<PAGE>
Pursuant to Rule 424(b)(2)
File No. 33-95784
[LOGO]
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 17, 1998
AMERICAN EXPRESS CREDIT ACCOUNT MASTER TRUST
$825,000,000 Class A Series 1998-1 Floating Rate Asset Backed Certificates
$80,000,000 Class B Series 1998-1 Floating Rate Asset Backed Certificates
AMERICAN EXPRESS CENTURION BANK
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION II
TRANSFERORS
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
SERVICER
------------------------
The Class A Series 1998-1 Floating Rate Asset Backed Certificates (the 'CLASS A
CERTIFICATES') and the Class B Series 1998-1 Floating Rate Asset Backed
Certificates (the 'CLASS B CERTIFICATES' and, together with the Class A
Certificates, the 'SERIES 1998-1 CERTIFICATES') offered hereby will
represent undivided interests in certain assets of the American
Express Credit Account Master Trust (the 'TRUST') created pursuant
to a Pooling and Servicing Agreement (the 'POOLING AND SERVICING
AGREEMENT') among American Express Travel Related Services
Company, Inc. ('TRS'), as Servicer (in such capacity, the
'SERVICER'), American Express Centurion Bank ('CENTURION')
and American Express Receivables Financing Corporation
II ('RFC II'), as Transferors (each, in such capacity,
a 'TRANSFEROR'), and The Bank of New York, as
Trustee (in such capacity, the 'TRUSTEE').
The property
(continued on next page)
THERE CURRENTLY IS NO SECONDARY MARKET FOR THE SERIES 1998-1 CERTIFICATES,
AND THERE IS NO ASSURANCE THAT ONE WILL DEVELOP OR, IF ONE DOES DEVELOP, THAT IT
WILL CONTINUE UNTIL THE SERIES 1998-1 CERTIFICATES ARE PAID IN FULL.
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER CONSIDERATIONS, THE
INFORMATION SET FORTH IN THE SECTIONS ENTITLED 'RISK FACTORS' COMMENCING ON PAGE
S-13 HEREIN AND ON PAGE 19 IN THE PROSPECTUS.
THE SERIES 1998-1 CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY
AND WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF, NOR WILL THEY BE
GUARANTEED BY, CENTURION, RFC II, AMERICAN EXPRESS CREDIT CORPORATION,
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC., AMERICAN
EXPRESS COMPANY OR ANY AFFILIATE THEREOF. NEITHER THE SERIES
1998-1 CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES
ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
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 SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO THE
PUBLIC(1) DISCOUNT TRANSFERORS(1)(2)
------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Per Class A Certificate...................... 100.0000% 0.2500% 99.7500%
Per Class B Certificate...................... 100.0000% 0.3000% 99.7000%
Total........................................ $905,000,000 $2,302,500 $902,697,500
</TABLE>
(1) Plus accrued interest, if any, at the Class A Certificate Rate or Class B
Certificate Rate, as applicable, from June 23, 1998.
(2) Before deduction of expenses payable by the Transferors, estimated to be
$800,000.
The Series 1998-1 Certificates are offered by the Underwriters when, as and
if issued by the Trust and accepted by the Underwriters and subject to the
Underwriters' right to reject orders in whole or in part. It is expected that
the Series 1998-1 Certificates will be delivered in book-entry form on or about
June 23, 1998, through the facilities of The Depository Trust Company, Cedel
Bank, societe anonyme and the Euroclear System.
UNDERWRITERS OF THE CLASS A CERTIFICATES
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
BLAYLOCK & PARTNERS L.P. THE WILLIAMS CAPITAL GROUP, L.P.
UNDERWRITERS OF THE CLASS B CERTIFICATES
CREDIT SUISSE FIRST BOSTON LEHMAN BROTHERS
The date of this Prospectus Supplement is June 17, 1998.
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(continued from previous page)
of the Trust includes, among other things, receivables described herein (the
'RECEIVABLES') generated from time to time in a portfolio of designated
Optima(Registered) Card, Optima Line of Credit and Sign & Travel(Registered)
revolving credit accounts and, in the future, may include other charge or credit
accounts or products (collectively, the 'ACCOUNTS'). In addition, the Collateral
Interest (as defined herein) will be issued in the initial amount of $95,000,000
and will be subordinated to the Series 1998-1 Certificates as described herein.
The Transferors initially will own the remaining undivided interest in the Trust
not represented by the Series 1998-1 Certificates and the other investor
certificates or interests issued by the Trust. The Transferors have offered and
may offer from time to time other series of certificates that evidence undivided
interests in certain assets of the Trust, which may have terms significantly
different from the Series 1998-1 Certificates and which are not offered hereby.
The issuance of additional series of certificates may impact the timing or
amount of payments received by holders of the Series 1998-1 Certificates.
Interest will accrue on the Class A Certificates from the Closing Date
through July 14, 1998 and with respect to each Interest Period (as defined
herein) thereafter, at the rate of 0.09% per annum above the London interbank
offered rate for one month United States dollar deposits ('LIBOR'), determined
as described herein, prevailing on the related LIBOR Determination Date (as
defined herein) with respect to such period (the 'CLASS A CERTIFICATE RATE').
The initial LIBOR Determination Date with respect to the Class A Certificates
will be the second business day prior to the Closing Date. Interest with respect
to the Class A Certificates will be distributed on July 15, 1998, and on the
15th day of each month thereafter (or, if such 15th day is not a business day,
the next succeeding business day) (each a 'DISTRIBUTION DATE').
Interest will accrue on the Class B Certificates from the Closing Date
through July 14, 1998 and with respect to each Interest Period thereafter, at
the rate of 0.25% per annum above LIBOR prevailing on the related LIBOR
Determination Date with respect to such period (the 'CLASS B CERTIFICATE RATE').
The initial LIBOR Determination Date with respect to the Class B Certificates
will be the second business day prior to the Closing Date. Interest with respect
to the Class B Certificates will be distributed on July 15, 1998 and on each
Distribution Date thereafter.
Principal with respect to the Class A Certificates and the Class B
Certificates is scheduled to be distributed on the June 2003 Distribution Date,
but may be paid earlier or later under certain limited circumstances described
herein. See 'Maturity Considerations' and 'Series Provisions--Pay-Out Events'
herein and 'Description of the Certificates--Pay-Out Events and Reinvestment
Events' in the Prospectus. Principal payments will not be made to Class B
Certificateholders until the final principal payment has been made in respect of
the Class A Certificateholders. See 'Series Provisions--Principal Payments.'
Application will be made to list the Series 1998-1 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.
------------------------
THE FRACTIONAL UNDIVIDED INTEREST IN THE TRUST REPRESENTED BY THE CLASS B
CERTIFICATES WILL BE SUBORDINATED TO THE EXTENT NECESSARY TO FUND PAYMENTS WITH
RESPECT TO THE CLASS A CERTIFICATES TO THE EXTENT DESCRIBED HEREIN.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES 1998-1
CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
THE SERIES 1998-1 CERTIFICATES OFFERED HEREBY CONSTITUTE A SEPARATE SERIES
OF INVESTOR CERTIFICATES BEING OFFERED BY THE TRUST FROM TIME TO TIME PURSUANT
TO A PROSPECTUS DATED JUNE 17, 1998. THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN
COMPLETE INFORMATION ABOUT THE OFFERING OF THE SERIES 1998-1 CERTIFICATES.
ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS AND PURCHASERS ARE URGED
TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE
SERIES 1998-1 CERTIFICATES MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS
RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS.
UPON RECEIPT OF A REQUEST BY AN INVESTOR, OR HIS OR HER REPRESENTATIVE,
WITHIN THE PERIOD DURING WHICH THERE IS A PROSPECTUS DELIVERY OBLIGATION, THE
UNDERWRITERS WILL TRANSMIT OR CAUSE TO BE TRANSMITTED PROMPTLY, WITHOUT CHARGE
AND IN ADDITION TO ANY SUCH DELIVERY REQUIREMENTS, A PAPER OR ELECTRONIC FORMAT
COPY OF A PROSPECTUS SUPPLEMENT AND PROSPECTUS.
S-2
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SUMMARY OF SERIES TERMS
The following is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and the
accompanying Prospectus. Reference is made to the Index of Defined Terms in this
Prospectus Supplement and the Prospectus for the location herein and therein of
the definitions of certain capitalized terms used herein. Certain capitalized
terms used but not defined herein have the meanings assigned to them in the
Prospectus.
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TRUST..................................... American Express Credit Account Master Trust (the 'TRUST').
TITLE OF SECURITIES....................... $825,000,000 Class A Series 1998-1 Floating Rate Asset Backed
Certificates (the 'CLASS A CERTIFICATES') and $80,000,000 Class B
Series 1998-1 Floating Rate Asset Backed Certificates (the 'CLASS B
CERTIFICATES' and, together with the Class A Certificates, the
'SERIES 1998-1 CERTIFICATES').
INITIAL INVESTED AMOUNT................... $1,000,000,000 (the 'INITIAL INVESTED AMOUNT').
CLASS A INITIAL INVESTED AMOUNT........... $825,000,000 (the 'CLASS A INITIAL INVESTED AMOUNT').
CLASS B INITIAL INVESTED AMOUNT........... $80,000,000 (the 'CLASS B INITIAL INVESTED AMOUNT').
COLLATERAL INITIAL INVESTED AMOUNT........ $95,000,000 (the 'COLLATERAL INITIAL INVESTED AMOUNT').
SERIES REQUIRED TRANSFEROR AMOUNT......... For any date, 7% of the Invested Amount (the 'SERIES REQUIRED
TRANSFEROR AMOUNT').
CLASS A CERTIFICATE RATE.................. 0.09% above LIBOR.
CLASS B CERTIFICATE RATE.................. 0.25% above LIBOR.
CONTROLLED ACCUMULATION AMOUNT............ For each Distribution Date with respect to the Controlled
Accumulation Period, $75,416,666.67 except that, if the commencement
of the Controlled Accumulation Period is delayed as described herein
under 'Series Provisions--Principal Payments,' the Controlled
Accumulation Amount for each Distribution Date with respect to the
Controlled Accumulation Period will be determined as described under
'Series Provisions--Application of Collections--Payments of
Principal.' The Invested Amount will be paid in full to the Class A
and Class B Certificateholders at the end of the Controlled
Accumulation Period; provided, however, that the Invested Amount may
be paid earlier if a Pay-Out Event occurs. See 'Series
Provisions--Pay-Out Events' herein and 'Description of the
Certificates--Pay-Out Events and Reinvestment Events' in the
Prospectus.
EXPECTED FINAL PAYMENT DATE............... The June 2003 Distribution Date.
CLOSING DATE.............................. June 23, 1998 (the 'CLOSING DATE').
SERIES INVESTED AMOUNT.................... The Initial Invested Amount.
THE SERIES 1998-1 CERTIFICATES; THE
COLLATERAL INTEREST..................... Each of the Series 1998-1 Certificates offered hereby represents an
undivided interest in the Trust. The portion of the Trust Assets
allocated to Series 1998-1 as described under 'The Pooling and
Servicing Agreement Generally--Allocations' in the Prospectus will be
further allocated among the interest of the holders of the Class A
Certificates (the 'CLASS A CERTIFICATEHOLDERS' INTEREST'), the
interest of the holders of the Class B Certificates (the 'CLASS B
CERTIFICATEHOLDERS' INTEREST'), the interest of the Collateral
Interest Holder (as defined below), and the interest of the holders
of the Transferor Certificates (the 'TRANSFERORS' INTEREST'), as
described below. The Class A Certificateholders' Interest and the
Class B Certificateholders' Interest are sometimes collectively
referred to herein as the 'SERIES 1998-1 CERTIFICATEHOLDERS'
INTEREST.' A
</TABLE>
S-3
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<TABLE>
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specified undivided interest in the Trust Assets (the 'COLLATERAL
INTEREST') in the initial amount of $95,000,000 (which amount
represents 9.5% of the sum of the Class A Initial Invested Amount,
the Class B Initial Invested Amount and the Collateral Initial
Invested Amount) constitutes Credit Enhancement for the Series 1998-1
Certificates. The provider of such Credit Enhancement is referred to
herein as the 'COLLATERAL INTEREST HOLDER.' Allocations will be made
to the Collateral Interest, and the Collateral Interest Holder will
have voting and certain other rights as if the Collateral Interest
were a subordinated class of Series 1998-1 Certificates. For purposes
of this Prospectus Supplement, the 'COLLATERAL INTEREST' shall be
deemed to be the 'COLLATERAL INVESTED AMOUNT' for the Series 1998-1
Certificates for all purposes under the Prospectus. The Transferors'
Interest will represent the right to the assets of the Trust not
allocated to the Class A Certificateholders' Interest, the Class B
Certificateholders' Interest, the Collateral Interest or the holders
of other undivided interests in the Trust. The principal amount of
the Transferors' Interest will fluctuate as the amount of Receivables
in the Trust changes from time to time.
The aggregate amount of Principal Receivables allocated to the Series
1998-1 Certificateholders' Interest and the Collateral Interest (the
'INVESTED AMOUNT') will be $1,000,000,000 on the Closing Date (the
'INITIAL INVESTED AMOUNT').
The aggregate amount of Principal Receivables allocable to the Class
A Certificateholders' Interest (as more fully defined herein, the
'CLASS A INVESTED AMOUNT') will be $825,000,000 on the Closing Date
(the 'CLASS A INITIAL INVESTED AMOUNT'). The aggregate amount of
Principal Receivables allocable to the Class B Certificateholders'
Interest (as more fully defined herein, the 'CLASS B INVESTED
AMOUNT') will be $80,000,000 on the Closing Date (the 'CLASS B
INITIAL INVESTED AMOUNT'). The aggregate amount of Principal
Receivables allocable to the Collateral Interest (as more fully
defined herein, the 'COLLATERAL INVESTED AMOUNT') will be $95,000,000
on the Closing Date (the 'COLLATERAL INITIAL INVESTED AMOUNT'). The
Class B Certificateholders' Interest will decline in certain
circumstances as a result of (a) the allocation to the Class B
Certificateholders' Interest of certain Defaulted Amounts, including
such amounts otherwise allocable to the Class A Certificateholders'
Interest when the Collateral Interest is zero, and (b) the
reallocation of collections of Principal Receivables otherwise
allocable to the Class B Certificateholders' Interest to fund certain
payments in respect of the Class A Certificates. Any such reductions
in the Class B Certificateholders' Interest may be reimbursed out of
Excess Spread, if any, Excess Finance Charge Collections allocable to
Series 1998-1, if any, and the reallocation of certain amounts
allocable to the Collateral Interest as described herein. During the
Controlled Accumulation Period, for the purpose of allocating
collections of Finance Charge Receivables and the Defaulted Amount
with respect to each Monthly Period, the Class A Certificateholders'
Interest will be reduced (in an amount not to exceed the Class A
Invested Amount) by the amount on deposit in the Principal Funding
Account (as so reduced, the 'CLASS A ADJUSTED INVESTED AMOUNT') and
the Class B Certificateholders' Interest will be reduced by the
amount by which the amount on deposit in the Principal Funding
Account exceeds the Class A
</TABLE>
S-4
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Invested Amount (as so reduced, the 'CLASS B ADJUSTED INVESTED
AMOUNT,' and, together with the Class A Adjusted Invested Amount and
the Collateral Invested Amount, the 'ADJUSTED INVESTED AMOUNT'). The
principal amount of the Transferors' Interest will fluctuate as the
amount of Principal Receivables in the Trust, the invested amount of
each Series and the amounts on deposit in the Special Funding Account
change from time to time.
The Class A Certificates, the Class B Certificates and the Collateral
Interest will each include the right to receive (but only to the
extent needed to make payments of interest on each Distribution Date
at the applicable certificate rate and payments of principal and
subject to any reallocation of such amounts as described herein),
varying percentages of the collections of Finance Charge Receivables
and Principal Receivables and will be allocated varying percentages
of the Defaulted Amount with respect to each Monthly Period.
Collections of Finance Charge Receivables and Principal Receivables
and the Defaulted Amount will be allocated to Series 1998-1 based on
the Series Allocation Percentage for Series 1998-1 (subject to
reallocation, in the case of certain Series Allocable Finance Charge
Collections, to other Series in Group II as described under
'Reallocated Investor Finance Charge Collections' below and under
'The Pooling and Servicing Agreement Generally-- Reallocations Among
Different Series Within a Reallocation Group' in the Prospectus).
Reallocated Investor Finance Charge Collections and the Investor
Default Amount will be further allocated to the holders of the Class
A Certificates and the holders of the Class B Certificates and the
Collateral Interest based on the Class A Floating Percentage, the
Class B Floating Percentage and the Collateral Floating Percentage,
respectively (each defined herein). The Principal Allocation
Percentage of Series Allocable Principal Collections will be
allocated to the holders of the Class A Certificates, the Class B
Certificates and the Collateral Interest based on the Class A
Principal Percentage, the Class B Principal Percentage and the
Collateral Principal Percentage, respectively (each defined herein).
OTHER SERIES.............................. The Series 1998-1 Certificates will be the third Series of investor
certificates issued by the Trust. The material terms of the
previously issued and outstanding Series of investor certificates are
described in Annex I hereto. Additional Series are expected to be
issued from time to time by the Trust. See 'The Pooling and Servicing
Agreement Generally--New Issuances' and '--Reallocations Among
Different Series Within a Reallocation Group' in the Prospectus and
'Maturity Considerations' herein.
RECEIVABLES............................... The Receivables arise in Accounts that have been selected from the
Total Portfolio, based on criteria specified in the Pooling and
Servicing Agreement as applied, with respect to the Accounts, as of
their selection date. See 'The Total Portfolio.' The aggregate amount
of Receivables (including Receivables closed at the request of
Account holders) in the Accounts (including the Additional Accounts)
as of March 31, 1998, was $3,861,710,226, comprised of $3,799,024,287
of Principal Receivables and $62,685,939 of Finance Charge
Receivables.
DENOMINATIONS............................. Beneficial interests in the Series 1998-1 Certificates will be
offered for purchase in denominations of $1,000 and integral
multiples thereof.
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S-5
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REGISTRATION OF SERIES 1998-1
CERTIFICATES............................ The Series 1998-1 Certificates initially will be represented by
Series 1998-1 Certificates registered in the name of Cede, as the
nominee of DTC. No purchaser of a Series 1998-1 Certificate will be
entitled to receive a definitive certificate except under certain
limited circumstances described in the Prospectus. Purchasers of the
Series 1998-1 Certificates may elect to hold their Series 1998-1
Certificates through DTC (in the United States) or Cedel or Euroclear
(in Europe). See 'Description of the Certificates--Definitive
Certificates' in the Prospectus.
SERVICING FEE............................. The Servicing Fee Rate for the Series 1998-1 Certificates will be
2.0% per annum. The Class A Servicing Fee, the Class B Servicing Fee
and the Collateral Interest Servicing Fee will be paid on each
Distribution Date as described under 'Series Provisions-- Application
of Collections--Payment of Fees, Interest and Other Items' and
'--Servicing Compensation and Payment of Expenses' herein. See
'Description of the Certificates--Servicing Compensation and Payment
of Expenses' in the Prospectus.
REVOLVING PERIOD AND CONTROLLED
ACCUMULATION PERIOD..................... The 'REVOLVING PERIOD' with respect to the Series 1998-1 Certificates
means the period from and including the Closing Date to, but not
including, the earlier of (a) the commencement of the controlled
accumulation period with respect to the Series 1998-1 Certificates
(the 'CONTROLLED ACCUMULATION PERIOD') and (b) the commencement of
the Early Amortization Period. Unless a Pay-Out Event has occurred,
the Controlled Accumulation Period will commence at the close of
business on the last day of the May 2002 Monthly Period; provided,
that subject to the conditions set forth under 'Series
Provisions--Principal Payments' herein, the day on which the
Revolving Period ends and the Controlled Accumulation Period begins
may be delayed to no later than the close of business on the last day
of the April 2003 Monthly Period. The Controlled Accumulation Period
will end on the earliest of (a) the commencement of the Early
Amortization Period, (b) the payment in full of the Invested Amount
and (c) the Series Termination Date for Series 1998-1 (the 'SERIES
1998-1 TERMINATION DATE'). No principal will be payable to Class A
Certificateholders until the June 2003 Distribution Date (the
'EXPECTED FINAL PAYMENT DATE'), or, upon the occurrence of a Pay-Out
Event as described herein, the first Distribution Date with respect
to the Early Amortization Period. No principal will be payable to the
Class B Certificateholders until the Class A Invested Amount is paid
in full. No principal will be payable to the Collateral Interest
Holder until the Class B Invested Amount is paid in full; provided,
that during the Revolving Period or the Controlled Accumulation
Period, certain collections of Principal Receivables allocable to the
Series 1998-1 Certificateholders' Interest and the Collateral
Interest will be paid to the Collateral Interest Holder to the extent
that the Collateral Invested Amount exceeds the Required Collateral
Invested Amount. For the period beginning on the Closing Date and
ending with the commencement of the Controlled Accumulation Period or
the Early Amortization Period, collections of Principal Receivables
otherwise allocable to the Series 1998-1 Certificateholders' Interest
and the Collateral Interest (other than collections of Principal
Receivables allocated to the Class B Certificateholders' Interest and
the
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S-6
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Collateral Interest ('REALLOCATED PRINCIPAL COLLECTIONS') that are
used to pay any deficiency in the Class A Required Amount or Class B
Required Amount) will, subject to certain limitations, be treated as
Shared Principal Collections and applied to cover principal payments
due to or for the benefit of Certificateholders of other Principal
Sharing Series, or paid to the holders of the Transferor Certificates
or, in certain circumstances, deposited in the Special Funding
Account. See 'Series Provisions--Pay-Out Events' herein and
'Description of the Certificates--Pay-Out Events and Reinvestment
Events' in the Prospectus for a discussion of the events which might
lead to the termination of the Revolving Period prior to the
commencement of the Controlled Accumulation Period. In addition, see
'Series Provisions--Principal Payments' herein and 'The Pooling and
Servicing Agreement Generally-- Sharing of Principal Collections
Among Principal Sharing Series' in the Prospectus.
EARLY AMORTIZATION PERIOD................. During the period from the day on which a Pay-Out Event has occurred
and ending on the earlier of (a) the payment of the Invested Amount
in full and (b) the Series 1998-1 Termination Date (the 'EARLY
AMORTIZATION PERIOD'), Available Principal Collections (as defined
herein) will be distributed monthly on each Distribution Date to the
holders of the Class A Certificates and, following payment in full of
the Class A Invested Amount, to the holders of the Class B
Certificates and, following payment in full of the Class B Invested
Amount, to the Collateral Interest Holder beginning with the
Distribution Date in the month following the commencement of the
Early Amortization Period. See 'Series Provisions--Pay-Out Events'
herein and 'Description of the Certificates--Pay-Out Events and
Reinvestment Events' in the Prospectus for a discussion of the events
which might lead to the commencement of the Early Amortization
Period.
SUBORDINATION OF THE CLASS B CERTIFICATES
AND THE COLLATERAL INTEREST............. The Class B Certificates and the Collateral Interest will be
subordinated, as described herein, to the extent necessary to fund
payments with respect to the Class A Certificates as described
herein. In addition, the Collateral Interest will be subordinated to
the extent necessary to fund certain payments with respect to the
Class B Certificates. If the Collateral Interest is reduced to zero,
holders of the Class B Certificates will bear directly the credit and
other risks associated with their interest in the Trust. To the
extent the Class B Invested Amount is reduced, the percentage of
collections of Finance Charge Receivables allocable to holders of the
Class B Certificates in subsequent Monthly Periods will be reduced.
Moreover, to the extent the amount of such reduction in the Class B
Invested Amount is not reimbursed, the amount of principal
distributable to holders of the Class B Certificates will be reduced.
Thereafter, such reductions of the Class B Invested Amount will be
reimbursed and the Class B Invested Amount will be increased on each
Distribution Date by the amount, if any, of Excess Spread and Excess
Finance Charge Collections allocable to Series 1998-1 for such
Distribution Date available for that purpose. See 'The Pooling and
Servicing Agreement Generally--Credit Enhancement-- Subordination' in
the Prospectus.
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ADDITIONAL AMOUNTS AVAILABLE TO
CERTIFICATEHOLDERS...................... With respect to any Distribution Date, Excess Spread and Excess
Finance Charge Collections allocable to Series 1998-1 will be applied
to fund the Class A Required Amount and the Class B Required Amount,
if any, as well as certain other items. The 'CLASS A REQUIRED AMOUNT'
means with respect to any Distribution Date the amount, if any, by
which the sum of (a) the Class A Monthly Interest due on such
Distribution Date and any overdue Class A Monthly Interest and Class
A Additional Interest thereon, (b) if TRS or an affiliate of TRS is
no longer the Servicer, the Class A Servicing Fee for the related
Monthly Period and any overdue Class A Servicing Fee and (c) the
Class A Investor Default Amount, if any, for the related Monthly
Period exceeds the Class A Available Funds for the related Monthly
Period. The 'CLASS B REQUIRED AMOUNT' means the amount equal to the
sum of (a) the amount, if any, by which the sum of (i) Class B
Monthly Interest due on the related Distribution Date and any overdue
Class B Monthly Interest and Class B Additional Interest thereon and
(ii) if TRS or an affiliate of TRS is no longer the Servicer, the
Class B Servicing Fee for the related Monthly Period and any overdue
Class B Servicing Fee exceeds the Class B Available Funds for the
related Monthly Period and (b) the Class B Investor Default Amount,
if any, for the related Monthly Period. The 'REQUIRED AMOUNT' for any
Monthly Period shall mean the sum of (a) the Class A Required Amount
and (b) the Class B Required Amount for such Monthly Period. 'EXCESS
SPREAD' for any Transfer Date will equal the sum of (a) the excess of
(i) Class A Available Funds for the related Monthly Period over (ii)
the sum of the amounts referred to in clauses (a), (b) and (c) in the
definition of 'Class A Required Amount' above and (b) the excess of
(i) Class B Available Funds for the related Monthly Period over (ii)
the sum of the amounts referred to in clauses (a)(i) and (ii) in the
definition of 'Class B Required Amount' above and (c) Collateral
Available Funds (defined herein) for the related Monthly Period not
used, if TRS or an affiliate of TRS is no longer the Servicer, to pay
the Collateral Interest Servicing Fee, as described herein.
If, on any Distribution Date, Excess Spread and Excess Finance Charge
Collections allocable to Series 1998-1 are less than the Class A
Required Amount, Reallocated Principal Collections allocable first to
the Collateral Interest and then to the Class B Certificateholders'
Interest with respect to the related Monthly Period will be used to
fund the remaining Class A Required Amount. If Reallocated Principal
Collections with respect to such Monthly Period are insufficient to
fund the remaining Class A Required Amount for the related
Distribution Date, then the Collateral Invested Amount (after giving
effect to reductions for any Collateral Charge-Offs (defined herein)
and Reallocated Principal Collections on such Distribution Date) will
be reduced by the amount of such deficiency (but not by more than the
Class A Investor Default Amount for such Monthly Period). In the
event that such reduction would cause the Collateral Invested Amount
to be a negative number, the Collateral Invested Amount will be
reduced to zero, and the Class B Invested Amount (after giving effect
to reductions for any Class B Investor Charge-Offs (defined below)
and any Reallocated Class B Principal Collections on such
Distribution Date) will be reduced by the amount by which the
</TABLE>
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<S> <C>
Collateral Invested Amount would have been reduced below zero (but
not by more than the excess of the Class A Investor Default Amount,
if any, for such Monthly Period over the amount of such reduction, if
any, of the Collateral Invested Amount with respect to such Monthly
Period). In the event that such reduction 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 by more than the excess, if any, of
the Class A Investor Default Amount for such Monthly Period over such
reductions in the Collateral Invested Amount and the Class B Invested
Amount with respect to such Monthly Period) (such reduction, a 'CLASS
A INVESTOR CHARGE-OFF'). If the Collateral Invested Amount and the
Class B Invested Amount are reduced to zero, the Class A
Certificateholders will bear directly the credit and other risks
associated with their undivided interest in the Trust. See 'Series
Provisions--Reallocation of Cash Flows' and '--Defaulted Receivables;
Investor Charge-Offs.'
If, on any Distribution Date, Excess Spread and Excess Finance Charge
Collections allocated to Series 1998-1 not required to pay the Class
A Required Amount or reimburse Class A Investor Charge-Offs is less
than the Class B Required Amount, Reallocated Principal Collections
allocable to the Collateral Interest for the related Monthly Period
not required to pay the Class A Required Amount will be used to fund
the remaining Class B Required Amount. If such remaining Reallocated
Principal Collections allocable to the Collateral Interest with
respect to such Monthly Period are insufficient to fund the remaining
Class B Required Amount for such Distribution Date, then the
Collateral Invested Amount (after giving effect to reductions for any
Collateral Charge-Offs, Reallocated Principal Collections and any
adjustments made thereto for the benefit of the Class A
Certificateholders) will be reduced by the amount of such deficiency
(but not by more than the Class B Investor Default Amount for such
Monthly Period). In the event that such reduction would cause the
Collateral Invested Amount to be a negative number, the Collateral
Invested Amount will be reduced to zero, and the Class B Invested
Amount will be reduced by the amount by which the Collateral Invested
Amount would have been reduced below zero (but not by more than the
excess, if any, of the Class B Investor Default Amount for such
Monthly Period over such reduction in the Collateral Invested Amount
with respect to such Monthly Period) (such reduction, a 'CLASS B
INVESTOR CHARGE-OFF'). In the event of a reduction of the Class A
Invested Amount, the Class B Invested Amount or the Collateral
Invested Amount, the amount of principal and interest available to
fund payments with respect to the Class A Certificates and the Class
B Certificates will be decreased. See 'The Pooling and Servicing
Agreement Generally--Reallocation Among Different Series Within a
Reallocation Group' in the Prospectus and '--Defaulted Receivables;
Investor Charge-Offs' herein.
REQUIRED COLLATERAL INVESTED
AMOUNT.................................. The 'REQUIRED COLLATERAL INVESTED AMOUNT' with respect to any
Distribution Date means (i) initially $95,000,000 and
(ii) thereafter on each Distribution Date an amount equal to the
</TABLE>
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<TABLE>
<S> <C>
greater of (a) 9.5% of the sum of the Class A Adjusted Invested
Amount, the Class B Adjusted Invested Amount and the Collateral
Invested Amount, in each case, on such Distribution Date (after
taking into account any adjustments made on such Distribution Date)
and (b) $30,000,000; provided, however, that (1) if certain
reductions in the Collateral Invested Amount are made or if a Pay-Out
Event occurs, the Required Collateral Invested Amount for such
Distribution Date shall equal the Required Collateral Invested Amount
for the Distribution Date immediately preceding the occurrence of
such reduction or Pay-Out Event, (2) in no event shall the Required
Collateral Invested Amount exceed the unpaid principal amount of the
Series 1998-1 Certificates as of the last day of the Monthly Period
preceding such Distribution Date and (3) the Required Collateral
Invested Amount may be reduced to a lesser amount at any time if the
Rating Agency Condition is satisfied with respect to such reduction.
REALLOCATED INVESTOR FINANCE CHARGE
COLLECTIONS............................. The Series 1998-1 Certificates will be the first Series issued by the
Trust in the second Group of Series ('GROUP II'), constituting a
Reallocation Group, which may be issued by the Trust from time to
time. Collections of Finance Charge Receivables allocable to the
investor certificates of each Series in Group II will be aggregated
and made available for certain required distributions to all Series
in Group II pro rata based upon the relative amount of such required
distributions for each Series in Group II as described under 'The
Pooling and Servicing Agreement Generally--Reallocations Among
Different Series Within a Reallocation Group' in the Prospectus.
Consequently, any issuance of a new Series in Group II may have the
effect of reducing or increasing the amount of collections of Finance
Charge Receivables allocable to the Series 1998-1 Certificates. See
'Risk Factors--Effect of the Issuance of New Series' in the
Prospectus. In addition, it has not been determined whether any
Series issued by the Trust in the future will be included in Group II.
SHARED PRINCIPAL COLLECTIONS.............. Series 1998-1 has been designated as a Principal Sharing Series.
Collections of Principal Receivables and certain other amounts
otherwise allocable to other Principal Sharing Series, if any, to the
extent such collections are not needed to make payments to or
deposits for the benefit of the certificateholders of such other
Series, will be applied to cover principal payments due to or for the
benefit of the holders of the Series 1998-1 Certificates and the
Collateral Interest. See 'The Pooling and Servicing Agreement
Generally-- Sharing of Principal Collections Among Principal Sharing
Series' in the Prospectus. There can be no assurance that any Series
issued by the Trust in the future will be designated a Principal
Sharing Series.
EXCESS FINANCE CHARGE COLLECTIONS......... Series 1998-1 has been designated as an Excess Allocation Series. See
'The Pooling and Servicing Agreement Generally--Sharing of Excess
Finance Charge Collections Among Excess Allocation Series' in the
Prospectus.
OPTIONAL REPURCHASE....................... The Series 1998-1 Certificateholders' Interest and the Collateral
Interest will be subject to optional repurchase by the Transferors on
any Distribution Date after the sum of the Class A Invested Amount,
the Class B Invested Amount and the Collateral Invested Amount, if
any, is reduced to an amount which is not more than $50,000,000
</TABLE>
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<TABLE>
<S> <C>
(5% of the Initial Invested Amount). The purchase price will be equal
to the sum of the Class A Invested Amount and the Class B Invested
Amount (less the Principal Funding Account Balance, if any), the
Collateral Invested Amount, if any, and accrued and unpaid interest
on the Series 1998-1 Certificates and the Collateral Interest (and
accrued and unpaid interest with respect to interest amounts that
were due but not paid on a prior Distribution Date) through (a) if
the day on which such purchase occurs is a Distribution Date, the day
preceding such Distribution Date or (b) if the day on which such
repurchase occurs is not a Distribution Date, the day preceding the
Distribution Date next following such day.
SERIES 1998-1 TERMINATION DATE............ The January 2006 Distribution Date. See 'Series Provisions-- Series
Termination.'
TRUSTEE................................... The Bank of New York in its capacity as the Trustee under the Pooling
and Servicing Agreement.
TAX STATUS................................ Special counsel to the Transferors will deliver its opinion on the
Closing Date that under existing law the Series 1998-1 Certificates
will be characterized as debt for federal income tax purposes. Under
the Pooling and Servicing Agreement, the Certificate Owners will
agree to treat the Series 1998-1Certificates as debt for federal
income tax purposes. See 'Tax Matters--Federal Income Tax
Consequences--General' in the Prospectus for additional information
concerning the application of federal income tax laws.
