<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-51045
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 20, 1998)
$1,000,000,000
AMERICAN EXPRESS MASTER TRUST
5.90% CLASS A ACCOUNTS RECEIVABLE TRUST CERTIFICATES,
SERIES 1998-1
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AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION
[LOGO] AMERICAN EXPRESS CENTURION BANK
TRANSFERORS
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AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
SERVICER
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Each of the 5.90% 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'), in
accordance with 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
(cover sheet continued on next page)
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POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER CONSIDERATIONS, THE
INFORMATION SET FORTH IN THE SECTIONS ENTITLED 'RISK FACTORS' COMMENCING
ON PAGE S-12 HEREIN AND ON PAGE 18 IN THE PROSPECTUS.
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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.
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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.
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<CAPTION>
UNDERWRITING
PRICE TO DISCOUNT AND PROCEEDS TO
PUBLIC(1) COMMISSIONS TRANSFEROR(1)(2)
<S> <C> <C> <C>
Per Class A Certificate........... 99.9375% 0.275% 99.6625%
Total............................. $999,375,000 $2,750,000 $996,625,000
</TABLE>
(1) Plus accrued interest, if any, at the Class A Certificate Rate from May 27,
1998.
(2) Before deducting expenses payable by the Transferors, expected to be
approximately $450,000.
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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 27, 1998, through the facilities of The Depository Trust Company,
Cedel Bank, societe anonyme and the Euroclear System.
LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
MORGAN STANLEY DEAN WITTER
BLAYLOCK & PARTNERS, L.P.
CREDIT LYONNAIS SECURITIES (USA) INC.
HSBC MARKETS
UTENDAHL CAPITAL PARTNERS, L.P.
May 20, 1998
<PAGE>
(continued from previous page)
the pay-in-full portion of certain designated American Express(Registered) Card,
American Express(Registered) Gold Card and Platinum Card(Registered) 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 $58,201,059 aggregate initial amount of 6.05% 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 the
Closing Date 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 a 'DISTRIBUTION
DATE'), commencing June 15, 1998. The principal of the Class A Certificates is
payable in full on May 15, 2003 (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; however, no assurance can be given that such listing will be
obtained. For the status of such listing, Certificateholders should consult with
Banque Generale du Luxembourg, the Luxembourg Listing Agent for the
Certificates, at 50, Avenue J.F. Kennedy, L-2951, Luxembourg, phone number
352-4242-3175.
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 May 20, 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-2
<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.
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Type of Security.......................... 5.90% 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 Pooling and Servicing Agreement, dated as of June 30, 1992, as
amended by the Amended and Restated Pooling and Servicing Agreement,
dated as of May 1, 1998, and as 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 all outstanding
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
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S-3
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opening of 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 March 31, 1998 was $5,715,737,001. 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 May 15, 2003 (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).
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S-4
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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 6.05% 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 Controlled 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 a 'DISTRIBUTION 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 Distribution Date will include accrued interest at the Class A
Certificate Rate from and including the preceding Distribution Date
or, in the case of the first Distribution Date, from and including
the Closing Date, to but excluding such Distribution Date. Interest
for any Distribution Date or Special Payment Date due but not paid on
any Distribution Date or Special Payment Date will be due on the next
succeeding Distribution 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
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S-5
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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 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
the initial principal amount of $1,000,000,000 (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 to 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
Distribution 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 May 27, 1998, and ending on the day prior to the day on which the
earlier of the Controlled 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
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S-6
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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 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 Controlled Accumulation
Period and therefore extend the length of the Revolving Period.
Controlled 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 the last
day of the Due Period ending in February 2003, and ending on the last
day of the Due Period ending in April 2003 (the 'CONTROLLED
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 Controlled
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 Controlled 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 Controlled Accumulation Period may be
postponed, see 'Description of the Class A Certificates and the
Agreement--Postponement of the Controlled 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
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time. Thereafter, principal and interest payments will be made to
Class A Certificateholders monthly on each Special Payment Date.
During either the Controlled 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 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:
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(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
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Revolving Period or deposited in the Principal Funding
Account and included in Class A Monthly Principal during the
Controlled Accumulation Period or paid to Class A
Certificateholders during any Early Amortization Period;
(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 Controlled 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
Controlled Accumulation Period or paid to Class A
Certificateholders during any Early Amortization Period;
(viii) on each Distribution Date from and after the Reserve Account
Funding Date, but prior to the date on which the Reserve
Account terminates as described under 'Description of the
Class A Certificates and the Agreement--Reserve Account'
herein, an amount up to the excess, if any, of the Required
Reserve Account Amount over the Available Reserve Account
Amount shall be deposited into the Reserve Account; and
(ix) any Yield Collections allocated to the Certificateholders'
Interest remaining after giving effect to the above-
described distributions and allocations (with respect to
each Distribution Date, 'EXCESS SPREAD'), will be made
available for allocation to other Excess Allocation Series
or paid to the Transferors as described in 'Description of
the Certificates--Sharing of Excess Yield Collections Among
Excess Allocation Series' in the Prospectus.
