by such
other stock exchange) specifying (a) the Distribution Date (which shall be the
Distribution Date in the month in which the deposit is made pursuant to Section
2.07 or subsection 12.02(a) of the Agreement) upon which final payment of such
Investor Certificates will be made upon presentation and surrender of such
Investor Certificates at the office or offices therein designated, (which, in
the case of Bearer Certificates, shall be outside the United States), (b) the
amount of any such final payment and (c) that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Investor Certificates at the office or
offices therein specified. The Servicer's notice to the Trustee in accordance
with the preceding sentence shall be accompanied by an Officers' Certificate
setting forth the information specified in the applicable Supplement covering
the period during the then current calendar year through the date of such notice
and setting forth the date of such final distribution. The Trustee shall give
such notice to the Transfer Agent and Registrar and the Paying Agent at the time
such notice is given to such Investor Certificateholders.
(b) Notwithstanding the termination of the Trust pursuant to subsection
12.01(a) of the Agreement or the occurrence of the Stated Series Termination
Date with respect to any Series pursuant to Section 12.02 of the Agreement, all
funds then on deposit in the Collection Account shall continue to be held in
trust for the benefit of the Certificateholders and the Paying Agent or the
Trustee shall pay such funds to the Certificateholders upon surrender of their
Certificates (which surrenders and payments, in the case of Bearer Certificates,
shall be made only outside the United States). In the event that all of the
Investor Certificateholders of such Series shall not surrender their
Certificates for cancellation within six months after the date specified in the
above-mentioned notice, the Trustee shall give a second written notice (or in
the case of Bearer Certificates, publication notice) to the remaining Investor
Certificateholders of such Series upon receipt of the appropriate records from
the Transfer Agent and Registrar to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
one and one-half years after the second notice all the Investor Certificates of
such Series shall not have been surrendered for cancellation, the Trustee may
take appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Investor Certificateholders of such Series concerning
surrender of their Certificates, and the cost thereof shall be paid out of the
funds in the Collection Account held for the benefit of such Investor
Certificateholders.
(c) All Certificates surrendered for payment of the final distribution
with respect to such Certificates and cancellation shall be cancelled by the
Transfer Agent and Registrar and be disposed of in a manner satisfactory to the
Trustee and the Transferors.
Section 12.04 Transferor's Termination Rights. Upon the termination of
Trust pursuant to Section 12.01 and the surrender of the Exchangeable
Transferor Certificate, the Trustee shall return to the Transferors (without
recourse, representation or warranty) all right, title and interest of the Trust
in the Receivables, whether then existing or hereafter created, and all monies
due or to become due with respect thereto, all proceeds thereof except for
amounts held by the Paying Agent pursuant to subsection 12.03(b). The Trustee
shall execute and deliver
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such instruments of transfer and assignment, in each case without recourse, as
shall be reasonably requested by the Transferors to vest in itself all right,
title and interest which the Trust had in the applicable Receivables and the
Trustee shall be entitled to receive and rely conclusively upon an Opinion of
Counsel as to its execution and delivery of such instruments being in compliance
herewith.
[END OF ARTICLE XII]
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.01 Amendment
(a) This Agreement and any Supplement may be amended from time to time
by the Servicer, the Transferors and the Trustee, without the consent of any of
the investor Certificateholders, to cure any ambiguity, to correct or supplement
any provisions herein which may be inconsistent with any other provisions herein
or to add any other provisions with respect to matters or questions raised under
this Agreement which shall not be inconsistent with the provisions of this
Agreement, including (i) any matters arising under subsection 2.05(d) of the
Agreement necessary to effect the conveyance contemplated thereunder, (ii) to
add, modify or eliminate such provisions as the Transferors may deem necessary
or advisable in order to enable all or a portion of the Trust (A) 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 (B) to avoid the imposition of
state or local income or franchise taxes imposed on the Trust's property or its
income and (iii) 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; provided, however, that such action shall not adversely affect in
any material respect the interests of any of the Investor Certificateholders.
Additionally, this Agreement and any Supplement may be amended from time to time
by the Servicer, the Transferors and the Trustee, without the consent of any of
the Certificateholders, to add to or change any of the provisions of this
Agreement to provide that Bearer Certificates may be registrable as to
principal, to change or eliminate any restrictions on the payment of principal
of (or premium, if any) or any interest on Bearer Certificates to comply with
the Bearer Rules, to permit Bearer Certificates to be issued in exchange for
Registered Certificates (if then permitted by the Bearer Rules), to permit
Bearer Certificates to be issued in exchange for Bearer Certificates of other
authorized denominations or to permit the issuance of Certificates in
uncertificated form, provided any such action shall not adversely affect the
interests of the Holders of Bearer Certificates of any Series or any related
Coupons in any material respect unless such amendment is necessary to comply
with the Bearer Rules. Prior to executing any amendment in accordance with this
subsection 13.01(a), the Trustee shall receive and shall be permitted to rely
upon an Opinion of Counsel to the effect that the conditions and requirements of
this subsection 13.01(a) have been satisfied.
(b) This Agreement and any Supplement may also be amended from time to
time by the Servicer, the Transferors and the Trustee, without the consent of
any of the Certificateholders, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement,
or of modifying in any manner the rights of the Holders of Investor
Certificates; provided that (i) the Servicer shall have provided an Opinion of
Counsel to the Trustee to the effect that such amendment will not materially and
adversely affect the interests of the Investor Certificateholders of any
outstanding Series (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 Investor
Certificates or any Certificate Owner and (iii) the Rating Agencies shall
confirm that such amendment shall not
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cause a reduction or withdrawal of the rating of any outstanding Series of
Certificates; provided, further, that such amendment shall not reduce in any
manner the amount of, or delay the timing of, distributions which are required
to be made on any Investor Certificate of such Series without the consent of the
related Investor Certificateholder, change the definition of or the manner of
calculating the interest of any Investor Certificateholder of such Series
without the consent of the related Investor Certificateholder or reduce the
percentage pursuant to clause (b) required to consent to any such amendment, in
each case without the consent of all such Investor Certificateholders.
(c) This Agreement and any Supplement may also be amended from time to
time by the Servicer, the Transferors and the Trustee with the consent of the
Holders of Investor Certificates evidencing Undivided Interests aggregating not
less than 66-2/3% of the Invested Amount of all Series adversely affected, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or modifying in any manner the rights of
the Investor Certificateholders of any Series then issued and outstanding;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, distributions which are required to be made
on any Investor Certificate of such Series without the consent of the related
Investor Certificateholders, (ii) change the definition of or the manner of
calculating the Invested Amount, the Invested Percentage, the applicable
available amount under any Enhancement or the Investor Default Amount of such
Series without the consent of each related Investor Certificateholders or (iii)
reduce the aforesaid percentage required to consent to any such amendment,
without the consent of each related Investor Certificateholder.
(d) Promptly after the execution of any such amendment or consent the
Trustee shall furnish written notification (or in the case of Bearer
Certificates, publication notice in the manner described in Section 13.05 of the
Agreement) of the substance of such amendment to each Investor
Certificateholder, and the Servicer shall furnish written notification of the
substance of such amendment to any related Enhancement Provider and each Rating
Agency.
(e) It shall not be necessary for the consent of Investor
Certificateholders under this Section 13.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such Certificateholders
shall approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by Investor
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe.
(f) Any Assignment or Reassignments regarding the addition to or
removal of Receivables from the Trust respectively, as provided in Sections 2.06
and 2.07, respectively, of the Agreement executed in accordance with the
provisions hereof shall not be considered amendments to this Agreement,
including, without limitation, for the purpose of subsections 13.01(a), (b), (c)
and (g) of the Agreement,
(g) Prior to the execution of any amendment to the Agreement, the
Trustee shall be entitled to receive and rely upon an Opinion of Counsel
substantially in the form of Part Two of Exhibit G, The Trustee may, but shall
not be obligated to enter into any such amendment which affects the Trustee's
own rights, duties or immunities under the Agreement or otherwise.
Section 13.02 Protection of Right, Title and Interest to Trust.
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(a) The Servicer shall cause this Agreement, any Supplement, all
amendments hereto and/or all financing statements, amendments and continuation
statements and any other necessary documents covering the right, title and
interest of the Trust in the property conveyed hereunder to be promptly
recorded, registered and filed, and at all times to be kept recorded, registered
and filed, all in such manner and in such places as may be required by law fully
to preserve and protect the right, title and interest of the Trustee hereunder
to all property comprising the Trust. The Servicer shall deliver to the Trustee
file-stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available following such
recording, registration or filing. Each Transferor shall cooperate fully with
the Servicer in connection with the obligations set forth above and will execute
any and all documents reasonably required to fulfill the intent of this
subsection 13.02(a).
(b) Within 30 days after either Transferor makes any change in its
name, identity or corporate structure which would make any financing statement,
amendment or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of Section 9-402(7) of the UCC as in
effect in the Relevant UCC State, such Transferor shall give the Trustee notice
of any such change and shall file such financing statements or amendments as may
be necessary to continue the perfection of the Trust's interest in the property
conveyed hereunder.
(c) The Transferors and the Servicer will give the Trustee prompt
written notice of any relocation of any office from which the Servicer services
Receivables or keeps records concerning the Receivables or of its principal
executive office and whether, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement and shall file such financing statements, continuation statements or
amendments as may be necessary to continue the perfection of the Trust's
security interest in the Receivables and the proceeds thereof notwithstanding
any relocation of any office from which the Servicer services Receivables or
keeps records concerning the Receivables or of its principal executive office.
The Servicer will at all times maintain each office from which it services
Receivables, and the Transferors and the Servicer will at all times maintain
their respective principal executive offices within the United States of
America.
(d) The Servicer will deliver to the Trustee: (i) upon each date that
any Additional Accounts are to be included in the Accounts pursuant to Section
2.06 hereof, an Opinion of Counsel substantially in the form of Part One of
Exhibit G; and (ii) on or before March 1 of each year, beginning with 1993 an
Opinion of Counsel, dated as of a date within 90 days of such day, substantially
in the form of Exhibit H.
Section 13.03 Limitation on Rights of Certificateholders.
(a) The death or incapacity of any Investor Certificateholder shall not
operate to terminate this Agreement or the Trust, nor shall such death or
incapacity entitle such Certificateholder's legal representatives or heirs to
claim at accounting or to take any action or commence any proceeding in any
court for a partition or winding up of the Trust, nor otherwise affect the
rights, obligations and liabilities of the parties hereto or any of them.
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(b) No Investor Certificateholder shall have any right to vote (except
as provided herein) or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto, nor shall any
Investor Certificateholder be under any liability to any third person by reason
of any action taken by the parties to this Agreement pursuant to any provision
hereof.
(c) No Investor Certificateholder shall have any right by virtue of any
provisions of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Certificateholder previously shall have given notice to the Trustee, and unless
the Holders of Certificates evidencing Undivided Interests aggregating more than
66-2/3% of the Invested Amount of any Series which may be adversely affected but
for the institution of such suit, action or proceeding shall have made written
request upon the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee, for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding; it being understood and intended,
and being expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Certificateholders shall
have the right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Certificateholders of any other of the Certificates, or to
obtain or seek to obtain priority over or preference to any other such
Certificateholder, or to enforce any right under this Agreement, except in the
manner herein provided and for the equal, ratable and common benefit of all
Certificateholders. For the protection and enforcement of the provisions of this
Section 13.03, each and every Certificateholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity. Each
Certificate Owner by its acquisition of a Book Entry Certificate shall be deemed
to have consented to the provisions of this Section 13.03.
Section 13.04. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
Section 13.05. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if sent by
facsimile transmission and confirmed by personal delivery or overnight
delivery, to (a) in the case of the RFC, to American Express Receivables
Financing Corporation, 200 Vesey Street, American Express Tower, New York,
New York 10285-4000, Attention: Secretary, telecopy number (212) 619-9651, with
copies to American Express Travel Related Services Company, Inc., American
Express Tower, World Financial Center, 200 Vesey Street, New York, New York
10285, Attention: General Counsel, (b) in the case of Centurion Bank, to
American Express Centurion Bank, 6985 Union Park Center, Midvale, Utah 19801,
Attention: President, telecopy number (801) 565-5110, (c) in the case of the
Servicer, to American Express Travel Related Services Company, Inc., 200 Vesey
Street, American Express Tower, New York, New York 10285-2920, Attention: Jay
Stevelman, telecopy number (212) 619-9651, with copies to American Express
Travel Related Services Company, Inc., American Express Tower, World Financial
Center, 200 Vesey Street, New York, New York 10285, Attention: General Counsel,
(d) in the case of the Trustee, to The Bank of New York, 101 Barclay Street, New
York, New York 10286, Attention: Corporate Trust
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Division, telecopy number (212) 815-5915; or, as to each party, at such other
address as shall be designated by such party in a written notice to each other
party. Any notice required or permitted to be mailed to a Certificateholder
shall be given by first class mail, postage prepaid, at the address of such
Certificateholder as shown in the Certificate Register. Any notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Certificateholder receives such notice.
Any notice required or permitted to be made to Holders of Bearer
Certificates by publication shall be published in an Authorized Newspaper and,
if the Certificates of such Series are then listed on the Luxembourg Stock
Exchange and such stock exchange shall so require, in a newspaper of general
circulation in Luxembourg (which newspaper shall be printed in the English
language and customarily published on each business day in Luxembourg) and, if
the Certificates of such Series are listed on any other stock exchange and such
stock exchange shall so require, in any other city required by such stock
exchange outside the United States, or, if not practicable, elsewhere in Europe.
In case by reason of the suspension of publication of any Authorized
Newspaper or permitted newspaper with respect to Luxembourg or by reason of any
other cause it shall be impracticable to publish any notice to Holders of Bearer
Certificates as provided above, then such notification to Holders of Bearer
Certificates as shall be given with approval of the Trustee shall constitute
sufficient notice to such Holders for every purpose hereunder. Neither the
failure to give notice by publication to Holders of Bearer Certificates as
provided above, nor any defect in any notice so published, shall affect the
sufficiency of any notice mailed to Holders of Registered Certificates as
provided above.