ERISA CONSIDERATIONS...................... Subject to the considerations described below, the Class A
Certificates are eligible for purchase by employee benefit plan
investors. Under regulations issued by the Department of Labor, the
Trust Assets would not be deemed 'plan assets' of an employee benefit
plan holding interests in the Class A Certificates if certain
conditions are met, including that interests in the Class A
Certificates must be held, upon completion of the public offering
being made hereby, by at least 100 investors who are independent of
the Transferors and of one another. The Underwriters expect that the
Class A Certificates will be held by at least 100 independent
investors at the conclusion of the offering, although no assurance
can be given, and no monitoring or other measures will be taken to
ensure, that such condition will be met with respect to the Class A
Certificates. The Transferors anticipate that the other conditions of
the regulation will be met. If the Trust Assets were deemed to be
'plan assets' of an employee benefit plan investor (e.g., if the 100
independent investor criterion is not satisfied), violations of the
'prohibited transaction' rules of the Employee Retirement Income
Security Act of 1974, as amended ('ERISA'), could result and generate
excise tax and other liabilities under ERISA and Section 4975 of the
Internal Revenue Code of 1986 as amended (the 'CODE'), unless a
statutory, regulatory or administrative exemption is available. It is
uncertain whether existing exemptions from the 'prohibited
transaction' rules of ERISA would apply to all transactions involving
the Trust Assets. Accordingly, fiduciaries or other persons
contemplating purchasing the Series 1998-1 Certificates on behalf or
with 'plan assets' of any employee benefit plan should consult their
counsel before making a purchase. See 'ERISA Considerations' in the
Prospectus.
The Underwriters currently do not expect that the Class B
Certificates will be held by at least 100 such persons and,
therefore, do not expect that such Class B Certificates will qualify
as publicly-
</TABLE>
S-11
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<TABLE>
<S> <C>
offered securities under the regulation referred to in the preceding
paragraph. Accordingly, the Class B Certificates may not be acquired
by (a) any employee benefit plan that is subject to ERISA, (b) any
plan or other arrangement (including an individual retirement account
or Keogh plan) that is subject to Section 4975 of the Code, or (c)
any entity whose underlying assets include 'plan assets' under the
regulation by reason of any such plan's investment in the entity. By
its acceptance of a Class B Certificate, each Class B
Certificateholder will be deemed to have represented and warranted
that it is not subject to the foregoing limitation.
CLASS A CERTIFICATE 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 upon the quality of the Receivables,
the continued ability of the Account Owners to generate and transfer
such Receivables, the terms of the Class B Certificates and the
benefits of the Collateral Interest. See 'Risk Factors--Limited
Nature of Rating' in the Prospectus and 'Risk Factors--Certificate
Ratings' herein.
CLASS B CERTIFICATE RATING................ It is a condition to the issuance of the Class B Certificates that
they be rated in one of the three highest rating categories by at
least one nationally recognized rating agency. The rating of the
Class B Certificates is based primarily upon the quality of the
Receivables, the continued ability of the Account Owners to generate
and transfer such Receivables and the benefits of the Collateral
Interest. See 'Risk Factors--Limited Nature of Rating' in the
Prospectus and 'Risk Factors--Certificate Ratings' herein.
LISTING................................... Application will be made to list the Series 1998-1 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.
</TABLE>
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RISK FACTORS
Potential investors should consider, among other things, the risk factors
discussed under 'Risk Factors' in the Prospectus and the following risk factors
in connection with the purchase of the Series 1998-1 Certificates.
Limited Amounts of Credit Enhancement. Although Credit Enhancement with
respect to the Class A Certificates will be provided by the subordination of the
Class B Certificates to the extent described herein and by the Collateral
Interest, and with respect to the Class B Certificates, will be provided by the
Collateral Interest, the amount available thereunder is limited and, in certain
circumstances described herein, may be reduced or may otherwise decline. If the
Collateral Invested Amount has been reduced to zero, Class B Certificateholders
will bear directly the credit and other risks associated with their undivided
interests in the Trust and the Class B Invested Amount may be reduced. If the
Class B Invested Amount is reduced to zero, Class A Certificateholders will bear
directly the credit and other risks associated with their undivided interest in
the Trust. Further, in the event of a reduction of the Class B Invested Amount
or the Collateral Invested Amount, the amount of principal and interest
available to make distributions with respect to the Class A Certificates and the
Class B Certificates may be reduced.
Effect of Subordination of Class B Certificates; Principal Payments. The
Class B Certificates are subordinated in right of payment of principal to the
Class A Certificates. Payments of principal in respect of the Class B
Certificates will not commence until after the final principal payment with
respect to the Class A Certificates has been made as described herein. Moreover,
the Class B Invested Amount is subject to reduction if the Class A Required
Amount for any Monthly Period is greater than zero and is not funded from Excess
Spread and Excess Finance Charge Collections allocated to Series 1998-1,
Reallocated Principal Collections with respect to the Collateral Interest and
reductions in the Collateral Invested Amount, if any. To the extent the Class B
Invested Amount is reduced, the percentage of collections of Finance Charge
Receivables allocable to the Class B Certificateholders' Interest in future
Monthly Periods will be reduced. Moreover, to the extent the amount of such
reduction in the Class B Invested Amount is not reimbursed, the amount of
principal and interest distributable to the Class B Certificateholders will be
reduced. See 'Series Provisions--Allocation Percentages' and '--Subordination of
the Class B Certificates and the Collateral Interest' herein. If the Class B
Invested Amount is reduced to zero, the holders of the Class A Certificates will
bear directly the credit and other risks associated with their undivided
interest in the Trust.
Certificate Ratings. It is a condition to issuance of the Class A
Certificates that they be rated in the highest rating category by at least one
nationally recognized rating agency specified in the Series 1998-1 Supplement
(each, with respect to Series 1998-1, a 'RATING AGENCY') and that the Class B
Certificates be rated in one of the three highest rating categories by at least
one Rating Agency. Each Rating Agency's rating addresses such Rating Agency's
assessment of the likelihood of full payment of principal and interest of the
applicable class of Certificates by the Expected Final Payment Date. The ratings
are based primarily on the quality of the Receivables, the continued ability of
the Account Owners to generate and transfer such Receivables, the benefits of
the Collateral Interest and, in the case of the Class A Certificates, the terms
of the Class B Certificates. The ratings do not address the possibility of the
occurrence of a Pay-Out Event with respect to the Certificates. The ratings are
not a recommendation to purchase, hold or sell Certificates, inasmuch as such
ratings do not comment as to the market price or suitability for a particular
investor. There is no assurance that the ratings will remain for any given
period of time or that a Rating Agency's ratings will not be lowered or
withdrawn by such Rating Agency if in its judgment circumstances so warrant.
MATURITY CONSIDERATIONS
The Pooling and Servicing Agreement and the Supplement for Series 1998-1
(the 'SERIES 1998-1 SUPPLEMENT') provide that the Class A Certificateholders
will not receive payments of principal until the June 2003 Distribution Date
(the 'EXPECTED FINAL PAYMENT DATE'), or earlier in the event of a Pay-Out Event
which results in the commencement of the Early Amortization Period. Class A
Certificateholders will receive payments of principal on each Distribution Date
following the Monthly Period in which a Pay-Out Event occurs (each such
Distribution Date, a 'SPECIAL PAYMENT DATE') until the Class A Invested Amount
has been paid in full or the Series 1998-1 Termination Date has occurred. The
Class B Certificateholders will not begin to receive payments of principal until
the final principal payment on the Class A Certificates has been made.
On each Distribution Date during the Controlled Accumulation Period,
amounts equal to the least of (a) Available Principal Collections (see 'Series
Provisions--Principal Payments') for the related Monthly Period on deposit in
the Collection Account, (b) the Controlled Deposit Amount, which is equal to the
sum of the
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Controlled Accumulation Amount for such Monthly Period and any Deficit
Controlled Accumulation Amount (both as defined under 'Series
Provisions--Application of Collections--Payments of Principal') and (c) the sum
of the Class A Adjusted Invested Amount and the Class B Adjusted Invested Amount
will be deposited in the Principal Funding Account for Series 1998-1 held by the
Trustee (the 'PRINCIPAL FUNDING ACCOUNT') until the Expected Final Payment Date
or the first Special Payment Date. See 'Series Provisions--Principal Payments'
for a discussion of the circumstances under which the commencement of the
Controlled Accumulation Period may be delayed.
Subject to satisfaction of the Rating Agency Condition, the Transferors
may, at or after the time at which the Controlled Accumulation Period commences
for Series 1998-1, cause the Trust to issue another Series (or some portion
thereof, to the extent that the full principal amount of such other Series is
not otherwise outstanding at such time) as a Paired Series with respect to
Series 1998-1 to be used to finance the increase in the Transferor Amount caused
by the accumulation of principal in the Principal Funding Account with respect
to Series 1998-1. Although no assurances can be given as to whether such other
Series will be issued and, if issued, the terms thereof, the outstanding
principal amount of such Series may vary from time to time (whether or not a
Pay-Out Event occurs with respect to the Series 1998-1 Certificates), and the
interest rate with respect to certificates of such other Series may be
established on its date of issuance and may be reset periodically. Further,
since the terms of the Series 1998-1 Certificates will vary from the terms of
such other Series, the Pay-Out Events or Reinvestment Events with respect to
such other Series will vary from the Pay-Out Events with respect to Series
1998-1 and may include Pay-Out Events or Reinvestment Events which are unrelated
to the status of the Transferors or the Servicer or the Receivables, such as
Pay-Out Events or Reinvestment Events related to the continued availability and
rating of certain providers of Series Enhancement to such other Series. If a
Pay-Out Event or Reinvestment Event does occur with respect to any such Paired
Series prior to the payment in full of the Series 1998-1 Certificates, the final
payment of principal to the Series 1998-1 Certificateholders may be delayed.
Should a Pay-Out Event occur with respect to the Series 1998-1 Certificates
and the Early Amortization Period commence, any amount on deposit (a) in the
Principal Funding Account will be paid to the Series 1998-1 Certificateholders
on the First Special Payment Date and the Series 1998-1 Certificateholders will
be entitled to receive Available Principal Collections on each Distribution Date
with respect to such Early Amortization Period as described herein until the
Class A Invested Amount and Class B Invested Amount are paid in full or until
the Series 1998-1 Termination Date occurs and (b) in the Special Funding Account
will be released and treated as Shared Principal Collections to the extent
needed to cover principal payments due to or for the benefit of any Series,
including Series 1998-1, entitled to the benefits of Shared Principal
Collections. See 'Description of the Certificates--Pay-Out Events and
Reinvestment Events' in the Prospectus and 'Series Provisions--Pay-Out Events'
herein.
The ability of the Series 1998-1 Certificateholders to receive payments of
principal on the Expected Final Payment Date depends on the payment rates on the
Receivables, the amount of outstanding Receivables, delinquencies, charge-offs
and new borrowings on the Accounts, the potential issuance by the Trust of
additional Series and the availability of Shared Principal Collections. Monthly
payment rates on the Receivables may vary because, among other things, account
holders may fail to make required minimum payments, may only make payments as
low as the minimum required amount or may make payments as high as the entire
outstanding balance. Monthly payment rates may also vary due to seasonal
purchasing and payment habits of account holders and to changes in any terms of
incentive programs in which account holders participate. See the table entitled
'Account Holder Monthly Payment Rates of the Total Portfolio' under 'The Total
Portfolio--Payment Rates' herein. The Transferors cannot predict, and no
assurance can be given, as to the account holders monthly payment rates that
will actually occur in any future period, as to the actual rate of payment of
principal of the Series 1998-1 Certificates or whether the terms of any
subsequently issued Series might have an impact on the amount or timing of any
such payment of principal. See 'Risk Factors--Payments and Maturity; Dependency
on Account Holder Repayments' and 'The Pooling and Servicing Agreement
Generally--Sharing of Principal Collections Among Principal Sharing Series' in
the Prospectus.
In addition, the amount of outstanding Receivables and the delinquencies,
charge-offs and new borrowings on the Accounts may vary from month to month due
to seasonal variations, the availability of other sources of credit, legal
factors, general economic conditions and spending and borrowing habits of
individual account holders. There can be no assurance that collections of
Principal Receivables with respect to the Trust Portfolio, and thus the rate at
which Series 1998-1 Certificateholders could expect to receive payments of
principal on their
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Series 1998-1 Certificates during the Early Amortization Period or the rate at
which the Principal Funding Account could be funded during the Controlled
Accumulation Period, will be similar to the historical experience set forth in
the table entitled 'Account Holder Monthly Payment Rates of the Total Portfolio'
under 'The Total Portfolio--Payment Rates' herein. As described under 'Series
Provisions--Principal Payments,' the Transferors may shorten the Controlled
Accumulation Period and, in such event, there can be no assurance that there
will be sufficient time to accumulate all amounts necessary to pay the Class A
Invested Amount and the Class B Invested Amount on the Expected Final Payment
Date. In addition, the Trust, as a master trust, has issued, and from time to
time may issue, additional Series, and there can be no assurance that the terms
of any such Series might not have an impact on the timing or amount of payments
received by the Series 1998-1 Certificateholders. Further, if a Pay-Out Event
occurs, the average life and maturity of the Class A Certificates and the Class
B Certificates could be significantly reduced, thereby reducing the anticipated
yield on such Certificates.
Due to the reasons set forth above, there can be no assurance that deposits
in the Principal Funding Account will be made on or prior to the Expected Final
Payment Date in an amount equal to the sum of the Class A Invested Amount and
the Class B Invested Amount or that the actual number of months elapsed from the
date of issuance of the Class A Certificates and Class B Certificates to their
respective final Distribution Dates will equal the expected number of months.
See 'Risk Factors--Payments and Maturity; Dependency on Account Holder
Repayments' in the Prospectus.
THE TOTAL PORTFOLIO
GENERAL
The Accounts, the Receivables of which are included in the Trust (the
'TRUST PORTFOLIO'), were selected from the total portfolio of Optima Card,
Optima Line of Credit and Sign & Travel accounts owned by Centurion (the 'TOTAL
PORTFOLIO') based upon the eligibility criteria specified in the Pooling and
Servicing Agreement applied with respect to the Accounts as of their selection
date. See 'Risk Factors--Effect of Addition of Trust Assets on Credit Quality'
in the Prospectus for a description of those eligibility criteria. Set forth
below is certain information with respect to the Total Portfolio. See
'Centurion's Revolving Credit Businesses' and 'The Accounts' in the Prospectus.
The Total Portfolio's yield, loss, delinquency and payment rate is comprised of
segments which may, when taken individually, have yield, loss, delinquency and
payment rate characteristics different from those of the overall Total Portfolio
of credit card accounts. As of March 31, 1998, the Receivables in the Trust
Portfolio represented approximately 27% of the Total Portfolio. Because the
Trust Portfolio is only a portion of the Total Portfolio, actual yield, loss,
delinquency and payment rate experience with respect to the Receivables may be
different from that set forth below for the Total Portfolio. There can be no
assurance that the yield, loss, delinquency and payment rate experience relating
to the Receivables in the Trust Portfolio will be comparable to the historical
experience relating to the receivables in the Total Portfolio set forth below.
LOSS AND DELINQUENCY EXPERIENCE
The following tables set forth the loss and delinquency experience for the
Total Portfolio for each of the periods shown.
LOSS EXPERIENCE OF THE TOTAL PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED ------------------------------------------
MARCH 31, 1998 1997 1996 1995
------------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(1)........ $13,972,116 $13,180,931 $10,535,181 $8,425,402
Total Gross Charge-Offs(2)................ 240,678 888,025 664,702 486,581
Total Recoveries.......................... 31,297 111,577 104,190 98,328
------------------- ----------- ----------- ----------
Total Net Charge-Offs(3).................. $ 209,381 $ 776,448 $ 560,512 $ 388,253
------------------- ----------- ----------- ----------
------------------- ----------- ----------- ----------
Total Net Charge-Offs as a Percentage of
Average Receivables Outstanding......... 5.99%(4) 5.89% 5.32% 4.61%
</TABLE>
(Footnotes on next page)
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<PAGE>
(Footnotes from previous page)
- ------------------
(1) Average Receivables Outstanding for each indicated period is calculated as
the average of the month-end receivables balances for such period.
(2) Total Gross Charge-Offs for each indicated period include charge-offs of
principal, finance charges and certain fees for such period.
(3) Total Net Charge-Offs for each indicated period is equal to Total Gross
Charge-Offs for such period, net of recoveries during such period.
(4) This percentage is an annualized figure.
AVERAGE RECEIVABLES DELINQUENT AS A PERCENTAGE OF THE TOTAL PORTFOLIO(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31, 1998 1997 1996 1995
---------------------- ------------------------- ------------------------- -------------------------
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF AVERAGE OF AVERAGE OF AVERAGE OF AVERAGE
DOLLAR RECEIVABLES DOLLAR RECEIVABLES DOLLAR RECEIVABLES DOLLAR RECEIVABLES
AMOUNT OUTSTANDING(2) AMOUNT OUTSTANDING(2) AMOUNT OUTSTANDING(2) AMOUNT OUTSTANDING(2)
---------- ---------- ---------- -------------- ---------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Average
Receivables
Outstanding(3).. $13,972,116 100.00 % $13,180,931 100.00% 10,535,181 100.00% $8,425,402 100.00%
Average
Receivables
Delinquent:
31 to 60
Days...... 238,628 1.71 % 225,595 1.71% 181,542 1.72% 163,136 1.94%
61 to 90
Days...... 118,718 0.85 % 107,950 0.82% 79,733 0.76% 65,915 0.78%
91 Days or
More...... 159,281 1.14 % 141,085 1.07% 103,384 0.98% 83,168 0.99%
---------- ---------- ---------- ------- ---------- ------- ---------- -------
Total........ $ 516,627 3.70 % $ 474,629 3.60% $ 364,659 3.46% $ 312,219 3.71%
---------- ---------- ---------- ------- ---------- ------- ---------- -------
---------- ---------- ---------- ------- ---------- ------- ---------- -------
</TABLE>
- ------------------
(1) Average Receivables Delinquent for each indicated period is calculated as
the average of month-end delinquent amounts for such period.
(2) The resulting percentages are the result of dividing the Average Receivables
Delinquent for the indicated period by the Average Receivables Outstanding
for such period.
(3) Average Receivables Outstanding for each indicated period is calculated as
the average of the month-end receivables balances for such period.
REVENUE EXPERIENCE
The revenues for the Total Portfolio from finance charges and fees billed
to account holders are set forth in the following table for each of the periods
shown.
The historical revenue figures in the tables include interest on purchases
and cash advances and fees accrued during the cycle. Cash collections on the
receivables may not reflect the historical experience in the table. During
periods of increasing delinquencies, billings of finance charges and fees may
exceed cash payments as amounts collected on receivables lag behind amounts
billed to account holders. Conversely, as delinquencies decrease, cash payments
may exceed billings of finance charges and fees as amounts collected in a
current period may include amounts billed during prior periods. Revenues from
finance charges and fees on both a billed and a cash basis will be affected by
numerous factors, including the periodic finance charges on the receivables, the
amount of fees paid by account holders, the percentage of account holders who
pay off their balances in full each month and do not incur periodic finance
charges on purchases and changes in the level of delinquencies on the
receivables. See 'Risk Factors' in the Prospectus.
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<PAGE>
REVENUE EXPERIENCE OF THE TOTAL PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED --------------------------------------
MARCH 31, 1998 1997 1996 1995
------------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(1).............. $13,972,116 $13,180,931 $10,535,181 $8,425,402
Total Finance Charges and Fees Billed(2)........ 534,846 2,007,506 1,598,793 1,419,945
Total Finance Charges and Fees Billed as a
Percentage of Average Receivables
Outstanding................................... 15.31%(3) 15.23% 15.18% 16.85%
</TABLE>
- ------------------
(1) Average Receivables Outstanding for each indicated period is calculated as
the average of the month-end receivables balances for such period.
(2) Total Finance Charges and Fees Billed are comprised of periodic finance
charges, cash advance fees, annual membership fees and certain other fees.
(3) This percentage is an annualized figure.
The revenues for the Total Portfolio shown in the table above are related
to finance charges, together with certain fees, billed to holders of the
accounts. The revenues related to finance charges depend in part upon the
collective preference of account holders to use their accounts as revolving
credit facilities for purchases and cash advances and paying off account
balances over several months as opposed to convenience use, where the account
holders prefer instead to pay off their entire account balance each month,
thereby avoiding finance charges. Revenues related to finance charges and fees
also depend on the types of charges and fees assessed by the Account Owners on
the accounts in the Total Portfolio. Accordingly, revenues will be affected by
future changes in the types of charges and fees assessed on the accounts and
other factors. See 'Certain Legal Aspects of the Receivables--Consumer
Protection Laws' in the Prospectus. Neither the Servicer nor any Account Owner
nor any of their respective affiliates has any basis to predict how any future
changes in the use of the accounts by account holders or in the terms of
accounts may affect the revenue for the Total Portfolio.
PAYMENT RATES
The following table sets forth the highest and lowest account holder
monthly payment rates for the Total Portfolio during any month in the period
shown and the average account holder monthly payment rates for all months during
each period shown, calculated as the percentage equivalent of a fraction. For
the highest and lowest monthly payment rates, the numerator of the fraction is
equal to all payments from account holders as posted to the accounts during the
applicable month, and the denominator is equal to the aggregate amount of
receivables billed to account holders during the prior month. For the monthly
average payment rate, the numerator of the fraction is equal to all payments
from account holders as posted to the accounts during the indicated period,
divided by the number of months in the period, and the denominator is equal to
the average of the month-end receivables balances for such period.
ACCOUNT HOLDER MONTHLY PAYMENT RATES OF THE TOTAL PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED -------------------------
MARCH 31, 1998 1997 1996 1995
------------------ ----- ----- -----
<S> <C> <C> <C> <C>
Lowest Month.................................. 14.53% 12.99% 9.98% 8.16%
Highest Month................................. 15.06% 14.53% 12.66% 9.93%
Monthly Average............................... 14.80% 13.68% 11.51% 9.53%
</TABLE>
THE RECEIVABLES
The Receivables (including Receivables in Accounts closed at the request of
Account holders) in the Accounts, as of March 31, 1998, totaled $3,861,710,226,
comprised of $3,799,024,287 of Principal Receivables and $62,685,939 of Finance
Charge Receivables.
In the following two paragraphs and in all of the following tables,
references to 'Accounts,' 'Receivables,' 'Receivables Outstanding' and 'total
receivables' include, respectively, all Accounts other than Accounts closed at
the request of Account holders and all Receivables (including both Finance
Charge Receivables and Principal Receivables) other than Receivables in Accounts
closed at the request of Account holders.
The following tables summarize the Trust Portfolio by various criteria as
of March 31, 1998. Because the future composition of the Trust Portfolio may
change over time, these tables are not necessarily indicative of the composition
of the Trust Portfolio at any time subsequent to March 31, 1998.
S-17
<PAGE>
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
- ------------------------- --------- --------- ------------- -----------
<S> <C> <C> <C> <C>
Credit Balance........... 26,280 0.9 % $ (3,148,786) (0.1)%
Zero Balance............. 1,416,888 48.0 0 0.0
$1 to $1,000............. 601,172 20.4 238,240,282 6.2
$1,001 to $5,000......... 682,863 23.1 1,700,369,915 44.3
$5,001 to $10,000........ 170,106 5.8 1,171,895,680 30.5
$10,001 or More.......... 52,461 1.8 732,439,236 19.1
--------- --------- ------------- -----------
Total............... 2,949,770 100.0 % $3,839,796,327 100.0%
--------- --------- ------------- -----------
--------- --------- ------------- -----------
</TABLE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
CREDIT LIMIT RANGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
- ------------------------- --------- --------- ------------- -----------
<S> <C> <C> <C> <C>
Less than $1,000......... 212,353 7.2% $ 45,947,080 1.2%
$1,001 to $5,000......... 941,280 31.9 669,309,393 17.4
$5,001 to $10,000........ 648,589 22.0 934,594,491 24.3
$10,001 or More.......... 224,813 7.6 809,359,197 21.1
--------- --------- ------------- -----------
Total (Optima
Accounts)......... 2,027,035 68.7 2,459,210,161 64.0
--------- --------- ------------- -----------
No Pre-Set Spending Limit
(Sign & Travel
Accounts).............. 922,735 31.3 1,380,586,166 36.0
--------- --------- ------------- -----------
Grand Total......... 2,949,770 100.0% $3,839,796,327 100.0%
--------- --------- ------------- -----------
--------- --------- ------------- -----------
</TABLE>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
PERIOD OF DELINQUENCY OF TOTAL OF TOTAL
(DAYS CONTRACTUALLY NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
DELINQUENT) ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
- ------------------------- --------- --------- ------------- -----------
<S> <C> <C> <C> <C>
Current to 30 Days....... 2,900,488 98.3% $3,691,285,262 96.1%
31 to 60 Days............ 22,208 0.8 59,787,330 1.6
61 to 90 Days............ 9,144 0.3 29,378,834 0.8
91 or More............... 17,930 0.6 59,344,901 1.5
--------- --------- ------------- -----------
Total............... 2,949,770 100.0% $3,839,796,327 100.0%
--------- --------- ------------- -----------
--------- --------- ------------- -----------
</TABLE>
S-18
<PAGE>
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
ACCOUNT AGE ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
- ------------------------- --------- --------- ------------- -----------
<S> <C> <C> <C> <C>
Not More than 12
Months................. 70,741 2.4% $ 35,052,387 0.9%
12 Months to 17 Months... 13,952 0.5 9,282,908 0.2
18 Months to 23 Months... 118,314 4.0 108,218,717 2.8
24 Months to 35 Months... 482,322 16.4 523,202,212 13.6
36 Months to 47 Months... 544,540 18.5 575,107,395 15.0
48 Months to 59 Months... 573,961 19.5 464,754,450 12.1
60 Months to 71 Months... 96,086 3.3 140,628,654 3.7
72 Months or More........ 1,049,854 35.6 1,983,549,604 51.7
--------- --------- ------------- -----------
Total............... 2,949,770 100.0% $3,839,796,327 100.0%
--------- --------- ------------- -----------
--------- --------- ------------- -----------
</TABLE>
As of March 31, 1998, approximately 16.66%, 12.28%, 9.09%, 8.05% and 6.06%
of the Receivables related to Account holders having billing addresses in
California, New York, Texas, Florida, and New Jersey, respectively. Not more
than 5% of the Receivables related to Account holders having billing addresses
in any other single state.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates, before the deduction of
expenses, will be paid to the Transferors. RFC II will use such proceeds to pay
Credco the purchase price of the Receivables, if any, transferred to RFC II by
Credco pursuant to the RFC II Purchase Agreement. Each of Credco and Centurion
will use its proceeds for general corporate purposes.
RFC II, CENTURION AND CREDCO
RFC II
RFC II was incorporated under the laws of the State of Delaware on August
7, 1995. 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, investor diversified financial services and international banking
services throughout the world. RFC II 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 the stockholder of RFC
II, nor RFC II's board of directors intends to change the business purpose of
RFC II. RFC II's executive offices are located at American Express Tower, World
Financial Center, Room 138, 200 Vesey Street, New York, New York 10285-4405.
CENTURION
Centurion was incorporated in 1987 under the laws of the State of Utah as
an industrial loan company. It received FDIC insurance in 1989. Its principal
office is located at 6985 Union Park Center, Midvale, Utah 84047. Centurion is a
wholly owned subsidiary of TRS. Centurion is the surviving company of a 1996
merger with an affiliated bank which was also named American Express Centurion
Bank. Prior to the merger, the affiliated bank was one of the Transferors. In
connection with the merger, Centurion assumed all of the rights and obligations
of the affiliated bank as a Transferor under the Pooling and Servicing Agreement
and with respect to the Accounts owned by it.
As of December 31, 1997, Centurion had total deposits of approximately $1.9
billion, total assets of approximately $11.9 billion and total equity capital of
approximately $1.3 billion. Centurion had net income of approximately $268
million for the year ended December 31, 1997.
CREDCO
Credco is a wholly owned subsidiary of TRS primarily engaged in the
business of purchasing charge card account receivables generated by TRS and
certain revolving credit account receivables generated by Centurion. Its
principal office is located at 301 N. Walnut Street, Wilmington, Delaware 19801.
As of December 31, 1997, and based upon the Annual Report on Form 10-K of
Credco at such date, Credco had total assets of approximately $23.1 billion and
total equity capital of approximately $1.9 billion. Credco had net income of
approximately $212 million for the one-year period ended December 31, 1997.
S-19
<PAGE>
THE SERVICER
As of December 31, 1997, TRS, the Servicer, had approximately $48.7 billion
in total assets, approximately $44 billion in total liabilities and redeemable
preferred stock and approximately $4.7 billion in shareholder's equity.
SERIES PROVISIONS
The Series 1998-1 Certificates will be issued pursuant to the Pooling and
Servicing Agreement and a Supplement specifying the Principal Terms of the
Certificates (the 'SERIES 1998-1 SUPPLEMENT'), the forms of which have been
filed as exhibits to the Registration Statement of which the Prospectus and this
Prospectus Supplement are a part. The following summary describes certain terms
applicable to the Series 1998-1 Certificates. Reference should be made to the
Prospectus for additional information concerning the Series 1998-1 Certificates
and the Pooling and Servicing Agreement. See 'The Pooling and Servicing
Agreement Generally' in the Prospectus.
INTEREST PAYMENTS
Interest on the Class A Certificates and the Class B Certificates will
accrue from the Closing Date on the outstanding principal balances of the Class
A Certificates and the Class B Certificates at the Class A Certificate Rate and
Class B Certificate Rate, respectively. Interest will be distributed monthly on
each Distribution Date, commencing on the July 1998 Distribution Date, to the
Series 1998-1 Certificateholders in whose names the Series 1998-1 Certificates
were registered at the close of business on the last day of the calendar month
preceding the date of such payment (each, a 'RECORD DATE'). Interest for any
Distribution Date will accrue 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. On each Distribution Date,
Interest due to the Class A Certificateholders will be equal to the product of
(i) the actual number of days in the related Interest Period divided by 360,
(ii) the Class A Certificate Rate for the related Monthly Period, and (iii) the
outstanding principal balance of the Class A Certificates as of the preceding
Record date (or in the case of the first Distribution Date, as of the Closing
Date). Interest due on the Class A Certificates but not paid on any Distribution
Date will be payable on the next succeeding Distribution Date together with
additional interest on such amount at the Class A Certificate Rate plus 2% per
annum. Such additional interest shall accrue on the same basis as interest on
the Class A Certificates, and shall accrue from the Distribution Date such
overdue interest became due, to but excluding the Distribution Date on which
such additional interest is paid.
The Class A Certificates will bear interest from the Closing Date through
July 14, 1998, and during each Interest Period thereafter, at the rate of 0.09%
per annum above LIBOR prevailing on the related LIBOR Determination Date with
respect to each such period (the 'CLASS A CERTIFICATE RATE').
On each Distribution Date, Class A Monthly Interest and Class A Monthly
Interest previously due but not paid to the Class A Certificateholders and any
Class A Additional Interest will be paid to the Class A Certificateholders.
Payments to the Class A Certificateholders in respect of interest on the Class A
Certificates on any Distribution Date will be funded from Class A Available
Funds for the related Monthly Period. To the extent Class A Available Funds
allocated to the Class A Certificateholders' Interest for such Monthly Period
are insufficient to pay such interest, Excess Spread and Excess Finance Charge
Collections allocated to Series 1998-1 and Reallocated Principal Collections
allocable first to the Collateral Invested Amount and then the Class B Invested
Amount will be used to make such payments. 'CLASS A AVAILABLE FUNDS' means, with
respect to any Monthly Period, an amount equal to the sum of (i) the Class A
Floating Percentage of Reallocated Investor Finance Charge Collections allocated
to the Series 1998-1 Certificates and the Collateral Interest with respect to
such Monthly Period (including any investment earnings and certain other amounts
that are to be treated as collections of Finance Charge Receivables allocable to
Series 1998-1 in accordance with the Pooling and Servicing Agreement and the
Series 1998-1 Supplement), (ii) if such Monthly Period relates to a Distribution
Date with respect to the Controlled Accumulation Period, Principal Funding
Investment Proceeds, if any, with respect to the related Distribution Date, and
(iii) amounts, if any, to be withdrawn from the Reserve Account that must be
included in Class A Available Funds pursuant to the Series 1998-1 Supplement
with respect to such Distribution Date.
S-20
<PAGE>
Interest will accrue on the Class B Certificates at the Class B Certificate
Rate from the Closing Date. Interest will be distributed on July 15, 1998 and on
each Distribution Date thereafter to Class B Certificateholders in an amount
equal to the product of (i) the actual number of days in the related Interest
Period divided by 360, (ii) the Class B Certificate Rate for the related
Interest Period, and (iii) the outstanding principal balance of the Class B
Certificates as of the preceding Record Date (or in the case of the first
Distribution Date, as of the Closing Date). Interest due on the Class B
Certificates but not paid on any Distribution Date will be payable on the next
succeeding Distribution Date together with additional interest on such amount at
the Class B Certificate Rate plus 2% per annum. Such additional interest shall
accrue on the same basis as interest on the Class B Certificates, and shall
accrue from the Distribution Date such overdue interest became due, to but
excluding the Distribution Date on which such additional interest is paid.
The Class B Certificates will bear interest from the Closing Date through
July 14, 1998, and during each Interest Period thereafter, at the rate of 0.25%
per annum above LIBOR prevailing on the related LIBOR Determination Date with
respect to each such period (the 'CLASS B CERTIFICATE RATE').
On each Distribution Date, Class B Monthly Interest and Class B Monthly
Interest previously due but not paid to the Class B Certificateholders and any
Class B Additional Interest will be paid to the Class B Certificateholders.
Payments to the Class B Certificateholders in respect of interest on the Class B
Certificates on any Distribution Date will be funded from Class B Available
Funds for the related Monthly Period. To the extent Class B Available Funds
allocated to the Class B Certificateholders' Interest for such Monthly Period
are insufficient to pay such interest, Excess Spread and Excess Finance Charge
Collections allocated to Series 1998-1 and Reallocated Principal Collections
allocable to the Collateral Invested Amount and not required to pay the Class A
Required Amount or reimburse Class A Investor Charge-Offs will be used to make
such payments. 'CLASS B AVAILABLE FUNDS' means, with respect to any Monthly
Period, an amount equal to the Class B Floating Percentage of Reallocated
Investor Finance Charge Collections allocated to the Series 1998-1 Certificates
and the Collateral Interest with respect to such Monthly Period (including any
investment earnings and certain other amounts that are to be treated as
collections of Finance Charge Receivables in accordance with the Pooling and
Servicing Agreement).
The Trustee will determine LIBOR with respect to the Series 1998-1
Certificates on the second business day prior to the Closing Date for the period
from the Closing date through July 14, 1998 and for each Interest Period
thereafter, on the second business day prior to the Distribution Date on which
such Interest Period commences (each, a 'LIBOR DETERMINATION DATE'). For
purposes of calculating LIBOR, a business day is any business day on which
dealings in deposits in United States dollars are transacted in the London
interbank market.