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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
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$58,201,059 (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 Controlled
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 Controlled 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 Controlled 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 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 $105,820,105 (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
</TABLE>
S-10
<PAGE>
<TABLE>
<S> <C>
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 April 2004 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.
Excess Yield Collections.................. Series 1998-1 has been designated as an Excess Allocation Series.
Series 1998-1 is currently the only Series designated as an Excess
Allocation Series. Subsequent Series may or may not be designated as
Excess Allocation Series. See 'Description of the Certificates--
Sharing of Excess Yield Collections Among Excess Allocation Series'
in the Prospectus.
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 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-11
<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-12
<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>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------ -----------------------------------------
1998 1997 1996 1995
------------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Charge Volume and Fees(1)..................... $ 15,765,340 $65,311,110 $62,207,966 $57,792,171
Average Receivables Outstanding(2)............ $ 7,596,368 $ 7,808,748 $ 7,385,284 $ 7,287,351
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.
MONTHLY PAYMENT RATES FOR THE PORTFOLIO(1)
<TABLE>
<CAPTION>
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.
S-13
<PAGE>
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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------ --------------------------------------
1998 1997 1996 1995
------------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Computed Yield(1)................................. $529,244 $1,993,964 $1,875,807 $1,757,635
Computed Yield as a Percentage of
Charge Volume and Fees(2)....................... 3.36% 3.05% 3.02% 3.04%
</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.
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.
S-14
<PAGE>
LOSS EXPERIENCE FOR THE PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------ ----------------------------------
1998 1997 1996 1995
------------------ -------- -------- --------
<S> <C> <C> <C> <C>
Gross Losses.................................... $115,938 $495,049 $478,656 $429,761
Gross Losses as a Percentage of
Charge Volume and Fees........................ 0.74% 0.76% 0.77% 0.74%
Recoveries...................................... $ 23,717 $102,317 $ 98,970 $101,988
Recoveries as a Percentage of
Charge Volume and Fees........................ 0.15% 0.16% 0.16% 0.18%
Net Losses...................................... $ 92,221 $392,732 $379,686 $327,773
Net Losses as a Percentage of
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.
PERIODIC NET YIELD COMPUTATION FOR
THE PORTFOLIO ASSUMING A 3.0% YIELD FACTOR
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------ ---------------------------------------
1998 1997 1996 1995
------------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Computed Net Yield............................ $437,023 1,601,233 1,496,121 $1,429,862
Computed Net Yield as a Percentage of
Charge Volume and Fees...................... 2.77% 2.45% 2.41% 2.47%
</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 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.
S-15
<PAGE>
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 THREE MONTHS
ENDED MARCH 31, AVERAGE OF TWELVE MONTHS ENDED DECEMBER 31,
--------------------------- ------------------------------------------------------------------------
1998 1997 1996 1995
--------------------------- --------------------------- --------------------------- ----------
NUMBER OF DAYS DELINQUENT DELINQUENT DELINQUENT DELINQUENT
DELINQUENT(1) AMOUNT PERCENTAGE(2) AMOUNT PERCENTAGE(2) AMOUNT PERCENTAGE(2) AMOUNT
- ----------------- ---------- ------------- ---------- ------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
30 to 59 days.... $143,333 1.96% $144,731 2.02% $147,391 2.13% $139,161
60 to 89 days.... $ 59,100 0.81% $ 65,403 0.91% 66,748 0.97% 57,749
90 to 119 days... $ 42,152 0.58% $ 48,919 0.68% 50,971 0.74% 44,388
120 or more
days........... $177,449 2.43% $194,086 2.71% 189,372 2.74% 171,706
---------- --- ---------- --- ---------- --- ----------
Total(3)....... $422,034 5.78% $453,140 6.32% $454,481 6.58% $413,003
---------- --- ---------- --- ---------- --- ----------
---------- --- ---------- --- ---------- --- ----------
<CAPTION>
NUMBER OF DAYS
DELINQUENT(1) PERCENTAGE(2)
- ----------------- -------------
<S> <C>
30 to 59 days.... 2.16%
60 to 89 days.... 0.90%
90 to 119 days... 0.69%
120 or more
days........... 2.67%
---
Total(3)....... 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-16
<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.