Copies of all notices, reports, certificates and amendments
delivered hereunder shall be mailed to the Rating Agency as follows: Moody's
Investors Service, Inc., 99 Church Street, New York, NY 10007, Attention: ABS
Monitoring Department - 4th Floor and Standard & Poor's Ratings Group, 25
Broadway, New York, NY 10004, Attention: Asset Backed Surveillance Department.
Section 13.06. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or rights of the Certificateholders thereof.
Section 13.07. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 7.02, 7.05, 8.02 and 8.05, this
Agreement, including any Supplement, may not be assigned by either Transferor or
the Servicer, as the case may be, without the prior consent of Holders of
Investor Certificate, evidencing Undivided Interests aggregating more than 51%
of the Aggregate Invested Amount,
Section 13.08. Certificates Nonassessable and Fully Paid. It is the
intention of the parties to this Agreement that the Certificateholders (and the
Certificate owners) shall not be personally liable for obligations of the Trust,
that the Undivided Interests represented by the Certificates shall be
nonassessable for any losses or expenses of the Trust or for any reason
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whatsoever, and that Certificates upon authentication thereof by the Trustee
pursuant to Section 6.02 are and shall be deemed fully paid.
Section 13.09 Further Assurances. The Transferor and the Servicer agree to
do and perform, from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by the Trustee more fully
to effect the purposes of this Agreement including, without limitation, the
execution of any financing statements or continuation statements relating to the
property of the Trust for filing under the provisions of the UCC of the Relevant
UCC State.
Section 13.10 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Trustee or the Investor
Certificateholders, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privileges provided by law.
Section 13.11 Counterparts. This Agreement and any Supplement may be
executed in two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of which together
shall constitute one and the same instrument.
Section 13.12 Third-Party Beneficiaries. This Agreement and any Supplement
will inure to the benefit of and be binding upon the parties hereto, the
Certificateholders and the Certificate Owners and their respective successors
and permitted assigns. Except as otherwise provided in this Agreement, no other
person will have any right or obligation hereunder provided, however, that if so
specified in the applicable Supplement, an Enhancement Provider may be deemed to
be a third party beneficiary of this Agreement.
Section 13.13 Actions by Certificateholders.
(a) Wherever in this Agreement or any Supplement a provision is made
that an action may be taken or a notice, demand or instruction given by Investor
Certificateholders, such action, notice or instruction may be taken or given by
any Investor Certificateholder of any Series, unless such provision requires a
specific percentage of Investor Certificateholders of a certain Series or all
Series.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Certificateholder shall bind such Certificateholder and
every subsequent holder of such Certificate issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or omitted to be done by the Trustee or the Servicer in reliance
thereon, whether or not notation of such action is made upon such Certificate.
Section 13.14 Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may hot be
modified, amended, waived or supplemented except as provided herein.
94
<PAGE>
Section 13.15 Headings. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
Section 13.16 Certificates and Opinions of Counsel.
(a) Any certificate delivered may be based, insofar as it relates to
legal matters, upon an Opinion of Counsel, unless the Person delivering such
certificate knows, or in the exercise of reasonable care should know, that such
opinion with respect to the matters upon which such certificate may be based as
aforesaid is erroneous. Any Opinion of Counsel or certificate delivered
hereunder may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer or a Transferor, stating that the information with respect to such
factual matters is in the possession of such Person, unless the Person
delivering such certificate or such counsel knows, or in the exercise of
reasonable care should know, that such certificate opinion or representations
with respect to such matters are erroneous. Any Opinion of Counsel delivered
hereunder may contain necessary exceptions and qualifications.
(b) Any Opinion of Counsel or certificate delivered hereunder may be
based, insofar as it relates to accounting matters, upon a certificate or
opinion of or representations by an independent public accountant or firm of
accountants, unless such counsel or the Person delivering such certificate as
the case may be, knows that the certificate or opinions or representations with
respect to the accounting matters upon which the certificate or opinion may be
based as aforesaid are erroneous, or in the exercise of reasonable care should
know that the same are erroneous. Any certificate, opinion or representations of
any firm of independent public accountants filed with the Trustee shall contain
a statement that such firm is independent.
(c) Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments, hereunder, they may, but need not, be consolidated and form one
instrument.
Section 13.17 Effect of Amendment No. 3. Reference is made to Amendment No.
3 to the Original Pooling Agreement, dated as of September 12, 1994. This
Agreement contains the Amemdment No. 3 to the Original Pooling Agreement. Such
Amendment No. 3 provides that it shall be null and void and of no further force
and effect on the date specified by the Servicer in an Officer's Certificate
delivered to the Trustee stating that the Servicer has modified its computer
programs such that from and after such date no amounts billed to Cardmembers
under the Privileged Assets Program will be included in any calculation of
Receivables balances. This Agreement shall be deemed amended to delete all
provisions hereof contained in such Amendment No. 3 as of the date so specified
by the Servicer.
[END OF ARTICLE XIII]
95
<PAGE>
IN WITNESS WHEREOF, the Transferors, the Servicer and the
Trustee have caused this Pooling and Servicing Agreement to be duly executed by
their respective officers as of the day and year first above written.
AMERICAN EXPRESS RECEIVABLES
FINANCING CORPORATION,
as Transferor
By:_________________________________
Name:
Title:
AMERICAN EXPRESS CENTURION BANK,
as Transferor
v By:_________________________________
Name:
Title:
AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC.,
as Servicer
By:_________________________________
Name:
Title:
THE BANK OF NEW YORK,
as Trustee and Paying Agent
By:_________________________________
Name:
Title:
96
<PAGE>
May 12, 1998
American Express Centurion Bank
6985 Union Park Center
Midvale, Utah 84047
Re: Registration Statement on Form S-3
Registration No. 333-51045
Ladies and Gentlemen:
I have acted as counsel to American Express Centurion Bank (the
"Transferor") in connection with the above-referenced Registration Statement
on Form S-3 being filed concurrently herewith with the Securities and Exchange
Commission (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"), relating to the proposed issuance and sale of Accounts
Receivable Trust Certificates (the "Certificates") of the American Express
Master Trust to which the Transferor and American Express Receivables
Financing Corporation ("RFC") will transfer receivables (the "Receivables")
generated from time to time in a portfolio of designated card accounts. The
American Express Master Trust was formed pursuant to the Pooling and Servicing
Agreement, dated as of June 30, 1992, among RFC, American Express Travel
Related Services Company, Inc., as Servicer (the "Servicer") and The Bank of
New York, as trustee (the "Trustee")(to be amended by the Amended and Restated
Pooling and Servicing Agreement, dated as of May 1, 1998, among American Express
Centurion Bank, RFC, the Servicer and the Trustee, and as so amended, the
"Pooling Agreement"). The Certificates will be issued and delivered in
accordance with the terms of a specified Series Supplement to the Pooling
Agreement.
I or members of my staff have examined the forms of Pooling
Agreement, Series Supplement and Underwriting Agreement included as exhibits
to the Registration Statement. In addition, we have examined and considered
executed originals or counterparts, or certified or other copies, identified
to my satisfaction as being true copies, of such certificates, instruments,
documents and other corporate records of the Transferor and matters of fact
and law as I deem necessary for the purposes of the opinion expressed below.
Capitalized terms not otherwise defined herein have the respective meanings
assigned to such terms in the Pooling Agreement.
In my examination I have assumed the genuineness of all signatures,
the authenticity of all documents submitted to me as originals, the conformity
to original documents of all documents submitted to me as certified or
photostatic copies and the authenticity of the original of such latter
documents.
Based upon the foregoing, and subject to the qualification that I am
admitted to the practice of law in the State of New York and do not
purport to be expert in the laws of any jurisdiction other than the State of
New York, I am of the opinion that, assuming the due execution and delivery of
the Pooling Agreement and applicable Series Supplement thereto substantially
in the form filed as an exhibit to the Registration Statement, upon the
issuance, authentication and delivery of the Certificates in accordance with
the provisions of such Pooling Agreement and such Supplement, against payment
therefor, the Certificates will be legally issued, fully paid and
non-assessable.
I consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the Prospectus included in the Registration Statement.
Very truly yours,
/s/ Robert D. Kraus
Robert D. Kraus
Group Counsel
<PAGE>
May 12, 1998
American Express Receivables
Financing Corporation
American Express Tower
World Financial Center
200 Vesey Street
New York, New York 10285
Re: Registration Statement on Form S-3
Registration No. 333-51045
Ladies and Gentlemen:
I have acted as counsel to American Express Receivables Financing
Corporation (the "Transferor") in connection with the above-referenced
Registration Statement on Form S-3 being filed concurrently herewith with the
Securities and Exchange Commission (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"), relating to the proposed
issuance and sale of Accounts Receivable Trust Certificates (the
"Certificates") of the American Express Master Trust to which the Transferor
and American Express Centurion Bank will transfer receivables (the
"Receivables") generated from time to time in a portfolio of designated card
accounts. The American Express Master Trust was formed pursuant to the Pooling
and Servicing Agreement, dated as of June 30, 1992, among the Transferor,
American Express Travel Related Services Company, Inc., as Servicer (the
"Servicer") and The Bank of New York, as trustee (the "Trustee") (to be amended
by the Amended and Restated Pooling and Servicing Agreement, dated as of May 1,
1998, among American Express Centurion Bank, the Transferor, the Servicer and
the Trustee, and as so amended, the "Pooling Agreement"). The Certificates
will be issued and delivered in accordance with the terms of a specified
Series Supplement to the Pooling Agreement.
I or members of my staff have examined the forms of Pooling
Agreement, Series Supplement and Underwriting Agreement included as exhibits
to the Registration Statement. In addition, we have examined and considered
executed originals or counterparts, or certified or other copies, identified
to my satisfaction as being true copies, of such certificates, instruments,
documents and other corporate records of the Transferor and matters of fact
and law as I deem necessary for the purposes of the opinion expressed below.
Capitalized terms not otherwise defined herein have the respective meanings
assigned to such terms in the Pooling Agreement.
In my examination I have assumed the genuineness of all signatures,
the authenticity of all documents submitted to me as originals, the conformity
to original documents of all documents submitted to me as certified or
photostatic copies and the authenticity of the original of such latter
documents.
Based upon the foregoing, and subject to the qualification that I am
admitted to the practice of law in the State of New York and do not
purport to be expert in the laws of any jurisdiction other than the State of
New York, I am of the opinion that, assuming the due execution and delivery of
the Pooling Agreement and applicable Series Supplement thereto substantially
in the form filed as an exhibit to the Registration Statement, upon the
issuance, authentication and delivery of the Certificates in accordance with
the provisions of such Pooling Agreement and such Supplement, against payment
therefor, the Certificates will be legally issued, fully paid and
non-assessable.
I consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to me under the caption "Legal
Matters" in the Prospectus included in the Registration Statement.
Very truly yours.
/s/ Carol V. Schwartz
Carol V. Schwartz
Group Counsel
<PAGE>
EXHIBIT 8.1
May 12, 1998
American Express Receivables Financing Corporation
World Financial Center
200 Vesey Street
New York, NY 10285
American Express Centurion Bank
World Financial Center
200 Vesey Street
New York, NY 10285
Re: American Express Master Trust
-----------------------------
Ladies and Gentlemen:
We have acted as special counsel for American Express Receivables
Financing Corporation ("RFC") and American Express Centurion Bank ("Centurion
Bank") in connection with the preparation of the Registration Statement on
Form S-3 (the "Registration Statement"), which has been filed with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"), for the registration under the Act of Accounts Receivable
Trust Certificates (the "Certificates") representing an undivided interest in
the American Express Master Trust (the "Trust"). The Certificates are to be
issued pursuant to the Amended and Restated Master Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement"), dated as of May 1, 1998
among RFC, Centurion Bank, American Express Travel Related Services Company,
Inc., as servicer and the Bank of New York, as trustee substantially in the
form filed as exhibit 4.1 to the Registration Statement.
We hereby confirm that the statements set forth in the prospectus
relating to the Certificates (the "Prospectus") forming a part of the
Registration Statement under the headings "Prospectus Summary--Tax Status,"
"Federal Income Tax Consequences" and "State and Local Taxation," to the
extent that they constitute matters of law or legal conclusions with respect
thereto, are correct in all material respects and we hereby confirm the
opinions set forth under such headings.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to Orrick, Herrington
& Sutcliffe LLP under the captions "Legal Matters" and "Federal Income Tax
Consequences" in the Prospectus. In giving such consent, we do not admit that
we are "experts," within the meaning of the term used in the Act or the rules
and regulations of the Securities and Exchange Commission issued thereunder,
<PAGE>
May 12, 1998
Page Two
with respect to any part of the Registration Statement, including this opinion
as an exhibit or otherwise.
Very truly yours,
/s/ Orrick, Herrington & Sutcliffe LLP
Orrick, Herrington & Sutcliffe LLP
<PAGE>
- -------------------------------------------------------------------------------
AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC.
Seller of the Receivables
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION
Purchaser of the Receivables
RECEIVABLE PURCHASE AGREEMENT
Dated as of June 30, 1992
- -------------------------------------------------------------------------------
<PAGE>
This Receivable Purchase Agreement (the "Agreement") is entered into
as of June 30, 1992 by and between American Express Receivables Financing
Corporation, a corporation organized and existing under the laws of the State
of Delaware ("RFC"), and American Express Travel Related Services Company,
Inc., a corporation organized and existing under the laws of the State of New
York (the "Seller").
Background
The following statements are the mutual representations of the parties
with respect to certain factual matters forming the basis for this Agreement
and are an integral part of this Agreement.