'LIBOR' means, as of any LIBOR Determination Date, the rate for deposits in
United States dollars for a one-month period (commencing on the first day of the
relevant Interest Period) which appears on Telerate Page 3750 as of 11:00 a.m.,
London time, on such LIBOR Determination Date. If such rate does not appear on
Telerate Page 3750, the rate for that LIBOR Determination Date will be
determined on the basis of the rates at which deposits in United States dollas
are offered by the Reference Banks at approximately 11:00 a.m., London time, on
that day to prime banks in the London interbank market for a one-month period
(commencing on the first day of the relevant Interest Period). The Trustee will
request the principal London office of each of the Reference Banks to provide a
quotation of its rate. If at least two such quotations are provided, the rate
for that LIBOR Determination Date will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, the rate for that LIBOR
Determination Date will be the arithmetic mean of the rates quoted by major
banks in New York City, selected by the Servicer, at approximately 11:00 a.m.
New York City time, on that day for loans in United States dollars to leading
European banks for a one-month period (commencing on the first day of the
relevant Interest Period). If the banks selected by the Servicer are not quoting
rates as provided in the immediately preceding sentence, LIBOR for such Interest
Period will be LIBOR in effect for the immediately preceding Interest Period.
'TELERATE PAGE 3750' means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
'REFERENCE BANKS' means four major banks in the London interbank market
selected by the Servicer.
S-21
<PAGE>
The Class A Certificate Rate and the Class B Certificate Rate applicable to
the then current and immediately preceding Interest Periods may be obtained by
telephoning the Trustee at its Corporate Trust Office at (212) 815-5738
PRINCIPAL PAYMENTS
During the Revolving Period (which begins on the Closing Date and ends on
the day before the commencement of the Controlled Accumulation Period or, if
earlier, the Early Amortization Period), no principal payments will be made to
the Series 1998-1 Certificateholders. During the Controlled Accumulation Period
(on or prior to the Expected Final Payment Date), principal will be deposited in
the Principal Funding Account as described below and on the Expected Final
Payment Date will be distributed to Class A Certificateholders up to the Class A
Invested Amount and then to Class B Certificateholders up to the Class B
Invested Amount. During the Early Amortization Period, which will begin upon the
occurrence of a Pay-Out Event, and until the Series 1998-1 Termination Date
occurs, principal will be paid first to the Class A Certificateholders until the
Class A Invested Amount has been paid in full, and then to the Class B
Certificateholders until the Class B Invested Amount has been paid in full.
Unless a reduction in the Required Collateral Invested Amount has occurred, no
principal payments will be made in respect of the Collateral Invested Amount
until the final principal payment has been made to the Class A
Certificateholders and the Class B Certificateholders.
On each Distribution Date with respect to the Controlled Accumulation
Period, the Trustee will deposit in the Principal Funding Account an amount
equal to the least of (a) Available Principal Collections on deposit in the
Collection Account with respect to such Distribution Date, (b) the Controlled
Deposit Amount for such Distribution Date and (c) the sum of the Class A
Adjusted Invested Amount and the Class B Adjusted Invested Amount, until the
Principal Funding Account Balance equals the sum of the Class A Invested Amount
and the Class B Invested Amount. Amounts on deposit in the Principal Funding
Account will be paid to the Class A Certificateholders and, if the amount on
deposit in the Principal Funding Account exceeds the Class A Invested Amount, to
the Class B Certificateholders on the Expected Final Payment Date.
If a Pay-Out Event occurs with respect to the Series 1998-1 Certificates
during the Controlled Accumulation Period, the Early Amortization Period will
commence and any amount on deposit in the Principal Funding Account will be paid
first to the Class A Certificateholders on the first Special Payment Date and
then, after the Class A Invested Amount is paid in full, to the Class B
Certificateholders. If, on the Expected Final Payment Date, monies on deposit in
the Principal Funding Account are insufficient to pay the Class A Invested
Amount and the Class B Invested Amount, a Pay-Out Event will occur and the Early
Amortization Period will commence. After payment in full of the Class A Invested
Amount, the Class B Certificateholders will be entitled to receive an amount
equal to the Class B Invested Amount.
'AVAILABLE PRINCIPAL COLLECTIONS' means, with respect to any Monthly
Period, an amount equal to the sum of (1) an amount equal to the Principal
Allocation Percentage of the Series Allocation Percentage of all collections of
Principal Receivables received during such Monthly Period (minus certain
Reallocated Principal Collections used to fund the Required Amount), (2) any
Shared Principal Collections with respect to other Principal Sharing Series that
are allocated to Series 1998-1, and (3) certain other amounts which pursuant to
the Series 1998-1 Supplement are to be treated as Available Principal
Collections with respect to the related Distribution Date.
The Controlled Accumulation Period is currently expected to commence at the
close of business on the last day of the May 2002 Monthly Period; however, the
date on which the Controlled Accumulation Period actually commences may be
delayed if the Controlled Accumulation Period Length (determined as described
below) is less than the number of months remaining between each Period Length
Determination Date (defined herein) and the Expected Final Payment Date.
Beginning on the Determination Date immediately preceding the May 2002
Distribution Date and on each Determination Date thereafter until the Controlled
Accumulation Period actually commences (each, a 'PERIOD LENGTH DETERMINATION
DATE'), the Transferors will determine the 'CONTROLLED ACCUMULATION PERIOD
LENGTH' based on, among other things, the then current principal payment rate on
the Accounts and the principal amount of Principal Sharing Series that are
entitled to share principal with Series 1998-1; provided, however, that the
Controlled Accumulation Period Length will not be less than one month. If the
Controlled Accumulation Period Length is less than 12 months, the Controlled
Accumulation Period will commence later than the close of business on the last
day of the May 2002 Monthly Period and the number of
S-22
<PAGE>
months in the Controlled Accumulation Period will be equal to the Controlled
Accumulation Period Length. The effect of the foregoing calculation is to reduce
the Controlled Accumulation Period Length based on the invested amounts of other
Principal Sharing Series that are scheduled to be in their revolving periods and
thus scheduled to create Shared Principal Collections during the Controlled
Accumulation Period. In addition, if the Controlled Accumulation Period Length
shall have been determined to be less than 12 months and, after the date on
which such determination is made, a Pay-Out Event or Reinvestment Event (as
those terms are defined in the Supplement for such Series) shall occur with
respect to any outstanding Principal Sharing Series, the Controlled Accumulation
Period will commence on the earlier of (i) the first day of the Monthly Period
immediately succeeding the date that such Pay-Out Event or Reinvestment Event
shall have occurred with respect to such Series and (ii) the date on which the
Controlled Accumulation Period is then scheduled to commence.
On each Distribution Date with respect to the Early Amortization Period
until the Class A Invested Amount has been paid in full or the Series 1998-1
Termination Date occurs, the holders of the Class A Certificates will be
entitled to receive Available Principal Collections in an amount up to the Class
A Invested Amount. After payment in full of the Class A Invested Amount, the
holders of the Class B Certificates will be entitled to receive, on each
Distribution Date, Available Principal Collections until the earlier of the date
the Class B Invested Amount is paid in full and the Series 1998-1 Termination
Date. After payment in full of the Class B Invested Amount, the Collateral
Interest Holder will be entitled to receive, on each Distribution Date,
Available Principal Collections until the earlier of the date the Collateral
Invested Amount is paid in full and the Series 1998-1 Termination Date.
SUBORDINATION OF THE CLASS B CERTIFICATES AND THE COLLATERAL INTEREST
The Class B Certificateholders' Interest and the Collateral Interest will
be subordinated to the extent necessary to fund certain payments with respect to
the Class A Certificates. In addition, the Collateral Interest will be
subordinated to the extent necessary to fund certain payments with respect to
the Class B Certificates. Certain principal payments otherwise allocable to the
Class B Certificateholders may be reallocated to the Class A Certificateholders
and the Class B Invested Amount may be reduced. Similarly, certain principal
payments otherwise allocable to the Collateral Interest may be reallocated to
the Class A Certificateholders and the Class B Certificateholders and the
Collateral Invested Amount may be reduced. If the Collateral Invested Amount is
reduced to zero, holders of the Class B Certificates will bear directly the
credit and other risks associated with their interest in the Trust. To the
extent the Class B Invested Amount is reduced, the percentage of collections of
Finance Charge Receivables allocated to the Class B Certificateholders in
subsequent Monthly Periods will be reduced. Moreover, to the extent the amount
of such reduction in the Class B Invested Amount is not reimbursed, the amount
of principal distributable to the Class B Certificateholders will be reduced. 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. In the event of a reduction in the Class A Invested
Amount, the Class B Invested Amount or the Collateral Invested Amount, the
amount of principal and interest available to fund payments with respect to the
Class A Certificates and the Class B Certificates will be decreased. See
'--Allocation Percentages,' '--Reallocation of Cash Flows,' '--Application of
Collections--Excess Spread; Excess Finance Charge Collections' below.
ALLOCATION PERCENTAGES
Pursuant to the Pooling and Servicing Agreement, the Servicer will allocate
among Series 1998-1 and all other Series outstanding all collections of Finance
Charge Receivables and Principal Receivables and the Defaulted Amount with
respect to such Monthly Period as described under 'The Pooling and Servicing
Agreement Generally--Allocations' in the Prospectus and, with respect to Series
1998-1 specifically, as described below.
Pursuant to the Pooling and Servicing Agreement, during each Monthly
Period, the Servicer will allocate to Series 1998-1 its Series Allocable Finance
Charge Collections, Series Allocable Principal Collections and Series Allocable
Defaulted Amount.
'SERIES ALLOCABLE FINANCE CHARGE COLLECTIONS,' 'SERIES ALLOCABLE PRINCIPAL
COLLECTIONS' and 'SERIES ALLOCABLE DEFAULTED AMOUNT' mean, with respect to
Series 1998-1 and for any Monthly Period, the product of (a) the Series
Allocation Percentage for Series 1998-1 and (b) the amount of collections of
Finance Charge
S-23
<PAGE>
Receivables deposited in the Collection Account, the amount of collections of
Principal Receivables deposited in the Collection Account and the amount of all
Defaulted Amounts with respect to such Monthly Period, respectively.
'SERIES ALLOCATION PERCENTAGE' means, with respect to Series 1998-1 and for
any Monthly Period, the percentage equivalent of a fraction, the numerator of
which is the sum of the Series Adjusted Invested Amount for Series 1998-1 as of
the last day of the immediately preceding Monthly Period and the denominator of
which is the Trust Adjusted Invested Amount.
'SERIES ADJUSTED INVESTED AMOUNT' means, with respect to Series 1998-1 and
for any Monthly Period, the Series Invested Amount for Series 1998-1, less the
excess, if any, of all reductions in the Invested Amount (other than any
reductions occasioned by payments of principal to the Series 1998-1
Certificateholders or to the Collateral Interest Holder) as of the last day of
the preceding Monthly Period over the aggregate amount of any reimbursement of
such reductions as of such last day.
The Series Allocable Finance Charge Collections and the Series Allocable
Defaulted Amount for Series 1998-1 with respect to any Monthly Period will be
allocated to the Series 1998-1 Certificates and the Collateral Interest based on
the Floating Allocation Percentage and the remainder of such Series Allocable
Finance Charge Collections and Series Allocable Defaulted Amount will be
allocated to the Transferors' Interest. The 'FLOATING ALLOCATION PERCENTAGE'
means, with respect to any Monthly Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is the
Adjusted Invested Amount as of the last day of the preceding Monthly Period (or
with respect to the first Monthly Period, the Initial Invested Amount) and the
denominator of which is the product of (a) the sum of the total amount of the
Principal Receivables in the Trust as of such day (subject to adjustment to give
effect to designations of Additional Accounts and Removed Accounts) (or with
respect to the first Monthly Period, the total amount of Principal Receivables
in the Trust on the Closing Date) and the principal amount on deposit in the
Special Funding Account as of such day and (b) the Series Allocation Percentage.
Investor Finance Charge Collections (which for any Monthly Period is equal
to the product of the Floating Allocation Percentage and the Series Allocable
Finance Charge Collections) will be reallocated among all Series in Group II as
set forth in 'The Pooling and Servicing Agreement Generally--Reallocations Among
Different Series Within a Reallocation Group' in the Prospectus. Reallocated
Investor Finance Charge Collections allocated to Series 1998-1 and the Investor
Default Amount will be further allocated between the Class A Certificateholders,
the Class B Certificateholders and the Collateral Interest Holder in accordance
with the Class A Floating Percentage, the Class B Floating Percentage and the
Collateral Floating Percentage, respectively. The 'CLASS A FLOATING PERCENTAGE'
means, with respect to any Monthly Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the numerator of which is
equal to the Class A Adjusted Invested Amount as of the close of business on the
last day of the preceding Monthly Period (or with respect to the first Monthly
Period, as of the Closing Date) and the denominator of which is equal to the
Adjusted Invested Amount as of the close of business on such day (or, with
respect to the first Monthly Period, the Initial Invested Amount). The 'CLASS B
FLOATING PERCENTAGE' means, with respect to any Monthly Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is equal to the Class B Adjusted Invested Amount as of the
close of business on the last day of the preceding Monthly Period (or with
respect to the first Monthly Period, as of the Closing Date) and the denominator
of which is equal to the Adjusted Invested Amount at the close of business on
such day (or with respect to the first Monthly Period, the Initial Invested
Amount). The 'COLLATERAL FLOATING PERCENTAGE' means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is equal to the Collateral Invested Amount as
of the close of business on the last day of the preceding Monthly Period (or
with respect to the first Monthly Period, as of the Closing Date) and the
denominator of which is equal to the Adjusted Invested Amount as of the close of
business on such day (or with respect to the first Monthly Period, the Initial
Invested Amount).
Series Allocable Principal Collections for Series 1998-1 will be allocated
to the Series 1998-1 Certificates and the Collateral Interest based on the
Principal Allocation Percentage and the remainder of such Series Allocable
Principal Collections will be allocated to the Transferors' Interest. The
'PRINCIPAL ALLOCATION PERCENTAGE' means, with respect to any Monthly Period, the
percentage equivalent (which percentage shall never exceed 100%) of a fraction,
the numerator of which is (a) during the Revolving Period, the Series Adjusted
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Invested Amount for Series 1998-1 as of the last day of the immediately
preceding Monthly Period (or, in the case of the first Monthly Period, the
Closing Date) and (b) during the Controlled Accumulation Period or the Early
Amortization Period, the Series Adjusted Invested Amount for Series 1998-1 as of
the last day of the Revolving Period and the denominator of which is the product
of (i) the sum of the total amount of Principal Receivables in the Trust as of
the last day of the immediately preceding Monthly Period (subject to adjustment
to give effect to designations of Additional Accounts and Removed Accounts) and
the principal amount on deposit in the Special Funding Account as of such last
day (or, in the case of the first Monthly Period, the Closing Date) and (ii) the
Series Allocation Percentage for Series 1998-1 as of the last day of the
immediately preceding Monthly Period; provided, however, that because the Series
1998-1 Certificates offered hereby are subject to being paired with a future
Series upon satisfaction of the Rating Agency Condition, if a Pay-Out Event or a
Reinvestment Event (as those terms are defined in the related Supplement) occurs
with respect to a Paired Series during the Controlled Accumulation Period with
respect to Series 1998-1, the Transferor may, by written notice delivered to the
Trustee and the Servicer, designate a different numerator for the foregoing
fraction, provided that such numerator is not less than the Adjusted Invested
Amount as of the last day of the revolving period for such Paired Series and the
Transferor shall have received written notice from each Rating Agency that such
designation will satisfy the Rating Agency Condition and the Transferor shall
have delivered to the Trustee a certificate of an authorized officer to the
effect that, based on the facts known to such officer at the time, in the
reasonable belief of the Transferor, such designation will not cause a Pay-Out
Event or an event that, after the giving of notice or lapse of time, would
constitute a Pay-Out Event, to occur with respect to Series 1998-1.
Such amounts so allocated to the Series 1998-1 Certificates and the
Collateral Interest will be further allocated to the Class A Certificateholders,
the Class B Certificateholders and the Collateral Interest Holder based on the
Class A Principal Percentage, the Class B Principal Percentage and the
Collateral Principal Percentage, respectively. The 'CLASS A PRINCIPAL
PERCENTAGE' means, with respect to any Monthly Period (i) during the Revolving
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction, the numerator of which is the Class A Invested Amount as of the last
day of the immediately preceding Monthly Period (or, in the case of the first
Monthly Period, the Class A Initial Invested Amount), and the denominator of
which is the Invested Amount as of such day (or, in the case of the first
Monthly Period, the Initial Invested Amount) and (ii) during the Controlled
Accumulation Period or the Early Amortization Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is the Class A Invested Amount as of the end of the Revolving Period, and the
denominator of which is the Invested Amount as of such day. The 'CLASS B
PRINCIPAL PERCENTAGE' means, with respect to any Monthly Period, (i) during the
Revolving Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is the Class B Invested Amount as of
the last day of the immediately preceding Monthly Period (or, in the case of the
first Monthly Period, the Class B Initial Invested Amount) and the denominator
of which is the Invested Amount as of such day (or, in the case of the first
Monthly Period, the Initial Invested Amount) and (ii) during the Controlled
Accumulation Period or the Early Amortization Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction, the numerator of which
is the Class B Invested Amount as of the end of the Revolving Period, and the
denominator of which is the Invested Amount as of such day. The 'COLLATERAL
PRINCIPAL PERCENTAGE' means, with respect to any Monthly Period, (i) during the
Revolving Period, the percentage equivalent (which percentage shall never exceed
100%) of a fraction, the numerator of which is the Collateral Invested Amount as
of the last day of the immediately preceding Monthly Period (or, in the case of
the first Monthly Period, the Collateral Initial Invested Amount) and the
denominator of which is the Invested Amount as of such day (or in the case of
the first Monthly Period, the Initial Invested Amount) and (ii) during the
Controlled Accumulation Period or the Early Amortization Period, the percentage
equivalent (which percentage shall never exceed 100%) of a fraction, the
numerator of which is the Collateral Invested Amount as of the end of the
Revolving Period, and the denominator of which is the Invested Amount as of such
day.
As used herein, the following terms have the meanings indicated:
'CLASS A INVESTED AMOUNT' for any date means an amount equal to (i)
the Class A Initial Invested Amount, less (ii) the amount of principal
payments made to holders of the Class A Certificates on or prior to such
date, less (iii) the excess, if any, of the aggregate amount of Class A
Investor Charge-Offs for all prior Distribution Dates over the aggregate
amount of any reimbursements of Class A Investor Charge-Offs for all
Distribution Dates prior to such date.
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<PAGE>
'CLASS B INVESTED AMOUNT' for any date means an amount equal to (i)
the Class B Initial Invested Amount, less (ii) the amount of principal
payments made to holders of the Class B Certificates on or prior to such
date, less (iii) the aggregate amount of Class B Investor Charge-Offs for
all prior Distribution Dates, less (iv) the aggregate amount of Reallocated
Principal Collections for all prior Distribution Dates which have been used
to fund the Required Amount with respect to such Distribution Dates
(excluding any Reallocated Principal Collections that have resulted in a
reduction of the Collateral Invested Amount), less (v) an amount equal to
the amount by which the Class B Invested Amount has been reduced to cover
the Class A Investor Default Amount on all prior Distribution Dates as
described herein under '--Defaulted Receivables; Investor Charge-Offs,'
plus (vi) the aggregate amount of Excess Spread and Excess Finance Charge
Collections allocated to Series 1998-1 and applied on all prior
Distribution Dates for the purpose of reimbursing amounts deducted pursuant
to the foregoing clauses (iii), (iv) and (v); provided, however, that the
Class B Invested Amount may not be reduced below zero.
'CLASS A ADJUSTED INVESTED AMOUNT' for any date means an amount equal
to the Class A Invested Amount less the funds on deposit in the Principal
Funding Account (up to the Class A Invested Amount) on such date.
'CLASS B ADJUSTED INVESTED AMOUNT' for any date means an amount equal
to the Class B Invested Amount less the funds on deposit in the Principal
Funding Account in excess of the Class A Invested Amount on such date.
'COLLATERAL INVESTED AMOUNT' for any date means an amount equal to (i)
the Collateral Initial Invested Amount, less (ii) the aggregate amount of
principal payments made to the Collateral Interest Holder prior to such
date, less (iii) the aggregate amount of Collateral Charge-Offs for all
prior Distribution Dates, less (iv) the aggregate amount of Reallocated
Principal Collections for all prior Distribution Dates, less (v) an amount
equal to the aggregate amount by which the Collateral Invested Amount has
been reduced to fund the Class A Investor Default Amount and the Class B
Investor Default Amount on all prior Distribution Dates as described under
'-- Defaulted Receivables; Investor Charge-Offs,' and plus (vi) the
aggregate amount of Excess Spread and Excess Finance Charge Collections
allocated to Series 1998-1 and applied on all prior Distribution Dates for
the purpose of reimbursing amounts deducted pursuant to the foregoing
clauses (iii), (iv) and (v); provided, however, that the Collateral
Invested Amount may not be reduced below zero.
'INVESTED AMOUNT' for any date means an amount equal to the sum of the
Class A Invested Amount, the Class B Invested Amount and the Collateral
Invested Amount on such date.
PRINCIPAL FUNDING ACCOUNT
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, the Principal Funding Account as a deposit account meeting
the eligibility requirements specified in the Pooling and Servicing Agreement
(an 'ELIGIBLE DEPOSIT ACCOUNT') held for the benefit of the Series 1998-1
Certificateholders. During the Controlled Accumulation Period, the Servicer will
transfer collections in respect of Principal Receivables, Shared Principal
Collections allocated to Series 1998-1 and other amounts described herein to be
treated in the same manner as collections of Principal Receivables from the
Collection Account to the Principal Funding Account as described under
'--Application of Collections.'
Unless a Pay-Out Event has occurred with respect to the Series 1998-1
Certificates, all amounts on deposit in the Principal Funding Account (the
'PRINCIPAL FUNDING ACCOUNT BALANCE') on any Distribution Date (after giving
effect to any deposits to, or withdrawals from, the Principal Funding Account to
be made on such Distribution Date) will be invested to the following
Distribution Date by the Trustee at the direction of the Servicer in Eligible
Investments. 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 a portion of Class A Available Funds. 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 other Class A
Available Funds (including a withdrawal from the Reserve Account, if necessary,
as described under '--Reserve Account'). The Available Reserve Account Amount at
any time
S-26
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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) the Principal
Funding Account Balance, if any, as of the preceding Distribution Date.
RESERVE ACCOUNT
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account for the benefit of the Class A
Certificateholders and the Collateral Interest Holder (the 'RESERVE ACCOUNT').
The Reserve Account is 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 (defined below), but prior to the
termination of the Reserve Account, the Trustee, acting pursuant to the
Servicer's instructions, will apply Excess Spread and Excess Finance Charge
Collections allocated to Series 1998-1 (in the order of priority described below
under '--Application of Collections--Payment of Fees, Interest and Other Items')
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
such 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 and
Excess Finance Charge Collections allocated and 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 Monthly Period that commences three months prior to the
Distribution Date with respect to the first Monthly Period in the Controlled
Accumulation Period, or such earlier date as the Transferor 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 percentage (which may
be 0%) of the Class A Invested Amount designated by the Transferors provided
that the designation of such other percentage by the Transferors shall have
received the prior written consent of the Collateral Interest Holder and shall
have satisfied the Rating Agency Condition. 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 Collateral Interest Holder for application
in accordance with the terms of the Loan Agreement.
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 through 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 collections of Finance Charge
Receivables allocable to Series 1998-1.
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 included in Class A Available Funds in an amount equal to the lesser
of (a) the Available Reserve Account Amount (defined below) with respect to such
Distribution Date or Special Payment Date and (b) the excess, if any, of the
Covered Amount with respect to such Distribution Date or Special Payment Date
over the Principal Funding Investment Proceeds with respect to such Distribution
Date or Special Payment Date; provided that the amount of such withdrawal will
be reduced to the extent that funds otherwise would be available to be deposited
in the Reserve Account on such Distribution Date or Special Payment Date. On
each Distribution Date, the amount available to be withdrawn from the Reserve
Account (the 'AVAILABLE RESERVE ACCOUNT AMOUNT') will be equal to the lesser of
the amount on deposit in the Reserve Account (before giving effect to any
deposit to be made to the Reserve Account on such Distribution Date) and the
Required Reserve Account Amount for such Distribution Date.
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<PAGE>
The Reserve Account will be terminated following the earlier to occur of
(a) the termination of the Trust pursuant to the Pooling and Servicing
Agreement, (b) the date on which the Series 1998-1 Certificates are paid in full
and (c) if the Controlled Accumulation Period has not commenced, the occurrence
of a Pay-Out Event with respect to the Series 1998-1 Certificates 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 Collateral Interest Holder for application in accordance with
the terms of the Loan Agreement. Any amounts withdrawn from the Reserve Account
and distributed to the Collateral Interest Holder as described above will not be
available for distribution to the Class A Certificateholders.
REALLOCATION OF CASH FLOWS
With respect to each Distribution Date, on each Determination Date, the
Servicer will determine the amount (the 'CLASS A REQUIRED AMOUNT'), which will
be equal to the amount, if any, by which (a) the sum of (i) Class A Monthly
Interest for such Distribution Date, (ii) any Class A Outstanding Monthly
Interest, (iii) any Class A Additional Interest, (iv) if TRS or an affiliate of
TRS is no longer the Servicer, the Class A Servicing Fee for such Distribution
Date and any unpaid Class A Servicing Fee and (v) the Class A Investor Default
Amount, if any, for such Distribution Date exceeds (b) the sum of (i) the amount
of Principal Funding Investment Proceeds, if any, with respect to such
Distribution Date, (ii) the Class A Floating Percentage of Reallocated Investor
Finance Charge Collections (including any investment earnings treated as
collections of Finance Charge Receivables in accordance with the Pooling and
Servicing Agreement) and (iii) the amount of funds, if any, withdrawn from the
Reserve Account and allocated to the Class A Certificates pursuant to the Series
1998-1 Supplement. If the Class A Required Amount is greater than zero, Excess
Spread and Excess Finance Charge Collections allocated to Series 1998-1 and
available for such purpose will be used to fund the Class A Required Amount with
respect to such Distribution Date. If such Excess Spread and Excess Finance
Charge Collections are insufficient to fund the Class A Required Amount,
collections of Principal Receivables allocable first to the Collateral Invested
Amount and then to the Class B Certificates for the related Monthly Period
('REALLOCATED PRINCIPAL COLLECTIONS') will then be used to fund the remaining
Class A Required Amount. If Reallocated Principal Collections with respect to
the related Monthly Period, together with Excess Spread and Excess Finance
Charge Collections allocated to Series 1998-1, are insufficient to fund the
Class A Required Amount for such related Monthly Period, then the Collateral
Invested Amount will be reduced by the amount of such excess (but not by more
than the Class A Investor Default Amount for such Distribution Date). In the
event that such reduction would cause the Collateral Invested Amount to be a
negative number, the Collateral Invested Amount will be reduced to zero, and the
Class B Invested Amount will be reduced by the amount by which the Collateral
Invested Amount would have been reduced below zero (but not by more than the
excess of the Class A Investor Default amount, if any, for such Distribution
Date over the amount of such reduction, if any, of the Collateral Invested
Amount with respect to such Distribution Date). In the event that such reduction
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 by more than the excess, if any, of the Class A
Investor Default Amount for such Distribution Date over the amount of the
reductions, if any, of the Collateral Invested Amount and the Class B Invested
Amount with respect to such Distribution Date as described above. Any such
reduction in the Class A Invested Amount will have the effect of slowing or
reducing the return of principal and interest to the Class A Certificateholders.
In such case, the Class A Certificateholders will bear directly the credit and
other risks associated with their undivided interest in the Trust. See
'--Defaulted Receivables; Investor Charge-Offs.'
With respect to each Distribution Date, on each Determination Date, the
Servicer will determine the amount (the 'CLASS B REQUIRED AMOUNT'), which will
be equal to the sum of (a) the amount, if any, by which the sum of (i) Class B
Monthly Interest for such Distribution Date, (ii) any Class B Outstanding
Monthly Interest, (iii) any Class B Additional Interest, and (iv) if TRS or an
affiliate of TRS is no longer the Servicer, the Class B Servicing Fee for such
Distribution Date and any unpaid Class B Servicing Fee exceeds the Class B
Floating Percentage of Reallocated Investor Finance Charge Collections
(including any investment earnings treated as collections of Finance Charge
Receivables in accordance with the Pooling and Servicing Agreement) and (b) the
Class B Investor Default Amount. If the Class B Required Amount is greater than
zero, Excess Spread and Excess
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<PAGE>
Finance Charge Collections allocated to Series 1998-1 and not required to pay
the Class A Required Amount or reimburse Class A Investor Charge-Offs will be
used to fund the Class B Required Amount with respect to such Distribution Date.
If such Excess Spread and Excess Finance Charge Collections available with
respect to such Distribution Date are less than the Class B Required Amount,
Reallocated Principal Collections allocable to the Collateral Interest and not
required to pay the Class A Required Amount for the related Monthly Period will
then be used to fund the remaining Class B Required Amount. If such Reallocated
Principal Collections allocable to the Collateral Interest with respect to the
related Monthly Period are insufficient to fund the remaining Class B Required
Amount, then the Collateral Invested Amount will be reduced by the amount of
such insufficiency (but not by more than the Class B Investor Default Amount for
such Distribution Date). In the event that such reduction would cause the
Collateral Invested Amount to be a negative number, the Collateral Invested
Amount will be reduced to zero, and the Class B Invested Amount will be reduced
by the amount by which the Collateral Invested Amount would have been reduced
below zero (but not by more than the excess of the Class B Investor Default
Amount for such Distribution Date over the amount of such reduction of the
Collateral Invested Amount), and the Class B Certificateholders will bear
directly the credit and other risks associated with their undivided interests in
the Trust. See '--Defaulted Receivables; Investor Charge-Offs.'
Reductions of the Class A Invested Amount or Class B Invested Amount shall
thereafter be reimbursed and the Class A Invested Amount or Class B Invested
Amount increased on each Distribution Date by the amount, if any, of Excess
Spread and Excess Finance Charge Collections allocable and available to
reimburse such amounts. See '--Excess Spread; Excess Finance Charge Collections'
below. When such reductions of the Class A Invested Amount and Class B Invested
Amount have been fully reimbursed, reductions of the Collateral Invested Amount
shall be reimbursed and the Collateral Invested Amount increased up to the
Required Collateral Invested Amount in a similar manner.
APPLICATION OF COLLECTIONS
Payment of Fees, Interest and Other Items. On each Distribution Date, the
Trustee, acting pursuant to the Servicer's instructions, will apply the Class A
Available Funds, Class B Available Funds and Collateral Available Funds (see
'--Interest Payments' above) on deposit in the Collection Account in the
following priority:
(A) On each Distribution Date, an amount equal to the Class A
Available Funds with respect to such Distribution Date will be distributed
or deposited in the following priority:
(i) an amount equal to Class A Monthly Interest for such
Distribution Date, plus any Class A Outstanding Monthly Interest,
plus additional interest with respect to any such Class A Outstanding
Monthly Interest at a rate equal to the Class A Certificate Rate plus
2% per annum (the 'CLASS A ADDITIONAL INTEREST'), will be distributed
to holders of the Class A Certificates;
(ii) if TRS or an affiliate of TRS is no longer the Servicer, an
amount equal to the Class A Servicing Fee for such Distribution Date,
plus the amount of any Class A Servicing Fee previously due but not
distributed to the Servicer on a prior Distribution Date, will be
distributed to the Servicer;
(iii) an amount equal to the Class A Investor Default Amount for
such Distribution Date will be treated as a portion of Available
Principal Collections for such Distribution Date; and
(iv) the balance, if any, shall constitute Excess Spread and
shall be allocated and distributed or deposited as described under
'--Excess Spread; Excess Finance Charge Collections' below.
(B) On each Distribution Date, an amount equal to the Class B
Available Funds with respect to such Distribution Date will be distributed
or deposited in the following priority:
(i) an amount equal to Class B Monthly Interest for such
Distribution Date, plus the amount of any Class B Outstanding Monthly
Interest, plus any additional interest with respect to any such Class
B Outstanding Monthly Interest at a rate equal to the Class B
Certificate Rate plus 2% per annum ('CLASS B ADDITIONAL INTEREST'),
will be distributed to the holders of the Class B Certificates;
(ii) if TRS or an affiliate of TRS is no longer the Servicer, an
amount equal to the Class B Servicing Fee for such Distribution Date,
plus the amount of any Class B Servicing Fee previously
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<PAGE>
due but not distributed to the Servicer on a prior Distribution Date,
will be distributed to the Servicer; and
(iii) the balance, if any, shall constitute Excess Spread and
shall be allocated and distributed or deposited as described under
'-- Excess Spread; Excess Finance Charge Collections' below.
(C) On each Distribution Date, an amount equal to the Collateral
Available Funds with respect to such Distribution Date will be distributed
or deposited in the following priority:
(i) if TRS or an affiliate of TRS is no longer the Servicer, an
amount equal to the Collateral Interest Servicing Fee for such
Distribution Date, plus the amount of any Collateral Interest
Servicing Fee previously due but not distributed to the Servicer on a
prior Distribution Date, will be paid to the Servicer; and
(ii) the balance, if any, will constitute a portion of Excess
Spread and will be allocated and distributed or deposited as
described under '--Excess Spread; Excess Finance Charge Collections'
below.
'CLASS A MONTHLY INTEREST' means, with respect to any Distribution Date, an
amount equal to the product of (i) the Class A Certificate Rate for such
Distribution Date, (ii) the outstanding principal balance of the Class A
Certificates as of the preceding Record Date and (iii) a fraction, the numerator
of which is the actual number of days in the period from and including the
preceding Distribution Date to but excluding such Distribution Date and the
denominator of which is 360; provided, that with respect to the first
Distribution Date, Class A Monthly Interest shall be equal to the interest
accrued on the outstanding principal balance of the Class A Certificates at the
Class A Certificate Rate from the Closing Date to but excluding the first
Distribution Date.
'CLASS A OUTSTANDING MONTHLY INTEREST' means, with respect to any
Distribution Date, the amount of Class A Monthly Interest previously due but not
paid to the Class A Certificateholders.
'CLASS B MONTHLY INTEREST' means, with respect to any Distribution Date, an
amount equal to the product of (i) the Class B Certificate Rate for such
Distribution Date (ii) the Class B Invested Amount as of the preceding Record
Date and (iii) a fraction, the numerator of which is the actual number of days
in the period from and including the preceding Distribution Date to but
excluding such Distribution Date and the denominator of which is 360; provided,
that with respect to the first Distribution Date, Class B Monthly Interest shall
be equal to the interest accrued on the Class B Invested Amount at the Class B
Certificate Rate for the period from the Closing Date to but excluding the first
Distribution Date.
'CLASS B OUTSTANDING MONTHLY INTEREST' means, with respect to any
Distribution Date, the amount of Class B Monthly Interest previously due but not
paid to the Class B Certificateholders.