COMPOSITION OF DESIGNATED ACCOUNTS BY ACCOUNT BALANCE
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF TOTAL NUMBER OF RECEIVABLES TOTAL RECEIVABLES
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS OUTSTANDING(1) OUTSTANDING
- ---------------------------------------------- ---------- --------------- -------------- -----------------
<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.
COMPOSITION OF DESIGNATED ACCOUNTS BY PAYMENT STATUS
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF TOTAL NUMBER OF RECEIVABLES TOTAL RECEIVABLES
PAYMENT STATUS(1) ACCOUNTS(2) ACCOUNTS OUTSTANDING(3) OUTSTANDING
- ---------------------------------------------- ---------- --------------- -------------- -----------------
<S> <C> <C> <C> <C>
Current and less than 30 days
delinquent.................................. 9,977,516 97.43% $5,426,605,157 94.94%
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.
(Footnotes continued on next page)
S-17
<PAGE>
(Footnotes continued from previous page)
(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 PERCENTAGE OF
NUMBER OF TOTAL NUMBER OF RECEIVABLES TOTAL 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-18
<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 Controlled 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 2.75, (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 Controlled 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 or Accumulation 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 Controlled
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.
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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 Special Funding 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 $1,000,000,000 and the Class B
Invested Amount was $58,201,059.
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 Distribution Date, commencing June 15, 1998.
Interest for any Distribution Date will include interest at the Class A
Certificate Rate from and including the preceding Distribution Date or, in the
case of the first Distribution Date, from and including the Closing Date, to but
excluding such Distribution 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 any Amortization Period or Accumulation Period to cover principal
payments due to the investor 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.
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Unless and until a Pay Out Event shall have occurred, on each Distribution
Date with respect the Controlled 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
$500,000,000. 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
$500,000,000. 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
Distribution 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 1/1,000,000 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 Controlled 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 Controlled Accumulation Period is not postponed, during the Controlled
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 Controlled 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
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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 Controlled 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
Controlled 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
Controlled 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 0.5% 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 Controlled
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 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
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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
Controlled 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 Controlled 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 B 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 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
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Controlled 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 Controlled
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
Controlled 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 CONTROLLED ACCUMULATION PERIOD
Upon written notice to the Trustee, the Transferors and the Rating Agency,
the Servicer may elect to postpone the commencement of the Controlled
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 December 2002 Distribution Date and thereafter on each
Determination Date until the date the Controlled Accumulation Period begins, the
Servicer will determine the 'CONTROLLED 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 Controlled Accumulation
Period Length is less than the length of the Controlled Accumulation Period
initially provided under the Agreement, the Servicer may, at its option,
postpone the commencement of the Controlled Accumulation Period such that the
number of months included in the Controlled Accumulation Period will be equal to
or exceed the Controlled Accumulation Period Length. The effect of the foregoing
calculation is to permit the reduction of the length of the Controlled
Accumulation Period based on the invested amounts of certain other Series which
are scheduled to be in their revolving periods during the Controlled
Accumulation Period and on increases in the payment rate on the Receivables,
which, if continued, would result in a shorter Controlled Accumulation Period.
The length of the Controlled 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 Controlled 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 Controlled Accumulation Period,
then it is probable that holders of Investor Certificates would receive some of
their principal later than if the Controlled Accumulation Period had not been
delayed.
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:
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(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 Date occurring during the Controlled 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 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 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 Controlled 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
Controlled 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 Controlled Accumulation
Period or any Early Amortization Period;
(viii) on each Distribution Date from and after the Reserve Account
Funding Date, but prior to the date on which the Reserve Account
terminates as described under 'Description of the Class A Certificates
and the Agreement--Reserve Account' herein, an amount up to the excess,
if any, of the Required Reserve Account Amount over the Available
Reserve Account Amount shall be deposited to the Reserve Account; and
(ix) any Yield Collections allocated to the Certificateholders'
Interest remaining after giving
effect to the above-described distributions and allocations (with
respect to each Distribution Date, 'EXCESS SPREAD'), will be made
available for allocation to other Excess Allocation Series or paid to
the Transferors as described in 'Description of the
Certificates--Sharing of Excess Yield Collections Among Excess
Allocation Series' in the Prospectus.
(b) For each Distribution Date with respect to the Controlled
Accumulation Period or any Early Amortization Period and thereafter, the
remaining funds on deposit in the Collection Account with respect to such
Distribution 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;
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<PAGE>
(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, 19/360ths 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,
19/360ths 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 Controlled 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 Controlled 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
Controlled 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 $500,000,000, or, if the Servicer
elects to postpone the commencement of the Controlled Accumulation Period, an
amount sufficient so that the sum of the Controlled Accumulation Amounts for
each Distribution Date during the Controlled 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 Controlled 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 Distribution Date with respect to the
Controlled 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
S-26
<PAGE>
the Collection Account on each Distribution Date with respect to the Controlled
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 Distribution 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 June 15, 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.'