A. Receivables. The Seller owns the receivables (the "Receivables") of
certain consumer charge card accounts (the "Accounts") meeting eligibility
criteria (the "Eligibility Criteria") set forth in a Master Pooling and
Servicing Agreement, dated as of June 30, 1992 (the "Pooling and Servicing
Agreement"), by and among RFC, as Transferor, American Express Travel Related
Services Company, Inc., as Servicer, and The Bank of New York, as Trustee, The
Receivables include the right to receive all monies due and to become due and
all amounts received with respect thereto in respect of each Account received
on or after June 30, 1992 (the "Cut Off Date") until termination of this
Agreement pursuant to Section 20 hereof. Accounts include (i) the consumer
charge card accounts so indicated on Schedule I hereto referred to below (the
"Initial Accounts") and (ii) certain consumer charge card accounts that will
become Accounts that will be designated as Additional Accounts pursuant to
Section 2.06 of the Pooling and Servicing Agreement.
B. Transfer of Receivables. The parties desire that the Seller sell
the Receivables in the Initial Accounts to RFC pursuant to the terms of this
Agreement. Pursuant to the terms of the Pooling and Servicing Agreement, RFC
shall transfer the Receivables in the Accounts sold to RFC by the Seller to the
American Express Master Trust (the "Trust").
C. Definitions. Capitalized terms not specifically defined in this
Agreement that are defined in the Pooling and Servicing Agreement shall have
the same meaning when used herein as when used in the Pooling and Servicing
Agreement.
Statement of Agreement
The parties, each in consideration of the promises of the other and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, hereby agree as follows:
Section 1. Sale of the Receivables.
(a) By execution of this Agreement, the Seller does hereby sell,
transfer, assign, set over and otherwise convey to RFC, without recourse
(except as specifically provided herein), all of its right, title and interest
in, to and under the Receivables, now existing and hereafter created, all
monies due or to become due with respect thereto (including Recoveries) on and
after the Cut Off Date and all proceeds of the Receivables. The foregoing sale,
transfer, assignment, set-over and conveyance does not constitute and is not
intended to result in a
<PAGE>
creation or an assumption by RFC of any obligation of the Seller or Servicer or
any other Person in connection with the Accounts, the Receivables or under any
agreement or instrument relating thereto, including, without limitation, any
obligation to any Obligors, merchant banks, and any affiliate thereof, or
insurers.
(b) In connection with such sale, the Seller agrees to record and
file, at its own expense, any financing statements (and continuation statements
with respect to such financing statements when applicable) with respect to the
Receivables now existing and hereafter created for the transfer of accounts
meeting the requirements of Relevant UCC State law in such manner and in such
jurisdictions as are necessary to perfect the sale, transfer and assignment of
the Receivables to RFC and the transfer of the Receivables to the Trust, and to
deliver a file-stamped copy of such financing statements or other evidence of
such filings to the Trustee on or prior to the date of issuance of the Series
1992-1 Certificates and Series 1992-2 Certificates issued pursuant to the
Pooling and Servicing Agreement and the Series 1992-1 Supplement and the Series
1992-2 Supplement, respectively. RFC shall be under no obligation whatsoever to
file such financing statements or make any other filings under the UCC in
connection with such conveyance. The Trustee and RFC shall be entitled to rely
upon the filings made by the Seller.
(c) In connection with such sale, the Seller further agrees, at its
own expense, on or prior to the Initial Closing Date (x) to indicate in its
books and records that all Receivables created in connection with the Accounts
have been sold to RFC pursuant to this Agreement, (y) to deliver to RFC and.
the Trustee a computer file or microfiche list containing a true and complete
list of all such Accounts specifying for each such Account, as of the Cut Off
Date, its account number and the aggregate amount of Receivables outstanding in
such Account and (z) within twenty Business Days of any request by the Trustee
or RFC, deliver to RFC and the Trustee a new computer file or microfiche list
containing a true and complete list of all Accounts identified as described in
the preceding clause (y). Such files or lists shall be marked as Schedule 1 to
this Agreement which is hereby incorporated into and made a part of this
Agreement.
(d) RFC shall not purchase Receivables if the Seller shall become an
involuntary party to (or be made the subject of) any proceeding provided for by
any federal or state bankruptcy, insolvency or other debtor relief law (an
"Involuntary Case"), other than as creditor or claimant, and such Involuntary
Case shall have continued for a period of ten Business Days from and including
the day of receipt by the Seller of notice of such Involuntary Case. During
such 10-Business Day period, RFC shall suspend its purchase of Receivables
hereunder and shall hold all Principal Collections that would have been
available to purchase Receivables in the Collection Account (if such deposits
would otherwise have been required to be made pursuant to the Pooling and
Servicing Agreement) and (a) if by the first Business Day after such
10-BusinessDay period, RFC has not obtained an order from the court having
jurisdiction of such case or filing which order approves the continuation of
the sale of Receivables hereunder by the Seller to RFC and which provides that
RFC and the Trustee may rely on such order for the validity and nonavoidance of
such transfer (the "Order"), RFC shall hold such Collections in such Collection
Account (if so required) until such time as they may be paid to holders of the
Certificates and shall not purchase Receivables thereafter for transfer to RFC,
or (b) if by such first Business Day, RFC has obtained such Order, the Seller
may continue selling Receivables, and RFC may continue purchasing Receivables,
pursuant to the terms hereof, as modified by the
2
<PAGE>
immediately succeeding sentence. During the period after the 10-Business Day
period described above and before the 90-day period following such filing, the
purchase price of the Receivables transferred during such period,
notwithstanding anything in this Agreement or the Pooling and Servicing
Agreement to the contrary, shall be paid to the Seller by RFC in cash not later
than the same Business Day of any sale of Receivables. If an order is obtained
but subsequently reversed, rescinded or expired, the Seller shall immediately
cease selling Receivables hereunder to RFC and RFC shall immediately cease
buying Receivables hereunder. If by the first Business Day after such 90-day
period, such Involuntary Case has not been dismissed, RFC shall immediately
cease purchasing Receivables hereunder.
(e) RFC shall not purchase Receivables hereunder if the Seller shall
admit in writing its inability to pay its debts as they are due, or the
commencement by the Seller of a voluntary case under the federal bankruptcy
laws, as now or hereafter in effect, or any present or future federal or state
bankruptcy, insolvency or similar law, or the consent by the Seller to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestator or other similar official of the Seller or of
any substantial part of its property or the making by the Seller of an
assignment for the benefit of creditors or the failure by the Seller generally
to pay its debts as such debt becomes due or the taking of corporate action by
the Seller in furtherance of any of the foregoing.
Section 2. Purchase Price. Except as provided in Section 3, the
purchase price for the Receivables (including Receivables in Additional
Accounts) sold to RFC under this Agreement shall be a dollar amount equal to
(1) with respect to Receivables in the Initial Accounts, the product of 90.41%
(which reflects the aging status and funding costs of the Receivables in and an
arm's length return to RFC mutually agreed by both parties) and the aggregate
unpaid balance of the Receivables on the Cut Off Date in respect of the Initial
Accounts and (2) with respect to Receivables in the Additional Accounts, the
product of a factor to be determined by the parties hereto in good faith based
on the same factors set forth above and the aggregate unpaid balance of all
Receivables in Additional Accounts on the Additional Account Cut Off Date in
respect thereof, and (3) with respect to additional Receivables created in
Accounts, the product of one minus the initial Yield Factor (as such price may
be adjusted by the Purchaser in good faith based on increases in charge-offs,
increases in the weighted average Certificate Rate for all Series, increases in
Servicing Fees or decreases in Recoveries, or subsequently adjusted downward
based on decreases in such items or increases in Recoveries), minus an arm's
length return to RFC mutually agreed by both parties and the aggregate unpaid
balance of all additional Receivables thereafter created in the Accounts. As
additional consideration for the Seller's agreement to sell the Receivables to
the Company, the Company has agreed pursuant to a loan agreement with the
Seller to loan an amount up to $47,000,000 to the Seller upon request of the
Seller, such loan to bear interest at the weighted average of the Fed Composite
30-day commercial paper rate, plus 0.15% on the outstanding principal balance
from time to time, payable upon the final payment of the Series 1992-2 Class A
Certificates.
Section 3. Capital Contribution. $20,684,993 of the Receivables sold
as of the Initial Closing Date are to be conveyed by the Seller to RFC as a
capital contribution to RFC.
Section 4. Payment of Purchase Price on the Initial Closing Date and
Additional Account Closing Date(s). The Purchase Price for Receivables shall be
paid or
3
<PAGE>
provided for on the Initial Closing Date and each Additional Account Closing
Date, as the case may be, in either of the following ways: (i) by payment in
cash in immediately available funds; or (ii) in the event that the total
Purchase Price is not paid in full in cash by RFC on the Initial Closing Date
and any Additional Account Closing Date, as the case may be, the Seller shall
convey the principal amount of such cash shortfall as a capital contribution to
RFC.
Section 5. Adjustments to Purchase Price. The Purchase Price shall be
adjusted (a "Credit Adjustment") with respect to any Receivable adjusted as
provided in subsection 3.08(a) of the Pooling and Servicing Agreement. To the
extent that RFC is required thereunder to pay to the Servicer for deposit into
the Collection Account, the Seller shall pay to RFC the amount required to be
paid to the Servicer thereunder.
Section 6. Settlement and Ongoing Payment of Purchase Price. On each
Distribution Date under the Pooling and Servicing Agreement, the Seller shall
deliver to RFC a settlement statement in substantially the form of Exhibit B
(the "Settlement Statement"), showing the aggregate Purchase Price of
Receivables conveyed to RFC during the prior Due Period, and the amount which
remains unpaid as Credit Adjustments made with respect to such prior Due Period
pursuant to Section 5 hereof. Any balance due from RFC to the Seller shall be
paid in immediately available funds or the Seller shall convey such amount as a
capital contribution to RFC and any balance due from the Seller to RFC shall be
paid in immediately available funds.
Section 7. Acceptance and Agreement by RFC.
(a) RFC hereby acknowledges its acceptance of all right, title and
interest to the property described in Section l(a) hereof. RFC further
acknowledges that, prior to or simultaneously with the execution and delivery
of this Agreement, the Seller delivered to RFC and the Trustee the computer
file or microfiche list described in clause (y) of subsection l(c) hereof.
(b) RFC hereby agrees not to disclose to any Person any of the account
numbers or other information contained in the computer files or microfiche
lists marked as Schedule i delivered to RFC by the Seller pursuant to
subsection l(c) or subsection 10(b) hereof, except as may be required by law or
to a Successor Servicer appointed pursuant to Section 10.02 of the Pooling and
Servicing Agreement. RFC agrees to take such measures as shall be reasonably
requested by the Seller to protect and maintain the security and
confidentiality of such information, and, in connection therewith, shall allow
the Seller to inspect RFC's security and confidentiality arrangements from time
to time during normal business hours. RFC shall make reasonable efforts to
provide the Seller with written notice five Business Days prior to any
disclosure pursuant to this subsection 7(b) and shall cooperate with the Seller
to seek any protective order and confidentiality agreement the Seller deems
necessary or advisable.
(c) The parties hereto intend that the Seller shall have sold,
transferred and assigned to RFC all right, title and interest of the Seller in
the Receivables and the proceeds thereof. If this Agreement does not constitute
a valid sale, transfer and assignment of all right, title and interest of the
Seller in such property despite the intent of the parties hereto, the Seller
hereby grants RFC a "security interest" (as defined in the UCC as in effect in
the Relevant UCC
4
<PAGE>
State) in such property to RFC and the parties agree that this Agreement shall
constitute a security agreement under the law in effect in the Relevant UCC
State.
(d) RFC shall maintain net worth (exclusive of any interest of RFC in
the Transferor Interest) at an amount equal to at least the greater of
$30,000,000 at 1.25% of the Trust Principal Component.
Section 8. Representations and Warranties of the Seller Relating to
the Seller. The Seller hereby represents and warrants to RFC, as of the date
hereof, that:
(a) Organization and Good Standing. The Seller is a corporation duly
organized and validly existing and in good standing under the laws of the State
of New York, and has 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 this Agreement and the transactions contemplated under this
Agreement.
(b) Due Qualification. The Seller is duly qualified to do business and
is in good standing as a foreign corporation in any state required in order to
conduct its business, and has obtained all necessary licenses and approvals, in
each jurisdiction in which failure to so qualify or to obtain such licenses and
approvals would have a material adverse effect on the conduct of its business
or render any Receivables unenforceable; provided, however, that no
representation or warranty is made with respect to any qualifications, licenses
or approvals which RFC would have to obtain to do business in any state in
which RFC seeks to enforce any Account or any Receivable.
(c) Due Authorization. The execution, delivery and performance of this
Agreement by the Seller and the consummation of the transactions provided for
in this Agreement have been duly authorized by the Seller by all necessary
corporate action on the part of the Seller.
(d) No Violation. The execution and delivery of this Agreement, the
performance of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof will not conflict with, violate, result in any
breach of any of the material terms and provisions of, or constitute (with or
without notice or lapse of time or both) a material default under, any
Requirement of Law applicable to the Seller or any material indenture,
contract, agreement, mortgage, deed of trust, or other instrument to which the
Seller is a party or by which it or any of its properties is bound.
(e) No Proceedings. There are no proceedings or investigations,
pending or, to the best knowledge of the Seller, threatened against the Seller,
before any court, regulatory body, administrative agency, or other tribunal or
governmental instrumentality (i) asserting the invalidity of this Agreement,
(ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement, (iii) seeking any determination or ruling that,
in the reasonable judgment of the Seller, would materially and adversely affect
the performance by the Seller of its obligations under this Agreement, (iv)
seeking any determination or ruling that would materially
5
<PAGE>
and adversely affect the validity or enforceability of this Agreement, or (v)
seeking to affect adversely the Federal or State of New York income tax
attributes of the Trust.
(f) Eligibility of Accounts. As of the Selection Date, each Account
was an Eligible Account.
(g) All Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or of any Governmental Authority required
in connection with the execution and delivery by the Seller of this Agreement,
the performance by the Seller of the transactions contemplated by this
Agreement and the fulfillment by the Seller of the terms hereof have been
obtained.
(h) Amount of Receivables; Computer File. As of the Cut Off Date, the
amount of Receivables in the Accounts was $2,433,528,576. The computer file or
microfiche list delivered pursuant to Section l(c) hereof is complete and
accurately reflects the information regarding the Receivables under the
Accounts in all material respects.