'COLLATERAL AVAILABLE FUNDS' means, with respect to any Monthly Period, an
amount equal to the Collateral Floating Percentage of Reallocated Investor
Finance Charge Collections (including any investment earnings and certain other
amounts that are to be treated as collections of Finance Charge Receivables
allocable to Series 1998-1 in accordance with the Pooling and Servicing
Agreement and the Series 1998-1 Supplement).
'EXCESS SPREAD' means, with respect to any Distribution Date, an amount
equal to the sum of the amounts described in clause (A)(iv) above, clause
(B)(iii) above and clause (C)(ii) above.
Excess Spread; Excess Finance Charge Collections. On each Distribution
Date, the Trustee, acting pursuant to the Servicer's instructions, will apply
Excess Spread and Excess Finance Charge Collections allocated to Series 1998-1
with respect to the related Monthly Period, to make the following distributions
or deposits in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with
respect to the related Monthly Period will be used to fund any deficiency
pursuant to clauses (A)(i), (ii) and (iii) above under '--Payment of Fees,
Interest and Other Items' in such order of priority;
(b) an amount equal to the aggregate amount of Class A Investor
Charge-Offs which have not been previously reimbursed will be treated as a
portion of Available Principal Collections for such Distribution Date as
described under '--Payments of Principal' below;
(c) an amount equal to the interest accrued with respect to the
outstanding aggregate principal balance of the Class B Certificates not
otherwise distributed to the Class B Certificateholders on such
Distribution
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Date will accrue at the Class B Certificate Rate and be paid to Class B
Certificateholders, except that any such interest previously due but not
paid will accrue at the Class B Certificate Rate plus 2% per annum;
(d) an amount equal to the Class B Required Amount, if any, with
respect to such Distribution Date will be (I) used to fund any deficiency
pursuant to clause (B)(ii) above under '--Payment of Fees, Interest and
Other Items' in such order of priority and (II) then treated, up to the
Class B Investor Default Amount, as a portion of Available Principal
Collections for such Distribution Date;
(e) an amount equal to the aggregate amount by which the Class B
Invested Amount has been reduced pursuant to clauses (iii), (iv) and (v) of
the definition of 'Class B Invested Amount' under '--Allocation
Percentages' above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) will be treated as a
portion of Available Principal Collections for such Distribution Date;
(f) an amount equal to Collateral Monthly Interest for such
Distribution Date, plus the amount of any Collateral Monthly Interest
previously due but not distributed to the Collateral Interest Holder on a
prior Distribution Date and any Collateral Additional Interest previously
due but not distributed to the Collateral Interest Holder on a prior
Distribution Date, will be distributed to the Collateral Interest Holder
for application in accordance with the Loan Agreement;
(g) an amount equal to the Monthly Servicing Fee due but not paid to
the Servicer on such Distribution Date or a prior Distribution Date shall
be paid to the Servicer;
(h) an amount equal to the Collateral Default Amount shall be treated
as a portion of Available Principal Collections with respect to such
Distribution Date;
(i) an amount equal to the aggregate amount by which the Collateral
Invested Amount has been reduced pursuant to clauses (iii), (iv) and (v) of
the definition of 'Collateral Invested Amount' under '--Allocation
Percentages' above (but not in excess of the aggregate amount of such
reductions which have not been previously reimbursed) shall be treated as a
portion of Available Principal Collections for such Distribution Date;
(j) 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 '--Reserve Account' above, 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;
(k) an amount equal to the aggregate of any other amounts then
required to be applied pursuant to the Loan Agreement among the
Transferors, the Trustee, the Servicer and the Collateral Interest Holder
(the 'LOAN AGREEMENT') (to the extent such amounts are required to be
applied pursuant to the Loan Agreement out of Excess Spread and Excess
Finance Charge Collections) shall be distributed to the Collateral Interest
Holder for application in accordance with the Loan Agreement; and
(l) the balance, if any, will constitute a portion of Excess Finance
Charge Collections for such Distribution Date and will be available for
allocation to other Excess Allocation Series or to the holders of the
Transferor Certificates as described in 'The Pooling and Servicing
Agreement Generally--Sharing of Excess Finance Charge Collections Among
Excess Allocation Series' in the Prospectus.
'COLLATERAL MONTHLY INTEREST' means, with respect to any Distribution Date,
an amount equal to the product of (i)(A) a fraction, the numerator of which is
the actual number of days in the period from and including the preceding
Distribution Date to but excluding such Distribution Date and the denominator of
which is 360, times (B) the Collateral Rate and (ii) the Collateral Invested
Amount as of the close of business on the last day of the preceding Monthly
Period; provided, however, with respect to the first Distribution Date,
Collateral Monthly Interest shall be equal to the interest accrued on the
Collateral Initial Invested Amount at the Collateral Rate for the period from
the Closing Date to but excluding the first Distribution Date.
'COLLATERAL RATE' means a rate specified in the Loan Agreement not to
exceed one-month LIBOR plus 1.00% per annum.
'COLLATERAL ADDITIONAL INTEREST' means, with respect to any Distribution
Date, additional interest with respect to Collateral Monthly Interest due but
not paid to the Collateral Interest Holder on a prior Distribution Date at a
rate equal to the Collateral Rate.
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Payments of Principal. On each Distribution Date, the Trustee, acting
pursuant to the Servicer's instructions, will distribute Available Principal
Collections (see ' Principal Payments' above) on deposit in the Collection
Account in the following priority:
(i) on each Distribution Date with respect to the Revolving Period,
all such Available Principal Collections will be distributed or deposited
in the following priority:
(A) an amount equal to the excess, if any, of the Collateral
Invested Amount over the Required Collateral Invested Amount will be
paid to the Collateral Interest Holder; and
(B) the balance will be treated as Shared Principal Collections
and applied as described under 'The Pooling and Servicing Agreement
Generally--Sharing of Principal Collections Among Principal Sharing
Series' in the Prospectus;
(ii) on each Distribution Date with respect to the Controlled
Accumulation Period, all such Available Principal Collections will be
distributed or deposited in the following priority:
(A) an amount equal to the lesser of (x) the Controlled Deposit
Amount and (y) the sum of the Class A Adjusted Invested Amount and
the Class B Adjusted Invested Amount will be deposited in the
Principal Funding Account;
(B) for each Distribution Date before the Class B Invested
Amount is paid in full, an amount equal to the balance, if any, of
such Available Principal Collections will be paid to the Collateral
Interest Holder, for application in accordance with the Loan
Agreement, to the extent the Collateral Invested Amount is greater
than the Required Collateral Invested Amount;
(C) for each Distribution Date beginning on the Distribution
Date on which the Class B Invested Amount is paid in full, an amount
up to the Collateral Invested Amount will be paid to the Collateral
Interest Holder; and
(D) for each Distribution Date, the balance, if any, of
Available Principal Collections not applied pursuant to paragraphs
(A) and (B) or (C) (as applicable) above will be treated as Shared
Principal Collections and applied as described under 'The Pooling and
Servicing Agreement Generally--Sharing of Principal Collections Among
Principal Sharing Series' in the Prospectus; and
(iii) on each Distribution Date with respect to the Early Amortization
Period, all such Available Principal Collections will be distributed as
follows:
(A) an amount up to the Class A Adjusted Invested Amount will be
distributed to the Class A Certificateholders;
(B) for each Distribution Date beginning on the Distribution
Date on which the Class A Invested Amount is paid in full, an amount
up to the Class B Adjusted Invested Amount will be distributed to the
Class B Certificateholders;
(C) for each Distribution Date beginning on the Distribution
Date on which the Class B Invested Amount is paid in full, an amount
up to the Collateral Invested Amount will be paid to the Collateral
Interest Holder; and
(D) for each Distribution Date, after giving effect to
paragraphs (A), (B) and (C) above, an amount equal to the balance, if
any, of such Available Principal Collections will be allocated to
Shared Principal Collections and applied in accordance with the
Pooling and Servicing Agreement.
'CONTROLLED ACCUMULATION AMOUNT' means for any Distribution Date with
respect to the Controlled Accumulation Period, $75,416,666.67; provided,
however, that, if the commencement of the Controlled Accumulation Period is
delayed as described above under '--Principal Payments,' the Controlled
Accumulation Amount for each Distribution Date with respect to the Controlled
Accumulation Period may be different for each Distribution Date with respect to
the Controlled Accumulation Period and will be determined by the Transferors in
accordance with the Series 1998-1 Supplement based on the principal payment
rates for the Accounts and on the invested amounts of other Principal Sharing
Series that are scheduled to be in their revolving periods and then scheduled to
create Shared Principal Collections during the Controlled Accumulation Period.
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'DEFICIT CONTROLLED ACCUMULATION AMOUNT' means (a) on the first
Distribution Date with respect to the Controlled Accumulation Period, the
excess, if any, of the Controlled Accumulation Amount for such Distribution Date
over the amount deposited in the Principal Funding Account on such Distribution
Date and (b) on each subsequent Distribution Date with respect to the Controlled
Accumulation Period, the excess, if any, of the Controlled Deposit Amount for
such subsequent Distribution Date over the amount deposited in the Principal
Funding Account on such subsequent Distribution Date.
'CONTROLLED DEPOSIT AMOUNT' shall mean, for any Distribution Date with
respect to the Controlled Accumulation Period, an amount equal to the sum of the
Controlled Accumulation Amount for such Distribution Date and any Deficit
Controlled Accumulation Amount for the immediately preceding Distribution Date.
REQUIRED COLLATERAL INVESTED AMOUNT
The 'REQUIRED COLLATERAL INVESTED AMOUNT' with respect to any Distribution
Date means (i) initially $95,000,000 and (ii) thereafter on each Distribution
Date an amount equal to the greater of (a) 9.5% of the sum of the Class A
Adjusted Invested Amount, the Class B Adjusted Invested Amount and the
Collateral Invested Amount, in each case, on such Distribution Date (after any
adjustments made on such Distribution Date) and (b) $30,000,000; provided,
however, that (1) if certain reductions in the Collateral Invested Amount are
made or if a Pay-Out Event occurs, the Required Collateral Invested Amount for
such Distribution Date shall equal the Required Collateral Invested Amount for
the Distribution Date immediately preceding the occurrence of such reduction or
Pay-Out Event, (2) in no event shall the Required Collateral Invested Amount
exceed the unpaid principal amount of the Series 1998-1 Certificates as of the
last day of the Monthly Period preceding such Distribution Date after taking
into account payments to be made on the related Distribution Date and (3) the
Required Collateral Invested Amount may be reduced to a lesser amount at any
time if the Rating Agency Condition is satisfied.
With respect to any Distribution Date, if the Collateral Invested Amount is
less than the Required Collateral Invested Amount, certain Excess Spread and
Excess Finance Charge Collections, if available, will be allocated to increase
the Collateral Invested Amount to the extent of such shortfall.
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
On each Determination Date, the Servicer will calculate the Investor
Default Amount for the preceding Monthly Period. The term 'INVESTOR DEFAULT
AMOUNT' means, for any Monthly Period, the product of (i) the Floating
Allocation Percentage with respect to such Monthly Period and (ii) the Series
Allocable Defaulted Amount for such Monthly Period. A portion of the Investor
Default Amount will be allocated to the Class A Certificates (the 'CLASS A
INVESTOR DEFAULT AMOUNT') on each Distribution Date in an amount equal to the
product of the Class A Floating Percentage applicable during the related Monthly
Period and the Investor Default Amount for such Monthly Period. A portion of the
Investor Default Amount will be allocated to the Class B Certificates (the
'CLASS B INVESTOR DEFAULT AMOUNT') in an amount equal to the product of the
Class B Floating Percentage applicable during the related Monthly Period and the
Investor Default Amount for such Monthly Period. An amount equal to the Class A
Investor Default Amount for each Monthly Period will be paid from Class A
Available Funds, Excess Spread and Excess Finance Charge Collections allocated
to Series 1998-1 and from Reallocated Principal Collections, if applicable, and
applied as described above in '--Application of Collections--Payment of Fees,
Interest and Other Items.' An amount equal to the Class B Investor Default
Amount for each Monthly Period will be paid from Excess Spread and Excess
Finance Charge Collections allocated to Series 1998-1 and from Reallocated
Principal Collections allocable to the Collateral Invested Amount, if
applicable, and applied as described above in '--Application of
Collections--Excess Spread; Excess Finance Charge Collections.'
On each Distribution Date, if the Class A Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charge
Collections allocable to Series 1998-1 and Reallocated Principal Collections,
the Collateral Invested Amount will be reduced by the amount of such excess, but
not by more than the Class A Investor Default Amount for such Distribution Date.
In the event that such reduction would cause the Collateral Invested Amount to
be a negative number, the Collateral Invested Amount will be reduced to zero,
and the Class B Invested Amount will be reduced by the amount by which the
Collateral Invested Amount would have been reduced below zero, but not by more
than the excess, if any, of the Class A Investor Default Amount for such
Distribution Date over the amount of such reduction, if any, of the Collateral
Invested Amount with
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respect to such Distribution Date. In the event that such reduction 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 by more than the excess, if any, of the Class A Investor Default Amount
for such Distribution Date over the amount of the reductions, if any, of the
Collateral Invested Amount and of the Class B Invested Amount with respect to
such Distribution Date as described above (a 'CLASS A INVESTOR CHARGE-OFF'),
which will have the effect of slowing or reducing the return of principal to the
holders of the Class A Certificates. If the Class A Invested Amount has been
reduced by the amount of any Class A Investor Charge-Offs, it will thereafter 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 Excess Spread and
Excess Finance Charge Collections allocable to Series 1998-1 available for such
purpose as described above under '--Application of Collections--Excess Spread;
Excess Finance Charge Collections.'
On each Distribution Date, if the Class B Required Amount for such
Distribution Date exceeds the sum of Excess Spread and Excess Finance Charge
Collections allocable to Series 1998-1 and not required to pay the Class A
Required Amount or reimburse Class A Investor Charge-Offs and Reallocated
Principal Collections allocable to the Collateral Interest and not required to
pay the Class A Required Amount, then the Collateral Invested Amount will be
reduced by the amount of such excess, but not by more than the Class B Investor
Default Amount for such Monthly Period. In the event that such reduction would
cause the Collateral Invested Amount to be a negative number, the Collateral
Invested Amount will be reduced to zero, and the Class B Invested Amount will be
reduced by the amount by which the Collateral Invested Amount would have been
reduced below zero, but not by more than the excess, if any, of the Class B
Investor Default Amount for such Distribution Date over the amount of such
reduction, if any, of the Collateral Invested Amount with respect to such
Distribution Date (a 'CLASS B INVESTOR CHARGE-OFF'). The Class B Invested Amount
will also be reduced by the amount of Reallocated Principal Collections in
excess of the Collateral Invested Amount and the amount of any portion of the
Class B Invested Amount allocated to the Class A Certificates to avoid a
reduction in the Class A Invested Amount. The Class B Invested Amount will
thereafter be increased on any Distribution Date (but not by an amount in excess
of the amount of such reductions in the Class B Invested Amount) by the amount
of Excess Spread and Excess Finance Charge Collections allocable to Series
1998-1 available for such purpose as described above under '--Application of
Collections--Excess Spread; Excess Finance Charge Collections.'
On each Distribution Date, if the Collateral Floating Percentage of the
Investor Default Amount (the 'COLLATERAL DEFAULT AMOUNT') for such Distribution
Date exceeds the amount of Excess Spread and Excess Finance Charge Collections
allocated to Series 1998-1 which is allocated and available to fund such amount
as described under '--Application of Collections--Excess Spread; Excess Finance
Charge Collections,' the Collateral Invested Amount will be reduced by the
amount of such excess but not by more than the lesser of the Collateral Default
Amount and the Collateral Invested Amount for such Distribution Date (a
'COLLATERAL CHARGE-OFF'). The Collateral Interest will also be reduced by the
amount of Reallocated Principal Collections and the amount of any portion of the
Collateral Invested Amount allocated to the Class A Certificates to avoid a
reduction in the Class A Invested Amount or to the Class B Certificates to avoid
a reduction in the Class B Invested Amount. The Collateral Invested Amount will
thereafter be increased on any Distribution Date (but not by an amount in excess
of the amount of such reductions in the Collateral Invested Amount) by the
amount of Excess Spread and Excess Finance Charge Collections allocated to
Series 1998-1 allocated and available for that purpose as described under
'--Application of Collections--Excess Spread; Excess Finance Charge
Collections.'
PAIRED SERIES
The Series 1998-1 Certificates may be paired with one or more other Series
(each, a 'PAIRED SERIES') at or after the commencement of the Controlled
Accumulation Period if the Rating Agency Condition is satisfied. As funds are
accumulated in the Principal Funding Account, the invested amount in the Trust
of such Paired Series will increase by up to a corresponding amount. Upon
payment in full of the Series 1998-1 Certificates, assuming that there have been
no unreimbursed charge-offs with respect to any related Paired Series, the
aggregate invested amount of such related Paired Series will have been increased
by an amount up to an aggregate amount equal to the Invested Amount paid to or
deposited for the benefit of the Series 1998-1 Certificateholders after the
Series 1998-1 Certificates were paired with the Paired Series. The issuance of a
Paired Series will be subject to the
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conditions described under 'The Pooling and Servicing Agreement Generally--New
Issuances' in the Prospectus. There can be no assurance, however, that the terms
of any Paired Series might not have an impact on the timing or amount of
payments received by the Series 1998-1 Certificateholders. See 'Risk
Factors--Effect of the Issuance of New Series' and 'The Pooling and Servicing
Agreement Generally--Paired Series' in the Prospectus.
PAY-OUT EVENTS
The 'PAY-OUT EVENTS' with respect to the Series 1998-1 Certificates will
include each of the following:
(a) the occurrence of an Insolvency Event (as such term is defined in
the Prospectus) with respect to any Transferor or other holder of the
Original Transferor Certificate;
(b) the Trust becomes an investment company within the meaning of the
Investment Company Act of 1940, as amended;
(c) a failure on the part of any Transferor (i) to make any payment or
deposit required under the Pooling and Servicing Agreement or the Series
1998-1 Supplement within five business days after the day such payment or
deposit is required to be made or (ii) to observe or perform any other
covenant or agreement of such Transferor set forth in the Pooling and
Servicing Agreement or the Series 1998-1 Supplement, which failure has a
material adverse effect on the Series 1998-1 Certificateholders and which
continues unremedied for a period of 60 days after written notice;
(d) any representation or warranty made by any Transferor in the
Pooling and Servicing Agreement or the Series 1998-1 Supplement or any
information required to be given by any Transferor to the Trustee to
identify the Accounts proves to have been incorrect in any material respect
when made or delivered 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 Series 1998-1 Certificateholders are materially
and adversely affected; provided, however, that a Pay-Out Event shall not
be deemed to occur thereunder if a Transferor has repurchased the related
Receivables 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 Pooling and Servicing
Agreement;
(e) a failure by a Transferor to convey Receivables in Additional
Accounts or Participation Interests to the Trust within five business days
after the day on which it is required to convey such Receivables or
Participation Interests pursuant to the Pooling and Servicing Agreement or
the Series 1998-1 Supplement;
(f) the occurrence of any Servicer Default which would have an Adverse
Effect;
(g) a reduction of the average Series Adjusted Portfolio Yield for any
three consecutive Monthly Periods to a rate less than the average of the
Base Rates for such three Monthly Periods;
(h) the failure to pay in full the Class A Invested Amount and the
Class B Invested Amount on the Expected Final Payment Date; and
(i) any Transferor is unable for any reason to transfer Receivables to
the Trust in accordance with the Pooling and Servicing Agreement or the
Series 1998-1 Supplement.
Then, in the case of any event described above in subparagraph (c), (d) or
(f), after the applicable grace period, if any, set forth in such subparagraphs,
either the Trustee or the holders of Series 1998-1 Certificates evidencing more
than 50% of the aggregate unpaid principal amount of Series 1998-1 Certificates
by notice then given in writing to the Transferors and the Servicer (and to the
Trustee if given by the Series 1998-1 Certificateholders) may declare that a
Pay-Out Event has occurred with respect to Series 1998-1 as of the date of such
notice, and, in the case of any event described in subparagraph (a), (b), (e),
(g), (h) or (i), a Pay-Out Event shall occur with respect to Series 1998-1
without any notice or other action on the part of the Trustee immediately upon
the occurrence of such event.
For purposes of the Pay-Out Event described in clause (g) above, the terms
'Base Rate' and 'Series Adjusted Portfolio Yield' will be defined as follows
with respect to the Series 1998-1 Certificates:
'BASE RATE' means, with respect to any Monthly Period, the annualized
percentage equivalent of a fraction, the numerator of which is equal to the sum
of Class A Monthly Interest, Class B Monthly Interest, Collateral Monthly
Interest and the Monthly Servicing Fee with respect to the Series 1998-1
Certificates and the Collateral Interest for the related Distribution Date and
the denominator of which is the Invested Amount as of the last day of the
preceding Monthly Period.
'SERIES ADJUSTED PORTFOLIO YIELD' means, with respect to any Monthly
Period, the annualized percentage equivalent of a fraction, (i) the numerator of
which is equal to (a) Reallocated Investor Finance Charge
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Collections (including any investment earnings and certain other amounts that
are to be treated as collections of Finance Charges Receivables allocable to
Series 1998-1 in accordance with the Pooling and Servicing Agreement) for such
Monthly Period, plus (b) the amount of Principal Funding Investment Proceeds for
the related Distribution Date, plus (c) provided that each Rating Agency has
consented to the inclusion thereof in calculating the Series Adjusted Portfolio
Yield, any Excess Finance Charge Collections that are allocated to Series
1998-1, plus (d) the amount of funds withdrawn from the Reserve Account and
included in Class A Available Funds for the Distribution Date with respect to
such Monthly Period, and less (e) the Investor Default Amount for the
Distribution Date with respect to such Monthly Period, and (ii) the denominator
of which is the Invested Amount as of the last day of the preceding Monthly
Period.
If the proceeds of any sale of the Receivables following the occurrence of
an Insolvency Event with respect to a Transferor, as described in the Prospectus
under 'Description of the Certificates--Pay-Out Events and Reinvestment Events,'
allocated to the Class A Invested Amount and the proceeds of any collections on
the Receivables 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 and no such proceeds will be available to the
Class B Certificateholders. See 'Certain Legal Aspects of the
Receivables--Certain Matters Relating to Insolvency and Receivership' in the
Prospectus for a discussion of the impact of recent federal legislation on the
Trustee's ability to liquidate the Receivables.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the Servicing Fee allocable to the Series 1998-1
Certificateholders and the Collateral Interest Holder with respect to any
Distribution Date (the 'MONTHLY SERVICING FEE') shall be equal to one-twelfth of
the product of (a) 2.00% (the 'SERVICING FEE RATE') and (b) (i) the Adjusted
Invested Amount as of the last day of the Monthly Period preceding such
Distribution Date (or, in the case of the first Distribution Date, the product
of (i) the actual number of days from and including the Closing Date to and
including June 30, 1998, divided by 365, (ii) the Servicing Fee Rate and (iii)
the Initial Invested Amount), less (ii) the product of (A) any amount on deposit
in the Special Funding Account as of the last day of the Monthly Period
preceding such Distribution Date and (B) the Series Allocation Percentage for
Series 1998-1 with respect to such Monthly Period (the amount calculated
pursuant to this clause (b) is referred to as the 'SERVICING BASE AMOUNT'). The
share of the Monthly Servicing Fee allocable to the Class A Certificateholders
with respect to any Distribution Date (the 'CLASS A SERVICING FEE') shall be
equal to one-twelfth of the product of (a) the Class A Floating Percentage, (b)
the Servicing Fee Rate and (c) the Servicing Base Amount. The share of the
Monthly Servicing Fee allocable to the Class B Certificateholders with respect
to any Distribution Date (the 'CLASS B SERVICING FEE') shall be equal to
one-twelfth of the product of (a) the Class B Floating Percentage, (b) the
Servicing Fee Rate and (c) the Servicing Base Amount. The share of the Monthly
Servicing Fee allocable to the Collateral Interest with respect to any
Distribution Date (the 'COLLATERAL INTEREST SERVICING FEE') shall be equal to
one-twelfth of the product of (a) the Collateral Floating Percentage, (b) the
Servicing Fee Rate and (c) the Servicing Base Amount. The remainder of the
Servicing Fee shall be paid by the holders of the Transferor Certificates or the
certificateholders of other Series (as provided in the related Supplements) and
in no event will the Trust, the Trustee or the Series 1998-1 Certificateholders
be liable for the share of the Servicing Fee to be paid by the holders of the
Transferor Certificates or the certificateholders of any other Series.
SERIES TERMINATION
If, on the Distribution Date, which is two months prior to the Series
1998-1 Termination Date, the Invested Amount (after giving effect to all changes
therein on such date) exceeds zero, the Servicer will, within the 40-day period
beginning on such date, solicit bids for the sale of interests in the Principal
Receivables or certain Principal Receivables, together in each case with the
related Finance Charge Receivables, in an amount equal to the Invested Amount at
the close of business on the last day of the Monthly Period preceding the
Termination Date (after giving effect to all distributions required to be made
on the Termination Date other than from the proceeds of the sale). The
Transferor and the Collateral Interest Holder will be entitled to participate
in, and to receive notice of each bid submitted in connection with, such bidding
process. Upon the expiration of such 40-day period, the Trustee will determine
(a) which bid is the highest cash purchase offer (the 'HIGHEST BID') and (b) the
amount (the 'AVAILABLE FINAL DISTRIBUTION AMOUNT') which otherwise would be
available in the Collection Account on the Termination Date for distribution to
the Series 1998-1 Certificateholders and the Collateral Interest Holder. The
Servicer will sell such Receivables on the Termination Date to the bidder who
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provided the Highest Bid and will deposit the proceeds of such sale in the
Collection Account for allocation (together with the Available Final
Distribution Amount) to the Series 1998-1 Certificateholders' Interest and the
Collateral Interest in the order of priority specified herein.
REPORTS
No later than the third business day prior to each Distribution Date, the
Servicer will forward to the Trustee, the Paying Agent, each Rating Agency and
the Collateral Interest Holder, a statement (the 'MONTHLY REPORT') prepared by
the Servicer setting forth certain information with respect to the Trust and the
Class A Certificates and the Class B Certificates, including: (a) the aggregate
amount of Principal Receivables and Finance Charge Receivables in the Trust as
of the end of such Monthly Period; (b) the Invested Amount, the Class A Invested
Amount, the Class B Invested Amount and the Collateral Invested Amount at the
close of business on the last day of the preceding Monthly Period; (c) the
Series Allocation Percentage, the Floating Allocation Percentage, the Class A
Floating Percentage, the Class B Floating Percentage and the Collateral Floating
Percentage and the Principal Allocation Percentage, the Class A Principal
Percentage, the Class B Principal Percentage and the Collateral Principal
Percentage; (d) the amount of collections of Principal Receivables and Finance
Charge Receivables processed during the related Monthly Period and the portion
thereof allocated to the Series 1998-1 Certificateholders' Interest; (e) the
aggregate outstanding balance of Accounts that were 31, 61 and 91 days or more
delinquent as of the end of such Monthly Period; (f) the Investor Default
Amount, the Class A Investor Default Amount, the Class B Investor Default Amount
and the Collateral Default Amount and the Defaulted Amount with respect to such
Monthly Period; (g) the aggregate amount, if any, of Class A Investor
Charge-Offs, Class B Investor Charge-Offs, any reductions in the Class B
Invested Amount pursuant to clauses (iv) and (v) of the definition of 'Class B
Invested Amount,' and the amounts by which the Collateral Invested Amount has
been reduced pursuant to clauses (iii), (iv) and (v) of the definition of
'Collateral Invested Amount' and any Class A or Class B Investor Charge-Offs
reimbursed on the related Monthly Period, for such Monthly Period; (h) the
Monthly Servicing Fee, Class A Servicing Fee, Class B Servicing Fee and
Collateral Interest Servicing Fee for such Monthly Period; (i) the Series
Adjusted Portfolio Yield for such Monthly Period; (j) the Base Rate for such
Monthly Period; (k) Reallocated Principal Collections; and (l) Shared Principal
Collections.
S-37
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the 'UNDERWRITING AGREEMENT') among the Transferors, TRS, the underwriters of
the Class A Certificates named below (the 'CLASS A UNDERWRITERS') and the
underwriters of the Class B Certificates named below (the 'CLASS B
UNDERWRITERS,' and together with the Class A Underwriters, the 'UNDERWRITERS'),
the Transferors have agreed to cause the Trust to sell to the Underwriters, and
the Underwriters have agreed to purchase, the principal amount of the Class A
Certificates and Class B Certificates set forth opposite their names:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS A
UNDERWRITERS OF THE CLASS A CERTIFICATES CERTIFICATES
- -------------------------------------------------- -------------------
<S> <C>
Credit Suisse First Boston Corporation............ $ 163,000,000
Goldman, Sachs & Co. ............................. $ 163,000,000
Lehman Brothers Inc. ............................. $ 163,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................... $ 163,000,000
NationsBanc Montgomery Securities LLC............. $ 163,000,000
Blaylock & Partners L.P. ......................... $ 5,000,000
The Williams Capital Group L.P. .................. $ 5,000,000
-------------------
Total.................................... $ 825,000,000
-------------------
-------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS B
UNDERWRITERS OF THE CLASS B CERTIFICATES CERTIFICATES
- -------------------------------------------------- -------------------
<S> <C>
Credit Suisse First Boston Corporation............ $40,000,000
Lehman Brothers Inc. ............................. $40,000,000
-------------------
Total.................................... $80,000,000
-------------------
-------------------
</TABLE>
The Underwriting Agreement provides that the obligation of the Class A
Underwriters to pay for and accept delivery of the Class A Certificates and the
obligation of the Class B Underwriters to pay for and accept delivery of the
Class B Certificates are subject to the approval of certain legal matters by
their counsel and to certain other conditions. All of the Series 1998-1
Certificates offered hereby will be issued if any are issued.
The Class A Underwriters propose initially to offer the Class A
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less concessions not in excess of 0.150% of the
principal amount of the Class A Certificates. The Class A Underwriters may
allow, and such dealers may reallow, concessions not in excess of 0.125% of the
principal amount of the Class A Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Class A Underwriters.
The Class B Underwriters propose initially to offer the Class B
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less concessions not in excess of 0.180% of the
principal amount of the Class B Certificates. The Class B Underwriters may
allow, and such dealers may reallow, concessions not in excess of 0.125% of the
principal amount of the Class B Certificates to certain brokers and dealers.
After the initial public offering, the public offering price and other selling
terms may be changed by the Class B Underwriters.
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 Series 1998-1
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 Series
1998-1 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 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
Series 1998-1 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
S-38
<PAGE>
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 Series 1998-1 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 Series 1998-1 Certificates so long as
the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Series 1998-1 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 Series 1998-1 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
Series 1998-1 Certificates to be higher than they would 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 Transferors will indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or contribute to
payments the Underwriters may be required to make in respect thereof.
S-39
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Accounts.......................................... S-2
Adjusted Invested Amount.......................... S-5
American Express.................................. S-19
Available Final Distribution Amount............... S-37
Available Principal Collections................... S-22
Available Reserve Account Amount.................. S-27
Base Rate......................................... S-36
Centurion......................................... Cover Page
Class A Additional Interest....................... S-29
Class A Adjusted Invested Amount.................. S-4, S-26
Class A Available Funds........................... S-20
Class A Certificate Rate.......................... S-2, S-20
Class A Certificateholders' Interest.............. S-3
Cover Page,
Class A Certificates.............................. S-3
Class A Floating Percentage....................... S-24
Class A Initial Invested Amount................... S-3, S-4
Class A Invested Amount........................... S-4, S-25
Class A Investor Charge-Off....................... S-9, S-34
Class A Investor Default Amount................... S-33
Class A Monthly Interest.......................... S-30
Class A Outstanding Monthly Interest.............. S-30
Class A Principal Percentage...................... S-25
Class A Required Amount........................... S-8, S-28
Class A Servicing Fee............................. S-36
Class A Underwriters.............................. S-38
Class B Additional Interest....................... S-29
Class B Adjusted Invested Amount.................. S-5, S-26
Class B Available Funds........................... S-21
Class B Certificate Rate.......................... S-2, S-21
Class B Certificateholders' Interest.............. S-3
Cover Page,
Class B Certificates.............................. S-3
Class B Floating Percentage....................... S-24
Class B Initial Invested Amount................... S-3, S-4
Class B Invested Amount........................... S-4, S-25
Class B Investor Charge-Off....................... S-9, S-34
Class B Investor Default Amount................... S-33
Class B Monthly Interest.......................... S-30
Class B Outstanding Monthly Interest.............. S-30
Class B Principal Percentage...................... S-25
Class B Required Amount........................... S-8, S-28
Class B Servicing Fee............................. S-36
Class B Underwriters.............................. S-38
Closing Date...................................... S-3
Code.............................................. S-11
Collateral Additional Interest.................... S-31
Collateral Available Funds........................ S-30
Collateral Charge-Off............................. S-34
Collateral Default Amount......................... S-34
Collateral Floating Percentage.................... S-24
Collateral Initial Invested Amount................ S-3, S-4
Collateral Interest............................... S-4
Collateral Interest Holder........................ S-4
</TABLE>
S-40
<PAGE>
<TABLE>
<S> <C>
Collateral Interest Servicing Fee................. S-37
S-4, S-26,
Collateral Invested Amount........................ S-37
Collateral Monthly Interest....................... S-31
Collateral Principal Percentage................... S-25
Collateral Rate................................... S-31
Controlled Accumulation Amount.................... S-32
Controlled Accumulation Period.................... S-6
Controlled Accumulation Period Length............. S-22
Controlled Deposit Amount......................... S-33
Covered Amount.................................... S-26
Deficit Controlled Accumulation Amount............ S-33
Distribution Date................................. S-2
Early Amortization Period......................... S-7
Eligible Deposit Account.......................... S-26
ERISA............................................. S-11
Excess Spread..................................... S-8, S-30
Expected Final Payment Date....................... S-6, S-13
Floating Allocation Percentage.................... S-24
Group II.......................................... S-10
Highest Bid....................................... S-37
Initial Invested Amount........................... S-3, S-4
Interest Funding Investment Proceeds.............. S-27
Invested Amount................................... S-4, S-26
Investor Default Amount........................... S-33
LIBOR............................................. S-2, S-21
LIBOR Determination Date.......................... S-21
Loan Agreement.................................... S-31
Monthly Report.................................... S-37
Monthly Servicing Fee............................. S-36
Paired Series..................................... S-34
Pay-Out Events.................................... S-35
Period Length Determination Date.................. S-22
Pooling and Servicing Agreement................... Cover Page
Principal Allocation Percentage................... S-24
Principal Funding Account......................... S-14
Principal Funding Account Balance................. S-26
Principal Funding Investment Proceeds............. S-26
Rating Agency..................................... S-13
Reallocated Principal Collections................. S-7, S-28
Receivables....................................... S-2
Record Date....................................... S-20
Reference Banks................................... S-21
Required Amount................................... S-8
Required Collateral Invested Amount............... S-10, S-33
Required Reserve Account Amount................... S-27
Reserve Account................................... S-27
Reserve Account Funding Date...................... S-27
Revolving Period.................................. S-6
RFC II............................................ Cover Page
Series 1998-1 Certificateholders' Interest........ S-3
Cover Page,
Series 1998-1 Certificates........................ S-3
Series 1998-1 Supplement.......................... S-13, S-20
Series 1998-1 Termination Date.................... S-6
Series Adjusted Invested Amount................... S-24
</TABLE>
S-41
<PAGE>
<TABLE>
<S> <C>
Series Adjusted Portfolio Yield................... S-36
Series Allocable Defaulted Amount................. S-23
Series Allocable Finance Charge Collections....... S-23
Series Allocable Principal Collections............ S-23
Series Allocation Percentage...................... S-24
Series Required Transferor Amount................. S-3
Servicer.......................................... Cover Page
Servicing Base Amount............................. S-36
Servicing Fee Rate................................ S-36
Special Payment Date.............................. S-13
Telerate Page 3750................................ S-21
Total Portfolio................................... S-15
Transferor........................................ Cover Page
Transferors' Interest............................. S-3
Cover Page,
TRS............................................... S-19
Cover Page,
Trust............................................. S-3
Trust Portfolio................................... S-15
Trustee........................................... Cover Page
Underwriters...................................... S-38
Underwriting Agreement............................ S-38
</TABLE>
S-42
<PAGE>
ANNEX I
OTHER SERIES
The table below sets forth the principal characteristics of all other
Series issued by the Trust and currently outstanding. For more specific
information with respect to the Series listed below, any prospective investor
should contact Centurion at (801) 565-5023. Centurion will provide, without
charge, to any prospective purchaser of the Series 1998-1 Certificates, a copy
of the Prospectus Supplement for any Series listed below.