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 $1,139,000,000
(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').
S-27
<PAGE>
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 $105,820,105 (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 April 15, 2004, (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 be
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) July 15, 2092 (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 close of business on the
last day of the Due Period ending in February 2003 and the Controlled
Accumulation Period will begin at such time, unless a Pay Out Event occurs or
unless commencement of the Controlled 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:
(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
S-28
<PAGE>
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 the fifth business day prior to any Distribution Date (the
'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
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
S-29
<PAGE>
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, 19/360ths 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.
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 American Express. 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, RFC, 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 May 20, 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:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF
CLASS A
UNDERWRITERS CERTIFICATES
- ------------------------------------------------------------------ --------------
<S> <C>
Lehman Brothers Inc............................................... 196,000,000
Bear, Stearns & Co. Inc........................................... 196,000,000
Goldman, Sachs & Co............................................... 196,000,000
J.P. Morgan Securities Inc........................................ 196,000,000
Morgan Stanley & Co. Incorporated................................. 196,000,000
Blaylock & Partners, L.P.......................................... 5,000,000
Credit Lyonnais Securities (USA) Inc.............................. 5,000,000
HSBC Securities, Inc.............................................. 5,000,000
Utendahl Capital Partners, L.P.................................... 5,000,000
--------------
Total........................................................... $1,000,000,000
--------------
--------------
</TABLE>
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 0.165% of the principal amount of the Class A Certificates. Underwriters may
allow and such dealers may reallow a concession not in
S-30
<PAGE>
excess of 0.100% 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 in the United Kingdom any document received by
it in connection with the issue or sale of the Class A Certificates to a person
who is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such
document may otherwise lawfully be issued or passed on; (c) if it is an
authorized person under Chapter III of part I of the Financial Services Act
1986, it has only promoted and will only promote (as that term is defined in
Regulation 1.02(2) of the Financial Services (Promotion of Unregulated Schemes)
Regulations 1991) to any person in the United Kingdom the Class A Certificates
described in this Prospectus Supplement and the Prospectus if that person is of
a kind described either in Section 76(2) of the Financial Services Act 1986 or
in Regulation 1.04 of the Financial Services (Promotion of Unregulated Schemes)
Regulations 1991; and (d) it is a person of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exceptions) Order
1996.
The Underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Class A Certificates in accordance with Regulation M under the Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions permit
bids to purchase the Class A Certificates so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases of
the Class A Certificates in the open market after the distribution has been
completed in order to cover syndicate short positions. Penalty bids permit the
Underwriters to reclaim a selling concession from a syndicate member when the
Class A Certificates originally sold by such syndicate member are purchased in a
syndicate covering transaction. Such over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids may cause the
prices of the Class A Certificates to be higher than they would otherwise be in
the absence of such transactions. Neither the Seller nor any of the Underwriters
represent that the Underwriters will engage in any such transactions or that
such transactions, once commenced, will not be discontinued without notice at
any time.