The representations and warranties set forth in this Section 8 shall
survive the transfer and assignment of the Receivables, and the proceeds
thereof to RFC and by RFC to the Trust. Upon discovery by the Seller or RFC of
a breach of any of the foregoing representations and warranties, the party
discovering such breach shall give prompt written notice to the other party and
to the Trustee.
Section 9. Representations and Warranties of the Seller Relating to
the Agreement and the Receivables.
(a) Binding Obligation; Valid Transfer and Assignment. The Seller
hereby represents and warrants to RFC, with respect to the Agreement and
Receivables, as of the Closing Date, and, with respect to any matters involving
Additional Accounts, as of the related Additional Account Closing Date that:
(i) this Agreement and, in the case of Additional Accounts,
the related Assignment, each constitutes a legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance
with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights and except as
such enforceability may be limited by general principles of equity
(whether considered in a suit at law or in equity);
(ii) Each of this Agreement, and as of the related Additional
Account Closing Date, each Assignment constitutes a valid sale and
assignment to RFC of all right, title and interest of the Seller in
and to the Receivables now existing and hereafter created, all monies
due or to become due with respect thereto on and after the Cut Off
Date, Recoveries, and all proceeds (as defined in the UCC as in effect
in the Relevant UCC State) of such Receivables, and such Receivables
and all proceeds thereof will be held by RFC free and clear of any
Lien of any Person claiming through or under the Seller or any of its
Affiliates except for Liens permitted under Section 12(b). Neither the
Seller nor any Person claiming through or under the Seller shall have
any claim to or
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interest in the Collection Account or any other account or accounts
maintained for the benefit of Certificateholders, except for any right
of RFC to receive interest accruing on, and investment earnings with
respect to, any such account as provided in the Pooling and Servicing
Agreement and any Supplement.
(b) Eligibility of Receivables. The Seller hereby represents and
warrants to RFC, as of the Cut Off Date and on each Additional Account Cut Off
Date that (i) each Receivable then existing is an Eligible Receivable, (ii) all
material information with respect to the Accounts and Receivables provided to
RFC by the Seller was true and correct in all material respects as of the
Selection Date or the related Additional Account Selection Date, (iii) each
Receivable then existing has been conveyed to RFC free and clear of any Lien of
any Person claiming through or under the Seller or any of its Affiliates (other
than Liens permitted under Section 12(b)) and in compliance, in all material
respects, with all Requirements of Law applicable to the Seller, (iv) with
respect to each Receivable then existing, all consents, licenses, approvals or
authorizations of or registrations or declarations with any Governmental
Authority required to be obtained, effected or given by the Seller, in
connection with the conveyance of such Receivable to RFC have been duly
obtained, effected or given and are in full force and effect, (v) as of the
Initial Closing Date, and, as of the applicable Additional Account Cut Off Date
with respect to Additional Accounts, Schedule 1 to this Agreement is and will
be an accurate and complete listing of all the Accounts in all material
respects as of the Cut Off Date or the applicable Additional Account Cut Off
Date, as the case may be, and the information contained therein with respect to
the identity of such Accounts and the Receivables existing thereunder is and
will be true and correct in all material respects as of such applicable Cut Off
Date or Additional Account Cut Off Date and (vi) no selection procedures
believed by the Seller to be adverse to the interests of RFC or the Investor
Certificateholders have been used in selecting the Initial Accounts. On each
day on which any new Receivable is created, the Seller shall be deemed to
represent and warrant to RFC that (A) each Receivable created on such day is an
Eligible Receivable, (B) each Receivable created on such day has been conveyed
to RFC in compliance, in all material respects, with all Requirements of Law
applicable to the Seller, (C) with respect to each such Receivable, all
consents, licenses, approvals or authorizations of or registrations or
declarations with, any Governmental Authority required to be obtained, effected
or given by the Seller, in connection with the conveyance of such Receivable to
RFC have been duly obtained, effected or given and are in full force and effect
and (D) the representations and warranties set forth in Section 9(a) are true
and correct with respect to each Receivable created on such day as if made on
such day.
(c) Notice of Breach. The representations and warranties set forth in
this Section 9 shall survive the transfer and assignment of the Receivables and
the proceeds thereof to the Trust. Upon discovery by the Seller or RFC of a
breach of any of the representations and warranties set forth in this Section
9, the party discovering such breach shall give prompt written notice to the
other party and to the Trustee.
Section 10. Addition of Accounts.
(a) With the consent of RFC, the Seller may, but shall not be
obligated to, designate from time to time Additional Accounts of the Seller to
be included as Accounts.
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(b) The Seller shall be permitted to designate and sell Receivables
from Additional Accounts to RFC only upon satisfaction of the following
conditions:
(i) On or before the tenth Business Day prior to the
Additional Account Closing Date, the Seller shall give RFC written
notice that such Additional Accounts will be included and specifying
the approximate aggregate amount of the Receivables to be transferred;
(ii) On or prior to the Additional Account Closing Date, the
Seller shall have delivered to RFC a written assignment (and RFC shall
have accepted such assignment) in substantially the form of Exhibit A
(the "Assignment") and shall have clearly indicated in its computer
files that the Receivables created in connection with the Additional
Accounts have been sold to RFC and the Seller shall have delivered to
RFC a computer file or microfiche list represented by the Seller to
contain a true and complete list of all Additional Accounts identified
by account number and by Receivable balance in such Additional
Accounts as of the Additional Account Cut Off Date, which computer
file or microfiche list shall be as of the date of such Assignment
incorporated into and made a part of such Assignment and this
Agreement;
(iii) The Seller shall represent and warrant that (x) each
Additional Account was, as of the date of its selection (the
"Additional Account Selection Date"), an Eligible Account, (y) no
selection procedures believed by the Seller to be materially adverse
to the interests of RFC, any Series of Investor Certificateholders or
any Enhancement Provider were utilized in selecting the Additional
Accounts from the available Eligible Accounts in the Seller's
portfolio; and (z) as of the Additional Account Closing Date, the
Seller is not insolvent and will not be made insolvent by the transfer
of the Receivables of such Additional Accounts;
(iv) The Seller shall represent and warrant, that, as of the
Additional Account Closing Date, the Assignment constitutes a valid
sale and assignment to RFC of all right, title and interest of the
Seller in and to the Receivables then existing and thereafter created
in the Additional Accounts, all monies due or to become due with
respect thereto on and after the Additional Account Cut Off Date,
Recoveries and the proceeds thereof to the extent set forth in Section
9-306 of the UCC in effect in the Relevant UCC State of such
Receivables, and such Receivables and all proceeds thereof will be
conveyed to RFC free and clear of any Lien of any Person claiming
through or under the Seller or any of its Affiliates, except for Liens
permitted under Section 12(b) hereunder;
(v) The Seller shall deliver to RFC an Officer's Certificate
confirming the items set forth in paragraphs (ii), (iii) and (iv)
above and (vii) below and RFC may conclusively rely on such Officer's
Certificate, shall have no duty to make inquiries with regard to the
matters set forth therein and shall incur no liability in so relying;
(vi) The Seller shall deliver to RFC an Opinion of Counsel
with respect to the Receivables in the Additional Accounts
substantially in the form of Exhibit C hereto; and
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(vii) The Rating Agencies shall have received ten (10)
Business Days' notice, and RFC shall have received three Business
Days' notice, of such proposed addition of Accounts; if such Accounts
are being added in connection with an addition of Accounts pursuant to
subsection 2.06(b) of the Pooling and Servicing Agreement, the Seller
shall have received written notice from Moody's (if Moody's shall then
be a Rating Agency) that such addition would not result in a
downgrading or withdrawal of the then current rating of any
outstanding Series of Investor Certificates; and, in the event that
the number of Additional Accounts designated with respect to any three
consecutive Due Periods would exceed 15% of the number of Accounts as
of the first day of the calendar year during which such Due Periods
commence (or the Cut-Off Date, in the case of 1992) or the number of
Additional Accounts designated during any such calendar year would
exceed 20% of the number of Accounts as of the first day of such
calendar year (or the Cut-Off Date, in the case of 1992), the Seller
shall have received written confirmation from Standard & Poor's (if
Standard & Poor's shall then be a Rating Agency) that such addition
would not result in a downgrade or withdrawal of its then current
rating of any outstanding Series of Investor Certificates.
Upon satisfaction of the above conditions, the Seller shall execute
and deliver the Assignment to RFC, and the Receivables from the Additional
Accounts shall be sold to RFC as provided in Section 1 of the Agreement.
(c) Notice of Breach. The representations and warranties set forth in
subsection 10(b)(iii) of this Agreement shall survive the sale, transfer and
assignment of the respective Receivables to RFC. Upon discovery by the Seller,
RFC, the Servicer or the Trustee of a breach of any of the covenants,
representations and warranties set forth herein, the party discovering the
breach shall give prompt written notice to the others.
Section 11. Repurchase of Ineligible Receivables.
(a) Automatic Removal. In the event of a breach with respect to a
Receivable of any of the representations and warranties set forth in Section
9(b)(iii), or in the event that a Receivable is not an Eligible Receivable as a
result of the failure to satisfy the conditions set forth in clause (iv) of the
definition of an Eligible Receivable, and either of the following conditions is
met:
(i) the Lien upon the subject Receivable (1) ranks prior to
the Lien created pursuant to this Agreement, (2) arises in favor of
the United States of America or any state or any agency or
instrumentality thereof or involves taxes or liens arising under Title
IV of the Employee Retirement Income Security Act of 1974, or (3) has
been consented to by the Sellers; or
(ii) the Lien on the subject Receivable is not of the types
described in clause (i) above, and as a result of such breach or event
such Receivable becomes a Receivable in a Defaulted Account or RFC's
or the Trust's rights in, to or under such Receivable or its proceeds
are materially impaired or the proceeds of such Receivable are not
available for any reason to the Trust free and clear of any Lien
except Liens permitted pursuant to Section 12(b);
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then, upon the earlier to occur of the discovery of such breach or
event by the Seller, the Servicer or RFC or receipt by the Seller of
written notice of such breach or event given by the Trustee, each such
Receivable or, at the option of RFC, all such Receivables with respect
to the related Account shall be automatically removed from the Trust
and repurchased by the Seller on the terms and conditions set forth
below in Section 11(c).
(b) Removal after Cure Period. In the event of a breach of any of the
representations and warranties set forth in Section 9(b)(i), (ii), (iv) or (v)
with respect to a Receivable (other than in the event that a Receivable is not
an Eligible Receivable as a result of the failure to satisfy the conditions set
forth in clause (iv) of the definition of Eligible Receivable), and as a result
of such breach or event such Receivable becomes a Receivable which is not an
Eligible Receivable, the Account related to such Receivable becomes a Defaulted
Account or the Trust's or RFC's rights in, to or under such Receivable or its
proceeds are materially impaired or the proceeds of such Receivable are not
available for any reason to the Trust or RFC free and clear of any Lien (other
than Liens permitted pursuant to Section 12(b)), then, upon the expiration of
60 days or any longer period agreed upon by the Trustee and RFC (not to exceed
an additional 60 days) from the earlier to occur of the discovery of any such
event by RFC or the Servicer, or receipt by RFC or the Servicer of written
notice of any such event given by the Trustee, each such Receivable or, at the
option of RFC or the Trustee, all such Receivables with respect to the related
Account, shall be removed from the Trust and repurchased by the Seller on the
terms and conditions set forth in Section 11(c); provided, however, that no
such removal shall be required to be made if, on any day within such applicable
period, (i) such representations and warranties with respect to such Receivable
shall then be true and correct in all material respects as if such Receivable
had been created on such day, and (ii) such Receivable is an Eligible
Receivable, the related Account is no longer a Defaulted Account as the result
of the breach of such representation and warranty (including those implied by
law), and the Trust's and RFC's rights in, to or under such Receivable or its
proceeds are no longer impaired as the result of the breach of such
representation and warranty, and the proceeds of such Receivable have become
available to the Trust and RFC free and clear of all Liens which caused the
breach of such representation or warranty, as applicable.
(c) Removal Terms and Conditions. When required or permitted with
respect to a Receivable (an "Ineligible Receivable") by the provisions of
Section 11(a) or Section 11(b) above, the Seller shall pay to RFC the balance
of such Receivable within two Business Days of the date on which such
Receivable became an Ineligible Receivable. Any such payment in connection with
the reassignment of an Ineligible Receivable shall be considered a payment in
full of the Ineligible Receivable. Upon the reassignment to the Seller of an
Ineligible Receivable, RFC shall, without further action be deemed to sell,
assign, set-over and otherwise convey to the Seller, without recourse,
representation or warranty (including those implied by law), all the right,
title and interest of RFC in and to such Ineligible Receivable, all monies due
or to become due with respect thereto and all proceeds thereof. RFC shall
execute such documents and instruments of transfer or assignment and take such
other actions as shall reasonably be requested by the Seller to effect the
conveyance of such Ineligible Receivable pursuant to this subsection and as
shall be specified in an Opinion of Counsel delivered to RFC to the effect that
such documents and instruments comply herewith. In the event that on any day
within 60 days, or any longer period agreed upon by the Trustee (not to exceed
an additional 60 days), of the date on which the repurchase of an Ineligible
Receivable pursuant to this Section 11
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is effected, (i) the applicable representations and warranties with respect to
such Receivable shall be true and correct in all material respects on such date
and (ii) the Receivable is an Eligible Receivable, the Account corresponding to
the Receivable is no longer a Defaulted Account as the result of the breach of
such representation and warranty and the proceeds of such Receivable are
available to the Trust and RFC free and clear of all Liens which caused the
breach of such representation and warranty, or (iii) the Seller has cured the
breach of the representation or warranty, as applicable, the Seller may, but
shall not be required to, reconvey such Receivable to RFC. Upon reconveyance of
a Receivable pursuant to this subsection, the Seller shall have been deemed to
have made the applicable representations and warranties in Section 9(b) as of
the date of such addition, as if the Receivable had been created on such date,
and shall execute all such necessary documents and instruments of transfer or
assignment and take such other actions as shall be necessary to effect and
perfect the reconveyance of such Receivable to RFC, The obligation of the
Seller set forth in this subsection, or the repurchase of such Receivable by
the Seller from RFC, as the case may be, shall constitute the sole remedy
respecting any breach of the representations and warranties set forth in the
above-referenced Sections with respect to such Receivable available to RFC, the
Certificateholders or the Trustee on behalf of Certificateholders.