SERIES 1996-1
Initial Invested Amount..................................$1,000,000,000
Class A Initial Invested Amount............................$865,000,000
Class A Certificate Rate................................6.80% per annum
Class B Initial Invested Amount.............................$60,000,000
Class B Certificate Rate................................6.95% per annum
Controlled Accumulation Amount (subject to adjustment)...$77,083,333.34
Commencement of Controlled Accumulation Period (subject to
adjustment)................................................May 1, 2000
Annual Servicing Fee Percentage..........................2.0% per annum
Collateral Initial Invested Amount..........................$75,000,000
Enhancement for the Class A and Class
B Certificates..............................Collateral Invested Amount
Other enhancement for the Class A Certificates.....Subordination of the
Class B Certificates
Expected Final Payment Date.. ...............May 2001 Distribution Date
Series Issuance Date.......................................May 16, 1996
Group...........................................................Group I
SERIES 1997-1
Initial Invested Amount..................................$1,000,000,000
Class A Initial Invested Amount............................$865,000,000
Class A Certificate Rate................................6.40% per annum
Class B Initial Invested Amount.............................$60,000,000
Class B Certificate Rate................................6.55% per annum
Controlled Accumulation Amount (subject to adjustment)...$77,083,333.34
Commencement of Controlled Accumulation Period (subject to
adjustment)..........................................September 1, 2001
Annual Servicing Fee Percentage..........................2.0% per annum
Collateral Initial Invested Amount..........................$75,000,000
Enhancement for the Class A and
Class B Certificates....................... Collateral Invested Amount
Other enhancement for the Class A
Certificates.................Subordination of the Class B Certificates
Expected Final Payment Date............September 2002 Distribution Date
Series Issuance Date....................................August 28, 1997
Group...........................................................Group I
A-1
<PAGE>
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<PAGE>
PROSPECTUS
[LOGO]
AMERICAN EXPRESS CREDIT ACCOUNT MASTER TRUST
ASSET BACKED CERTIFICATES
AMERICAN EXPRESS CENTURION BANK
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION II
TRANSFERORS
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
SERVICER
------------------------------
American Express Centurion Bank ('CENTURION') and American Express
Receivables Financing Corporation II ('RFC II'), as transferors (each, in such
capacity, a 'TRANSFEROR'), may sell from time to time one or more series (each,
a 'SERIES') of asset backed certificates (the 'CERTIFICATES') evidencing
undivided interests in certain assets of the American Express Credit Account
Master Trust (the 'TRUST') created pursuant to a pooling and servicing agreement
(the 'POOLING AND SERVICING AGREEMENT') among American Express Travel Related
Services Company, Inc., as Servicer (in such capacity, the 'SERVICER'),
Centurion and RFC II, as Transferors, and The Bank of New York, as trustee (the
'TRUSTEE'). The property of the Trust includes, among other things, receivables
as described herein (the 'RECEIVABLES') generated from time to time in a
portfolio of designated Optima(Registered) Card, Optima Line of Credit and Sign
& Travel(Registered) revolving credit accounts which, in the future, may include
other charge or credit accounts or products, including revolving credit features
of the American Express(Registered) Card, American Express(Registered) Gold Card
and the Platinum Card(Registered) (collectively, the 'ACCOUNTS').
Certificates will be sold from time to time under this Prospectus on terms
determined for each Series at the time of the sale and described in the related
prospectus supplement (each, a 'PROSPECTUS SUPPLEMENT'). Each Series will
consist of one or more classes of Certificates (each, a 'CLASS'). Each
Certificate will represent an undivided interest in certain assets of the Trust
and the interest of the holders 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. A Series offered
hereby (or any Class within such Series) may be entitled to the benefits of a
cash collateral guaranty, cash collateral account, collateral interest, letter
of credit, surety bond, insurance policy, spread account, guaranteed rate
agreement, maturity liquidity facility, tax protection agreement, interest rate
swap agreement, interest rate cap agreement or any combination of the foregoing.
In addition, any Series offered hereby may include one or more Classes which are
subordinated in right and priority of payment to 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 offered
hereby will be rated in one of the four highest categories by at least one
nationally recognized statistical rating organization.
---------------------
POTENTIAL INVESTORS SHOULD CONSIDER, AMONG OTHER CONSIDERATIONS, THE
INFORMATION SET FORTH IN THE SECTIONS ENTITLED 'RISK FACTORS' COMMENCING ON PAGE
19 HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
---------------------
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF, NOR WILL THEY BE GUARANTEED BY,
CENTURION, RFC II, AMERICAN EXPRESS CREDIT CORPORATION, AMERICAN EXPRESS
TRAVEL RELATED SERVICES COMPANY, INC., AMERICAN EXPRESS COMPANY OR ANY
AFFILIATE THEREOF. NEITHER THE CERTIFICATES NOR THE UNDERLYING ACCOUNTS
OR RECEIVABLES ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
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.
---------------------
Certificates may be sold by the Transferors 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 'Plan of Distribution' for a more detailed discussion of the
plan pursuant to which the Certificates will be offered.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF CERTIFICATES OF ANY
SERIES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
The date of this Prospectus is June 17, 1998
<PAGE>
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT.......................... 2
REPORTS TO CERTIFICATEHOLDERS.................. 2
AVAILABLE INFORMATION.......................... 2
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE........................ 2
PROSPECTUS SUMMARY............................. 3
RISK FACTORS................................... 19
USE OF PROCEEDS................................ 28
THE TRUST...................................... 28
CENTURION'S REVOLVING CREDIT
BUSINESSES.................................... 29
General...................................... 29
Underwriting and Authorization Procedures.... 30
Billing and Payments......................... 31
Collection Efforts........................... 31
RFC II, CREDCO, CENTURION AND TRS.............. 32
RFC II....................................... 32
Credco....................................... 32
Centurion.................................... 32
TRS.......................................... 33
MERGER OR CONSOLIDATION OF A TRANSFEROR OR THE
SERVICER...................................... 33
ASSUMPTION OF A TRANSFEROR'S OBLIGATIONS....... 33
THE ACCOUNTS................................... 34
DESCRIPTION OF THE CERTIFICATES................ 35
General...................................... 35
Book-Entry Registration...................... 36
Definitive Certificates...................... 38
Interest..................................... 39
Principal.................................... 39
Pay-Out Events and Reinvestment
Events.................................... 40
Servicing Compensation and Payment of
Expenses.................................. 41
THE POOLING AND SERVICING
AGREEMENT GENERALLY........................... 42
Conveyance of Receivables.................... 42
Representations and Warranties............... 43
The Transferor Certificates; Additional
Transferors............................... 44
Additions of Accounts or Participation
Interests................................. 45
Removal of Accounts.......................... 46
Discount Option.............................. 46
Premium Option............................... 47
Indemnification.............................. 48
Collection and Other Servicing Procedures.... 48
<CAPTION>
PAGE
----
<S> <C>
New Issuances................................ 49
Collection Account........................... 50
Deposits in Collection Account............... 51
Allocations.................................. 52
Groups of Series............................. 52
Reallocations Among Different Series Within a
Reallocation Group........................ 53
Sharing of Excess Finance Charge Collections
Among Excess Allocation Series............ 56
Sharing of Principal Collections Among
Principal Sharing Series.................. 56
Paired Series................................ 56
Special Funding Account...................... 57
Funding Period............................... 57
Defaulted Receivables; Rebates and Fraudulent
Charges................................... 58
Credit Enhancement........................... 58
Servicer Covenants........................... 60
Certain Matters Regarding the Servicer....... 60
Servicer Default............................. 60
Evidence as to Compliance.................... 61
Amendments................................... 62
Defeasance................................... 62
List of Certificateholders................... 63
The Trustee.................................. 63
DESCRIPTION OF THE PURCHASE AGREEMENTS......... 63
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES....... 65
Transfer of Receivables...................... 65
Certain Matters Relating to Insolvency and
Receivership.............................. 65
Consumer Protection Laws..................... 67
TAX MATTERS.................................... 68
Federal Income Tax Consequences--
General................................... 68
Treatment of the Certificates as Debt........ 68
Treatment of the Trust....................... 69
Treatment of the Trust as a FASIT............ 70
Taxation of Interest Income of U.S.
Certificate Owners........................ 71
Sale or Exchange of Certificates............. 71
Non-U.S. Certificate Owners.................. 72
Information Reporting and Backup
Withholding............................... 72
State and Local Taxation..................... 73
ERISA CONSIDERATIONS........................... 74
PLAN OF DISTRIBUTION........................... 75
LEGAL MATTERS.................................. 76
INDEX OF DEFINED TERMS......................... 77
</TABLE>
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to any Series 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 Rate (or method of
determining the Certificate Rate) of each such Class; (c) the expected date or
dates on which the Invested Amount with respect to each such Class will be paid
to the holders of the Certificates of such Class; (d) the extent to which any
Class within a Series is subordinated to any other Class of such Series or any
other Series; (e) the Distribution Dates for the respective Classes; (f)
relevant financial information with respect to the Receivables; (g) additional
information with respect to any Series Enhancement relating to such Series; and
(h) the plan of distribution of such Series.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) are issued,
monthly and annual 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 nominee of The Depository Trust Company ('DTC') and
registered holder of the Certificates pursuant to the Pooling and Servicing
Agreement. Such reports will be made available by DTC and its participants to
the Certificateholders in accordance with the rules, regulations and procedures
creating and affecting DTC and as described under 'Series Provisions--Reports'
in the applicable Prospectus Supplement and 'The Pooling and Servicing Agreement
Generally--Evidence as to Compliance.' Such reports will not constitute
financial statements prepared in accordance with generally accepted accounting
principles. The Pooling and Servicing Agreement does not require the sending of,
and neither Transferor intends to send, any of its financial reports to the
Certificateholders or to the owners of beneficial interests in the Certificates
('CERTIFICATE OWNERS').
AVAILABLE INFORMATION
The Transferors, as originators of the Trust, have filed a Registration
Statement under the Securities Act of 1933, as amended (the 'SECURITIES ACT'),
with the Securities and Exchange Commission (the 'COMMISSION') with respect to
the Certificates offered pursuant to this Prospectus. For further information,
reference is made to the Registration Statement and amendments thereof and
exhibits thereto, which are available for inspection without charge at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549; Seven World Trade Center, New York, New
York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of the Registration Statement and amendments thereof and
exhibits thereto may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Servicer will file with the Commission such periodic reports, if any,
with respect to the Trust as are required under the Securities Exchange Act of
1934, as amended (the 'EXCHANGE ACT'), and the rules and regulations of the
Commission thereunder. In addition, the Commission maintains 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 part 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.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in any
accompanying Prospectus Supplement (each, a 'PROSPECTUS SUPPLEMENT'). Reference
is made to the Index of Defined Terms for the location herein of the definitions
of certain capitalized terms used herein. Unless the context requires otherwise,
certain capitalized terms, when used herein and in any accompanying Prospectus
Supplement, relate only to the particular Series being offered by such
Prospectus Supplement.
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Issuer............................. American Express Credit Account Master
Trust (the 'TRUST'). The Trust, as a
master trust, is expected to issue series
of Certificates (each, a 'SERIES') from
time to time. See 'The Trust,' 'Risk
Factors--Effect of Addition of Trust
Assets on Credit Quality,' 'The Pooling
and Servicing Agreement
Generally--Additions of Accounts or
Participation Interests' and '--Removal
of Accounts.'
Servicer........................... American Express Travel Related Services
Company, Inc., a New York Corporation
('TRS'), as servicer or any successor
servicer (in such capacity, the
'SERVICER').
Trustee............................ The Bank of New York, a New York banking
corporation (the 'TRUSTEE').
Account Owner...................... Centurion is the owner of the Accounts (as
such, an 'ACCOUNT OWNER'). In the
future, 'ACCOUNT OWNERS' may also include
(i) one or more different transferors
that may transfer receivables pursuant to
receivables purchase agreements, which
may include terms different from the RFC
II Purchase Agreement (as defined
herein), between each such transferor and
RFC II, Centurion or an Additional
Transferor as the transferee of such
receivables (each, a 'RECEIVABLES
PURCHASE AGREEMENT'), or (ii) one or more
Additional Transferors (as defined
herein). See 'The Pooling and Servicing
Agreement Generally--The Transferor
Certificates; Additional Transferors' for
a description of the circumstances under
which such Additional Transferors may be
designated.
Transferors........................ American Express Centurion Bank
('CENTURION'), a Utah state-chartered,
FDIC-insured industrial loan company (and
the successor-by-merger to American
Express Centurion Bank, a former Delaware
state-chartered bank), and American
Express Receivables Financing Corporation
II, a Delaware corporation ('RFC II'),
are the transferors of interests in the
Receivables (each, in such capacity, or
any Additional Transferor (as defined
below) is herein referred to as a
'TRANSFEROR'). Each of Centurion and RFC
II is a wholly owned subsidiary of TRS,
which is a wholly owned subsidiary of
American Express Company ('AMERICAN
EXPRESS').
Subject to certain conditions described
herein under 'The Pooling and Servicing
Agreement Generally--The Transferor
Certificates; Additional Transferors,'
the Transferors may designate one or more
of their affiliates to transfer
Receivables or Participation Interests
(as defined herein) to the Trust from
time to time (such affiliates,
'ADDITIONAL TRANSFERORS'). Under certain
circumstances, a Transferor may transfer
its respective interests and obligations
as a Transferor to another entity that
will assume all of such Transferor's
obligations under the Pooling and
Servicing Agreement and related
agreements. For a discussion of
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the circumstances in which a Transferor
may be permitted to merge or consolidate
or to sell substantially all of its
assets, see 'Merger or Consolidation of a
Transferor or the Servicer.'
Trust Assets....................... The assets of the Trust (the 'TRUST
ASSETS') include receivables arising from
time to time (the 'RECEIVABLES') under
the Accounts, as such Receivables are
conveyed to the Trust and as more fully
described under 'The Accounts,' including
monies due and to become due with respect
thereto, monies and other property on
deposit in certain accounts of the Trust
for the benefit of Certificateholders,
Participation Interests (as defined
herein), if any, and any Series
Enhancement (as defined herein) issued
with respect to a particular Series (the
drawing on or payment of any Series
Enhancement for the benefit of a Series
or Class of Certificateholders will not
be available to the Certificateholders of
any other Series or Class) and certain
rights of the Transferors to receive
Recoveries (as defined herein). 'SERIES
ENHANCEMENT' means, with respect to any
Series or Class of Certificates, any
Credit Enhancement (as defined herein)
for the benefit of Certificateholders of
such Series or Class. The subordination
of any Series or Class of Certificates to
another Series or Class of Certificates
shall be deemed to be Series Enhancement.
'PARTICIPATION INTERESTS' mean
participations representing undivided
interests in a pool of assets primarily
consisting of credit account receivables,
consumer loan receivables, charge card
receivables or other self-liquidating
financial assets. To the extent that such
participations encompass previously
issued credit-card or other asset-backed
securities, such securities (i) either
will have been registered under the
Securities Act or will have been held for
the 'holding period' prescribed by Rule
144(k) under the Securities Act and (ii)
will have been acquired in a bona fide
secondary market transaction, rather than
from the issuer thereof or one of such
issuer's affiliates or such securities
will have otherwise been acquired in
compliance with the Securities Act.
To the extent provided in any Supplement
(as defined herein), or in an amendment
to the Pooling and Servicing Agreement,
all or a portion of the Receivables or
Participation Interests conveyed to the
Trust and all collections received with
respect thereto may be allocated to one
or more Series or groups of Series (each
a 'GROUP') as long as the Rating Agency
Condition (as defined herein) shall have
been satisfied with respect to such
allocation and the Servicer shall have
delivered an officer's certificate to the
Trustee to the effect that the Servicer
reasonably believes such allocation will
not have an Adverse Effect (as defined
herein).
The Certificates................... Asset backed certificates (the
'CERTIFICATES') will be issued in Series,
each of which will consist of one or more
Classes, representing undivided interests
in the Trust. The specific terms of a
Series or Class will be established as
described herein under 'The Pooling and
Servicing Agreement Generally--New
Issuances.' However, while the specific
terms of any Series or Class offered
hereby will be described in the related
Prospectus Supplement, the terms of such
Series or Class will not be subject to
prior review by, or consent of, the
holders of the Certificates of any
previously issued Series.
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The Certificates of a Series offered hereby
will generally be available for purchase
in minimum denominations of $1,000 and in
integral multiples thereof, and will only
be available in book-entry form except in
certain limited circumstances as
described herein under 'Description of
the Certificates--Definitive
Certificates.' Interests in the Trust
Assets will be allocated among (a) the
Certificateholders, including Credit
Enhancers (as defined herein) holding
uncertificated subordinated interests
(each, a 'COLLATERAL INVESTED AMOUNT'),
of a particular Series (the
'CERTIFICATEHOLDERS' INTEREST'), (b) the
Certificateholders (including such
holders of Collateral Invested Amounts)
of other Series, if any, and (c) the
interest of the Transferors and their
permitted transferees (the 'TRANSFERORS'
INTEREST'), as described below. The
Invested Amount of a Series offered
hereby will, except as otherwise provided
herein and except with respect to
Certificates with a variable principal
amount, remain fixed at the aggregate
initial principal amount of the
Certificates of such Series. The
Certificateholders' Interest of a Series
will include the right to receive (but
only to the extent needed to make
required payments under the Pooling and
Servicing Agreement, including the
related Supplement, and subject to any
reallocation of such amounts if the
related Supplement so provides) varying
percentages of collections of Finance
Charge Receivables and Principal
Receivables and will be allocated a
varying percentage of the Defaulted
Receivables with respect to each Monthly
Period (defined below). For a description
of how collections of Finance Charge
Receivables and principal Receivables
will be allocated among Series, see
'Description of the Certificates--Interest' and
'--Principal.' If the Certificates of a
Series offered hereby include more than
one Class of Certificates, the
collections allocable to the Invested
Amount of such Series may be further
allocated among each Class in such Series
as described in the related Prospectus
Supplement.
'MONTHLY PERIOD' means the period beginning
at the opening of business on the day
following the last day of the seventh
billing cycle of each month and ending at
the close of business on the last day of
the seventh billing cycle of the
immediately following month. The last day
of each seventh monthly billing cycle
generally occurs between the twenty-first
day and the twenty-fifth day of each
month. Therefore, the number of days in a
Monthly Period generally may vary from a
calendar month by up to four days. In
certain circumstances, the Pooling and
Servicing Agreement may be amended to
change the definition of Monthly Period.
See 'The Pooling and Servicing Agreement
Generally--Amendments.'
The Transferors' Interest.......... The Transferors' Interest at any time
represents the right to the Trust Assets
in excess of the Certificateholders'
Interest including the Collateral
Invested Amounts of all Series then
outstanding. The principal amount of the
Transferors' Interest (the 'TRANSFEROR
AMOUNT') will fluctuate as the amount of
the Principal Receivables held by the
Trust changes from time to time. In
addition, the Transferors intend to cause
the issuance of Series from time to time
and any such issuance will have the
effect of decreasing the Transferor
Amount to the extent of the initial
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Invested Amount of such Series. See 'Risk
Factors--Effect of the Issuance of New
Series.'
The level of the 'REQUIRED TRANSFEROR
AMOUNT,' which equals the sum of the
Series Required Transferor Amounts for
each outstanding Series, is intended to
enable the Transferors' Interest to
absorb fluctuations in the amount of
Principal Receivables held by the Trust
from time to time (due to, among other
things, seasonal purchase and payment
habits of Account holders or adjustments
in the amount of Principal Receivables
because of rebates, refunds, fraudulent
charges or otherwise). See 'Risk
Factors--Payments and Maturity;
Dependency on Account Holder Repayments'
and 'The Pooling and Servicing Agreement
Generally--Defaulted Receivables; Rebates
and Fraudulent Charges.'
Issuance of New Series............. The Pooling and Servicing Agreement
authorizes the Trustee to issue three
types of certificates: (a) one or more
Series of Certificates, (b) a certificate
evidencing the Transferors' Interest in
the Trust retained by the Transferors
(the 'ORIGINAL TRANSFEROR CERTIFICATE'),
which certificate will be held by the
Transferors, and (c) one or more
certificates (each, a 'SUPPLEMENTAL
CERTIFICATE') held by transferees of a
portion of the Transferors' Interest. The
Original Transferor Certificate and any
Supplemental Certificates are
collectively referred to as the
'TRANSFEROR CERTIFICATES.' The Pooling
and Servicing Agreement provides that,
pursuant to one or more supplements to
the Pooling and Servicing Agreement
(each, a 'SUPPLEMENT'), the Transferors
may cause the Trustee without the consent
of the Certificateholders to issue one or
more new Series and accordingly cause a
reduction in the Transferors' Interest
represented by the Transferor
Certificates. There can be no assurance
that the terms of any Series might not
have an impact on the timing or amount of
payments received by a Certificateholder
of another Series. Under the Pooling and
Servicing Agreement, the Transferors may
define, with respect to any Series, the
Principal Terms of such Series. See 'The
Pooling and Servicing Agreement
Generally--New Issuances' for a
discussion of, among other things, the
characteristics that other Series may
have and the conditions that must be
satisfied if a new Series will be issued.
The Transferors may offer any Series to
the public or other investors under a
disclosure document (a 'DISCLOSURE
DOCUMENT'), which will consist of a
Prospectus Supplement in the case of a
Series offered hereby, in transactions
either registered under the Securities
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. See 'Plan of
Distribution' for a more detailed
discussion of the plan pursuant to which
any such Series may be offered.
A new Series may be issued only upon
satisfaction of the conditions described
herein under 'The Pooling and Servicing
Agreement Generally--New Issuances'
including, among others, that (a) such
issuance will satisfy the Rating Agency
Condition (as defined herein) and (b)
each Transferor shall have delivered to
the Trustee and certain providers of
Series Enhancement a certificate of an
authorized representative to the effect
that, in the reasonable
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belief of such Transferor, such issuance
will not, based on the facts known to
such representative at the time of such
certification, have an Adverse Effect (as
defined herein).
The Accounts....................... The Accounts consist of certain Optima
Card, Optima Line of Credit and Sign &
Travel revolving credit accounts owned by
Centurion and, in the future, may also
consist of charge or other revolving
credit accounts owned by an Account Owner
(including revolving credit features of
the American Express Card, American
Express Gold Card and the Platinum Card)
and designated from time to time by the
Transferors or an Additional Transferor
that, in each case, meet the criteria
provided in the Pooling and Servicing
Agreement for an Eligible Account (as
defined herein), but will not include any
Removed Accounts (as defined herein). No
Account is being sold or transferred to
the Trust, and each Account will continue
to be controlled and held by an Account
Owner. See 'Centurion's Revolving Credit
Businesses' and 'Description of the
Purchase Agreements.'
Centurion and Credco, in the ordinary
course of their respective businesses,
have entered into certain receivables
purchase agreements (collectively, the
'CREDCO PURCHASE AGREEMENT') pursuant to
which Centurion has sold to Credco all of
its right, title and interest in and to
certain Receivables in the Accounts,
including Centurion's rights to
recoveries of charged-off Receivables
('RECOVERIES') allocable to such
Receivables so transferred to Credco.
Credco and RFC II have entered into a
receivables purchase agreement (the 'RFC
II PURCHASE AGREEMENT'). Pursuant to the
RFC II Purchase Agreement, Credco has
sold to RFC II all of its right, title
and interest in and to the Receivables in
the Accounts in existence at the close of
business on April 25, 1996 (the 'INITIAL
CUT-OFF DATE'), and Credco may also sell
to RFC II all of its right, title and
interest in and to the Receivables in
Additional Accounts (as defined herein)
existing at the close of business on each
applicable date of designation thereof.
In addition, Credco has assigned and will
assign to RFC II its rights to Recoveries
associated with the Receivables so sold
or to be sold to RFC II. The terms of the
RFC II Purchase Agreement are described
in more detail under 'Description of the
Purchase Agreements.' Any Transferor may
in the future enter into other
receivables purchase agreements with
additional Account Owners or purchasers
from Account Owners, such as Credco,
pursuant to which such Transferor may
purchase, for addition to the Trust,
existing or subsequently arising
receivables.
RFC II in turn will transfer such
Receivables, and Centurion will from time
to time transfer certain other
Receivables, in each case, including the
associated rights to Recoveries, to the
Trust pursuant to the Pooling and
Servicing Agreement.
On the first Series Closing Date, the
Transferors conveyed to the Trust the
Receivables that existed on the Initial
Cut-Off Date in certain Optima Card,
Optima Line of Credit and Sign & Travel
revolving credit accounts (the 'INITIAL
ACCOUNTS') and that met the criteria
specified in the Pooling and Servicing
Agreement for an Eligible Account as
applied, in connection with each such
account, at the close of business on the
cycle billing date for such
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account occurring in the monthly period
beginning at the close of business on
September 1, 1995, and ending at the
close of business on September 30, 1995
(the 'INITIAL SELECTION DATE'). Centurion
will also directly or indirectly convey
to the Trust Receivables arising in the
Initial Accounts from time to time
thereafter until the termination of the
Trust. In addition, pursuant to the
Pooling and Servicing Agreement, the
Transferors expect (subject to certain
limitations and conditions), and in some
circumstances will be obligated, to have
Additional Accounts designated, the
Receivables of which will be included in
the Trust or, in lieu thereof or in
addition thereto, to include
Participation Interests in the Trust.
Additional Accounts include New Accounts
(as defined herein) and Aggregate
Addition Accounts (as defined herein). If
Additional Accounts are designated, the
Transferors will convey to the Trust all
Receivables in such Additional Accounts,
whether such Receivables are then
existing or thereafter created. The
addition to the Trust of Receivables in
Aggregate Addition Accounts or
Participation Interests will be subject
to certain conditions, including, among
others, that (a) unless such addition is
a required addition, such addition will
satisfy the Rating Agency Condition and
(b) each Transferor of such Receivables
shall have delivered to the Trustee a
certificate of an authorized officer to
the effect that, in the reasonable belief
of such Transferor, such addition will
not have an Adverse Effect. The
Transferors will also have the right, in
certain circumstances, to remove from the
Trust all Receivables of certain
designated Accounts or Participation
Interests (the 'REMOVED ACCOUNTS'). See
'The Pooling and Servicing Agreement
Generally--Additions of Accounts or
Participation Interests' and '--Removal
of Accounts' for a more detailed
discussion of the circumstances and
manner in which, respectively, Additional
Accounts may be designated or
Participation Interests may be added to
the Trust and the Receivables of certain
Accounts or Participation Interests may
be removed from the Trust.
The Receivables.................... The Receivables include (a) periodic
finance charges, cash advance fees,
administrative fees, late charges, credit
insurance premiums, annual membership
fees and certain other fees, Discount
Receivables, if any, and the interest
portion of any Participation Interests as
determined pursuant to the applicable
Supplement (the 'FINANCE CHARGE
RECEIVABLES'), and (b) amounts charged by
Account holders for merchandise and
services, amounts advanced to Account
holders as cash advances or otherwise
borrowed by Account holders under any
line of credit existing under an Account,
Premium Receivables, if any, and the
principal portion of any Participation
Interests as determined pursuant to the
applicable Supplement (the 'PRINCIPAL
RECEIVABLES'). Recoveries will be treated
as Finance Charge Receivables.
All new Receivables arising in the Accounts
during the term of the Trust
automatically will be sold by Centurion
directly or indirectly to the Trust.
Accordingly, the amount of Receivables
will fluctuate from day to day as new
Receivables are generated and as existing
Receivables are collected, charged-off as
uncollectible or otherwise adjusted.
Clearance and Settlement........... Unless otherwise provided in the related
Prospectus Supplement, Certificateholders
may elect to hold their Certificates
through any
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of (a) DTC (in the United States) or (b)
Cedel Bank, societe anonyme ('CEDEL') or
the Euroclear System ('EUROCLEAR') (in
Europe). See 'Description of the
Certificates--Book-Entry Registration.'
Interest........................... Interest will accrue on the Invested Amount
or the outstanding principal amount of
the Certificates of a Series or Class
offered hereby at the per annum rate
either specified in, or determined in the
manner specified in, the related
Prospectus Supplement. Except as
otherwise provided herein, collections of
Finance Charge Receivables and certain
other amounts allocable to the Invested
Amount of a Series offered hereby will
generally be used to make interest
payments to Certificateholders of such
Series on each Interest Payment Date with
respect thereto; provided that if an
Early Amortization Period or Early
Accumulation Period commences with
respect to such Series, thereafter
interest will be distributed to such
Certificateholders monthly on each
Special Payment Date (defined herein). If
the Interest Payment Dates for a Series
or Class occur less frequently than
monthly, such collections or other
amounts (or the portion thereof allocable
to such Class) will be deposited in one
or more trust accounts (each, an
'INTEREST FUNDING ACCOUNT') and used to
make interest payments to
Certificateholders of such Series or
Class on the following Interest Payment
Date with respect thereto. If a Series
has more than one Class of Certificates,
each such Class may have a separate
Interest Funding Account. See
'Description of the
Certificates--Interest' for a more
detailed discussion of the foregoing.
Principal.......................... The principal of the Certificates of each
Series offered hereby will be scheduled
to be paid either (a) in full on an
expected date specified in the related
Prospectus Supplement (the 'EXPECTED
FINAL PAYMENT DATE'), in which case such
Series will have a Controlled
Accumulation Period as described below
under '--Controlled Accumulation Period,'
or (b) in installments commencing on a
date specified in the related Prospectus
Supplement (the 'PRINCIPAL COMMENCEMENT
DATE'), in which case such Series
generally will have a Controlled
Amortization Period as described below
under '--Controlled Amortization Period.'
If a Series has more than one Class of
Certificates, each class may have a
different method of paying principal,
Expected Final Payment Date or Principal
Commencement Date. The payment of
principal with respect to the
Certificates of a Series or Class may
commence earlier than the applicable
Expected Final Payment Date or Principal
Commencement Date, and the final
principal payment with respect to the
Certificates of a Series or Class may be
made later than the applicable Expected
Final Payment Date or other expected
date, if a Pay-Out Event or Reinvestment
Event occurs with respect to such Series
or Class or under certain other
circumstances described herein. See 'Risk
Factors--Payments and Maturity;
Dependency on Account Holder Repayments'
for a description of factors that may
affect the timing of principal payments
on Certificates. See 'Description of the
Certificates--Principal.'
Revolving Period................... The Certificates of each Series offered
hereby will have a revolving period (the
'REVOLVING PERIOD') that will commence on
the date of issuance of the related
Series (the 'SERIES CLOSING DATE') or
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on a date prior thereto specified in the
related Supplement and, for a Series
offered hereby, in the related Prospectus
Supplement (the 'SERIES CUT-OFF DATE')
and continue until the earlier of (a) the
commencement of the Early Amortization
Period or Early Accumulation Period with
respect to such Series and (b) the date
specified in the related Prospectus
Supplement as the end of the Revolving
Period with respect to such Series. If
the related Prospectus Supplement
provides that a Series is a Principal
Sharing Series (as defined herein),
during the Revolving Period with respect
to such Series, collections of Principal
Receivables and certain other amounts
otherwise allocable to the
Certificateholders' Interest of such
Series will be treated as Shared
Principal Collections (as defined herein)
and will be distributed to, or for the
benefit of, the Certificateholders of
other Principal Sharing Series or the
holders of the Transferor Certificates or
deposited into the Special Funding
Account (as defined herein), as more
fully described in the related Prospectus
Supplement. If the related Prospectus
Supplement provides that a Series is not
a Principal Sharing Series, during the
Revolving Period with respect to such
Series, collections of Principal
Receivables and certain other amounts
otherwise allocable to the
Certificateholders' Interest of such
Series will be paid to the holders of the
Transferor Certificates or deposited into
the Special Funding Account, as more
fully described in the related Prospectus
Supplement. See 'Description of the
Certificates--Principal,' and '--Pay-Out
Events and Reinvestment Events' for a
discussion of the events that might lead
to the termination of the Revolving
Period with respect to a Series prior to
its scheduled date.