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-31
<PAGE>
GLOSSARY FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
TERM PAGE(S)
- ---- -------
<S> <C>
Agreement........................................................................................ S-3
August 1993 Additional Accounts.................................................................. S-3
Available Reserve Account Amount................................................................. S-23
Certificateholders............................................................................... S-6
Certificateholders' Interest..................................................................... S-4
Certificates..................................................................................... S-2
Class A Adjusted Invested Amount................................................................. S-23
Class A Certificate Owners....................................................................... S-2, 21
Class A Certificate Rate......................................................................... S-4
Class A Certificateholders....................................................................... S-6
Class A Certificates............................................................................. S-1, 3
Class A Initial Invested Amount.................................................................. S-6
Class A Invested Amount.......................................................................... S-23
Class A Investor Charge-Off...................................................................... S-27
Class A Monthly Interest......................................................................... S-26
Class A Monthly Principal........................................................................ S-26
Class B Certificate Rate......................................................................... S-5
Class B Certificateholders....................................................................... S-6
Class B Certificates............................................................................. S-2
Class B Initial Invested Amount.................................................................. S-10
Class B Invested Amount.......................................................................... S-23
Class B Investor Charge-Off...................................................................... S-27
Class B Monthly Interest......................................................................... S-26
Closing Date..................................................................................... S-20
Code............................................................................................. S-11
Controlled Accumulation Amount................................................................... S-26
Controlled Accumulation Period................................................................... S-7
Controlled Accumulation Period Length............................................................ S-24
Controlled Deposit Amount........................................................................ S-26
Covered Amount................................................................................... S-22
Cut Off Date..................................................................................... S-3
Deficit Controlled Accumulation Amount........................................................... S-26
Designated Accounts.............................................................................. S-2, 3
Determination Date............................................................................... S-29
Distribution Date................................................................................ S-2, S-5, S-27
DTC.............................................................................................. S-6
Early Amortization Period........................................................................ S-8
ERISA............................................................................................ S-11
Excess Principal Collections..................................................................... S-24
Excess Spread.................................................................................... S-9, S-25
Expected Final Payment Date...................................................................... S-2, 4
Final Series 1998-1 Termination Date............................................................. S-11, 28
Final Termination Date........................................................................... S-28
Fixed Allocation Percentage...................................................................... S-23
Floating Allocation Percentage................................................................... S-23
Interest Funding Investment Proceeds............................................................. S-22
Invested Amount.................................................................................. S-23
Invested Percentage.............................................................................. S-5
January 1996 Additional Accounts................................................................. S-3
June 1992 Designated Accounts.................................................................... S-3
June 1994 Additional Accounts.................................................................... S-3
</TABLE>
S-32
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE(S)
- ---- -------
<S> <C>
Minimum Trust Principal Component................................................................ S-27
Monthly Servicing Fee............................................................................ S-30
NASD............................................................................................. S-31
Participants..................................................................................... S-21
Pay Out Event.................................................................................... S-28
Principal Funding Account........................................................................ S-7
Principal Funding Investment Proceeds............................................................ S-22
Principal Shortfalls............................................................................. S-24
Rating Agency.................................................................................... S-12
Receivables...................................................................................... S-1
Record Date...................................................................................... S-6
Required Reserve Account Amount.................................................................. S-22
Reserve Account.................................................................................. S-22
Reserve Account Funding Date..................................................................... S-22
Revolving Period................................................................................. S-6
RFC.............................................................................................. S-1
Series........................................................................................... S-3
Series 1998-1 Supplement......................................................................... S-20
Series Minimum Trust Principal Component......................................................... S-27
Series Undistributed Principal Collections....................................................... S-26
Servicer......................................................................................... S-1
Servicing Fee.................................................................................... S-30
Special Payment Date............................................................................. S-27
Termination Payment Date......................................................................... S-26
Transferor....................................................................................... S-1
Transferor Interest.............................................................................. S-4
Transferor Percentage............................................................................ S-23
TRS.............................................................................................. S-1
Trust............................................................................................ S-1, 3
Trust Principal Component........................................................................ S-8
Trustee.......................................................................................... S-1, S-3
Underwriters..................................................................................... S-30
Underwriting Agreement........................................................................... S-30
</TABLE>
S-33
<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
<TABLE>
<S> <C>
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
</TABLE>
2. AMERICAN EXPRESS MASTER TRUST CLASS A AND CLASS B ACCOUNTS RECEIVABLE TRUST
CERTIFICATES, SERIES 1993-1
<TABLE>
<S> <C>
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
</TABLE>
3. AMERICAN EXPRESS MASTER TRUST CLASS A AND CLASS B ACCOUNTS RECEIVABLE TRUST
CERTIFICATE 1994-1
<TABLE>
<S> <C>
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
</TABLE>
S-34
<PAGE>
4. AMERICAN EXPRESS MASTER TRUST CLASS A AND CLASS B ACCOUNTS RECEIVABLE TRUST
CERTIFICATES, SERIES 1994-2
<TABLE>
<S> <C>
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
</TABLE>
5. AMERICAN EXPRESS MASTER TRUST CLASS A AND CLASS B ACCOUNTS RECEIVABLE TRUST
CERTIFICATES, SERIES 1994-3
<TABLE>
<S> <C>
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
</TABLE>
6. AMERICAN EXPRESS MASTER TRUST CLASS A AND CLASS B ACCOUNTS RECEIVABLE TRUST
CERTIFICATES, SERIES 1996-1
<TABLE>
<S> <C>
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
</TABLE>
7. AMERICAN EXPRESS MASTER TRUST CLASS A AND CLASS B ACCOUNTS RECEIVABLE TRUST
CERTIFICATES, SERIES 1996-2
<TABLE>
<S> <C>
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
</TABLE>
S-35
<PAGE>
[This page intentionally left blank]
<PAGE>
AMERICAN EXPRESS MASTER TRUST
ACCOUNTS RECEIVABLE TRUST CERTIFICATES
[LOGO] 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'), in
accordance with 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 the pay-in-full
portion of certain designated American Express(Registered) Card, American
Express(Registered) Gold Card and Platinum Card(Registered) 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 otherwise specified in the
related Prospectus
(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 18 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 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 May 20, 1998.