Notwithstanding any other provision of this Section 11, a reassignment
of an Ineligible Receivable shall not occur if the Seller fails to make the
deposit required by this Section 11 with respect to such Ineligible Receivable.
(d) No Impairment. For the purposes of Sections 11(a) and 11(b) and
above, proceeds of a Receivable shall not be deemed to be impaired hereunder
solely because such proceeds are held by the Servicer for more than the
applicable period under Section 9-306(3) of the UCC as in effect in the
Relevant UCC State.
(e) Reassignment of Trust Portfolio. In the event of (1) a breach of
any of the representations or warranties set forth in Section 8(a) or Section
9(a) or (2) a material amount of Receivables are not Eligible Receivables, and
in either case such event has a materially adverse effect on RFC or Investor
Certificateholders, RFC by notice then given in writing to the Seller, may
direct the Seller to accept reassignment of all Receivables within 60 days of
such notice, or within such longer period as may be specified in such notice
(not to exceed an additional 60 days) and the Seller shall be obligated to
accept such reassignment on a Distribution Date specified by RFC occurring
within such applicable period on the terms and conditions set forth below;
provided, however, that no such reassignment shall be required to be made if,
on the Business Day prior to such Distribution Date the representations and
warranties contained in Section 8(a) or 9(a) shall then be true and correct in
all material respects, or there shall no longer be a material amount of
Ineligible Receivables, as the case may be. The Seller shall pay RFC on the
Business Day immediately prior to the Distribution Date (in immediately
available funds) an amount equal to the reassignment deposit amount for such
Receivables in the Collection Account. The amount for such reassignment shall
be equal to the Aggregate Invested Amount on the Record Date related to the
applicable Distribution Date on which such payment is made (less the aggregate
principal amount on deposit in any principal funding account) plus an amount
equal to all accrued but unpaid interest on the Certificates of all Series at
the applicable certificate rates through the end of the interest accrual
periods of such Series. On the Distribution Date with respect to which such
amount has been paid in full to RFC, the
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Receivables and all monies due or to become due with respect thereto and all
proceeds relating thereto shall be reconveyed to the Seller and RFC shall
execute or cause the Trustee to execute and deliver such instruments of transfer
or assignment, in each case without recourse, representation or warranty, as
shall be reasonably requested by the Seller to vest in the Seller or its
designee or assignee, all right, title and interest of RFC in and to the
Receivables, all monies due or to become due with respect thereto and all
proceeds thereof and as shall be specified in an Opinion of Counsel delivered to
RFC to the effect that such documents and instruments comply herewith.
Section 12. Covenants of the Seller. The Seller hereby covenants that:
(a) Receivables Not to be Evidenced by Promissory Notes or Chattel
Paper. The Seller will take no action to cause any Receivable to be evidenced
by any instrument (as defined in the UCC as in effect in the Relevant UCC
State). Each Receivable shall be payable pursuant to a contract which does not
create a Lien on any goods purchased thereunder.
(b) Security Interests. Except for the conveyances hereunder, the
Seller will not sell, pledge, assign or transfer to any other Person, or grant,
create, incur, assume or suffer to exist any Lien on any Receivable, whether
now existing or hereafter created, or any interest therein; the Seller will
notify RFC of the existence of any Lien on any Receivable transferred by the
Seller immediately upon discovery thereof; and the Seller shall defend the
right, title and interest of RFC or the Trust in, to and under the Receivables,
whether now existing or hereafter created, against all claims of third parties
claiming through or under the Seller; provided, however, that nothing in this
subsection 12(b) shall prevent or be deemed to prohibit the Seller from
suffering to exist upon any of the Receivables any Liens for municipal or other
local taxes and other governmental charges if such taxes or governmental
charges shall not at the time be due and payable or if the Seller shall
currently be contesting the validity thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate reserves with
respect thereto; provided, further, that nothing in this subsection shall
prohibit the Seller or RFC from having or participating an interest in the
Exchangeable Transferor Certificate pursuant to subsection 6.03(b) of the
Pooling and Servicing Agreement.
(c) Account Agreements and Guidelines. The Seller shall comply with and
perform its obligations under the applicable Account Agreements relating to the
Accounts and the Account Guidelines except insofar as any failure so to comply
or perform would not materially and adversely affect the rights of the Trust or
the Investor Certificateholders under the Pooling and Servicing Agreement.
Subject to compliance with all Requirements of Law the failure to comply with
which would have a material adverse effect on the Investor Certificateholders,
the Seller may change the terms and provisions of the Account Agreement or the
Account Guidelines in any respect (including, without limitation, the
calculation of the amount, or the timing, of charge-offs) as follows: (a) if the
Seller owns a comparable segment of accounts, then such change is made
applicable to such comparable segment which has characteristics the same as, or
substantially similar to, the Accounts which are the subject of such change and
(b) if it does not own such a comparable segment, the Seller will not make any
such change with the intent to materially benefit the Seller or RFC over the
Investor Certificateholders.
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(d) Account Allocations, In the event that the Seller is unable for
any reason to sell Receivables to RFC in accordance with the provisions of this
Agreement (including, without limitation, by reason of the application of the
provisions of Section 9.02 of the Pooling and Servicing Agreement or an order
of any court of competent jurisdiction ordering that the Seller not sell any
additional Receivables to RFC) then, in any such event, the Seller agrees
(except as prohibited by any such order) to allocate and pay to RFC, after the
date of such inability, all Principal Collections with respect to Receivables
and all amounts which would have constituted Principal Collections with respect
to such receivables which would have been Receivables but for the Seller's
inability to sell such receivables (up to an aggregate amount equal to the
amount of Receivables in the Trust on such date). If the Seller is unable
pursuant to any Requirement of Law to allocate Principal Collections as
described above, the Seller agrees that it shall, in any such event, allocate,
after the date that the Seller becomes unable to do so, payments on each
Account with respect to the balance of such Account first to the oldest balance
of such Account.
(e) Delivery of Collections. In the event that the Seller receives
Collections, the Seller agrees to pay the Servicer or any Successor Servicer
all payments received by the Seller in respect of the Receivables as soon as
practicable after receipt thereof by the Seller, but in no event later than two
Business Days after the receipt by the Seller thereof.
(f) Notice of Liens. The Seller shall notify RFC and the Trustee
promptly after becoming aware of any Lien on any Receivable other than the
conveyances hereunder and under the Pooling and Servicing Agreement.
Section 13. Removal of Accounts.
(a) Subject to the conditions set forth below, on each Determination
Date on which the Transferor Amount as a percentage of Trust Principal
Component exceeds 20% at the end of the related Due Period, RFC may, but shall
not be obligated to, designate, from time to time, Accounts for deletion and
removal from the Accounts and reconveyance to the Seller; provided, however,
that RFC shall not make more than one such designation in any Due Period. On or
before the tenth Business Day (the "Removal Notice Date") prior to the date on
which (i) the designated Removed Accounts will be reassigned by the Trustee to
RFC, and (ii) RFC shall reconvey the designated Removed Accounts to the Seller,
(the "Removal Date"), RFC shall give the Trustee, the Seller and the Servicer
written notice that the Receivables from such Removed Accounts are to be
reassigned by the Trustee to RFC, and shall be reconveyed by RFC to the Seller.
(b) RFC shall be permitted to designate and require reassignment to it
of Receivables from Removed Accounts, and reconveyance of Receivables in
Removed Accounts to the Seller, only upon satisfaction of the following
conditions:
(i) on or prior to the Removal Date, RFC shall have executed
a written instrument of reassignment in substantially the form of
Exhibit D (the "Reassignment") and RFC shall deliver to the Seller a
computer file or microfiche list containing a true and complete list
of all Removed Accounts identified by account number and by the
aggregate balance of the Receivables in such Removed Accounts as of
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the Removal Notice Date, which computer file or microfiche list shall
as of the Removal Date modify and amend and be made a part of this
Agreement;
(ii) RFC shall represent and warrant that no selection
procedures believed by RFC to be materially adverse to the interests
of any outstanding Series of Investor Certificateholders or any
Enhancement Provider were utilized in selecting the Removed Accounts
to be removed from the Trust and reconveyed to the Seller;
(iii) The removal of any Receivables of any Removed Accounts
and the reconveyance thereof to the Seller on any Removal Date shall
not, (a) in the reasonable belief of RFC, cause an Early Amortization
Event to occur or an event which with notice or lapse of time or both
would constitute an Early Amortization Event and (b) cause the
Transferor Amount as a percentage of the Trust Principal Component to
be less than the Minimum Transferor Percentage on such Removal Date;
(iv) The Rating Agencies shall have received ten Business
Days' notice of such proposed removal of Accounts and RFC shall have
received written confirmation from the Rating Agencies that such
removal would not result in a downgrading or withdrawal of the then
current rating of any outstanding Series of the Investor Certificates;
and
(v) RFC shall have delivered to the Trustee an Officer's
Certificate confirming the items set forth in (i) through (iv) above.
The Seller may conclusively rely on such Officer's Certificates, shall
have no duty to make inquiries with regard to the matters set forth
therein and shall incur no liability in so relying.
Upon satisfaction of the above conditions and the delivery by the
Trustee of the Reassignment required by the Pooling and Servicing Agreement,
RFC shall execute and deliver the Reassignment to the Seller, and the
Receivables from the Removed Accounts shall be reconveyed to the Seller
pursuant to the provisions of this Section 13.
Section 14. Liability; Indemnification. The Seller shall be liable for
each obligation, covenant, representation and warranty of the Seller, arising
under or related to this Agreement. Except as provided in the preceding
sentence, the Seller shall be liable only to the extent of the obligations
specifically undertaken by the Seller in its capacity as Seller hereunder. The
Seller agrees 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 as a result of a material breach of a covenant,
representation or warranty hereunder.
Section 15. Merger or Consolidation of, or Assumption of the
Obligations of, the Seller.
(a) The Seller shall not consolidate with or merge into any other
corporation or convey or transfer its properties and assets substantially as an
entirety to any Person unless:
(i) the corporation formed by such consolidation or into
which the Seller is merged or the Person which acquires by conveyance
or transfer the properties and assets of the Seller substantially as
an entirety shall be a corporation organized and
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existing under the laws of the United States of America or any state
or the District of Columbia, and, if the Seller is not the surviving
entity, shall expressly assume, by an agreement supplemental hereto,
executed and delivered to RFC, the Servicer and the Trustee, in form
satisfactory to RFC, the Servicer and the Trustee, the performance of
every covenant and obligation of the Seller hereunder. (To the extent
that any right, covenant or obligation of the Transferor is
inapplicable to the successor entity, such successor entity shall be
subject to such covenant or obligation, or benefit from such right, as
would apply, to the extent practicable, to such successor entity); and
(ii) the Seller has delivered to RFC, the Servicer and the
Trustee an officers' certificate signed by a Vice President (or any
more senior officer) of the Seller and an Opinion of Counsel each
stating that such consolidation, merger, conveyance or transfer and
such supplemental agreement comply with this Section 15 and that all
conditions precedent herein provided for relating to such transaction
have been complied with.
The Seller shall promptly advise the Rating Agencies in writing of any such
merger, consolidation, conveyance or transfer.
Section 16. Limitation on Liability of the Seller. Subject to Section
14 of this Agreement, neither the Seller nor any of its directors or officers
or employees or agents in its capacity as Seller shall be under any liability
to the Trust, the Trustee, the Certificateholders, RFC or any other Person for
any action taken or for refraining from the taking of any action in the
capacity as Seller pursuant to this Agreement whether arising from express or
implied duties under this Agreement; provided, however, that this provision
shall not protect the Seller or any such person against any liability which
would otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder. The Seller and any director or
officer or employee or agent of the Seller may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising hereunder.
Section 17. Sale of Accounts.
(a) The Seller may sell, transfer, assign, exchange, pledge,
participate or otherwise convey its interest in the Accounts, to any Person, in
whole or in part, upon satisfaction of the conditions set forth in subsection
17(b) of this Agreement (such a sale transaction is referred to in this Section
17 as a "Conveyance"). The consummation of any Conveyance shall not require the
consent of RFC, the Trustee or the Holders of the Investor Certificates of any
Series except as provided in this Section 17.
(b) No Conveyance may be effected unless and until the following
conditions precedent are satisfied:
(i) the Person that acquires by Conveyance the conveyed
Accounts shall (A) be organized and existing under the laws of the
United States of America or any state or the District of Columbia
thereof, (B) be a member of the same consolidated federal income tax
group as RFC, and (C) expressly assume, by an agreement
15
<PAGE>
supplemental hereto in form satisfactory to RFC, the Servicer and the
Trustee, executed and delivered to RFC, the Servicer and the Trustee,
the performance of every covenant and obligation of the Seller
hereunder and under the Pooling and Servicing Agreement;
(ii) the Seller shall deliver to RFC, the Trustee, the
Servicer and each Enhancement Provider an Officer's Certificate
stating that such Conveyance and such supplemental agreement comply
with this Section 17 and that all conditions precedent provided by
this Section 17(b) have been complied with and an opinion of Counsel
stating that all conditions precedent provided by this Section 17(b)
have been complied with, and RFC, the Servicer and the Trustee may
conclusively rely on such Officer's Certificate, shall have no duty to
make inquiries with regard to the matters set forth therein and shall
incur no liability in so relying;
(iii) the Seller shall deliver to RFC, the Trustee, the
Servicer and each Enhancement Provider a letter from each Rating
Agency rating the Investor Certificates of any Series, confirming that
the rating of such Certificates, after giving effect to such
Conveyance, will not be lowered or withdrawn;
(iv) the Seller shall deliver to RFC, the Trustee, the
Servicer, the Rating Agencies and each Enhancement Provider an opinion
of Counsel to the effect that (i) such transfer will not adversely
affect the treatment of the Investor Certificates of any Series after
such transfer as debt for Federal income tax purposes and such
transfer will not have any material adverse effect on the Federal
income taxation of an Investor Certificateholder or any Certificate
Owner and (ii) such transfer will not cause a taxable Event for
Federal income tax purposes to any Investor Certificateholder; and
(v) all filings and other actions necessary to continue the
perfection of the interest of RFC and the Trustee in the Receivables
and the other property conveyed hereunder shall have been taken or
made.