Controlled Accumulation Period..... If the related Prospectus Supplement so
specifies, unless an Early Amortization
Period or, if so specified in the related
Prospectus Supplement, an Early
Accumulation Period commences with
respect to a Series offered hereby, the
Certificates of such Series will have a
scheduled accumulation period (the
'CONTROLLED ACCUMULATION PERIOD') that
will commence at the close of business on
the date or dates specified or determined
as specified in such Prospectus
Supplement and continue until the
earliest of (a) the commencement of the
Early Amortization Period or, if so
specified in the related Prospectus
Supplement, an Early Accumulation Period
with respect to such Series, (b) payment
in full of the Invested Amount, including
the Collateral Invested Amount, if any,
of the Certificates of such Series, and
(c) the series termination date with
respect to such Series (the 'SERIES
TERMINATION DATE'). During the Controlled
Accumulation Period with respect to a
Series, collections of Principal
Receivables and, if so specified in the
related Prospectus Supplement, certain
other amounts allocable to the
Certificateholders' Interest of such
Series, including Shared Principal
Collections, if any, allocable to such
Series, will be deposited on each
Distribution Date in a trust account
established for the benefit of the
Certificateholders of such Series (each,
a 'PRINCIPAL FUNDING ACCOUNT') and used
to make principal distributions to the
Certificateholders of such Series or any
Class thereof when due. The amount to be
deposited in the Principal Funding
Account (the 'CONTROLLED DEPOSIT AMOUNT')
for any
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Series offered hereby on any Distribution
Date may, but will not necessarily, be
limited to an amount equal to an amount
specified or determined as specified in
the related Prospectus Supplement (the
'CONTROLLED ACCUMULATION AMOUNT') plus
any existing deficit controlled
accumulation amount arising from prior
Distribution Dates. If the Prospectus
Supplement for a Series so specifies, the
amount to be deposited in the Principal
Funding Account on a Distribution Date
may be a variable amount. If a Series has
more than one Class of Certificates, each
Class may have a separate Principal
Funding Account and Controlled
Accumulation Amount, and the Controlled
Accumulation Period with respect to each
Class may commence on different dates. In
addition, the related Prospectus
Supplement may describe certain
priorities among such Classes with
respect to deposits of principal into
such Principal Funding Accounts.
Early Accumulation Period.......... If so specified and under the conditions
set forth in the Prospectus Supplement
relating to a Series having a Controlled
Accumulation Period, during the period
from the day on which a Reinvestment
Event (as defined herein) has occurred,
until the earliest of (a) the
commencement of the Early Amortization
Period (if any), (b) payment in full of
the Invested Amount of the Certificates
of such Series or Class, including the
Collateral Invested Amount, if any, with
respect to such Series and (c) the Series
Termination Date with respect to such
Series (the 'EARLY ACCUMULATION PERIOD'),
collections of Principal Receivables and,
if so specified in the related Prospectus
Supplement, certain other amounts
allocable to the Certificateholders'
Interest of such Series, including Shared
Principal Collections, if any, allocable
to such Series, will be deposited on each
Distribution Date in the Principal
Funding Account and used to make
distributions of principal to the
Certificateholders of such Series or any
Class thereof on the Expected Final
Payment Date. The amount to be deposited
in the Principal Funding Account during
the Early Accumulation Period will not be
limited to any Controlled Deposit Amount.
See 'Description of the
Certificates--Pay-Out Events and
Reinvestment Events' for a discussion of
the events which might lead to
commencement of an Early Accumulation
Period.
Controlled Amortization Period..... If the related Prospectus Supplement so
specifies, unless an Early Amortization
Period commences with respect to a Series
offered hereby, the Certificates of such
Series will have an amortization period
(the 'CONTROLLED AMORTIZATION PERIOD')
that will commence at the close of
business on the date specified in such
Supplement and continue until the
earliest of (a) the commencement of the
Early Amortization Period, if any, with
respect to such Series, (b) payment in
full of the Invested Amount, including
the Collateral Invested Amount, if any,
of the Certificates of such Series and
(c) the Series Termination Date with
respect to such Series. During the
Controlled Amortization Period with
respect to a Series, collections of
Principal Receivables and certain other
amounts allocable to the
Certificateholders' Interest of such
Series, including Shared Principal
Collections, if any, allocable to such
Series, will be used on each Distribution
Date to make principal distributions to
Certificateholders of such Series or any
Class thereof then
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scheduled to receive such distributions.
The amount to be distributed to
Certificateholders of any Series offered
hereby on any Distribution Date may, but
will not necessarily, be limited to an
amount (the 'CONTROLLED DISTRIBUTION
AMOUNT') equal to an amount (the
'CONTROLLED AMORTIZATION AMOUNT')
specified in the related Prospectus
Supplement plus any existing deficit
controlled amortization amount arising
from prior Distribution Dates. If a
Series has more than one Class of
Certificates, each Class may have a
different Controlled Amortization Amount.
In addition, the related Prospectus
Supplement may describe certain
priorities among such Classes with
respect to such distributions.
Early Amortization Period.......... During the period from the day on which a
Pay-Out Event has occurred with respect
to a Series to the date on which the
Invested Amount, including the Collateral
Invested Amount, if any, of the
Certificates of such Series has been paid
in full or the related Series Termination
Date has occurred (the 'EARLY
AMORTIZATION PERIOD'), collections of
Principal Receivables and certain other
amounts allocable to the
Certificateholders' Interest of such
Series, including Shared Principal
Collections, if any, allocable to such
Series, will be distributed as principal
payments to the Certificateholders of
such Series monthly on each Distribution
Date beginning with the first Special
Payment Date with respect to such Series.
During the Early Amortization Period with
respect to a Series, distributions of
principal to Certificateholders, in
general, will not be subject to any
Controlled Deposit Amount or Controlled
Distribution Amount. In addition, upon
the commencement of the Early
Amortization Period with respect to a
Series, any funds on deposit in a
Principal Funding Account with respect to
such Series will be paid to the
Certificateholders of the relevant Class
or Series on the first Special Payment
Date with respect to such Series. See
'Description of the Certificates--Pay-Out
Events and Reinvestment Events' for a
discussion of the events that might lead
to the commencement of the Early
Amortization Period with respect to a
Series.
Allocations Among Series........... Pursuant to the Pooling and Servicing
Agreement, during each Monthly Period,
the Servicer is required to first
allocate to each Series collections of
Principal Receivables and Finance Charge
Receivables and the Defaulted Receivables
with respect to such Monthly Period based
on the Series Allocation Percentage (as
defined herein). Subject to reallocation
among Series in a Reallocation Group,
such amounts allocated to each Series are
then further allocated within each Series
to the Certificateholders, any Series
Enhancement and the holders of the
Transferor Certificates pursuant to the
terms of the related Supplement. See 'The
Pooling and Servicing Agreement
Generally-- Allocations,' where the
manner in which collections are so
allocated is discussed at greater length.
Reallocations Among Series in a
Reallocation Group............... If so specified in the related Prospectus
Supplement, the Certificates of a Series
may be included in a Group that will be
subject to reallocations of collections
of Receivables and other amounts or
obligations among the Series in such
Group (a 'REALLOCATION GROUP').
Collections of Finance Charge Receivables
allocable to each Series in a
Reallocation Group will be aggregated and
made available for certain required
payments for all Series in such
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Group. Consequently, the issuance of new
Series in such Group may have the effect
of reducing or increasing the amount of
collections of Finance Charge Receivables
allocable to the Certificates of other
Series in such Group. For a more detailed
discussion of the effect of the issuance
of new Series and the manner in which
Collections will be allocated among
Reallocation Groups and the Series within
such Reallocation Groups, see,
respectively, 'Risk Factors--Effect of
the Issuance of New Series' and 'The
Pooling and Servicing Agreement
Generally--Reallocation Among Different
Series Within a Reallocation Group.'
Sharing of Excess Finance Charge
Collections Among Excess
Allocation Series................ If the Prospectus Supplement for a Series
so provides, any Series may be designated
as a Series that shares with other Series
similarly designated, subject to certain
limitations, certain Excess Finance
Charge Collections (as defined herein)
allocable to any such Series (an 'EXCESS
ALLOCATION SERIES'). Subject to certain
limitations described under 'The Pooling
and Servicing Agreement
Generally--Sharing of Excess Finance
Charge Collections Among Excess
Allocation Series,' collections of
Finance Charge Receivables 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 Series Enhancement) will be
applied to cover shortfalls with respect
to amounts payable from collections of
Finance Charge Receivables allocable to
any other Series designated as an Excess
Allocation Series, in each case pro rata
based upon the Invested Amount of each
such Series that has such a shortfall
with respect to the related Monthly
Period. See 'The Pooling and Servicing
Agreement Generally--Sharing of Excess
Finance Charge Collections Among Excess
Allocation Series.'
Sharing of Principal Collections
Among Principal Sharing Series... If the Prospectus Supplement for a Series
so provides, any Series may be designated
as a Series that shares with other Series
similarly designated, subject to certain
limitations, certain excess collections
of Principal Receivables and certain
other amounts allocable to the
Certificateholders' Interest of such
Series (a 'PRINCIPAL SHARING SERIES'). To
the extent that collections of Principal
Receivables and certain other amounts
that are allocated to the
Certificateholders' Interest of any
Principal Sharing Series are not needed
to make payments to the
Certificateholders of such Series or are
not required to be deposited in a
Principal Funding Account for such
Series, such collections may be applied
to cover principal payments due to or for
the benefit of Certificateholders of
another Principal Sharing Series. Any
such reallocation will not result in a
reduction in the Invested Amount of the
Series to which such collections were
initially allocated. For a more detailed
discussion of the foregoing, see 'The
Pooling and Servicing Agreement
Generally--Sharing of Principal
Collections Among Principal Sharing
Series.'
Paired Series...................... If so specified in the related Prospectus
Supplement, a Series of Certificates may
be issued (a 'PAIRED SERIES') that is
paired with
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one or more other Series or a portion of
one or more other Series previously
issued by the Trust (a 'PRIOR SERIES'). A
Paired Series may be issued at or after
the commencement of a Controlled
Accumulation Period or Controlled
Amortization Period for a Prior Series.
As the Invested Amount of the Prior
Series having a Paired Series is reduced,
the Invested Amount of the Paired Series
will increase by an equal amount. Upon
payment in full of such Prior Series, the
Invested Amount of the Paired Series will
be equal to the amount of the Invested
Amount paid to Certificateholders of such
Prior Series. If a Pay-Out Event or
Reinvestment Event occurs (a) with
respect to the Prior Series having a
Paired Series or (b) with respect to the
Paired Series when such Prior Series is
in a Controlled Amortization Period or
Controlled Accumulation Period, the
percentage specified in the applicable
Prospectus Supplement for the allocation
of collections of Principal Receivables
to the Certificateholders' Interest of
such Prior Series (the 'PRINCIPAL
ALLOCATION PERCENTAGE') and the Series
Allocation Percentage for the Prior
Series and the Principal Allocation
Percentage and the Series Allocation
Percentage for the Paired Series will be
reset as specified in the related
Prospectus Supplement and the Controlled
Amortization Period, Controlled
Accumulation Period, Early Amortization
Period or Early Accumulation Period for
such Prior Series could be lengthened,
which, in turn, may result in the holders
of the Certificates of such Prior Series
receiving the final payment of principal
on such Certificates after the Expected
Final Payment Date.
Special Funding Account............ If on any date the Transferor Amount is
less than or equal to the Required
Transferor Amount, the Servicer shall not
distribute to the holders of the
Transferor Certificates any collections
of Principal Receivables that otherwise
would be distributed to the holders of
the Transferor Certificates, but shall
deposit such funds in the Special Funding
Account.
Funds on deposit in the Special Funding
Account will be withdrawn and paid to the
holders of the Transferor Certificates on
any Distribution Date to the extent that,
after giving effect to such payment, the
Transferor Amount exceeds the Required
Transferor Amount on such date; provided,
however, that if a Controlled
Accumulation Period, Early Accumulation
Period, Controlled Amortization Period or
Early Amortization Period has commenced
and is continuing with respect to any
Series, any funds on deposit in the
Special Funding Account will be released
and treated as collections of Principal
Receivables 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 to be less than the
Required Transferor Amount. In addition,
if the Transferors determine that, by
decreasing the amount on deposit in the
Special Funding Account, one or more
Series, for which the Supplements related
thereto permit partial amortization, may
be prevented from experiencing a Pay-Out
Event due to the insufficiency of yield,
funds on deposit in the Special Funding
Account may be applied to each such
Series (on a pro rata basis according to
each Series' Invested Amount) to reduce
the Invested Amount thereof and thereby
to avoid such yield-insufficiency Pay-Out
Event, but only to the
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extent that doing so would not cause the
Transferor Amount to be less than the
Required Transferor Amount. The
Transferors, at their option, may
instruct the Trustee to deposit to the
Special Funding Account Shared Principal
Collections that would otherwise be
payable to the holders of the Transferor
Certificates in accordance with the
foregoing.
Funding Period..................... The Prospectus Supplement relating to a
Series of Certificates may specify that
for a period beginning on the Series
Closing Date and ending on a specified
date before the commencement of a
Controlled Amortization Period or
Controlled Accumulation Period with
respect to such Series (the 'FUNDING
PERIOD'), the aggregate amount of
Principal Receivables in the Trust
allocable to such Series may be less than
the aggregate principal amount of the
Certificates of such Series and an amount
equal to the amount of such deficiency
(the 'PRE-FUNDING AMOUNT') will be held
in a trust account established with the
Trustee for the benefit of
Certificateholders of such Series (the
'PRE-FUNDING ACCOUNT') pending the
transfer of additional Principal
Receivables to the Trust or pending the
reduction of the Invested Amounts of
other Series issued by the Trust. The
related Supplement will specify the
initial Invested Amount on the Series
Closing Date with respect to such Series,
the aggregate principal amount of the
Certificates of such Series (the 'FULL
INVESTED AMOUNT') and the date by which
the Invested Amount is expected to equal
the Full Invested Amount. The Invested
Amount will increase as Principal
Receivables are delivered to the Trust or
as the Invested Amounts of other Series
of the Trust are reduced. The Invested
Amount may also decrease due to the
occurrence of a Pay-Out Event or
Reinvestment Event as specified in the
related Prospectus Supplement. The
Transferors do not have any present
intention of permitting the duration of
any Funding Period to be greater than one
year.
During the Funding Period, funds on deposit
in the Pre-Funding Account for a Series
of Certificates will be withdrawn and
paid to the Transferors to the extent of
any increases in the Invested Amount. In
the event that the Invested Amount does
not for any reason equal the Full
Invested Amount by the end of the Funding
Period, any amount remaining in the
Pre-Funding Account and any additional
amounts specified in the related
Prospectus Supplement will be payable to
the Certificateholders of such Series in
a manner and at such time as set forth in
the related Prospectus Supplement.
If so specified in the related Prospectus
Supplement, monies in the Pre-Funding
Account with respect to any Series will
be invested by the Trustee in Eligible
Investments or will be subject to a
guaranteed rate or investment agreement
or other similar arrangement, and
investment earnings and any applicable
payment under any such investment
arrangement will be applied to pay
interest on the Certificates of such
Series.
Credit Enhancement................. The credit enhancement (the 'CREDIT
ENHANCEMENT') with respect to a Series
offered hereby may include a cash
collateral guaranty, cash collateral
account, collateral interest, letter of
credit, surety bond, insurance policy,
spread account, guaranteed rate
agreement, maturity liquidity facility,
tax protection agreement,
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interest rate swap agreement, interest
rate cap agreement, or any combination of
the foregoing. Credit Enhancement may
also be provided to a Class or Classes of
a Series or to a Series by subordination
provisions which require that
distributions of principal or interest be
made with respect to the Certificates of
such Class or Classes or such Series
before distributions are made to one or
more other Classes of such Series or to
another Series (if the Supplement for
such Series so provides).
The type, characteristics and amount of the
Credit Enhancement with respect to any
Series will be determined based on
several factors, including the
characteristics of the Receivables and
Accounts underlying or comprising the
Trust Assets as of the Series Closing
Date with respect thereto, and will be
established on the basis of requirements
of each applicable Rating Agency. The
terms of the Series Enhancement with
respect to any Series offered hereby will
be described in the related Prospectus
Supplement. If so specified in the
Prospectus Supplement for a Series, the
level of Credit Enhancement for such
Series may be reduced or increased if
such reduction or increase satisfies the
Rating Agency Condition. See both 'The
Pooling and Servicing Agreement
Generally--Credit Enhancement' and 'Risk
Factors--Limited Nature of Rating' for a
more detailed discussion of the
foregoing.
Servicing.......................... TRS, in its capacity as Servicer under the
Pooling and Servicing Agreement, will be the
initial Servicer for the Trust. The
Servicer will be responsible for servicing,
managing and making collections on the
Receivables. Subject to certain exceptions
described under 'The Pooling and Servicing
Agreement Generally--Deposits in Collection
Account' and '--Allocations,' which
currently permit the Servicer to make
deposits on a monthly basis, the Servicer
will deposit any collections on the
Receivables in a Monthly Period into the
Collection Account within two business days
of the Date of Processing (defined below)
to the extent such collections are
allocable to the Certificateholders'
Interest of any Series and are required to
be deposited into an account for the
benefit of, or distributed to, the
Certificateholders of any Series or the
provider of any Series Enhancement. The
'DISTRIBUTION DATE' for a Series will be
the 15th day of each month (or, if such day
is not a business day, the next business
day) or such other date specified in the
Supplement for a Series and reflected in
the Prospectus Supplement for such Series.
On the earlier of (a) the second business
day following the Date of Processing and
(b) the day on which the Servicer deposits
any collections into the Collection
Account, subject to certain exceptions
described herein, the Servicer will pay to
the holders of the Transferor Certificates
their allocable portion of any collections
then held by the Servicer. The 'DATE OF
PROCESSING' is, with respect to any
transaction or receipt of collections, the
business day after such transaction is
first output, in written form pursuant to
the Servicer's usual and customary data
processing procedures, from the Servicer's
computer file of accounts comparable to the
Accounts (regardless of the effective date
of recordation). The 'DETERMINATION DATE'
for a series will be the earlier of the
third business day and the fifth calendar
day (but, if the fifth calendar day is not
a business
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day, the immediately preceding business
day) preceding the fifteenth day of each
calendar month or such other date
specified in the Supplement for a Series
and reflected in the Prospectus
Supplement for such Series. On each
Determination Date, the Servicer will
calculate the amounts to be allocated to
the Certificateholders of each Class or
Series and the holders of the Transferor
Certificates as described herein in
respect of collections of Receivables
received with respect to the preceding
Monthly Period.
In certain limited circumstances, TRS may
resign or be removed as Servicer, in
which event the Trustee or, so long as it
meets certain eligibility standards set
forth in the Pooling and Servicing
Agreement, a third-party servicer may be
appointed as the successor Servicer. TRS
is permitted to delegate all or part of
its duties as Servicer to any of its
affiliates or, subject to certain
conditions, to third-party service
providers, but any such delegation will
not relieve the Servicer of its liability
and responsibility with respect to such
duties under the Pooling and Servicing
Agreement or any Supplement. In addition,
TRS may assign all or part of its
obligations and duties as Servicer under
the Pooling and Servicing Agreement if
such assignment satisfies the Rating
Agency Condition. It is possible that TRS
will assign or delegate all or part of
its rights, duties and obligations as
Servicer to Centurion within the next two
years. The Servicer will receive
servicing fees payable with respect to
each Series offered hereby as servicing
compensation from the Trust. For
discussion of the manner in which such
fees will be allocated and calculated,
see 'Description of the
Certificates--Servicing Compensation and
Payment of Expenses.'
Income Tax Withholding............. Interest on the Certificates held by
non-U.S. persons will be subject to United
States withholding tax unless the holder
complies with applicable IRS
identification requirements. Interest on
the Certificates held by U.S. persons
will be subject to backup withholding
unless the holder complies with
applicable IRS identification
requirements.
Tax Status......................... Except to the extent otherwise provided 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 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 'Tax
Matters--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.
Certificate Rating................. It will be a condition to the issuance of
each Series of Certificates or Class
thereof offered pursuant to this
Prospectus and the related Prospectus
Supplement that they be rated in one of
the four highest applicable rating
categories by at least one nationally
recognized statistical rating
organization selected by the Transferors,
as specified in the applicable Supplement
(each
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rating agency rating any Series, a
'RATING AGENCY'). The rating or ratings
applicable to the Certificates of each
such Series or Class thereof will be set
forth in the related Prospectus
Supplement. A security rating should be
evaluated independently of similar
ratings of different types of securities.
A rating is not a recommendation to buy,
sell or hold securities and may be
subject to revision or withdrawal at any
time by the assigning Rating Agency. Each
rating should be evaluated independently
of any other rating. See 'Risk
Factors--Limited Nature of Rating.'
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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18
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RISK FACTORS
Investors should consider, among other things, the following factors in
connection with the purchase of 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 can be no assurance that a secondary market will
develop or, if a secondary market does develop, that it will provide
Certificateholders of any Series offered hereby with liquidity of investment or
that it will continue for the life of such Certificates.
Potential Priority of Certain Liens. Centurion represents and warrants in
the Credco Purchase Agreement that the transfer of Receivables pursuant thereto
to Credco is a valid sale and assignment of such Receivables from Centurion to
Credco. Centurion and Credco have filed or will file appropriate Uniform
Commercial Code ('UCC') financing statements to evidence this sale and perfect
Credco's right, title and interest in such Receivables. However, if a
conservator or receiver for Centurion is appointed and such conservator or
receiver argues that the transaction between Centurion and Credco should be
recharacterized as a pledge of such receivables to secure a borrowing by
Centurion, rather than an absolute transfer, delays in payments of collections
of Receivables to Credco and, therefore, to RFC II, and possible reductions in
the amounts of such payments could result. Moreover, if the transfer of
Receivables by Centurion to Credco pursuant to the Credco Purchase Agreement is
deemed to create a security interest therein under applicable law, (i) a tax or
governmental lien or other nonconsensual lien on property of Centurion arising
before Receivables come into existence may have priority over Credco's (and,
therefore, RFC II's) interest in such Receivables and (ii) if the Federal
Deposit Insurance Corporation ('FDIC') were appointed receiver or conservator of
Centurion, the receiver's or conservator's administrative expenses may also have
priority over Credco's, and, therefore, RFC II's, ownership or security interest
in the Receivables transferred by Centurion to Credco and by Credco to RFC II.
Credco represents and warrants in the RFC II Purchase Agreement that the
transfer of all Receivables pursuant thereto to RFC II is a valid sale and
assignment of such Receivables from Credco to RFC II. Credco and RFC II will
file appropriate UCC financing statements to evidence this sale and perfect RFC
II's right, title and interest in such Receivables. While Credco and RFC II will
treat the transactions described in the RFC II Purchase Agreement as sales of
the Receivables to RFC II under applicable state law and will take all actions
that are required under applicable state law to perfect RFC II's ownership
interest in the Receivables, if Credco were to become a debtor in a bankruptcy
case or a creditor or a bankruptcy trustee of Credco or Credco itself as a
debtor-in-possession were to take the position that the sale of Receivables to
RFC II should be recharacterized as a pledge of such Receivables to secure a
borrowing of Credco, then delays in payments of collections of Receivables to
RFC II (and therefore to the Trust and the Certificateholders) and possible
reductions in the amount of such payments could occur. Moreover, if the transfer
of Receivables by Credco to RFC II is deemed to create a security interest
therein under applicable state law, a tax or governmental lien or other
nonconsensual lien on property of Credco arising before Receivables come into
existence may have priority over Credco's (and, therefore, the Trust's) interest
in such Receivables. These issues are discussed in more detail under 'Certain
Legal Aspects of the Receivables--Transfer of Receivables.'
Each Transferor represents and warrants in the Pooling and Servicing
Agreement that the transfer of the Receivables by it to the Trust pursuant to
the Pooling and Servicing Agreement is either a valid sale and assignment of
such Receivables to the Trust or the grant to the Trust of a security interest
in such Receivables. Each Transferor will file appropriate UCC financing
statements to evidence this sale and perfect the Trust's right, title and
interest in such Receivables. If the transfer of the Receivables to the Trust
were deemed to create a security interest therein under the UCC, a tax or
governmental lien or other nonconsensual lien on property of a Transferor
arising before a Receivable is transferred to the Trust may have priority over
the Trust's interest in such Receivable. If (i) RFC II were to become a debtor
in a bankruptcy case and a bankruptcy trustee or a creditor of RFC II or RFC II
as a debtor-in-possession were to take the position that the transfer of the
Receivables from RFC II to the Trust should be characterized as a pledge of such
Receivables or (ii) if the FDIC were appointed receiver or conservator of
Centurion, then delays in distributions on the Certificates and possible
reductions in such distributions could occur and, in the case of clause (ii),
the receiver's or conservator's
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administrative expenses may have priority over Centurion's (and, therefore, the
Trust's) security interest in the Receivables transferred by Centurion to the
Trust. See 'Certain Legal Aspects of the Receivables--Certain Matters Relating
to Insolvency and Receivership.'
Certain Matters Relating to the Insolvency or Receivership of a Transferor
or Other Holder of the Original Transferor Certificate. To the extent Centurion
has granted or will grant a security interest in the Receivables to Credco or
the Trust, and such security interest is validly perfected before the occurrence
of an Insolvency Event (defined herein) relating to Centurion and was not or
will not be taken in contemplation of insolvency or with the intent to hinder,
delay or defraud Centurion 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. Positions taken by the FDIC staff prior to the
passage of FIRREA do not suggest that the FDIC, as receiver or conservator for
Centurion, 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 Credco or 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 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
Insolvency and Receivership.'
RFC II is a separate, limited purpose subsidiary of TRS, the certificate of
incorporation of which contains limitations on the nature of RFC II's business
and restrictions on the ability of RFC II to commence a voluntary case or
proceeding under Title 11 of the United States Code (the 'BANKRUPTCY CODE')
without the prior unanimous consent of all of its directors. See 'RFC II,
Credco, Centurion and TRS--RFC II' for more information regarding RFC II.
If RFC II were to become a debtor in a bankruptcy case and a creditor or
bankruptcy trustee of RFC II or RFC II itself as a debtor-in-possession were to
take the position that the transfer of Receivables by RFC II to the Trust should
be recharacterized as a pledge of such Receivables to secure a borrowing of RFC
II, then delays in payments of collections of such Receivables to the Trust (and
therefore to the Certificateholders) could occur or (should the court rule in
favor of any such creditor or trustee, or RFC II) reductions in the amount of
such payments could result.
The Pooling and Servicing Agreement provides that upon the occurrence of an
Insolvency Event (as defined herein) with respect to any Transferor or other
holder of the Original Transferor Certificate, a Pay-Out Event or Reinvestment
Event would occur with respect to each Series, and pursuant to the terms of the
Pooling and Servicing Agreement, new Principal Receivables would not be
transferred by the Transferors to the Trust, unless the bankruptcy trustee,
receiver or conservator for any Transferor or other holder of the Original
Transferor Certificate or such Transferor or such holder of the Original
Transferor Certificate as a debtor-in-possession instructs otherwise. In
addition, if TRS were to become a debtor in a bankruptcy case, and a creditor,
bankruptcy trustee or TRS as a debtor-in-possession were to request a bankruptcy
court to order that TRS be substantively consolidated with RFC II, delays in,
and reductions in the amounts of, distributions on the Certificates could occur.
Following the occurrence of an Insolvency Event with respect to any Transferor
or other holder of the Original Transferor Certificate, the Trustee would sell
the Receivables (unless Holders (as defined herein) of Certificates evidencing
undivided interests aggregating more than 50% of the aggregate unpaid principal
amount of each Series (or with respect to any Series with two or more Classes,
50% of the unpaid principal amount of each Class), each Transferor (or other
holder of the Original Transferor Certificate) not subject to an Insolvency
Event, each holder of a Supplemental Certificate, and possibly certain other
persons designated by the Transferors to the Trustee prior to the Insolvency
Event instruct otherwise, and provided that a bankruptcy trustee, conservator or
receiver for such Transferor or holder or such Transferor or such holder of the
Original Transferor Certificate as a debtor-in-possession does not order a sale
despite such instructions not to sell), thereby causing early termination of the
Trust. The entire proceeds of such sale or liquidation will be treated as
collections of Receivables and allocated accordingly among Series. In such
event, the portion of the proceeds of such sale allocable to such
Certificateholders of a related Series and the proceeds of any collections on
the Receivables in the Collection Account allocated to the Certificateholders'
Interest of such Series may be
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insufficient to pay such Certificateholders in full. Upon the occurrence of an
Insolvency Event with respect to any Transferor or holder of the Original
Transferor Certificate, if no Pay-Out Event or Reinvestment Event other than
such insolvency exists, the bankruptcy trustee, the conservator or the receiver
for such Transferor or holder of the Original Transferor Certificate or such
Transferor or such holder of the Original Transferor Certificate as a
debtor-in-possession, may have the power to prevent the early sale, liquidation
or disposition of the Receivables and the commencement of the Early Amortization
Period or Reinvestment Period. A receiver or conservator of Centurion may also
disaffirm or repudiate Centurion's obligations, under the Pooling and Servicing
Agreement, to accept reassignment of Receivables from the Trust under certain
conditions. See 'Certain Legal Aspects of the Receivables--Certain Matters
Relating to Insolvency and Receivership.'
An 'INSOLVENCY EVENT' shall occur if any Transferor or other holder of the
Original Transferor Certificate shall consent to or fail to object to the
appointment of a conservator or receiver or liquidator or trustee in any
insolvency, bankruptcy, receivership, conservatorship, liquidation, readjustment
of debt, marshaling of assets and liabilities or similar proceedings of or
relating to such Transferor or other holder or of or relating to all or
substantially all of such Transferor's or other holder's property, or a court or
agency or supervisory authority having jurisdiction in the premises shall issue,
or enter against such Transferor or other holder a decree or order for the
appointment of a conservator or receiver or liquidator or trustee in any
insolvency, bankruptcy, receivership, conservatorship, liquidation, readjustment
of debt, marshaling of assets and liabilities or similar proceedings or for the
winding-up or liquidation of such Transferor's or other holder's affairs; or any
such Transferor or other holder shall admit in writing its inability, or shall
be unable, to pay its debts generally as they become due, file a petition to
take advantage of any applicable insolvency, bankruptcy, reorganization,
liquidation, receivership, or conservatorship statute, make any assignment for
the benefit of its creditors or voluntarily suspend payment of its obligations;
or a proceeding shall have been instituted against such Transferor or other
holder by a court having jurisdiction in the premises seeking a decree or order
for relief in respect of any such person in an involuntary case under any
bankruptcy, insolvency, reorganization or liquidation statute, or for the
appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator, conservator or other similar official, of such Transferor or other
holder or for any substantial part of such Transferor's or other holder's
property, or for the liquidation and winding up of such Transferor's or other
holder's affairs and, if instituted against such Transferor or other holder, any
such proceeding shall continue undismissed or unstayed and in effect for a
period of 60 consecutive days, or any of the actions sought in such proceeding
shall occur.
While TRS or an affiliate of TRS is the Servicer, for as long as the
Servicer's short-term credit rating (which may be an implied rating) is at least
A-1 by Standard and Poor's Ratings Services ('S&P') and P-1 by Moody's Investors
Service, Inc. ('MOODY'S') (or such other rating below A-1 or P-1, as the case
may be, which is acceptable to such Rating Agency), which is currently the case,
cash collections held by the Servicer may be commingled and used for the benefit
of the Servicer prior to each Distribution Date and, in the event of the
bankruptcy, insolvency, liquidation, receivership or conservatorship of the
Servicer or, in certain circumstances, the lapse of certain time periods, the
Trust may not have a perfected security interest in such collections. However,
if, while TRS or an affiliate of TRS is the Servicer, the short-term credit
rating of the Servicer (which may be an implied rating) is reduced below A-1 by
S&P and P-1 by Moody's (or such other rating below A-1 or P-1, as the case may
be, which is acceptable to such Rating Agency), within five business days of
such reduction, the Servicer will begin to deposit collections directly into the
Collection Account within two business days of each Date of Processing unless
(i) the Servicer has obtained a guarantee with respect to its deposit and
payment obligations under the Pooling and Servicing Agreement pursuant to a
guaranty (in form and substance satisfactory to the Rating Agencies) from a
guarantor that has a short-term credit rating of at least A-1 or P-1 from each
applicable Rating Agency (or such other rating below A-1 or P-1, as the case may
be, which is acceptable to such Rating Agency), or (ii) the Rating Agency
Condition shall be satisfied with respect to the Servicer's inability to satisfy
the rating requirement described above. In the event of a Servicer Default
relating to the bankruptcy or insolvency of the Servicer, if no Servicer Default
other than such bankruptcy- or insolvency-related Servicer Default exists, the
bankruptcy trustee, receiver or conservator for the Servicer or the Servicer
itself as debtor-in-possession may have the power to prevent either the Trustee
or the Certificateholders from appointing a successor Servicer. In addition, if
the Servicer becomes a debtor-in-possession in a bankruptcy case, the Servicer's
rights under the Pooling and Servicing Agreement (including the right to service
the Receivables) would be property of the estate of the Servicer and, therefore,
under the Bankruptcy Code, subject to the Servicer's right to assume or reject
such agreement.
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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 caps on credit or charge cards), may adversely affect the Servicer's
ability to collect on the Receivables or Centurion's ability to maintain the
required level of periodic finance charges, 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 Pooling and Servicing Agreement, Centurion 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 RFC II Purchase Agreement, Credco 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 II, for reassignment, in turn,
to Credco pursuant to the RFC II 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 'The
Pooling and Servicing Agreement Generally--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 Credit Enhancement or other sources.
For more information regarding the foregoing, see 'The Pooling and Servicing
Agreement Generally--Defaulted Receivables; Rebates and Fraudulent Charges.'
Potential Effect of Non-Compliance with CEBA. The Competitive Equality
Banking Act of 1987 ('CEBA') contains provisions that prohibit certain
overdrafts by Centurion on its account at a Federal Reserve Bank on behalf of an
affiliate or by an affiliate on its account at Centurion. Violation of these
provisions would result in Centurion being deemed to be a 'bank' under the Bank
Holding Company Act, requiring TRS and American Express either to divest control
of Centurion or to comply with other provisions of the Bank Holding Company Act.
Potential Effect of Legislation. Congress and the states may enact new
laws and amendments to existing laws to regulate further the consumer credit
industry or to reduce finance charges or other fees or charges applicable to
consumer credit accounts. The potential effect of any such legislation could be
to reduce the yield on the Accounts. If such yield is reduced, a Pay-Out Event
or Reinvestment Event could occur, and an Early Amortization Period or Early
Accumulation Period may commence. See 'Description of the Certificates--Pay-Out
Events and Reinvestment Events' for discussion of what may give rise to a
Pay-Out Event or a Reinvestment Event and what would happen if, for a particular
Series, an Early Amortization Period or an Early Accumulation Period were to
commence.
Payments and Maturity; Dependency on Account Holder Repayments. The
Receivables may be paid at any time and there is no assurance that there will be
additional Receivables created in the Accounts, that Receivables will be added
to the Trust from Additional Accounts or Aggregate Additional Accounts
designated to the Trust, or that any particular pattern of Account holder
repayments will occur. The actual rate of accumulation of principal with respect
to a Series in a Principal Funding Account during a Controlled Accumulation
Period or Early Accumulation Period and the rate of distribution of principal
with respect to a Series during a Controlled Amortization Period or Early
Amortization Period will depend upon, among other factors, the rate of Account
holder repayments, the timing of the receipt of repayments and the rate of
default by Account holders. As a result, no assurance can be given that the
Invested Amount of a Series will be paid on the Expected Final Payment Date, if
any, with respect to a Series or that payments of principal during the
Controlled Amortization
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Period with respect to a Series will equal the Controlled Amortization Amount,
if any, with respect to such Series or will follow any particular pattern.