<PAGE>
(continued from previous page)
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 Transferors, 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(Registered) Card, American Express(Registered) Gold
Card and Platinum Card(Registered) 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.
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.
2
<PAGE>
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 Exchange Act, and the rules and regulations of
the Commission thereunder. In addition, the Commission maintains 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.
3
<PAGE>
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 May 1, 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.
Trustee................................... The Bank of New York, unless otherwise specified in the related
Prospectus Supplement (the 'TRUSTEE').
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 the
pay-in-full portion of certain designated American
Express(Registered) Card, American Express(Registered) Gold Card and
Platinum Card(Registered)* 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
</TABLE>
- ------------------
* American Express and Platinum Card are registered trademarks of American
Express Company.
4
<PAGE>
<TABLE>
<S> <C>
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 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
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
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 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 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 and
including the May 1998 Distribution Date, the period from and
including the first day of the immediately preceding 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
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
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, 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
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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 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, a 'DISTRIBUTION 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 Distribution 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 Distribution 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 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
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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 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
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be payable to Certificateholders until the Principal Commencement
Date or the Expected Final Payment Date with respect 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 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
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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 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.
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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 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 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.
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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 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'
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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
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.'
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
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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 any
Accumulation Period 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 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 either
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
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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 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 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
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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 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
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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 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.
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
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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
Investors Service Inc. ('MOODY'S') and Standard and Poor's ('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.
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(Registered), Morgan Stanley Dean Witters' NOVUS(SM)
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.
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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 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
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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.'
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 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.'
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
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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.'
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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. Centurion Bank may
cause the Accounts to be combined into larger, multifunctional accounts that
would offer to the Cardmembers other credit 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 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.
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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 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
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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.
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(Registered) Travelers Cheques,
corporate and consumer travel products and services, magazine publishing,
database marketing and management and insurance. Credco is a wholly owned
subsidiary of TRS primarily engaged in the business of purchasing certain
Cardmember receivables generated by TRS and its subsidiaries.
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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 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.
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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 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.
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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 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 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
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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 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
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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 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.
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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.
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 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.
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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 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
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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 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.
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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 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 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
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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
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
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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.
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
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reassignment to them of the Receivables from Removed Accounts only upon
satisfaction of the 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 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.
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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 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
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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 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:
(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.
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(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 believe 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.
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 any
Accumulation Period or 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.
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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 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).
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 the 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
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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 RFC
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
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
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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 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 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.
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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 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
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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 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 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
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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.'
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.
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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 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.
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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.
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
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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.
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
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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.
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 RFC Receivable Purchase Agreement, dated as of June 30, 1992, as amended and
supplemented, between RFC, as purchaser, and TRS, as seller (the 'RFC RECEIVABLE
PURCHASE AGREEMENT'). (A copy of the RFC 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 RFC Receivable
Purchase Agreement.
SALE OF RECEIVABLES
Under the RFC 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 RFC 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
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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.
In connection with the sale of the Receivables contemplated by the RFC
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 RFC 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 RFC Receivable Purchase Agreement. TRS and RFC may also agree from time to
time to designate Additional Accounts under the RFC 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 RFC 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 RFC Receivable Purchase Agreement, (b) the RFC Receivable
Purchase Agreement constitutes a legal, valid and binding obligation of TRS, (c)
the RFC 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 RFC 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.
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
RFC 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
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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 RFC 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 RFC Receivable Purchase
Agreement to the Trustee for the benefit of the Certificateholders. TRS also
agrees, for the benefit of the Trustee and any provider of any Enhancement, that
any amounts payable by TRS to RFC pursuant to the RFC 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 RFC 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 RFC 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 RFC 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
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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.'
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.'
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.
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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 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
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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 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 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
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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 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
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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 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.
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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 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.
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.
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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 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
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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.