Section 18. Access to Certain Documentation and Information Regarding
the Receivables. The Seller shall provide to the Trustee, the Servicer and RFC
reasonable access to the documentation regarding the Accounts and the
Receivables in such cases where required in connection with the performance by
the Trustee, the Servicer or RFC of their obligations under this Agreement, the
Pooling and Servicing Agreement or any Supplement, the enforcement of the
rights of the Investor Certificateholders, or by applicable statutes or
regulations to review such documentation, such access being afforded without
charge but only (i) upon reasonable request, (ii) during normal business hours,
(iii) subject to such protective orders and confidentiality agreements or
procedures as the Seller deems necessary or advisable and (iv)at offices
designated by the Seller. Nothing in this Section 19 shall derogate from the
obligation of RFC, the Servicer, the Trustee or the Seller to observe any
applicable law prohibiting disclosure of information regarding the obligors and
the failure of the Seller to provide access as provided in this Section 18 as a
result of such obligation shall not constitutes breach of this Section 18.
Section 19. Examination of Records. The Seller and RFC shall indicate
clearly and unambiguously in their computer files or other records that the
Receivables arising in the Accounts have been conveyed to the Trust pursuant to
this Agreement and the Pooling and
16
<PAGE>
Servicing Agreement for the benefit of the Investor Certificateholders. The
Seller and RFC shall, prior to the sale or transfer to a third party of any
receivable held in their custody, examine its computer and other records to
determine that such receivable is not a Receivable.
Section 20. Termination. Upon the termination of the Trust pursuant to
Section 12.01 of the Pooling and Servicing Agreement, the surrender of the
Exchangeable Transferor Certificate and the compliance by the Trustee with
Section 12.04 of the Pooling and Servicing Agreement, RFC shall return to the
Seller (without recourse, representation or warranty) all right, title and
interest of RFC in the Receivables, whether then existing or thereafter
created, all moneys due or to become due with respect thereto (including
Recoveries), and all proceeds thereof except for amounts held by the Trustee
pursuant to subsection 12.03(b) of the Pooling and Servicing Agreement. RFC
shall execute and deliver such instruments of transfer and assignment, in each
case without recourse, as shall be reasonably requested by the Seller to vest
in the Seller all right, title and interest which RFC had in the Receivables.
Section 21. Amendment.
(a) This Agreement may be amended from time to time by the Seller and
RFC, without the consent of the Trustee or any of the Investor
Certificateholders, to cure any ambiguity, to correct or supplement any
provisions herein which may be inconsistent with any other provisions herein or
to add any other provisions with respect to matters or questions raised under
this Agreement which are not inconsistent with the provisions of this
Agreement. This Agreement may also be amended from time to time by the Seller
and RFC without the consent of the Trustee or the Investor Certificateholders
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or modifying in any manner
the rights of the Investor Certificateholders; provided, however, that (i) the
Servicer shall have provided to the Trustee an Officer's Certificate to the
effect that such action will not materially and adversely affect the interests
of such Investor Certificateholders (or 100% of the Class of Investor
Certificateholders so affected shall have consented), (ii) each Rating Agency
rating the Investor Certificates confirms that such action will not result in
the reduction or withdrawal of its rating of Investor Certificates and (iii)
such action will not, as evidenced by an opinion of counsel satisfactory to the
Trustee, cause the Trust to be characterized for Federal income tax purposes as
an association taxable as a corporation or adversely affect the treatment of
the Investor Certificates as debt for Federal income tax purposes.
(b) This Agreement may also be amended from time to time by the Seller
and RFC with the consent of the Holders of Investor Certificates evidencing
Undivided Interests aggregating not less than 66-2/3% of the Invested Amount of
each and every Series adversely affected, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Investor
Certificateholders of any Series then issued and outstanding; provided,
however, that no such amendment under this subsection shall (i) reduce in any
manner the amount of, or delay the timing of, Collections on the Receivables or
payments or distributions which are required to be made on any Investor
Certificate of such Series without the consent of the related Investor
Certificateholder, or (ii) reduce the aforesaid percentage required to consent
to any such amendment, in each case without the consent of all such Investor
Certificateholders.
17
<PAGE>
(c) Prior to the execution of any such amendment or consent the
Trustee shall furnish written notification of the substance of such amendment
to the Rating Agencies.
(d) Promptly after the execution of any such amendment or consent the
Trustee shall furnish written notification (or in the case of Bearer
Certificates, publish notice in the manner described in Section 13.05 of the
Pooling and Servicing Agreement) of the substance of such amendment to each
Investor Certificateholder, and the Servicer shall furnish written notification
of the substance of such amendment to any related Enhancement Provider and each
Rating Agency.
(e) It shall not be necessary for the consent of Investor
Certificateholders under this Section 21 to approve the particular form of any
proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Investor Certificateholders shall
be subject to such reasonable requirements as the Trustee may prescribe.
(f) Any Assignment regarding the sale of Receivables by the Seller to
RFC as provided in Section 10 of this Agreement, or Reassignment relating to
the conveyance of Receivables by RFC to the Seller as provided in Section 13 of
this Agreement, executed to facilitate the addition to or removal of
Receivables from the Trust as provided in Sections 2.06 and 2.07, respectively,
of the Pooling and Servicing Agreement and executed in accordance with the
provisions hereof shall not be considered amendments to this Agreement,
including, without limitation, for the purpose of subsections 21(a), (b) or (c)
of the Agreement.
Section 22. Protection of Right, Title and Interest to Receivables.
(a) The Seller shall cause this Agreement, all amendments hereto
and/or all financing statements and continuation statements and any other
necessary documents covering the Seller's and RFC's right, title and interest
to the Receivables and proceeds thereof to be promptly recorded, registered and
filed, and at all times to be kept recorded, registered and filed, all in such
manner and in such places as may be required by law fully to preserve and
protect the right, title and interest of RFC hereunder and the Trustee under
the Pooling and Servicing Agreement to the Receivables and proceeds thereof.
The Seller shall deliver to RFC file-stamped copies of, or filing receipts for,
any document recorded, registered or filed as provided above, as soon as
available following such recording, registration or filing. RFC shall cooperate
fully with the Seller in connection with the obligations set forth above and
will execute any and all documents reasonably required to fulfill the intent of
this Section 22(a).
(b) Within 30 days after the Seller makes any change in its name,
identity or corporate structure which would make any financing statement or
continuation statement filed in accordance with paragraph (a) above seriously
misleading within the meaning of Section 9-402(7) of the UCC as in effect in the
Relevant UCC State, the Seller shall give RFC and the Trustee notice of any such
change and shall file such financing statements or amendments as may be
necessary to continue the perfection of RFC's and the Trustee's security
interest in the Receivables and the proceeds thereof.
18
<PAGE>
(c) The Seller will give RFC and the Trustee prompt written notice of
any relocation of any office from which it keeps records concerning the
Receivables or of its principal executive office, and whether, as a result of
such relocation, the applicable provisions of the UCC would require the filing
of any amendment of any previously filed financing or continuation statement or
of any new financing statement and shall file such financing statements or
amendments as may be necessary to perfect or to continue the perfection of
RFC's security interest in the Receivables and the proceeds thereof. The Seller
will at all times maintain each office from which it services Receivables and
its principal executive office within the United States of America.
Section 23. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
CONFLICTS OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 24. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered at or mailed by registered mail, return receipt requested, to (a) in
the case of American Express Receivables Financing Corporation to American
Express Tower, World Financial Center, 200 Vesey Street, New York, New York
10285, Attention: Arthur Berman, with copies to American Express Travel Related
Services Company, Inc., American Express Tower, World Financial Center, 200
Vesey Street, New York, New York 10285, Attention: General Counsel, and (b) in
the case of American Express Travel Related Services Company, Inc., American
Express Tower, World Financial Center, 200 Vesey Street, New York, New York
10285, Attention: Jay B. Stevelman, with copies to American Express Travel
Related Services Company, Inc., American Express Tower, World Financial Center,
200 Vesey Street, New York, New York 10285, Attention: General Counsel; or, as
to each party, at such other address as shall be designated by such party in a
written notice to each other party, Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the party receives such notice.
Section 25. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement.
Section 26. Assignment. Notwithstanding anything to the contrary
contained herein, this Agreement may not be assigned by RFC or the Seller
except as contemplated by this Section 26 and Section 17 of this Agreement and
the Pooling and Servicing Agreement; provided, however, that simultaneously
with the execution and delivery of this Agreement, RFC shall assign all of its
right, title and interest herein to the Trustee for the benefit of the Investor
Certificateholders of all Series as provided in Section 2.01 of the Pooling and
Servicing Agreement, to which the Seller hereby expressly consents; provided,
further, that except for the foregoing assignment, no such assignment shall
occur unless the Trustee shall have received confirmation from the Rating
Agencies that such assignment shall not cause a reduction or
19
<PAGE>
withdrawal of the rating of any Series of Certificates. The Seller agrees to
perform its obligations hereunder for the benefit of the Trust and that the
Trustee may enforce the provisions of this Agreement, exercise the rights of
RFC and enforce the obligations of the Seller hereunder without the consent of
RFC. In the event that the Seller is obligated to pay funds to RFC hereunder,
to the extent RFC is obligated to remit funds to the Trust pursuant to the
Pooling and Servicing Agreement in connection with such event, the Seller
agrees that it shall pay such funds to the Servicer or the Trustee as
appropriate.
Section 27. Further Assurances. The Seller and RFC agree to do and
perform, from time to time, any and all acts and to execute any and all further
instruments required or reasonably requested by the Trustee more fully to
effect the purposes of this Agreement, including, without limitation, the
execution of any financing statements or continuation statements relating to
the Receivables for filing under the provisions of the Relevant UCC State of
any applicable jurisdiction.
Section 28. No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Seller or RFC, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exhaustive of any rights, remedies,
powers and privileges provided by law.
Section 29. Counterparts. This Agreement may be executed in two or
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
Section 30. Third Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto, and, in addition, shall
inure to the benefit of the Trustee and the Investor Certificateholders and
their respective successors and permitted assigns. Except as otherwise provided
in this Agreement, no other person will have any right or obligation hereunder;
provided, however, that if so specified in the applicable Supplement to the
Pooling and Servicing Agreement, an Enhancement Provider may be deemed to be a
third party beneficiary of this Agreement.
Section 31. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
Section 32. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
20
<PAGE>
IN WITNESS WHEREOF, the Seller and RFC have caused this Receivable
Purchase Agreement to be duly executed by their respective officers as of the
day and year first above written.
AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC.,
as Seller
By
----------------------------------
Name:
Title:
AMERICAN EXPRESS RECEIVABLES
FINANCING CORPORATION,
as Purchaser
By
----------------------------------
Name:
Title:
21
<PAGE>
EXHIBIT A
---------
FORM OF ASSIGNMENT,OF RECEIVABLES IN ADDITIONAL ACCOUNTS
(As required by Subsection 10(b)(ii) of
the Receivable Purchase Agreement)
ASSIGNMENT No. ____ OF ADDITIONAL RECEIVABLES IN ACCOUNTS,
dated as of _______________, by and between AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC., a New York corporation, as Seller (the "Seller") and
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION, a Delaware corporation
("RFC"), pursuant to the Receivables Purchase Agreement referred to below.
W I T N E S S E T H:
WHEREAS, the Seller and RFC are parties to the Receivable
Purchase Agreement, dated as of June 30, 1992 (hereinafter as such agreement
may have been or may from time to time be, amended, supplemented or otherwise
modified, the "Receivable Purchase Agreement");
WHEREAS, the Seller wishes, pursuant to Section 10(a) of the
Receivable Purchase Agreement, to designate Additional Accounts of the Seller
to be included as Accounts and to sell the Receivables of such Additional
Accounts, whether now existing or hereafter created, to RFC, and RFC will
transfer the Receivables of such Additional Accounts to the American Express
Master Trust to become a part of the corpus of the Trust (the "Trust") pursuant
to Section 2.06 of the Master Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement") dated as of June 30, 1992, between RFC as Transferor,
American Express Travel Related Services Company, Inc., as Servicer and The
Bank of New York, as Trustee (the "Trustee"); and
WHEREAS, RFC is willing to accept such designation and
conveyance of the Receivables in the Additional Accounts subject to the terms
and conditions hereof;
NOW THEREFORE, the Seller and RFC hereby agree as follows:
1. Defined Terms. All terms defined in the Pooling and
Servicing Agreement and used herein shall have such defined meanings when used
herein, unless otherwise defined herein.
"Additional Account Closing Date" shall mean, with respect to
the Additional Accounts designated hereby, ____________, 19__.
"Additional Account Cut Off Date" shall mean, with respect to
the Additional Accounts designated hereby, ____________, 19__.
"Addition Selection Date" shall mean, with respect to the
Additional Accounts designated hereby, ____________.
A-1
<PAGE>
2. Designation of Additional Accounts. The Seller shall
deliver to RFC on the Additional Account Closing Date, a computer file or
microfiche list containing a true and complete list of each Account which as of
the Additional Account Closing Date shall be deemed to be an Additional
Account, such accounts being identified by account number and by the aggregate
Receivables balance in such accounts as of the close of business on the
Additional Account Cut Off Date. Such list shall be marked as Schedule 1 to
this Assignment and, as of the Additional Account Closing Date, shall be
incorporated into and made a part of this Assignment and the Receivable
Purchase Agreement.