Account holder monthly payment rates with respect to the Accounts are dependent
upon a variety of factors, including seasonal purchasing and payment habits of
cardholders, the availability of other sources of credit, general economic
conditions, tax laws and the terms of the Accounts (which terms are subject to
change by Centurion). Increased convenience use (where Account holders pay their
Account balances in full on or prior to the due date and thus avoid all finance
charges) would decrease the effective yield on the Accounts and could result in
a Pay-Out Event or Reinvestment Event with respect to one or more Series and the
commencement of an Early Amortization Period or Early Accumulation Period with
respect to one or more Series, as well as a decrease in protection to
Certificateholders against defaults under the Accounts. No assurance can be
given as to the Account holder payment rates that will actually occur in any
future period.
A decline in the amount of Receivables in the Accounts for any reason
(including the decision by Account holders to use competing sources of credit,
an economic downturn or other factors) could result in the occurrence of a
Pay-Out Event or a Reinvestment Event with respect to a Series and the
commencement of an Early Amortization Period or Early Accumulation Period with
respect to such Series. The Pooling and Servicing Agreement provides that the
Transferors will be required (subject to certain conditions) to designate
Additional Accounts, the receivables of which will be added to the Trust in the
event that the amount of the Principal Receivables is not maintained at the
Required Minimum Principal Balance or if the Transferor Amount is less than the
Required Transferor Amount. If Additional Accounts are not designated by the
Transferors when required, a Pay-Out Event or Reinvestment Event may occur and
result in the commencement of an Early Amortization Period or Early Accumulation
Period.
In addition, if a Series utilizes a Pre-Funding Account (see 'The Pooling
and Servicing Agreement Generally--Funding Period' for a description of the
material characteristics of a Pre-Funding Account), the Certificateholders of
such Series may receive principal payments on their Certificates sooner than
anticipated, thereby reducing the anticipated yield on such Certificates, if
amounts on deposit in the Pre-Funding Account are not fully invested (to the
extent of the Invested Amount for such Series) in Receivables prior to the
termination of the Funding Period.
Social, Legal and Economic Factors. Changes in account use, payment
patterns and the rate of defaults by Account holders result from a variety of
social, legal and economic factors. Economic factors include the rate of
inflation, unemployment levels, tax law changes and relative interest rates. The
use of incentive programs (e.g., gift awards for account usage) may also affect
account use. The Transferors are unable to determine and have no basis to
predict whether or to what extent social, legal or economic factors will affect
future account use or repayment patterns.
Competition in the Credit Card Industry. There exists substantial and
increasingly intense competition worldwide with respect to the Optima Card, the
American Express Card, the American Express Gold Card and the Platinum Card
(collectively, the 'CARD' or the 'CARDS') from other financial institutions
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, Inc. ('MASTERCARD'), that issue
general-purpose credit cards, primarily under revolving credit plans, in
connection with one or both of these systems. As a network, Centurion and TRS
also encounter intense competition from card systems like VISA, MasterCard,
Diners Club(Registered), Morgan Stanley Dean Witters' NOVUSSM Network and JCB.
There is also very limited competition from businesses that issue their own
cards or otherwise extend credit to their customers, such as retailers and
airline associations, although these products are not generally substitutes for
the Card products due to their limited acceptance. Numerous United States banks
issuing credit cards under revolving credit plans charge annual fees in addition
to interest charges where permitted by state law. However, the issuer of the
Discover Card on the NOVUS Network, as well as many issuers of VISA cards and
MasterCard cards, generally charge no annual fees.
Competing card issuers offer a variety of products and services to attract
cardholders including premium cards with enhanced services or lines of credit,
airline frequent flyer program mileage credits and other reward or
- ------------------
* VISA(Registered) and MasterCard(Registered) are federally registered
servicemarks of VISA U.S.A., Inc. and MasterCard International Inc.,
respectively.
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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 Centurion 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.'
Ability of an Account Owner to Change Terms of the Accounts; Decrease in
Finance Charges. Pursuant to the Pooling and Servicing Agreement, the
Transferors will be transferring the Receivables arising in the Accounts, not
the Accounts themselves, to the Trust. Each Account Owner will have the right to
determine the annual percentage rates and the fees which will be applicable from
time to time to the Accounts owned by it, to alter the minimum monthly payment
required under the Accounts owned by it and to change various other terms, as
well as the origination, underwriting and collection practices, relating to the
Accounts owned by it. A decrease in the annual percentage rates or a reduction
in fees would decrease the Portfolio Yield (defined below) and could result in
the occurrence of a Pay-Out Event or Reinvestment Event and the commencement of
an Early Amortization Period or Early Accumulation Period. An alteration of
payment terms may result in fewer payments on Receivables being made in any
month. In the Pooling and Servicing Agreement or in a Receivables Purchase
Agreement to which it is a party, each Account Owner agrees or will agree that,
unless required by law or unless, in its good faith judgment, it deems it
necessary to maintain on a competitive basis its credit or charge business or
any program operated in connection with its credit or charge business, it will
not take any action which would have the effect of reducing the Portfolio Yield
to a level that could reasonably be expected to cause any Series to experience a
Pay-Out Event or Reinvestment Event based on the insufficiency of the Portfolio
Yield or any similar test and agrees or will agree that, unless required by law,
it will not take any action that would have the effect of reducing the Portfolio
Yield to less than the highest Average Rate (defined below) for any Group.
'PORTFOLIO YIELD' means, with respect to the Trust as a whole and, with respect
to any Monthly Period, the annualized percentage equivalent of a fraction (a)
the numerator of which is the aggregate of the sum of the Series Allocable
Finance Charge Collections (as defined herein) for all Series during the
immediately preceding Monthly Period calculated on a cash basis after
subtracting therefrom the Series Allocable Defaulted Amount (as defined herein)
for all Series for such Monthly Period and (b) the denominator of which is the
total amount of Principal Receivables as of the last day of such immediately
preceding Monthly Period. Unless otherwise provided in the Prospectus Supplement
with respect to any Series, 'AVERAGE RATE' means, with respect to any Group, the
percentage equivalent of a decimal equal to the sum of the amounts for each
outstanding Series (or each Class within a Series consisting of more than one
Class) within such Group obtained by multiplying (a) the certificate rate for
such Series or Class (adjusted to take into account any payments received or
payable pursuant to any interest rate agreements) and (b) a fraction, the
numerator of which is the aggregate unpaid principal amount of the Certificates
of such Series or Class and the denominator of which is the aggregate unpaid
principal
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amount of all Certificates within such Group. In servicing the Accounts, each of
TRS and any successor servicer will be required to exercise the same care and
apply the same policies that it exercises in servicing other comparable
accounts. Except as specified above, there are no restrictions specified in the
Pooling and Servicing Agreement on the ability of an Account Owner to change the
terms of its Accounts.
There can be no assurances that changes in applicable law, changes in the
marketplace or prudent business practice might not result in a determination by
an Account Owner to decrease customer finance charges or otherwise take actions
which would change other Account terms. Under certain circumstances, an Account
Owner may be required from time to time to designate Receivables from time to
time existing in Additional Accounts or Participation Interests for inclusion in
the Trust. However, such Additional Accounts or Participation Interests may not
be of the same credit quality or have the same characteristics as the Accounts,
the Receivables of which have been conveyed to the Trust. See 'The Pooling and
Servicing Agreement Generally--Additions of Accounts or Participation Interests'
for a more detailed discussion of the circumstances and manner in which
Additional Accounts may be designated for the Trust.
Effect of Subordination. Certain Series may have one or more Classes of
Certificates ('SUBORDINATED CERTIFICATES'), payments of principal in respect of
which will not commence until after the final principal payment shall have been
made with respect to one or more other Classes of Certificates ('SENIOR
CERTIFICATES') in such Series. In addition, if so specified in the related
Prospectus Supplement, if collections of finance charges 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 collections of finance charges 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 in the Trust due to the insolvency of RFC II, the appointment of a
conservator or receiver for Centurion or a bankruptcy trustee or receiver for
Credco, 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.
Basis Risk. The Accounts generally have finance charges set (generally on
a monthly basis) at a variable rate above the prime rate as published in The
Wall Street Journal (the 'PRIME RATE') or other specified index. Any Class of
Certificates offered hereby may bear interest at a fixed rate or a floating rate
based on a different floating rate index. If there is a decline in the Prime
Rate or such other specified index, the amount of collections of Finance Charge
Receivables on the Accounts may be reduced, whereas the amounts payable as
interest with respect to the Certificates and other amounts required to be
funded out of collections of Finance Charge Receivables may not be similarly
reduced.
Affinity and Co-Branded Programs. The Accounts include accounts that were
originated under affinity or co-branded programs between a Transferor and an
unaffiliated entity. The terms of such programs may affect the rate at which new
Receivables are generated in the Accounts.
Limited Nature of Rating. Any rating assigned to the Certificates of a
Series or a Class by a Rating Agency will reflect such Rating Agency's
assessment of the likelihood that Certificateholders of such Series or Class
will receive the payments of interest and principal required to be made under
the Pooling and Servicing Agreement and the related Supplement and will be based
primarily on the value of the Receivables in the Trust. Any such rating will
therefore generally address credit risk and will not, unless otherwise specified
in the related Prospectus Supplement with respect to any Class or Series offered
hereby, address the likelihood that the principal of, or interest on, any
Certificates of such Class or Series will be prepaid, paid on a scheduled date
or paid on any particular date before the applicable Series Termination Date. In
addition, any such rating will not address the possibility of the occurrence of
a Pay-Out Event or Reinvestment Event with respect to such Class or Series or
the possibility of the imposition of United States withholding tax with respect
to non-U.S. Certificateholders. Further, the available amount of any Credit
Enhancement with respect to any such Series or Class will be limited and will be
subject to reduction from time to time as described in the related Prospectus
Supplement. In addition, the rating of any Series or Class may be dependent upon
the rating of any provider of Series Enhancement for such Series or Class. The
rating of the Certificates of a Class or Series will not be a recommendation to
purchase, hold or sell such Certificates, and such rating will not comment as to
the marketability of such Certificates, any
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<PAGE>
market price or suitability for a particular investor. There is no assurance
that any rating will remain for any given period of time or that any rating will
not be lowered or withdrawn entirely by a Rating Agency if in such Rating
Agency's judgment circumstances so warrant.
Effect of the Issuance of New Series. The Trust, as a master trust, is
expected to issue new Series from time to time. While the terms of any Series
will be specified in a Supplement, the provisions of a Supplement and,
therefore, the terms of any new Series, will not be subject to the prior review
or consent of holders of the Certificates of any previously issued Series. Such
terms may include methods for determining applicable investor percentages and
allocating collections, provisions creating different or additional security or
other Series Enhancements, provisions subordinating such Series to other Series
or subordinating other Series (if the Supplement relating to such Series so
permits) to such Series, and any other amendment or supplement to the Pooling
and Servicing Agreement which is made applicable only to such Series. The
obligation of the Trustee to issue any new Series is subject to the following
conditions, among others: (a) such issuance will not result in any Rating Agency
reducing or withdrawing its then existing rating of the Certificates of any
outstanding Series or Class with respect to which it is a Rating Agency (the
notification in writing by each Rating Agency to the Transferors, the Servicer
and the Trustee that any action will not result in such a reduction or
withdrawal is referred to herein as the 'RATING AGENCY CONDITION') and (b) each
Transferor shall have delivered to the Trustee a certificate of an authorized
officer to the effect that, in the reasonable belief of such Transferor, such
issuance will not (i) result in the occurrence of a Pay-Out Event or
Reinvestment Event or (ii) materially adversely affect the timing or amount of
payments to Certificateholders of any Series or Class (any of the conditions
referred to in the preceding clauses (i) and (ii) are referred to herein as an
'ADVERSE EFFECT'). There can be no assurance, however, that the issuance of any
other Series, including any Series issued from time to time hereafter, might not
have an impact on the timing or amount of payments received by a
Certificateholder. In addition, the Supplements relating to Series which are
part of a Group as described herein may provide that collections of Receivables
allocable to such Series will be reallocated among all Series in the Group.
Consequently, the issuance of new Series in a Group may have the effect of
reducing the amount of collections of Receivables which are reallocated to the
Certificates of existing Series in such Group. For example, in a Reallocation
Group, which will provide for the reallocation of collections of Finance Charge
Receivables allocable to a Series among all Series in such Group, an additional
Series which is issued with a larger claim with respect to monthly interest than
that of previously issued Series in such Group (due to a higher certificate
rate) will receive a proportionately larger reallocation of collections of
Finance Charge Receivables. Such issuance will reduce the amount of collections
of Finance Charge Receivables which are reallocated to the existing Series in
such Group. Furthermore, there can be no assurance that, for any Series in a
Group, the Trust will issue any other Series in such Group. Accordingly, the
anticipated benefits of sharing or reallocation of collections of Receivables
may not be realized. See 'The Pooling and Servicing Agreement Generally--Groups
of Series.'
Effect of Addition of Trust Assets on Credit Quality. The Transferors may
from time to time designate Participation Interests to be conveyed to the Trust
or may designate Additional Accounts, the Receivables in which will be conveyed
to the Trust. The primary purpose for such designation would be to increase,
from time to time, the aggregate amount of Receivables held by the Trust,
thereby permitting the issuance of new Series from time to time. In addition,
under certain circumstances, the Transferors will be obligated to designate
Aggregate Addition Accounts or, at the Transferors' option, Participation
Interests for inclusion in the Trust. 'AGGREGATE ADDITION ACCOUNTS' means
revolving credit or other charge or credit accounts established pursuant to a
revolving credit agreement or other charge or credit agreement, respectively,
between an Account Owner and the person or persons obligated to make payments
thereunder, excluding any merchant, which is designated by such Account Owner to
be included as an Account. Aggregate Addition Accounts may be subject to
different eligibility criteria than the Accounts, the Receivables of which are
currently included in the Trust, and may include accounts originated,
underwritten or collected using criteria different from those which were applied
to the Accounts, the Receivables of which are currently included in the Trust,
because such accounts were originated at a later date or were part of a
portfolio of revolving credit accounts or other charge or credit accounts which
were not part of the Accounts or which were acquired from another revolving
credit issuer or other credit issuer, respectively. Moreover, Aggregate Addition
Accounts may not be accounts of the same type previously included in the Trust.
Consequently, there can be no assurance that such Aggregate Addition Accounts
will be of the same credit quality as the Accounts, the Receivables of which are
currently included in the Trust. In addition, such Aggregate Addition Accounts
may consist of revolving credit accounts or other charge or credit accounts
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which have different terms than the Accounts, the Receivables of which are
currently included in the Trust, including, in the case of revolving credit
accounts, lower periodic finance charges, which may have the effect of reducing
the Portfolio Yield. The designation of Aggregate Addition Accounts may be made
at random or in accordance with the application of specific criteria determined
from time to time at the discretion of the Transferors, but will be subject to
the satisfaction of certain conditions, including among others that (a) such
Aggregate Addition Accounts are Eligible Accounts, (b) the designation of such
Aggregate Addition Accounts will satisfy the Rating Agency Condition and (c)
each Transferor shall have delivered to the Trustee a certificate of an
authorized officer to the effect that, in the reasonable belief of such
Transferor, such designation will not have an Adverse Effect. The Transferors
expect to convey from time to time to the Trust the Receivables arising in
certain Aggregate Addition Accounts in accordance with the provisions of the
Pooling and Servicing Agreement.
The Transferors may also from time to time, at their sole discretion,
designate Eligible Accounts to be included as Accounts ('NEW ACCOUNTS') subject
to the limitations and conditions specified in this paragraph. For purposes of
the definition of New Accounts, Eligible Accounts will be deemed to include only
types of revolving credit accounts or other credit accounts which are included
as Initial Accounts or which have previously been included in any Aggregate
Addition if the assignment related to such Aggregate Addition provides that such
type of account or other credit account is permitted to be designated as a New
Account. Until such time as each applicable Rating Agency otherwise consents,
the number of New Accounts may be subject to certain restrictions. To the extent
New Accounts are designated for inclusion in the Trust, the Transferors will
deliver to the Trustee, at least semiannually, an opinion of counsel with
respect to the Receivables in New Accounts included as Accounts confirming the
creation and perfection of each transfer of such Receivables. If such opinion of
counsel with respect to Receivables in any New Accounts is not so received, all
Receivables arising in the New Accounts to which such failure relates will be
removed from the Trust. The designation of New Accounts may be made at random or
in accordance with the application of specific criteria determined from time to
time at the discretion of the Transferors, but will be subject to the
satisfaction of certain conditions, including among others that (a) the New
Accounts will all be Eligible Accounts; (b) such designation will not result in
the occurrence of a Pay-Out Event or Reinvestment Event; and (c) such
designation will not have been made in contemplation of an Insolvency Event with
respect to any Transferor or any similar event with respect to Credco. New
Accounts and Aggregate Addition Accounts are collectively referred to herein as
'ADDITIONAL ACCOUNTS.'
Any Participation Interests to be included as Trust Assets or any Eligible
Accounts, other than New Accounts, designated to be included as Accounts after
the Initial Selection Date, are collectively referred to herein as an 'AGGREGATE
ADDITION.'
'ELIGIBLE ACCOUNT' means a credit or charge account or product owned by an
Account Owner and its successors and permitted assignees which, as of the
respective date of designation, is a credit or charge account or product in
existence and maintained by an Account Owner or such successors or assignees, is
payable in United States dollars, has not been sold or pledged to any other
party except for any other Account Owner that has entered into a Receivables
Purchase Agreement, a Transferor or an Additional Transferor, does not have
receivables which have been sold or pledged to any other party other than Credco
pursuant to the Credco Purchase Agreement or a Transferor, except as provided
below has an Account holder who has not been confirmed by the Servicer in its
computer files as being involved in any voluntary or involuntary bankruptcy
proceeding, has an Account holder who has provided as his or her most recent
billing address an address located in the United States, its territories or
possessions or Canada or a United States military address (provided, however,
that, at any time, up to 3% of the Accounts may have Account holders who have
provided as their most recent billing addresses, addresses outside of such
jurisdictions), has not been identified as an account or product with respect to
which the related card has been lost or stolen (if such account or product is a
credit card or charge card account or product), does not have receivables that
are Defaulted Receivables and does not have any receivables that have been
identified by the Servicer as having been incurred as a result of fraudulent use
of any related credit card or charge card; and with respect to Aggregate
Addition Accounts, certain other accounts or products which shall have satisfied
the Rating Agency Condition. Accounts which relate to bankrupt obligors or
certain charged-off receivables may be designated as Accounts provided that the
amount of Principal Receivables in any such Account is deemed to be zero for
purposes of all allocations under the Pooling and Servicing Agreement.
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Allocations. To the extent provided in any Supplement, or any amendment to
the Pooling and Servicing Agreement, portions of the Receivables or
Participation Interests conveyed to the Trust and collections received with
respect thereto may be allocated to one or more Series or Groups which may
separately benefit from different types and methods of Series Enhancement as
long as the Rating Agency Condition shall have been satisfied with respect to
such allocation and the Servicer shall have delivered an officer's certificate
to the Trustee to the effect that the Servicer reasonably believes such
allocation will not have an Adverse Effect.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates of any Series offered
hereby, before the deduction of expenses, will be paid to the Transferors.
Unless otherwise specified in the related Prospectus Supplement, RFC II will use
such proceeds to pay Credco the purchase price of the Receivables transferred to
RFC II by Credco pursuant to the RFC II Purchase Agreement. Each of Credco and
Centurion will use its proceeds for general corporate purposes.
THE TRUST
The Trust was formed pursuant to the Pooling and Servicing Agreement. The
Trust has not engaged and will not engage in any business activity other than
acquiring and holding the Receivables and the other Trust Assets and proceeds
therefrom, issuing Certificates, the Original Transferor Certificate and any
Supplemental Certificates and making payments thereon and on any Series
Enhancements and related activities. As a consequence, the Trust has not had,
and is not expected to have, any source of capital other than the Trust Assets.
The Trust has been and will be administered in accordance with the laws of the
State of New York.
On the first Series Closing Date, the Transferors will convey to the Trust,
without recourse, all Receivables that existed in the Initial Accounts at the
close of business on the Initial Cut-Off Date, and all Receivables arising under
such Accounts from time to time thereafter, in exchange for the net cash
proceeds from the sale of one or more Series of Certificates plus the Transferor
Certificates representing the Transferors' Interest. In addition, the
Transferors may convey from time to time to the Trust, without recourse, all
Receivables existing in certain Additional Accounts and Participation Interests,
if any, at the close of business on each applicable date of designation thereof.
The Trust Assets will consist of the Receivables and any Participation Interests
hereafter conveyed to the Trust, all monies due or to become due thereunder, the
proceeds of the Receivables, all monies and other property on deposit in certain
accounts maintained for the benefit of the Certificateholders, and the right to
receive Recoveries allocable to the Trust for the benefit of the
Certificateholders. Pursuant to the Pooling and Servicing Agreement, the
Transferors will have the right and in certain circumstances will be obligated
to designate from time to time Additional Accounts to be included as Accounts
and, to the extent that any Transferor owns the Receivables arising in such
Accounts, such Transferor will convey to the Trust, pursuant to the Pooling and
Servicing Agreement, all Receivables of such Additional Accounts or
Participation Interests. Under the Pooling and Servicing Agreement, each
Transferor may convey Participation Interests to the Trust. Matters relating to
the designation of Additional Accounts and the conveyance of Receivables of such
Additional Accounts or Participation Interests to the Trust are discussed at
greater length under 'The Pooling and Servicing Agreement Generally--Additions
of Accounts or Participation Interests.' In addition, each Transferor may, but
is not obligated to, designate from time to time Participation Interests or
Receivables from Accounts to be removed from the Trust. See 'The Pooling and
Servicing Agreement Generally--Removal of Accounts.'
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CENTURION'S REVOLVING CREDIT BUSINESSES
GENERAL
Pursuant to the RFC II Purchase Agreement, Credco transfered to RFC II, and
pursuant to the Pooling and Servicing Agreement, RFC II and Centurion transfered
to the Trust, certain Receivables generated from transactions made by persons
who are holders of revolving credit card accounts, whether branded 'Optima' Card
accounts or otherwise (each, an 'OPTIMA CARD ACCOUNT'), Optima Line of Credit
accounts (each, an 'OPTIMA LINE OF CREDIT ACCOUNT') and Sign & Travel revolving
credit accounts (each, a 'SIGN & TRAVEL ACCOUNT'). Optima Card Accounts and
Optima Line of Credit Accounts are sometimes referred to herein as 'OPTIMA
ACCOUNTS.' Cards issued by Centurion are currently accepted worldwide, and may
be used for the purchase of merchandise and services. The Sign & Travel Account
is currently available only to holders (each, a 'CARDMEMBER') of American
Express Card, American Express Gold Card and Platinum Card accounts, excluding
corporate card accounts (each such account, a 'CHARGE CARD ACCOUNT'), but, in
the future, may be available to corporate card account holders. The Optima Card
Account, Optima Line of Credit Account and the Sign & Travel Account (such
accounts, the 'REVOLVING CREDIT ACCOUNTS') are owned by Centurion and are
primarily serviced either by Centurion at its headquarters and its application
processing branch or by TRS at its operations centers.
Subject to certain conditions, the Transferors may convey to the Trust
receivables arising in charge or credit accounts or other charge or credit
products that may be of a type not currently included as Accounts. Such accounts
and products may be originated, underwritten, used or collected in a different
manner than the accounts described below and may differ with respect to loss and
delinquency experience, revenue experience and historical payment rates. Such
accounts and products may also have different terms than the accounts described
below and may be subject to different servicing, charge-off and collection
practices. Consequently, the addition to the Trust of receivables arising in
such accounts or from such products could have the effect of reducing the
Portfolio Yield.
Optima Card Accounts. The Optima Card Account is accessed primarily by use
of the Optima Card and may be used to purchase merchandise and services from
participating service establishments or to obtain cash advances through check
access, by using a loan activator check available only to make payments on
outstanding balances on the Cardmember's Charge Card Account or from automated
teller machines. The Optima Card Account was first offered in early 1987. All
Optima Card Accounts are originated by Centurion and are generated by direct
mail solicitations and telemarketing to prospects. Offers are made to existing
Cardmembers having a credit history with a Charge Card Account and to
non-Cardmembers. In addition, Centurion offers Optima Card Accounts that are
originated under affinity or co-branded programs between Centurion and certain
unaffiliated entities. Centurion also distributes unsolicited or 'Take-One'
applications and runs print advertisements and radio and television
advertisements for Optima Card Accounts and has a toll free telephone number for
requests for information and applications. Receivables are also generated by
soliciting the transfer of account balances from competitors' accounts.
Optima Line of Credit Accounts. The Optima Line of Credit Account is an
unsecured revolving line of credit that is offered as an additional benefit in
association with certain approved Cardmembers' Charge Card Accounts. The Optima
Line of Credit Accounts may be accessed by writing a check supplied to
Cardmembers by Centurion, by using a loan activator check available only to make
payments on outstanding balances on the customer's Charge Card Account, or to
obtain cash from automatic teller machines. The predecessor to the Optima Line
of Credit Account was established in 1985. The Optima Line of Credit Accounts
owned by Centurion were principally generated through (i) applications mailed
directly to existing Cardmembers, (ii) direct mail solicitations to existing or
prospective Cardmembers for accounts on a pre-approved credit basis and (iii)
with respect to certain Optima Line of Credit Accounts, purchases of accounts
from other financial institutions providing lines of credit to Cardmembers.
Sign & Travel Accounts. The Sign & Travel Account is a feature currently
associated with consumer Charge Card Accounts although Corporate Charge Card
Account holders may be offered this feature in the future. Prior to 1994, all
Cardmembers had access to Sign & Travel Accounts. Since 1994, only qualified
Cardmembers who have been Charge Card Account holders in good standing, usually
for at least one year, have
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been invited to obtain a Sign & Travel Account. A Cardmember may use the Sign &
Travel Account for certain travel-related purchases and may access the Sign &
Travel Account by indicating to the travel product merchant or to TRS, as
Servicer, the preference to have such travel items billed to the Sign & Travel
Account. Certain non-travel-related charges may be allowed in the future. In
addition, selected Cardmembers are invited to enroll in the Sign & Travel
Express service that automatically bills eligible travel purchases to the
Cardmember's Sign & Travel Account. Selected Cardmembers may also use this
feature to repay over time certain other designated charges. Currently this
capability is offered only with respect to merchandise purchases on the Charge
Card Account of $350 or greater. This feature is referred to as the 'Special
Purchase Account'. The predecessor to the Sign & Travel Account was established
in 1965 as a closed-end credit account and was changed to an open-end credit
account in 1983. All Sign & Travel Accounts are owned by Centurion.
Over a period of time, beginning in the later half of 1998 and continuing
through 1999, Sign & Travel Accounts are expected to become a feature of a
multi-functional product offered by Centurion. Such product will consist of a
pay-in-full feature for purchasing merchandise and one or more interest-bearing
revolving credit features including the Sign & Travel Account. It is anticipated
that, in addition to the Receivables generated by the Sign & Travel Accounts,
the receivables generated by such other revolving credit features may, in the
future, be conveyed to the Trust.
UNDERWRITING AND AUTHORIZATION PROCEDURES
Optima Card Accounts. Centurion uses two types of approval processes in
determining whether to open an Optima Card Account: the 'pre-approved process'
and the 'full application process.' The pre-approved process involves
determining in advance that a person will qualify for an Optima Card Account.
Centurion determines the minimum credit criteria required for a consumer to
receive an offer. These criteria were developed from proprietary risk models and
commercially available risk evaluation scores. Credit bureaus provide Centurion
with the credit attributes, scores, and encrypted names and addresses of persons
passing the minimum criteria. Centurion then screens out persons with prior
Centurion delinquencies and incidents of fraud, and uses its proprietary risk
and response modeling to finalize the solicitation pool. Centurion may also
determine the eligibility of such persons to receive an offer based on such
person's activities (e.g., membership in a rewards program, holding credit
cards, magazine or newspaper subscriptions, and college enrollment).
The full application process is used for evaluation of unsolicited
applications. The primary sources of these applications are the 'inbound'
telemarketing program that features a toll-free telephone number and, on a
limited basis, the American Express 'Take One' boxes located in a variety of
public establishments. The full application process entails receiving a
completed application, evaluating the application using proprietary scoring
models and credit bureau information, screening out prior Centurion
delinquencies and incidents of fraud, and verifying that the information on the
application is both accurate and provided by the true applicant.
In addition to the credit review performed in connection with origination
of accounts, Centurion has established credit authorization procedures
applicable to Optima Card Account utilizations. Utilizations of such Optima Card
Accounts are 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. The credit limits for Optima Card Accounts
generally range from $500 to $15,000, although the credit limits applicable to
certain Optima Card Accounts may be as high as $100,000.
Optima Line of Credit Accounts. Optima Line of Credit Accounts are no
longer actively solicited. They had been underwritten pursuant to procedures
similar to those for Optima Card Accounts. Authorization based on Account
holders' past spending and payment behavior and personal resources occurs at the
time of utilization.
Sign & Travel Accounts. Centurion extends the right to access a Sign &
Travel Account to qualified Cardmembers after they have been Charge Card Account
holders in good standing for one year. There is no pre-set spending limit on
these accounts. However, utilizations of the Sign & Travel Account are subject
to approval through a credit authorization process similar to credit
authorization procedures applicable to the Optima Card Account.
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BILLING AND PAYMENTS
The accounts owned by Centurion have various billing and payment
structures, including various annual fees and monthly finance charges. Each
account holder is subject to an agreement governing the terms and conditions of
the Optima Card Account, the Optima Line of Credit Account and the Sign & Travel
Account, as applicable. Pursuant to each such agreement, Centurion reserves the
right to change or terminate any terms, conditions, service or features of the
account (including increasing or decreasing monthly finance charges, fees or
minimum payments or changing the order in which payments made by account holders
will be applied to satisfy amounts owing by account holders). Such changes are
subject to the requirements of applicable laws and to certain limitations in the
Pooling and Servicing Agreement described herein. Any announced increase in the
formula used to calculate the APR (defined below) or other change making the
terms of an account more stringent, generally becomes effective on a designated
future date, absent instructions from the account holder to the contrary, or in
any event, upon subsequent use of the account.
Optima Card Accounts. Generally, an Optima Card Account holder is charged
(i) an annual fee for the Optima Card of $0.00 to $80.00, (ii) a variable APR
finance charge on merchandise and services purchased and on cash advances equal
to the Prime Rate plus a spread ranging from 2.00% to 13.99%, depending on the
Cardmember's tenure, spending and payment patterns and type of product, (iii)
amounts payable for certain uses of the Optima Card, including the standard
network fee of 2% on cash advances obtained through an automated teller machine,
with a $2.50 minimum charge and a $20 maximum charge, and a 1% fee for obtaining
American Express Travelers Cheques, and (iv) if applicable, insufficient funds
fees, late fees, overlimit fees and other fees. Optima Card Accounts are billed
by Centurion on a cycle basis. Generally, Optima Card Account holders must make
a minimum payment equal to the greater of (a) $15 or, if the balance is less
than $15, such balance, and (b) 1/50th of the new balance, plus any amount which
is past due. Payments on the Optima Card Accounts are currently generally
applied, in order of application, to balances in respect of finance charges and
fees, cash advances, and merchandise and services.
Optima Line of Credit Accounts. Billing and payment for Optima Line of
Credit Accounts are the same as for Optima Card Accounts.
Sign & Travel Accounts. There are no annual fee or other fees imposed for
the use of the Sign & Travel Account except for a monthly finance charge, based
on an annual percentage rate (an 'APR'), on the outstanding balance on the Sign
& Travel Account. The APR for the Sign & Travel Account balances is variable
equal to the Prime Rate plus 9.9%. Sign & Travel Accounts not in good standing
are assessed interest at an APR equal to the Prime Rate plus 13.99%. The Sign &
Travel Account is billed by Centurion on a cycle basis at the same time as the
obligor's Charge Card Account. Generally, Sign & Travel Account holders must
make a monthly minimum payment equal to the greater of (a) $20.00 or, if the
balance is less than $20.00, such balance, and (b) 1/50th of the new balance,
plus any amount which is past due. Currently, payments made on the Charge Card
or Sign & Travel Accounts are generally applied first, to past due Sign & Travel
Account balances, second, to past due Charge Card Account balances, third, to
current Sign & Travel Account minimum payments, fourth, to current Charge Card
Account balances, and finally, to outstanding Sign & Travel Account balances.
Each minimum monthly payment is applied first to finance charges and then to the
appropriate principal balance designated in the preceding sentence. After the
incorporation of a Sign & Travel Account into the multifunctional product
referred to under 'Centurion's Revolving Credit Business--General--Sign & Travel
Accounts,' it is expected that payments made on such product shall be applied
first to the pay-in-full feature, and then to the revolving features. It is
expected that the lower rate-bearing features will be paid off prior to the
higher rate-bearing features.
COLLECTION EFFORTS
Efforts to collect delinquent Optima Card Accounts, Optima Line of Credit
Accounts and Sign & Travel Accounts are made by Centurion and collection
agencies and attorneys retained by Centurion. Under current practice, Centurion
includes a request for payment of overdue amounts on all billing statements upon
delinquency. Centurion uses its proprietary risk evaluation systems to determine
the appropriate collection strategy. Account holders whom Centurion considers a
high risk may be contacted by either a letter or a telephone call when the
account becomes delinquent or sooner based on a number of factors, including the
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account holder's tenure and the amount owed in relation to prior spending and
payment behavior. An Account is generally considered to be delinquent if the
minimum payment specified in the Account holder's most recent billing statement
is not received by the next statement cycle date. If Centurion determines that
the account holder is unable to pay the outstanding balance, the account is
'pre-empted'--i.e., the card is cancelled, credit privileges are revoked, and
more intensive collection action is initiated. For all other account holders,
credit privileges are generally cancelled no later than 90 days from initial
billing. For both the pre-empted 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, letters
and telegrams. Legal action may be instituted. Centurion may enter into
arrangements with account holders to extend or otherwise change payment
schedules to maximize collections. In the future, Centurion may sell its rights
to certain collections to collection agencies.
Generally, it is Centurion's practice to cause the Receivables in an
Account to be charged-off no later than the date on which such Account becomes
six contractual payments past due (i.e., approximately 180 days from initial
billing), although charge-offs may be made earlier in some circumstances, such
as confirmed bankruptcies. The credit evaluation, servicing, charge-off and
collection practices of Centurion may change over time in accordance with its
business judgment and applicable law.
RFC II, CREDCO, CENTURION AND TRS
RFC II
American Express Receivables Financing Corporation II ('RFC II'), a
Transferor, was incorporated under the laws of the State of Delaware on August
7, 1995. 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 II 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 II,
nor RFC II's board of directors, intends to change the business purpose of RFC
II. RFC II's executive offices are located at American Express Tower, World
Financial Center, 200 Vesey Street, Room 138, New York, New York 10285-4405.