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 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, RFC 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
Class 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
<TABLE>
<CAPTION>
TERM PAGE(S)
- ---- -------
<S> <C>
Account........................................................................................... 25
Account Originator................................................................................ 22
Accumulation Period............................................................................... 7
Act............................................................................................... 10
Additional Account Closing Date................................................................... 39
Additional Account Cut Off Date................................................................... 20
Additional Account Selection Date................................................................. 27
Additional Accounts............................................................................... 5, 21, 27
Adjustment........................................................................................ 44
Agreement......................................................................................... 4
American Express.................................................................................. 28
Amortization Period............................................................................... 7
Application Process............................................................................... 25
Card.............................................................................................. 21, 25
Cardmember........................................................................................ 25
Cash Collateral Account........................................................................... 53
Cash Collateral Guaranty.......................................................................... 53
CEBA.............................................................................................. 20
Cede.............................................................................................. 3
CEDEL............................................................................................. 32
CEDEL Participants................................................................................ 32
Centurion Bank.................................................................................... cover, 4, 28
Certificate Owners................................................................................ 3
Certificate Rate.................................................................................. 7
Certificateholders................................................................................ 7
Certificateholders' Interest...................................................................... 7
Certificates...................................................................................... cover, 4
Class............................................................................................. 2
Closing Date...................................................................................... 11
Code.............................................................................................. 61
Collateral Interest............................................................................... 53
Collection Account................................................................................ 17, 40
Collections....................................................................................... 6
Commission........................................................................................ 3
Controlled Accumulation Amount.................................................................... 12
Controlled Accumulation Period.................................................................... 11
Controlled Amortization Amount.................................................................... 11
Controlled Amortization Period.................................................................... 11
Controlled Deposit Amount......................................................................... 11
Controlled Distribution Amount.................................................................... 11
Cooperative....................................................................................... 32
Credco............................................................................................ 18
Cut Off Date...................................................................................... 6
Defaulted Receivables............................................................................. 44
Definitive Certificates........................................................................... 33
Depositaries...................................................................................... 31
Depository........................................................................................ 30
Designated Account................................................................................ cover, 4, 27
Disclosure Document............................................................................... 10
Distribution Date................................................................................. 8, 30
DOL............................................................................................... 64
</TABLE>
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<TABLE>
<CAPTION>
TERM PAGE(S)
- ---- -------
<S> <C>
DTC............................................................................................... 10, 71
Due Period........................................................................................ 6
Early Accumulation Period......................................................................... 13
Early Amortization Period......................................................................... 13
Eligible Account.................................................................................. 27
Eligible Institution.............................................................................. 40
Eligible Investments.............................................................................. 40
Eligible Receivable............................................................................... 38
Enhancement....................................................................................... 5
Enhancement Invested Amount....................................................................... 53
ERISA............................................................................................. 64
Euroclear......................................................................................... 32
Euroclear Operator................................................................................ 32
Euroclear Participants............................................................................ 32
Excess Allocation Series.......................................................................... 15
Excess Finance Charge Collections................................................................. 43
Excess Principal Collections...................................................................... 15
Exchange.......................................................................................... 9
Exchange Act...................................................................................... 3
Exchangeable Transferor Certificate............................................................... 8
Expected Final Payment Date....................................................................... 8
FASIT............................................................................................. 61
FDIA.............................................................................................. 19
Final Regulation.................................................................................. 64
Final Termination Date............................................................................ 45
Financial Asset Securitization Investment Trust................................................... 61
FIRREA............................................................................................ 19
Global Securities................................................................................. 71
Holders........................................................................................... 33
Indirect Participants............................................................................. 31
Ineligible Receivable............................................................................. 37
Interest Funding Account.......................................................................... 34
Interest Period................................................................................... 8
Invested Amount................................................................................... 7
Invested Percentage............................................................................... 7
Investor Charge-Off............................................................................... 45
Investor Default Amount........................................................................... 44
IRS............................................................................................... 59
L/C Bank.......................................................................................... 53
MasterCard........................................................................................ 21
Minimum Transferor Percentage..................................................................... 39
Monthly Interest.................................................................................. 14
Monthly Servicer Report........................................................................... 49
Monthly Servicing Fee............................................................................. 48
Moody's........................................................................................... 21
New Accounts...................................................................................... 21
OID............................................................................................... 61