3. Conveyance of Receivables. (a) The Seller does hereby
sell, transfer, assign, set-over and otherwise convey to RFC without recourse
on and after the Additional Account Closing Date, all right, title and interest
of the Seller in and to the Receivables now existing and hereafter created in
the Additional Accounts designated on Schedule 1, all monies due or to become
due on and after the Additional Account Cut Off Date and all amounts received
with respect thereto, including all Recoveries related thereto, and all
proceeds thereof.
(b) In connection with such transfer, the Seller agrees to
record and file, at its own expense, financing statements with respect to the
Receivables now existing and hereafter created in the Additional Accounts
designated on Schedule 1 (which may be a single financing statement with
respect to all such Receivables) for the transfer of accounts and general
intangibles as defined in Section 9-106 of the UCC as in effect in the Relevant
UCC State meeting the requirements of Relevant UCC State law in such manner and
such jurisdictions as are necessary to perfect the sale and assignment of such
Receivables to RFC, and to deliver a file-stamped copy of such financing
statement or other evidence of such filing (which may, for purposes of this
Section 3. consist of telephone confirmation of such filing, confirmed within
24 hours in writing) to RFC on or prior to the Additional Account Closing Date.
(c) In connection with such transfer, the Seller further
agrees, at its own expense, on or prior to the Additional Account Closing Date,
to indicate clearly and unambiguously in its computer files that Receivables
created in connection with the Additional Accounts designated hereby have been
conveyed to RFC pursuant to this Assignment.
4. Acceptance by RFC. RFC hereby acknowledges its acceptance
of all right, title and interest previously held by the Seller in and to the
Receivables now existing and hereafter created. RFC further acknowledges that,
prior to or simultaneously with the execution and delivery of this Assignment,
the Seller delivered to RFC the computer file or microfiche list described in
Section 2 of this Assignment.
5. Representations and Warranties of the Seller. The Seller
hereby represents and warrants to RFC as of the Additional Account Closing Date
that:
(a) Legal Valid and Binding Obligation. This Assignment
constitutes a legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect affecting the enforcement of
creditors' rights in general and except as such enforceability may be limited
by general principles of equity (whether considered in a suit at law or in
equity).
A-2
<PAGE>
(b) Eligibility of Accounts. Each Additional Account
designated hereby as of the Addition Selection Date is an Eligible Account.
(c) Selection Procedures. No selection procedures believed by
the Seller to be materially adverse to the interests of any outstanding Series
of Investor Certificates or any Enhancement Provider were utilized in selecting
the Additional Accounts designated hereby from the available Eligible Accounts
in the Seller's portfolio of charge card accounts.
(d) Insolvency. The Seller is not insolvent and, after giving
effect to the conveyance set forth in Section 3 of this Assignment, will not be
insolvent.
(e) Security Interest. This Assignment constitutes a valid
transfer and assignment to RFC of all right, title and interest of the Seller
in and to Receivables now existing and hereafter created in Additional Accounts
designated on Schedule 1 hereto, all monies due or to become due with respect
thereto on and after the Additional Account Cut Off Date, Recoveries and all
proceeds of such Receivables to the extent set forth in Section 9-306 of the
UCC in effect in the Relevant UCC State of such Receivables, and such
Receivables and all proceeds thereof will be conveyed to RFC free and clear of
any Lien of any Person claiming through or under the Seller or any of its
Affiliates except for Liens permitted under subsection 12(b) of the Receivable
Purchase Agreement.
6. Conditions Precedent. The acceptance of RFC set forth in
Section 4 and the amendment of the Receivable Purchase Agreement set forth in
Section 7 are subject to the satisfaction, on or prior to the Additional
Account Closing Date, of the following conditions precedent:
(a) Officer's Certificate. The Seller shall have delivered to
RFC an Officer's Certificate, certifying that (i) all requirements set forth in
Section 10 of the Receivable Purchase Agreement for designating Additional
Accounts and conveying the Receivables of such Accounts, whether now existing
or hereafter created, have been satisfied and (ii) each of the representations
and warranties made by the Seller in Section 5 is true and correct as of the
Additional Account Closing Date. RFC may conclusively rely on such Officer's
Certificate, shall have no duty to make inquiries with regard to the matters
set forth therein, and shall incur no liability in so relying.
(b) Opinion of Counsel. The Seller shall have delivered to
RFC and each Rating Agency an Opinion of Counsel with respect to the
Receivables in the Additional Accounts designated hereby substantially in the
form of Part One of Exhibit C to the Receivable Purchase Agreement.
(c) Additional Information. The Seller shall have delivered
to RFC such information as was reasonably requested by RFC to satisfy itself as
to the accuracy of the representation and warranty set forth in subsection 5(d)
to this Assignment.
7. Amendment of the Receivable Purchase Agreement. The
Receivable Purchase Agreement is hereby amended to provide that all references
therein to the "Receivable Purchase Agreement," to "this Agreement" and
"herein" shall be deemed from and after the Additional Account Closing Date to
be a dual reference to the Receivable Purchase Agreement
A-3
<PAGE>
as supplemented by this Assignment. Except as expressly amended hereby, all of
the representations, warranties, terms, covenants and conditions of the
Receivable Purchase Agreement shall remain unamended and shall continue to be,
and shall remain, in full force and effect in accordance with its terms and
except as expressly provided herein shall not constitute or be deemed to
constitute a waiver of compliance with or a consent to non-compliance with any
term or provision of the Receivable Purchase Agreement.
8. Counterparts. This Assignment may be executed in two or
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
A-4
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this
Assignment of Additional Accounts to be duly executed and delivered by their
respective duly authorized officers on the day and the year first above
written.
AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC.,
as Seller
By
----------------------------------
Name:
Title:
AMERICAN EXPRESS RECEIVABLES
FINANCING CORPORATION,
as Purchaser
By
----------------------------------
Name:
Title:
A-5
<PAGE>
EXHIBIT B
---------
to Receivable Purchase Agreement
Revised
FORM OF SETTLEMENT STATEMENT
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION
RECEIVABLES PURCHASE AGREEMENT
---------------------------------------------
For Preceding Due Period Beginning
___________ and Ending ___________
American Express Travel Related Services Company, Inc. (the
"Seller"), and American Express Receivables Financing Corporation ("RFC"),
pursuant to the Receivable Purchase Agreement (the "Purchase Agreement") dated
as of June 30, 1992, by and between the Seller and RFC, do hereby agree and
certify as follows:
1. Capitalized terms used in this Settlement Statement have
their respective meanings in the Purchase Agreement,
This Settlement Statement is being delivered pursuant to
Section 6 of the Purchase Agreement. References herein
to certain sections are references to the respective
sections in the Purchase Agreement.
2. New Receivables created in Accounts in the preceding Due
Period being settled on this Purchase Date. ---------
Settlement
3. Purchase Price: ---------
4. Payment due to TRS in immediately available funds: ---------
B-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed and
delivered this Settlement Statement this ____ day of ___________, 19__.
AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC.,
as Seller
By
----------------------------------
Name:
Title:
B-2
<PAGE>
EXHIBIT C
---------
FORM OF OPINION OF COUNSEL
PROVISIONS TO BE INCLUDED IN
OPINION OF COUNSEL TO BE
DELIVERED PURSUANT TO
SUBSECTION 10(b)(vi)
--------------------
The opinions set forth below may be subject to certain
qualifications, assumptions, limitations and exceptions taken or made in the
opinion with respect to similar matters delivered on the Closing Date, Such
counsel may rely as to factual matters on certificates of officers of the
Seller.
(i) The Assignment has been duly authorized, executed and
delivered by the Seller and constitutes the valid and legally binding agreement
of the Seller, enforceable against the Seller in accordance with its terms
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditor's rights and to general equity principles.
(ii) with respect to Receivables in existence on the date
hereof, such sale transfers all of the right, title and interest of the Seller
in and to such Receivables to RFC, free and clear of any Liens now existing or
hereafter created;
(iii) with respect to Receivables which come into existence
after the date hereof, upon the creation of such Receivables and the subsequent
transfer of such Receivables to RFC in accordance with the Receivable Purchase
Agreement and receipt by the Seller of the consideration therefor required
pursuant to the Receivable Purchase Agreement, such sale will transfer all of
the right, title and interest of the Seller in and to such Receivables to RFC
free and clear of any Liens;
C-1
<PAGE>
EXHIBIT D
---------
FORM OF REASSIGNMENT OF
RECEIVABLES IN REMOVED ACCOUNTS
(As required by Section 13 of
the Receivables Purchase Agreement)
REASSIGNMENT No. ____ OF RECEIVABLES, dated as of __________,
___, by and between AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., a
New York Corporation, as Seller (the "Seller"), and AMERICAN EXPRESS
RECEIVABLES FINANCING CORPORATIONT a Delaware Corporation ("RFC"), pursuant to
the Receivable Purchase Agreement referred to below.
W I T N E S S E T H:
--------------------
WHEREAS, the Seller and RFC are parties to the Receivable
Purchase Agreement, dated as of June 30, 1992 (hereinafter as such agreement
may have been, or may from time to time be, amended, supplemented or otherwise
modified, the "Receivable Purchase Agreement");
WHEREAS, pursuant to the Master Pooling and Servicing
Agreement, dated as of June 30, 1992, by and between RFC as Transferor,
American Express Travel Related Services Company, Inc., as Servicer, and The
Bank of New York, as trustee (the "Trustee"), RFC wishes to remove all
Receivables in certain designated Accounts of RFC (the "Removed Accounts") from
the American Express Master Trust (the "Trust") and to cause the Trustee to
transfer the Receivables of such Removed Accounts, whether now existing or
hereafter created, from the Trust to RFC;
WHEREAS, pursuant to Section 13 of the Receivable Purchase
Agreement, RFC wishes to reconvey to the seller the Receivables in the Removed
Accounts; and
WHEREAS, the Seller is willing to accept the reconveyance of
the Receivables in the Removed Accounts subject to the terms and conditions
hereof;
NOW, THEREFORE, the Seller and RFC hereby agree as follows:
1. Defined Terms. All terms defined in the Pooling and
Servicing Agreement and used herein shall have such defined meanings when used
herein, unless otherwise defined herein.
"Removal Date" shall mean, with respect to the Removed
Accounts designated hereby, ___________,19__.
"Removal Notice Date" shall mean, with respect to the Removed
Accounts designated hereby, __________, ________ (which shall be a date on or
prior to the tenth Business Day prior to the Removal Date).
D-1
<PAGE>
2. Designation of Removed Accounts. The Seller shall deliver
to the Trustee, not later than three Business Days after the delivery of this
Reassignment, a computer file or microfiche list containing a true and complete
list of each Account which as of the Removal Date shall be deemed to be a
Removed Account, such accounts being identified by account number and by the
aggregate Receivables balance in such Removed Accounts as of the Removal Notice
Date. Such list shall be marked as Schedule 1 to this Reassignment and shall be
incorporated into and made a part of this Reassignment and the Receivables
Purchase Agreement as of the Removal Date.
3. Conveyance of Receivables. (a) RFC does hereby sell,
transfer, assign, set over and otherwise convey to the Seller, without recourse
or representation (included those implied by law) on and after the Removal
Date, all right, title and interest of RFC in and to the Receivables now
existing and hereafter created in the Removed Accounts designated on Schedule 1
hereto, all monies due or to become due and all amounts received with respect
thereto, including all Recoveries related thereto, and all proceeds thereof.
(b) In connection with such sale, RFC agrees to execute and
deliver to the Seller on or prior to the date of this Reassignment, a
termination statement with respect to the Receivables now existing and
hereafter created in the Removed Accounts designated hereby (which may be a
single termination statement with respect to all such Receivables) evidencing
the release by RFC of its lien on the Receivables in the Removed Accounts, and
meeting the requirements of applicable state law, in such manner and such
jurisdictions as are necessary to remove such lien.
4. Acceptance by RFC. RFC hereby acknowledges that, prior to
or simultaneously with the execution and delivery of this Reassignment, the
Seller delivered to RFC the computer file or microfiche list represented by the
Seller to be as described in Section 2 of this Reassignment.
5. Representations and Warranties of the Seller. The Seller
hereby represents and warrants to RFC as of the Removal Date:
(a) Valid and Legally Binding Obligation. This Reassignment
constitutes a valid and legally binding obligation of the Seller enforceable
against the Seller in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect affecting the enforcement of creditors' rights in general and except
as such enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity); and
(b) Selection Procedures. No selection procedures believed by
such Seller to be materially adverse to the interests of any outstanding Series
of Investor Certificates or any Enhancement Provider were utilized in selecting
the Removed Accounts designated hereby.
6. Conditions Precedent. The amendment of the Receivable
Purchase Agreement set forth in Section 7 hereof is subject to the
satisfaction, on or prior to the Removal Date, of the following condition
precedent:
D-2
<PAGE>
(a) Officer's Certificate. The Seller shall have delivered to
RFC an Officer's Certificate certifying that (i) on the Removal Date, all
requirements set forth in Section 13 of the Receivable Purchase Agreement for
designating Removed Accounts and reconveying the Receivables of such Removed
Accounts, whether now existing or hereafter created, have been satisfied, and
(ii) each of the representations and warranties made by the Seller in Section 5
hereof is true and correct as of the Removal Date. RFC may conclusively rely on
such Officer's Certificate, shall have no duty to make inquiries with regard to
the matters set forth therein and shall incur no liability in so relying.
7. Amendment of the Receivable Purchase Agreement. The
Receivable Purchase Agreement is hereby amended to provide that all references
therein to the "Receivable Purchase Agreement," to "this Agreement" and
"herein" shall be deemed from and after the Removal Date to be a dual reference
to the Receivable Purchase Agreement as supplemented by this Reassignment.
Except as expressly amended hereby, all of the representations, warranties,
terms, covenants and conditions of the Receivable Purchase Agreement shall
remain unamended and shall continue to be, and shall remain, in full force and
effect in accordance with its terms and except as expressly provided herein
shall not constitute or be deemed to constitute a waiver of compliance with or
a consent to noncompliance with any term or provision of the Receivable
Purchase Agreement.
8. Counterparts. This Reassignment may be executed in two
or more counterparts (and by different parties on separate counterparts), each
of which shall be an original, but all of which together shall constitute one
and the same instrument,
D-3
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this
Reassignment of Receivables to be duly executed and delivered by their
respective duly authorized officers on the day and year first above written.
AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC.,
as Seller
By
-----------------------------------
Name:
Title:
AMERICAN EXPRESS RECEIVABLES
FINANCING CORPORATION,
as Purchaser
By
----------------------------------
Name:
Title:
D-4
<PAGE>
Schedule 1
----------
to Reassignment
of Receivables
REMOVED ACCOUNTS
----------------
D-5
<PAGE>
AMENDMENT NO. 1 TO RECEIVABLE PURCHASE AGREEMENT
AMENDMENT No. 1, dated as of September 12, 1994, to the Receivable
Purchase Agreement, dated as of June 30, 1992 (the "Agreement"), between
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., a corporation organized
under the laws of the State of New York, as Seller of the Receivables
("Seller"), and AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION, a Delaware
corporation, as Purchaser of the Receivables ("RFC"). Capitalized terms used
herein and not defined herein have the respective meanings assigned to them in
the Agreement.
W I T N E S S E T H:
WHEREAS, pursuant to Section 21(a) of the Agreement, the Agreement may
be amended from time to time by the Seller and RFC, without the consent of the
Trustee or any of the Investor Certificateholders, among other things, to add
any provisions to or change in any manner or eliminate any provisions of the
Agreement; provided, however, that (i) the Servicer shall have provided to the
Trustee an Officer's Certificate to the effect that such amendment will not
materially and adversely affect the interests of the Investor
Certificateholders, (ii) such amendment shall not, as evidenced by an Opinion
of Counsel satisfactory to the Trustee, cause certain adverse tax consequences
and (iii) the Rating Agencies confirm that such amendment will not result in
the reduction or withdrawal of the rating of any outstanding Series of Investor
Certificates;
WHEREAS, American Express Travel Related Services Company, Inc.
("TRS") and its affiliates, AMEX Life Assurance Company and American Centurion
Life Assurance Company (AMEX Life Assurance Company and American Centurion Life
Assurance Company and any other affiliates of American Express Company that
shall offer such program are hereinafter referred to as "Amex Life") offer an
annuity program called "Privileged Assets" to obligors with respect to American
Express Card accounts ("Cardmembers");
WHEREAS, Cardmembers who enroll in Privileged Assets enter into an
annuity contract with Amex Life pursuant to which such enrollees make voluntary
annuity contributions, which contributions do not constitute Receivables as
defined in the Pooling and Servicing Agreement or in the Agreement;
WHEREAS, Privileged Assets Billed Amounts are treated by TRS, as
Servicer under the Pooling and Servicing 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 pursuant to Section 3.08(a) of the Pooling and Servicing Agreement
if they are not paid within 60 days of first being billed;
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and delivered by their respective duly authorized officers on the date
and year first above written.
AMERICAN EXPRESS TRAVEL RELATED
SERVICES COMPANY, INC.
as Seller
By:
------------------------------
Name:
Title:
AMERICAN EXPRESS RECEIVABLES
FINANCING CORPORATION
as Purchaser
By:
-------------------------------
Name:
Title:
The Trustee acknowledges that it has received an Officer's Certificate
and an Opinion of Counsel satisfactory to the Trustee pursuant to Section 21(a)
of the Agreement, copies of which are attached hereto. The Trustee also
acknowledges that it has furnished or caused to be furnished written
notification of the substance of this amendment to the Rating Agencies.
Attached hereto are copies of the confirmation of the Rating Agencies required
pursuant to Section 21(a).
THE BANK OF NEW YORK,
as Trustee
By:
---------------------------------
Name:
Title:
2
<PAGE>
Amendment No. 2
to Receivable Purchase Agreement
AMENDMENT NO. 2, dated as of August 7, 1997 (the "Effective Date"), to
the RECEIVABLE PURCHASE AGREEMENT, dated as of June 30, 1992 (as amended and
otherwise supplemented prior to the Effective Date, the "Receivable Purchase
Agreement"), between AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., a
corporation organized and existing under the laws of the State of New York, as
the Seller of the Receivables (the "Seller"), and AMERICAN EXPRESS RECEIVABLES
FINANCING CORPORATION, a corporation organized and existing under the laws of
the State of Delaware, as the Purchaser of the Receivables ("RFC").
Each capitalized term that is used, but not defined, herein shall have
the meaning specified in the Receivable Purchase Agreement.
WHEREAS, pursuant to Section 3.08 of the Pooling and Servicing
Agreement, the Servicer may from time to time, at the request of RFC, and
pursuant to the written instructions of RFC, adjust downward the amount of
Receivables in Adjusted Accounts (as such term is defined below) without
receiving any Collections therefor;
WHEREAS, the Seller and RFC wish to amend the Receivable Purchase
Agreement (in the manner set forth below) so that the Purchase Price payable by
RFC to the Seller pursuant to the Receivable Purchase Agreement shall not be
subject to a Credit Adjustment as a result of such adjustment downward of the
amount of any Receivables in Adjusted Accounts;
WHEREAS, pursuant to Section 21(a) of the Receivable Purchase
Agreement, such amendment may be effected without the consent of any of the
Investor Certificateholders;
NOW, THEREFORE, pursuant to Section 21(a) of the Receivable Purchase
Agreement, the Seller and RFC hereby agree as follows:
1. New Defined Terms. Paragraph C (entitled "Definitions") appearing on page
of the Receivable Purchase Agreement is hereby amended by inserting the
following text immediately after the first and only sentence thereof:
In addition, whenever used herein, the following capitalized terms
shall have the meanings set forth below:
(a) "Adjusted Accounts Report" shall mean the re ort of RFC,
substantially in the form of Exhibit E attached hereto, to be dated on
or before the Determination Date with respect to the prior Due Period,
pursuant to which RFC shall report or cause to be reported (i) the
account numbers and Receivable balance of the Adjusted Accounts on the
date (the "Adjustment Date") the Adjusted Account was adjusted to zero
without receiving any Collections therefor
<PAGE>
with respect to Cycle 9 for the second preceding Due Period and Cycles
1 through 8 for the immediately preceding Due Period and (ii) the
Adjustment Date.
(b) "Adjusted Account" shall mean any Account the Receivables
of which have been adjusted to zero pursuant to Section 3.08 of the
Pooling and Servicing Agreement, but for reasons unrelated to rebates,
refunds, unauthorized charges, or billing errors to obligors, or
because such Receivable was created in respect of merchandise which
was refused or returned by an Obligor, in each case identified by
account number, Receivable balance and Adjustment Date, and reflected
in the books and records of the Servicer.
2. Amendment of Section 5 of the Receivable Purchase Agreement. As of
the Effective Date, Section 5 of the Receivable Purchase Agreement is hereby
amended and restated in its entirety to read as follows:
Section 5. Adjustments to Purchase Price. Subject to the
exception described in the next sentence, (a) the Purchase Price shall
be adjusted (a "Credit Adjustment") with respect to any Receivable
adjusted as provided in subsection 3.08(a) of the Pooling and
Servicing Agreement, and (b) to the extent that RFC is required
thereunder to pay any amount to the Servicer for deposit into the
Collection Account, the Seller shall pay to RFC the amount required to
be paid to the Servicer thereunder. Notwithstanding any of the
foregoing, (a) a Credit Adjustment shall not be made with respect to
the adjustment to zero of any Receivables in an Adjusted Account
pursuant to subsection 3.08(a) of the Pooling and Servicing Agreement,
and (b) notwithstanding any adjustment to zero described in clause (a)
of this sentence, the Purchase Price shall remain unaffected and the
Seller shall not be obligated, under this Section 5 or any other
provision of this Agreement or the Pooling and Servicing Agreement, to
pay or otherwise credit any amount to RFC, the Servicer or the Trust
in connection with such adjustment. RFC shall provide or cause to be
provided to the Trustee, on or before each Determination Date, an
Adjusted Accounts Report for the immediately preceding Due Period.
3. New Exhibit E. As of the Effective Date, Exhibit E attached hereto
shall be added to the exhibit section of, and shall be deemed to constitute
Exhibit E to, the Receivable Purchase Agreement.
4. Conditions Precedent. As contemplated by Section 21(a) of the
Receivable Purchase Agreement, the effectiveness of this Amendment as of the
Effective Date shall be subject to the satisfaction of the following conditions
precedent:
(a) the Servicer shall have provided to the Trustee an Officer's
Certificate to the effect that the amendments to the Receivable
Purchase Agreement and the transactions contemplated hereby will not
materially and adversely affect any of the Investor
Certificateholders;
(b) each Rating Agency rating any of the Investor Certificates shall
have confirmed that the execution and delivery of this Amendment by
the parties
2
<PAGE>
hereto and the transactions contemplated hereby will not result in the
reduction or withdrawal of its rating of any of the Investor
Certificates; and
(c) Orrick, Herrington & Sutcliffe LLP, counsel to the Seller and RFC,
shall have delivered to the Trustee an opinion (which shall be
satisfactory to the Trustee) to the effect that the execution and
delivery of this Amendment by the parties hereto will not cause the
Trust to be characterized for U.S. federal income tax purposes as an
association taxable as a corporation or adversely affect the treatment
of any of the Investor Certificates as debt for U.S. federal income
tax purposes.
5. No Further Amendments. Except as expressly amended hereby, the
Receivable Purchase Agreement shall remain unmodified and in full force and
effect.
6. GOVERNRNG LAW. THIS AMENDMENT AND THE RECEIVABLE PURCHASE
AGREEMENT, AS AMENDED HEREBY, SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT-OF-LAWS PROVISIONS; AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
7. Counterparts. This Amendment may be executed in counterparts, all
of which, together, shall constitute one and the same agreement.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their names to be
signed hereto by their respective, duly authorized officers.
AMERICAN EXPRESS TRAVEL
RELATED SERVICES COMPANY,
INC.,
as Seller of the Receivables and as Sevicer
By:
-------------------------------------------
Name.
Title:
AMERICAN EXPRESS RECEIVABLES
FINANCING CORPORATION,
as Purchaser of the Receivables
By:
-------------------------------------------
Name:
Title
ACKNOWLEDGED AND ACCEPTED BY:
THE BANK OF NEW YORK,
as the Trustee
By:
-----------------------------
Name:
Title:
4
<PAGE>
Exhibit E
Adjusted Accounts Report
[Date]
We refer to (i) the Master Pooling and Servicing Agreement
dated as of June 30, 1992, as amended and supplemented (the "Pooling
Agreement"), among American Express Receivables Financing Corporation ("RFC"),
as Transferor, American Express Travel Related Services Company, Inc. ("TRS"),
as Servicer; and The Bank of New York, as Trustee, related to the American
Express Master Trust, and (ii) the Receivable Purchase Agreement dated as of
June 30, 1992, as amended and supplemented (the "RPA"), between RFC, as Buyer,
and TRS, as Seller. Each capitalized term used but not defined herein or in the
RPA shall have the meaning specified in the Pooling Agreement.
As contemplated by Section 5 of the RPA, we have enclosed
herewith a [list][microfiche] identifying certain Accounts (hereinafter
"Adjusted Accounts") by (i) account number and outstanding Receivables balance
as of the Adjustment Date and (ii) the Adjustment Date. Such Accounts have been
adjusted to zero on the books and records of the Servicer pursuant to Section
3.08(a) of the Pooling Agreement for reasons unrelated to rebates, refunds,
unauthorized charges, or billing errors to Obligors, or because such Receivable
was created in respect of merchandise which was refused or returned by an
Obligor.
AMERICAN EXPRESS RECEIVABLES
FINANCING CORPORATION, the Transferor
By:
--------------------------------------
Name:
Title:
<PAGE>
EXHIBIT 24.1
AMERICAN EXPRESS CENTURION BANK
POWER OF ATTORNEY
American Express Centurion Bank, a Utah industrial loan corporation
(the "Company"), and each of the undersigned officers and directors of the
Company, hereby constitute and appoint Gilbert E. Ahye, Robert D. Kraus and
Maureen Ryan, jointly and severally, will 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 Receivable Trust Certificates
to be issued by the American Express Master Trust: a registration statement
under the Securities Act of 1933, including any amendments thereto, on behalf
of the Company, 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 Centurion Bank has caused this
Power of Attorney to be executed in its name by its Chief Executive Officer
and attested by its Assistant Secretary, and the undersigned officers and
directors have hereunto set their hand as of the 30th day of April 1998.
AMERICAN EXPRESS CENTURION BANK
By: /s/ Frank L. Skillern
---------------------------
Frank L. Skillern
Chief Executive Officer
ATTEST:
/s/ Robert D. Kraus
- ------------------------------
Robert D. Kraus
Assistant Secretary
<PAGE>
- ------------------------------ -------------------------------
Phillip J. Riese Peter A. Lefferts
Director and Chairman of the Board Director
/s/ Frank L. Skillern /s/ John J.P. McDonnell
- ------------------------------ -------------------------------
Frank L. Skillern John J.P. McDonnell
Director and Chief Executive Officer Director
(Principal Executive Officer)
/s/ David E. Poulsen /s/ Raymond F. Pettit
- ------------------------------ -------------------------------
David E. Poulsen Raymond F. Pettit
Director, President and chief Credit Director
Officer
/s/ Gilbert E. Ahye /s/ Roslyn M. Watson
- ------------------------------ -------------------------------
Gilbert E. Ahye Roslyn M. Watson
Director Director
/s/ Maria J. Garciaz /s/ Jim F. Welch
- ------------------------------ -------------------------------
Maria J. Garciaz Jim F. Welch
Director Director
/s/ Ashwini Gupta /s/ Rhonda M. Halpern
- ------------------------------ -------------------------------
Ashwini Gupta Rhonda M. Halpern
Director Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
Exhibit 24.2
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