Original Billing Date............................................................................. 26
Participants...................................................................................... 30
Parties in Interest............................................................................... 64
Paying Agent...................................................................................... 31
Payment Date Statement............................................................................ 50
</TABLE>
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<TABLE>
<CAPTION>
TERM PAGE(S)
- ---- -------
<S> <C>
Pay Out Events.................................................................................... 45
Plan.............................................................................................. 64
Portfolio......................................................................................... 27
Pre-approved Process.............................................................................. 25
Principal Collections............................................................................. 23
Principal Commencement Date....................................................................... 8
Principal Funding Account......................................................................... 12
Principal Terms................................................................................... 36
Privileged Assets Calculated Amount............................................................... 44
Privileged Assets program......................................................................... 44
Prospectus Supplement............................................................................. cover
PTCE.............................................................................................. 65
Rapid Amortization Period......................................................................... 12
Rating Agency..................................................................................... 23
Receivables....................................................................................... cover, 4
Record Date....................................................................................... 30
Recoveries........................................................................................ 4
Recovery Arrangement.............................................................................. 26
Regulations....................................................................................... 60
Removed Accounts.................................................................................. 5, 28, 39
Reserve Account................................................................................... 54
Revolving Period.................................................................................. 11
RFC............................................................................................... 4, 28
RFC Receivable Purchase Agreement................................................................. 9
Selection Date.................................................................................... 5
Senior Certificates............................................................................... 7
Series............................................................................................ cover
Series Supplement................................................................................. 4
Series Termination Date........................................................................... 45
Service Transfer.................................................................................. 48
Servicer.......................................................................................... cover, 17
Servicer Default.................................................................................. 49
Servicing Fee..................................................................................... 48
S&P............................................................................................... 21
Special Counsel................................................................................... 59
Special Funding Account........................................................................... 16
Spread Account.................................................................................... 54
Subordinate Certificates.......................................................................... 7
Terms and Conditions.............................................................................. 33
Transfer Deposit Amount........................................................................... 44
Transferor........................................................................................ cover, 28
Transferor Amount................................................................................. 7, 39
Transferor Interest............................................................................... 7, 30
Transferor Percentage............................................................................. 30
TRS............................................................................................... cover, 4, 28
Trust............................................................................................. cover, 4
Trustee........................................................................................... cover, 4
Trust Portfolio................................................................................... 27
Trust Principal Component......................................................................... 14
Trustee........................................................................................... cover
UCC............................................................................................... 18
Underwriters...................................................................................... 66
</TABLE>
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<TABLE>
<CAPTION>
TERM PAGE(S)
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<S> <C>
Undistributed Principal Collections............................................................... 42
U.S. Certificate Owner............................................................................ 59
U.S. Person....................................................................................... 59
VISA.............................................................................................. 21
Withholding Agent................................................................................. 62
Yield Collections................................................................................. 23
Yield Factor...................................................................................... 6
</TABLE>
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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.
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
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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 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:
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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.
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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 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.
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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 Transferors 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Summary............................. S-3
Risk Factors................................... S-12
Domestic Consumer Charge Card Business......... S-13
Designated Accounts............................ S-17
Use of Proceeds................................ S-18
Maturity and Principal Payment
Considerations............................... S-19
Description of the Class A Certificates and the
Agreement.................................... S-20
Legal Matters.................................. S-30
Underwriting................................... S-30
Glossary for Prospectus Supplement............. S-32
Annex I: Other Issuances of Investor
Certificates.......................... S-34
PROSPECTUS
Prospectus Supplement.......................... 3
Reports to Certificateholders.................. 3
Available Information.......................... 3
Incorporation of Certain Documents by
Reference.................................... 3
Prospectus Summary............................. 4
Risk Factors................................... 18
Domestic Consumer Charge Card Business......... 25
The Designated Accounts........................ 27
The Transferors and Related Parties............ 28
The Trust...................................... 29
Maturity and Principal Payment
Considerations............................... 29
Description of the Certificates................ 29
Enhancement.................................... 52
Description of the RFC Receivable Purchase
Agreement.................................... 54
Certain Legal Aspects of the Receivables....... 56
Federal Income Tax Consequences................ 59
State and Local Taxation....................... 64
ERISA Considerations........................... 64
Legal Matters.................................. 65
Plan of Distribution........................... 66
Glossary for the Prospectus.................... 67
Annex 1: Global Clearance, Settlement and
Tax Documentation Procedures.......... 71
</TABLE>
---------------------
Until August 18, 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.
- --------------------------------------------------------------------------------
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$1,000,000,000
AMERICAN EXPRESS
MASTER TRUST
5.90% CLASS A ACCOUNTS
RECEIVABLE
TRUST CERTIFICATES,
SERIES 1998-1
[LOGO]
AMERICAN EXPRESS RECEIVABLES
FINANCING CORPORATION
AND
AMERICAN EXPRESS
CENTURION BANK
TRANSFERORS
AMERICAN EXPRESS
TRAVEL RELATED
SERVICES COMPANY, INC.
SERVICER
------------------------------------------
PROSPECTUS SUPPLEMENT
MAY 20, 1998
------------------------------------------
LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
J.P. MORGAN & CO.
MORGAN STANLEY DEAN WITTER
BLAYLOCK & PARTNERS, L.P.
CREDIT LYONNAIS SECURITIES (USA) INC.
HSBC MARKETS
UTENDAHL CAPITAL PARTNERS, L.P.
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