CREDCO
American Express Credit Corporation ('CREDCO'), is a wholly owned
subsidiary of TRS primarily engaged in the business of purchasing charge card
account receivables generated by TRS and certain revolving credit account
receivables generated by Centurion. Its principal office is located at 301 N.
Walnut Street, Wilmington, Delaware 19801.
CENTURION
American Express Centurion Bank ('CENTURION'), 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 is a wholly owned subsidiary of TRS.
Centurion is the surviving company of a 1996 merger with an affiliated bank
which was also named American Express Centurion Bank. Prior to the merger, the
affiliated bank was one of the Transferors. In connection with the merger,
Centurion assumed all of the rights and obligations of the affiliated bank as a
Transferor under the Pooling and Servicing Agreement and with respect to the
Accounts owned by it.
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TRS
American Express Travel Related Services Company, Inc. ('TRS'), a company
incorporated under the laws of the State of New York on May 3, 1982, is a wholly
owned subsidiary of American Express and the parent company of Centurion, RFC II
and Credco. TRS, directly or through its subsidiaries, provides a variety of
products and services, including the Charge Card Accounts, consumer loans,
American Express(Registered) Travelers Cheques, corporate and consumer travel
products and services, magazine publishing, database marketing and management
and insurance. TRS' principal office is located at American Express Tower, World
Financial Center, 200 Vesey Street, New York, New York 10285.
MERGER OR CONSOLIDATION OF A TRANSFEROR OR THE SERVICER
According to the Pooling and Servicing Agreement, no Transferor is
permitted to consolidate with or merge into, or to sell all or substantially all
of its assets as an entirety to, any other entity (in each case, a 'SURVIVING
TRANSFEROR COMPANY') unless, as specified in the Pooling and Servicing
Agreement, (i) the Surviving Transferor Company is organized under the laws of
the United States of America, any state thereof or the District of Columbia,
(ii) the Surviving Transferor Company, the Transferors and the Trustee shall
have entered into and delivered to the Trustee a supplement to the Pooling and
Servicing Agreement (in form reasonably satisfactory to the Trustee) providing
for the Surviving Transferor Company to assume all of such Transferor's
obligations under the Pooling and Servicing Agreement, (iii) such Transferor
shall have delivered to the Trustee (a) an officer's certificate and an Opinion
of Counsel regarding the enforceability against the Surviving Transferor Company
of such assumption agreement and (b) a Tax Opinion (which shall also be
addressed and delivered to each Rating Agency), (iv) all UCC filings, if any,
required to perfect the interest of the Trustee in the Receivables to be
conveyed by the Surviving Transferor Company shall have been duly made and
copies thereof shall have been delivered by the Surviving Transferor Company to
the Trustee, (v) the Trustee shall have received an opinion of counsel with
respect to the satisfaction of clause (iv) and certain other matters specified
in the Pooling and Servicing Agreement, and (vi) if the Surviving Transferor
Company shall be eligible to be a debtor in a case under the Bankruptcy Code,
such Transferor shall have delivered to the Rating Agencies (with a copy to the
Servicer and the Trustee) notice of the assumption of such Transferor's
obligations by the Surviving Transferor Company and the Rating Agency Condition
shall have been satisfied or, if the Surviving Transferor Company shall not be
eligible to be a debtor in a case under the Bankruptcy Code, such Transferor
shall have delivered to the Rating Agencies notice of the assumption of such
Transferor's obligations by the Surviving Transferor Company.
According to the Pooling and Servicing Agreement, the Servicer is not
permitted to consolidate with or merge into, or to sell all or substantially all
of its assets to, any other entity (in each case, a 'SURVIVING SERVICER
COMPANY') unless, in addition to certain other conditions specified in the
Pooling and Servicing Agreement, such Surviving Servicer Company is an Eligible
Servicer, such Surviving Servicer Company is a corporation organized and
existing under the laws of the United States of America, any state thereof or
the District of Columbia, and such Surviving Transferor Company expressly
assumes (by entering into and delivering to the Trustee a supplement to the
Pooling and Servicing Agreement in form reasonably satisfactory to the Trustee)
the obligations of the Servicer under the Pooling and Servicing Agreement.
ASSUMPTION OF A TRANSFEROR'S OBLIGATIONS
A Transferor may, from time to time, consider a transfer of all or a
portion of its credit or charge accounts (if any) and a transfer of all or a
portion of its respective receivables arising thereunder, which may include all,
but not less than all, of the Accounts and such Transferor's remaining
respective interests in (a) the Receivables arising thereunder, (b)
Participations and (c) the Trust (collectively, the 'ASSIGNED ASSETS'), together
with all servicing functions, if any, and other obligations under the Pooling
and Servicing Agreement or relating to the transactions contemplated thereby
(collectively, the 'ASSUMED OBLIGATIONS'), to another entity (the 'ASSUMING
ENTITY') which may be an entity that is not affiliated with the Transferors.
Pursuant to the Pooling and Servicing Agreement, each Transferor is permitted to
assign, convey and transfer Assigned Assets and Assumed Obligations to the
Assuming Entity without the consent or approval of the holders of any
Certificates if the following conditions, among others, are satisfied: (i) the
Assuming Entity, such Transferor and the Trustee
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shall have entered into and delivered to the Trustee a supplement to the Pooling
and Servicing Agreement or an assumption agreement providing for the Assuming
Entity to assume the Assumed Obligations, including the obligation under the
Pooling and Servicing Agreement to transfer such Transferor's interest in the
Receivables arising under the Accounts and the Receivables arising under any
Additional Accounts to the Trust, (ii) all UCC filings required to perfect the
interest of the Trustee in the Receivables arising under such Accounts shall
have been duly made and copies thereof shall have been delivered by such
Transferor to the Trustee, (iii) if the Assuming Entity shall be eligible to be
a debtor in a case under the Bankruptcy Code, such Transferor shall have
delivered to the Rating Agencies (with a copy to the Servicer and the Trustee)
notice of such transfer and assumption, and the Rating Agency Condition shall
have been satisfied or, if the Assuming Entity shall not be eligible to be a
debtor under the Bankruptcy Code, such Transferor shall have delivered to the
Rating Agencies notice of such transfer and assumption, and (iv) the Trustee
shall have received an opinion of counsel with respect to the satisfaction of
clause (ii) above and certain other matters specified in the Pooling and
Servicing Agreement, and (v) the Trustee shall have received a Tax Opinion. The
Pooling and Servicing Agreement provides that the Transferors, the Assuming
Entity and the Trustee may enter into amendments to the Pooling and Servicing
Agreement to permit the transfer and assumption described above without the
consent of the holders of any Certificates. After any permitted transfer and
assumption, the Assuming Entity will be considered to be a 'Transferor' for all
purposes hereof, and such Transferor will have no further liability or
obligation under the Pooling and Servicing Agreement, other than those
liabilities that arose prior to such transfer.
THE ACCOUNTS
The Receivables have arisen or will arise in certain revolving credit
accounts that have been selected from the total portfolio (the 'TOTAL
PORTFOLIO') of Optima Card Accounts, Optima Line of Credit Accounts and Sign &
Travel Accounts owned by Centurion and in the future may include other charge or
credit accounts or products owned by Centurion or other Account Owners,
including revolving credit features of the Charge Card Accounts (all selected
accounts and products described in this sentence are referred to herein as the
'ACCOUNTS'), in each case, on the basis of criteria set forth in the Pooling and
Servicing Agreement. An account in the Total Portfolio must be an Eligible
Account to be selected for inclusion in the portfolio of Accounts, the
Receivables of which will be owned by the Trust (the 'TRUST PORTFOLIO'). The
Accounts include and may include all related accounts that satisfy certain
conditions set forth in the Pooling and Servicing Agreement or are originated as
a result of (a) a credit or charge card being lost or stolen or (b) the
conversion of an Account into another type of Eligible Account.
Pursuant to the Pooling and Servicing Agreement, in certain circumstances,
the Transferors will be obligated (subject to certain limitations and
conditions) to designate, from time to time, Eligible Accounts to be included as
Accounts and, pursuant to the RFC II Purchase Agreement, to the extent that
Credco owns any Receivables arising in such Accounts, Credco will be required to
convey to RFC II for ultimate conveyance to the Trust the Receivables of such
Accounts. Such Accounts must meet the eligibility criteria set forth in the
Pooling and Servicing Agreement as of the date on which the Transferors
designate such Accounts to be Additional Accounts. Under the Pooling and
Servicing Agreement, each Transferor also has the right to convey Participation
Interests to the Trust subject to the conditions described in the Pooling and
Servicing Agreement. See 'The Pooling and Servicing Agreement
Generally--Additions of Accounts or Participation Interests' for a more detailed
discussion of the circumstances and manner in which the Receivables arising in
Additional Accounts or Participation Interests will be conveyed to the Trust.
As of each date with respect to which Additional Accounts are designated,
to the extent that Credco transfers to RFC II Receivables arising in such
Accounts, Credco will represent and warrant to RFC II that the Receivables
generated under the Additional Accounts meet the eligibility requirements set
forth in the RFC II Purchase Agreement and, to the extent that any Transferor
transfers any such Receivables or Participation Interests, such Transferor will
represent and warrant to the Trust that such Receivables or Participation
Interests, if any, meet the eligibility requirements set forth in the Pooling
and Servicing Agreement. See 'The Pooling and Servicing Agreement
Generally--Conveyance of Receivables.' Because the Initial Accounts were
designated as of the Initial Selection Date and subsequent Aggregate Addition
Accounts may be designated from time to time, there can be no assurance that all
of such Accounts will continue to meet the eligibility requirements as of any
Series Closing Date.
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Subject to certain limitations and restrictions, the Transferors may also
designate certain Accounts or Participation Interests, if any, for removal from
the Trust, in which case such Participation Interests or the Receivables of the
Removed Accounts will be reassigned to the Transferors and Credco may, but shall
not be required to, repurchase Receivables in the Removed Accounts. Throughout
the term of the Trust, the Receivables in the Trust will consist of Receivables
generated under the Accounts, Participation Interests, if any, and the
Receivables generated under Additional Accounts, but will not include the
Receivables generated under Removed Accounts or removed Participation Interests.
In the future, Centurion or any other Transferor may determine to transfer
to the Trust all or a portion of any merchant discount or other fees or charges
relating to transactions in the Accounts, some of which may be similar to
interchange fees that are assessed in transactions on bank card networks.
Pursuant to the Pooling and Servicing Agreement, such fees would be treated as
Finance Charge Receivables.
The Prospectus Supplement relating to a Series will provide certain
information about the portfolio of Accounts in the Trust as of the date
specified. Such information will include the amount of Principal Receivables,
the amount of Finance Charge Receivables, the range of principal balances of the
Accounts, the range of credit lines of the Accounts, the range of ages of the
Accounts, the material geographic distribution of the Accounts, the types of
Accounts and delinquency statistics relating to the Accounts.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and the related Supplement substantially in the forms filed as
exhibits to the Registration Statement of which this Prospectus is a part. The
Trustee will provide a copy of the Pooling and Servicing Agreement and the
related Supplement (without exhibits or schedules) to Certificateholders on
written request. The following summary describes certain terms of the Pooling
and Servicing Agreement and the related Supplement and is qualified in its
entirety by reference to the Pooling and Servicing Agreement and the related
Supplement.
The Certificates will evidence undivided beneficial interests in the Trust
Assets allocated to such Certificates, representing the right to receive from
such Trust Assets funds up to (but not in excess of) the amounts required to
make payments of interest and principal in the manner described below.
The Certificates will initially be represented by one or more 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 stated in the related Prospectus Supplement, the
Certificates will be available for purchase in minimum denominations of $1,000
and integral multiples thereof in book-entry form. The Transferors have been
informed by DTC that DTC's nominee will be Cede & Co. ('CEDE'). Accordingly,
Cede is expected to be the holder of record of the Certificates. Except under
the limited circumstances described herein, no Certificateholder will be
entitled to receive a Definitive Certificate representing such person's interest
in the Certificates. Unless and until Definitive Certificates are issued under
the limited circumstances described herein, all references herein to actions by
Certificateholders shall refer to actions taken by DTC upon instructions from
its Participants (as defined herein), and all references herein to
distributions, notices, reports and statements to Certificateholders shall refer
to distributions, notices, reports and statements to Cede, as the registered
holder of the Certificates, for distribution to the beneficial owners of the
Certificates in accordance with DTC procedures. See '--Book-Entry Registration'
and '--Definitive Certificates.'
Payments of interest and principal will be made on each related Interest
Payment Date to the Certificateholders in whose names the Certificates were
registered on the last day of the calendar month preceding such Interest Payment
Date, unless otherwise specified in the related Prospectus Supplement (each, a
'RECORD DATE').
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BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement,
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 Certificate or 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 (as defined herein) 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').
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 UCC in effect in the State of New York
and a 'clearing agency' registered pursuant to the provisions of Section 17A of
the Exchange Act. DTC was created to hold securities for its participating
organizations ('PARTICIPANTS') and to facilitate the 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 underwriters, securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system also is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ('INDIRECT PARTICIPANTS').
Transfers between Participants will occur in accordance with DTC rules.
Transfers between Cedel Participants (as defined herein) and Euroclear
Participants (as defined herein) will occur in accordance with their respective
rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing systems by its Depositary. 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 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 Participants 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 Participant will be received with value on the DTC settlement
date but will be available in the relevant Cedel or Euroclear cash account only
as of the business day following settlement in DTC. For information with respect
to tax documentation procedures relating to the Certificates, see 'Tax
Matters--Federal Income Tax Consequences--Non-United States Investors.'
Certificateholders 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, Certificateholders will receive all distributions of principal and
interest on the Certificates from the Trustee through DTC and its Participants.
Under a book-entry format, Certificateholders will receive payments after the
related Distribution Date, as the case may be, because, while payments are
required to be forwarded to Cede, as nominee for DTC, on each such date, DTC
will forward such payments to its Participants, which thereafter will be
required to forward them to Indirect Participants or holders of beneficial
interests in the Certificates. It is anticipated that the only
'Certificateholder' will be Cede, as nominee of DTC,
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and that holders of beneficial interests in the Certificates will not be
recognized by the Trustee as Certificateholders under the Pooling and Servicing
Agreement. Holders of beneficial interests in the Certificates will only be
permitted to exercise the rights of Certificateholders under the Pooling and
Servicing Agreement indirectly through DTC and its Participants who in turn will
exercise their rights through DTC. The Trustee, the Transferors, the Servicer
and any paying agent, transfer agent or registrar may treat the registered
holder in whose name any Certificate is registered (expected to be Cede) as the
absolute owner thereof (whether or not such Certificate shall be overdue and
notwithstanding any notice of ownership or writing thereon or any notice to the
contrary) for the purpose of making payment and for all other purposes.
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 holders of
beneficial interests in the Certificates have accounts similarly are required to
make book-entry transfers and receive and transmit such payments on behalf of
these respective holders.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of holders of
beneficial interests in the Certificates 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 Definitive
Certificate for such Certificates.
DTC has advised the Transferor that it will take any action permitted to be
taken by a Certificateholder under the Pooling and Servicing Agreement and the
related Supplement only at the direction of one or more Participants to whose
account with DTC the Certificates are credited. Additionally, DTC has advised
the Transferor that it may take actions with respect to the Certificateholders'
Interest that conflict with other of its actions with respect thereto.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. 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 Cedel
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 depository, 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. 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.
Euroclear was created in 1968 to hold securities for participants of
Euroclear ('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. Euroclear 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. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the 'EUROCLEAR OPERATOR'), under contract
with Euroclear Clearance Systems 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 Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), underwriters, securities brokers and
dealers and other professional financial intermediaries. Indirect access to
Euroclear is also available to other firms that clear through or maintain a
custodial relationship with a Euroclear Participant, either directly or
indirectly.
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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 'EUROCLEAR PROVISIONS'). The Euroclear Provisions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Euroclear Provisions 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--Federal Income Tax Consequences--Non-United States Investors.'
Cedel or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Certificateholder under the Pooling and Servicing
Agreement and the related Supplement 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 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 as definitive certificates in fully
registered certificated form ('DEFINITIVE CERTIFICATES') to Certificate Owners
or their nominees 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 Depository with respect to such Series of
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 book-entry system through DTC or (iii) after the occurrence of a Servicer
Default, Certificate Owners evidencing not less than 50% of the aggregate unpaid
principal amount of the Certificates, advise the Trustee and DTC through
Participants in writing that the continuation of a book-entry system through DTC
(or a successor thereto) is no longer in the best interests 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
re-registration, the Trustee will issue the Certificates in the form of
Definitive Certificates, and thereafter the Trustee will recognize the holders
of such Definitive Certificates as Certificateholders under the Pooling and
Servicing Agreement and the related Supplement ('HOLDERS').
Distribution of principal and interest on the Certificates will be made by
the Trustee directly to Holders in accordance with the procedures described
herein and in the Prospectus Supplement and set forth in the Pooling and
Servicing Agreement and the related Supplement. Interest payments and principal
payments 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
register maintained by the Trustee. The final payment on any Certificate
(whether Definitive Certificates or Certificates registered in the name of
Cede), however, will be made only upon presentation and surrender of such
Certificate on the final payment date at such office or agency as is 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 the final distribution.
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Definitive Certificates will be transferable and exchangeable at the
offices of the transfer agent and registrar, which will 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
Interest will accrue on the Certificates of a Series or Class offered
hereby at the per annum rate either specified in or determined in the manner
specified in the related Prospectus Supplement. Except as otherwise provided
herein, collections of Finance Charge Receivables and certain other amounts
allocable to the Certificateholders' Interest of a Series or Class offered
hereby will generally be used to make interest payments to Certificateholders of
such Series or Class on each Interest Payment Date specified in the related
Prospectus Supplement; provided that after the commencement of an Early
Amortization Period or Early Accumulation Period with respect to such Series,
interest will be distributed to such Certificateholders monthly on each Special
Payment Date. If the Interest Payment Dates 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 Interest
Funding Accounts and used to make interest payments to Certificateholders of
such Series or Class on the following Interest Payment Date. If a Series has
more than one Class of Certificates, each such Class may have a separate
Interest Funding Account. Funds on deposit in an Interest Funding Account will
be invested in Eligible Investments. Any earnings (net of losses and investment
expenses) on funds in an Interest Funding Account will be paid to, or at the
direction of, the Transferors except as otherwise specified in any Supplement.
Interest with respect to the Certificates of each Series offered hereby will
accrue and be calculated on the basis described in the related Prospectus
Supplement.
PRINCIPAL
The Certificates of each Series will have a Revolving Period during which
collections of Principal Receivables and certain other amounts otherwise
allocable to the Invested Amount of such Series will, (i) if such Series is a
Principal Sharing Series, be treated as Shared Principal Collections and will be
distributed to, or for the benefit of, the Certificateholders of other Series in
such Group or, if not required for such purpose, the holders of the Transferor
Certificates or deposited into the Special Funding Account or (ii) if such
Series is not a Principal Sharing Series, paid to the holders of the Transferor
Certificates or deposited into the Special Funding Account, as more fully
described in the related Prospectus Supplement. Unless an Early Amortization
Period or Early Accumulation Period commences with respect to a Series,
following the Revolving Period with respect to such Series, such Series will
have either a Controlled Amortization Period or a Controlled Accumulation
Period.
During the Controlled Accumulation Period, if any, with respect to a
Series, collections of Principal Receivables and certain other amounts allocable
to the Certificateholders' Interest of such Series (including Shared Principal
Collections, if any, allocable to such Series) will be deposited on each
Distribution Date in a Principal Funding Account and used to make principal
distributions to the Certificateholders of such Series or any Class thereof when
due. If so specified in the related Prospectus Supplement, the amount to be
deposited in a Principal Funding Account for any Series offered hereby on any
Distribution Date may, but will not necessarily, be limited to an amount equal
to a Controlled Accumulation Amount specified in such Prospectus Supplement plus
any existing deficit controlled accumulation amount arising from prior
Distribution Dates. If the Prospectus Supplement for a Series so specifies, the
amount to be deposited in the Principal Funding Account on a Distribution Date
may be a variable amount. 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.
During the Controlled Amortization Period, if any, with respect to a
Series, collections of Principal Receivables and certain other amounts allocable
to the Certificateholders' Interest of such Series (including Shared Principal
Collections, if any, allocable to such Series) will be used on each Distribution
Date to make principal distributions to any Class of Certificateholders then
scheduled to receive such distributions. If so specified in the related
Prospectus Supplement, the amount to be distributed to Certificateholders of any
Series offered hereby on any Distribution Date may be limited to an amount equal
to the Controlled Amortization
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Amount specified in such Prospectus Supplement plus any existing deficit
controlled amortization amount arising from prior Distribution Dates. 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.
During the Early Accumulation Period, if any, with respect to a Series,
collections of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series (including Shared Principal
Collections, if any, allocated to such Series) will be deposited on each
Distribution Date in a Principal Funding Account 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
will not be limited to any Controlled Deposit Amount. See 'Series
Provisions--Pay-Out Events' in the related Prospectus Supplement for a
discussion of the events that might lead to the commencement of the Early
Accumulation Period with respect to a Series.
During the Early Amortization Period with respect to a Series, collections
of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series (including Shared Principal
Collections, if any, allocable to such Series) will be distributed as principal
payments to the applicable Certificateholders monthly on each Distribution Date
beginning with the first Special Payment Date. During the Early Amortization
Period with respect to a Series, distributions of principal to
Certificateholders of such Series, in general, will not be subject to any
Controlled Distribution Amount. In addition, upon the commencement of the Early
Amortization Period, any funds on deposit in a Principal Funding Account with
respect to such Series will be paid to the Certificateholders of the relevant
Class or Series on the first Special Payment Date. See 'Series
Provisions--Pay-Out Events' in the related Prospectus Supplement for a
discussion of the events that might lead to the commencement of the Early
Amortization Period with respect to a Series.
Funds on deposit in any Principal Funding Account established with respect
to a Class or Series offered hereby will be invested in Eligible Investments and
may be subject to a guarantee or guaranteed investment contract or a deposit
account or other mechanism 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 Class of Certificates offered hereby at the end of a Controlled
Accumulation Period or Early Accumulation Period with respect thereto, such
Class may be subject to a maturity liquidity facility or a deposit account or
other similar mechanism specified in the relevant Prospectus Supplement.
PAY-OUT EVENTS AND REINVESTMENT EVENTS
The Revolving Period with respect to a Series will continue through the
date specified in the applicable Prospectus Supplement and the Controlled
Amortization Period or Controlled Accumulation Period will begin at such time,
unless a Pay-Out Event or Reinvestment Event occurs. The Early Amortization
Period with respect to such Series will commence when a Pay-Out Event occurs or
is deemed to occur and the Early Accumulation Period will occur when a
Reinvestment Event occurs or is deemed to occur. If a Reinvestment Event has
occurred with respect to a Series and a Pay-Out Event occurs or is deemed to
occur then the Early Amortization Period with respect to such Series will
commence. A 'PAY-OUT EVENT' may occur with respect to any specific Series upon
the occurrence of any event specified in the related Prospectus Supplement. Such
events may include, but are not required to include nor are they limited to, (i)
certain events of bankruptcy, insolvency, liquidation, receivership, or
conservatorship relating to a Transferor or holder of the Original Transferor
Certificate, (ii) the Trust becoming subject to regulation as an 'investment
company' within the meaning of the Investment Company Act of 1940, as amended,
(iii) the failure by a Transferor to make any payment or deposit required under
the Pooling and Servicing Agreement within a specified period of the date such
payment or deposit is required to be made, (iv) the breach of certain other
covenants, representations or warranties contained in the Pooling and Servicing
Agreement, after any applicable notice and cure period (and, if so specified in
the related Supplement, only to the extent such breach has a material adverse
effect on the related Certificateholders), (v) the failure by Centurion to make
a required designation of Additional Accounts for the Trust within a specified
time after the date such addition is required to be made, (vi) a reduction in
the series adjusted portfolio yield below the rates, and for the period,
specified in the related Prospectus Supplement and (vii) the occurrence of a
Servicer Default. The Early Amortization Period with respect to a Series will
commence on the day on which a Pay-Out
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Event occurs or is deemed to occur with respect thereto. If an Early
Amortization Period commences, monthly distributions of principal to the
Certificateholders of such Series will begin on the Distribution Date in the
Monthly Period following the Monthly Period in which such Pay-Out Event occurs
(such Distribution Date and each following Distribution Date with respect to
such Series, a 'SPECIAL PAYMENT DATE'). Any amounts on deposit in a Principal
Funding Account or an Interest Funding Account with respect to such Series at
such time will be distributed on such first Special Payment Date to the
Certificateholders of such Series. If, because of the occurrence of a Pay-Out
Event, the Early Amortization Period begins earlier than the scheduled
commencement of a Controlled Amortization Period or prior to an Expected Final
Payment Date, Certificateholders will begin receiving distributions of principal
earlier than they otherwise would have and such distributions, in general, will
not be subject to the Controlled Deposit Amount or the Controlled Distribution
Amount. As a result, the average life of the Certificates may be reduced or
increased and depending upon the characteristics and types of alternative
investments in which a Certificateholder could then reinvest the proceeds
received with respect to its Certificates, the return to such Certificateholder
on such proceeds could be less than the return such Certificateholder would have
realized on its Certificates had such Pay-Out Event not occurred. If a Series
has more than one Class of Certificates, each Class may have different Pay-Out
Events which, in the case of any Series of Certificates offered hereby, will be
described in the related Prospectus Supplement.
A particular Series may have no Pay-Out Events or only limited Pay-Out
Events, but may have in lieu thereof specified events ('REINVESTMENT EVENTS')
that end the reinvestment of the Trust in new Receivables and apply available
collections of Principal Receivables to the purchase of Eligible Investments. A
Reinvestment Event may include all or some of the events that constitute Pay-Out
Events for other Series. The Early Accumulation Period with respect to a Series
will commence on the day on which a Reinvestment Event occurs or is deemed to
occur with respect thereto. If a Series has more than one Class of Certificates,
each Class may have different Reinvestment Events (or may have only Pay-Out
Events) which, in the case of any Series of Certificates offered hereby, will be
described in the related Prospectus Supplement.
In addition to the consequences of a Pay-Out Event or Reinvestment Event
discussed above, if an Insolvency Event shall occur, immediately on the day of
such event the Transferors will cease to transfer Principal Receivables to the
Trust and promptly give notice to the Trustee of such event. Under the terms of
the Pooling and Servicing Agreement, as soon as possible but in any event within
15 days, the Trustee will publish a notice of the occurrence of an Insolvency
Event with respect to any Transferor or the holder of the Original Transferor
Certificate stating that the Trustee intends to sell, dispose of, or otherwise
liquidate the Receivables in a commercially reasonable manner unless
instructions otherwise are received within a specified period from Holders of
more than 50% of the Invested Amount of each Series of Certificates issued and
outstanding (or, with respect to any Series with two or more Classes, 50% of the
Invested Amount of each Class, which may include a Collateral Invested Amount),
each Transferor (or other holder of the Original Transferor Certificate) not
subject to an Insolvency Event, each holder of a Supplemental Certificate, and
possibly the vote of other persons designated by the Transferors to the Trustee
prior to the Insolvency Event to the effect that such persons disapprove of the
liquidation of Receivables. The Trustee will sell, dispose of, or otherwise
liquidate the Receivables 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 applied as provided above and in each Prospectus Supplement.
If the only Pay-Out Event or Reinvestment Event to occur with respect to
any Series is the bankruptcy, insolvency, liquidation receivership or
conservatorship of a Transferor, the Trustee may not be permitted to suspend
transfers of Receivables to the Trust, and the instructions to sell the
Receivables may not be given effect.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and reimbursement
for its expenses is a monthly servicing fee (the 'SERVICING FEE'). The Servicing
Fee will be allocated among the Transferors' Interest (the 'TRANSFEROR SERVICING
FEE'), Certificateholders of each Series and, if any, the holder of the
Collateral Interest of such Series. The portion of the Servicing Fee allocable
to each Series of Certificates on any Distribution Date (the 'MONTHLY SERVICING
FEE') will generally be equal to one-twelfth of the product of (a) the
applicable servicing fee percentage with respect to such Series and (b) the
Invested Amount of such Series with respect to the related Monthly Period.
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The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, payment of the fees and disbursements of the Trustee, paying agent,
transfer agent and registrar and independent accountants and other fees which
are not expressly stated in the Pooling and Servicing Agreement to be payable by
the Trust or the Transferors other than federal, state and local income and
franchise taxes, if any, of the Trust.
THE POOLING AND SERVICING AGREEMENT GENERALLY
CONVEYANCE OF RECEIVABLES
On the first Series Closing Date, Credco sold and assigned to RFC II, for
sale and assignment by RFC II to the Trust, Credco's interest in all Receivables
in the Initial Accounts existing at the close of business on April 25, 1996 (the
'INITIAL CUT-OFF DATE'), all Recoveries allocable to the Trust, and the proceeds
of all of the foregoing, and the Transferors sold and assigned to the Trust
their respective interests in the Receivables in the Initial Accounts existing
on the Initial Cut-Off Date, all Receivables thereafter created from time to
time under the Initial Accounts, all Recoveries allocable to the Trust and the
proceeds of all of the foregoing. Centurion, directly or indirectly, may also
sell and assign, from time to time, to the Trust, and Credco, to the extent that
Credco owns any Receivables arising in any designated Additional Accounts, will
sell and assign, to RFC II, for sale and assignment by RFC II to the Trust, the
Receivables in designated Additional Accounts existing at the close of business
on each applicable date of designation thereof, and each may from time to time
sell and assign to the Trust its interest in Participation Interests, all
Recoveries allocable to the Trust and the proceeds of all of the foregoing.
On each Series Closing Date, the Trustee will authenticate and deliver one
or more certificates representing the Series or Class of Certificates, in each
case against payment to the Transferors of the net proceeds of the sale of the
Certificates. In the case of the first Series Closing Date, the Trustee will
also deliver to the Transferors the Transferor Certificate, representing the
Transferors' Interest.
In connection with each transfer of Receivables to the Trust, the computer
records relating to such Receivables will be marked to indicate that such
Receivables have been conveyed to the Trust. In addition, the Trustee will be
provided with a computer file or a microfiche list containing a true and
complete list showing for each Account, as of the applicable date of
designation, (i) its account number and (ii) except in the case of New Accounts,
the aggregate amount of Receivables in such Account. The Transferors and Credco
will retain and will not deliver to the Trustee any other records or agreements
relating to the Accounts or the Receivables. Except as set forth above, the
records and agreements relating to the Accounts and the Receivables will not be
segregated from those relating to other credit accounts and receivables, and the
physical documentation relating to the Accounts or Receivables will not be
stamped or marked to reflect the transfer of Receivables to the Transferor or
the Trust. Each Transferor will file UCC financing statements with respect to
the transfer of the Receivables from such Transferor to the Trust meeting the
requirements of applicable state law. See 'Risk Factors' and 'Certain Legal
Aspects of the Receivables.'
As described below under '--Additions of Accounts or Participation
Interests,' in some circumstances, Centurion will be obligated to designate from
time to time Additional Accounts to be included as Accounts and, as a result of
such designation, each Transferor, to the extent that such Transferor owns any
Receivables arising in such Accounts, will be obligated to convey to the Trust
all such Receivables, whether such Receivables are then existing or thereafter
created. Each such Additional Account must be an Eligible Account. In respect of
any designation of Additional Accounts, the Transferors will follow the
procedures set forth in the preceding paragraph, except the list will show
information for such Additional Accounts as of the date such Additional Accounts
are identified and selected. Aggregate Addition Accounts will be selected by the
Transferors in a manner which they reasonably believe will not be materially
adverse to the Certificateholders. The Transferors have the right (subject to
certain conditions described under '--Additions of Accounts or Participation
Interests') to convey Participation Interests to the Trust. In addition, the
Transferors may (under certain circumstances and subject to certain limitations
and conditions) remove the Participation Interests and the Receivables in
certain Accounts as described under '--Removal of Accounts.'
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REPRESENTATIONS AND WARRANTIES
The Pooling and Servicing Agreement includes representations and warranties
of Centurion to the Trust relating to the Accounts and of Centurion and RFC II
to the Trust relating to the Receivables as of each Series Closing Date (or as
of the related addition date with respect to Additional Accounts) to the effect,
among other things, that (a) as of each applicable selection date, each Account
was an Eligible Account, (b) as of each applicable selection date, each of the
Receivables then existing in the Initial Accounts or in the Additional Accounts,
as applicable, is an Eligible Receivable and (c) on the date of creation of any
new Receivable, such Receivable is an Eligible Receivable. If a Transferor
breaches any representation and warranty described in this paragraph in any
material respect and such breach remains uncured for 60 days, or such longer
period as may be agreed to by the Trustee and the Servicer, after the earlier to
occur of the discovery of such breach by either Transferor or receipt of written
notice of such breach by either Transferor and such breach has a material
adverse effect on the Certificateholders' Interest in such Receivable, all
Receivables with respect to the Accounts affected ('INELIGIBLE RECEIVABLES')
will be reassigned to the Transferors on the terms and conditions set forth
below and such Account shall no longer be included as an Account.
'ELIGIBLE RECEIVABLE' means each receivable, or interest therein as
contemplated by the Pooling and Servicing Agreement and the RFC II Purchase
Agreement, (a) which has arisen under an Eligible Account, (b) which was created
in compliance with all requirements of law and pursuant to an agreement which
complies with all requirements of law applicable to the Account Owner of such
Eligible Account, in either case, the failure to comply with which would have an
Adverse Effect, (c) with respect to which all material consents, licenses,
approvals or authorizations of, or registrations or declarations with, any
governmental authority required to be obtained, effected or given in connection
with the creation of such Receivable or the execution, delivery, creation and
performance by such Account Owner of the related agreement pursuant to which
such Receivable was created have been duly obtained or given and are in full
force and effect, (d) as to which at the time of its transfer to the Trust, a
Transferor or the Trust will have good and marketable title, free and clear of
all liens, encumbrances, charges and security interests other than Permitted
Liens (defined below), (e) which has been the subject of either a valid transfer
and assignment from a Transferor to the Trust of all such Transferor's right,
title and interest therein (and in the proceeds thereof), or the grant of a
first-priority perfected security interest therein (and in the proceeds
thereof), effective until the termination of the Trust, (f) which will at all
times be the legal, valid and binding payment obligation of the related Account
holder enforceable against such Account holder in accordance with its terms,
subject to certain bankruptcy or insolvency related exceptions, (g) which at the
time of its transfer to the Trust, has not been waived or modified except as
permitted under the Pooling and Servicing Agreement, (h) which is not at the
time of its transfer to the Trust subject to any right of rescission, setoff,
counterclaim or defense (including the defense of usury), other than certain
bankruptcy and insolvency related defenses, (i) as to which the Transferor has
satisfied all obligations to be fulfilled at the time it is transferred to the
Trust, (j) as to which, at the time of its transfer to the Trust, neither such
Transferor nor Credco nor its Account Owner has taken any action which would
impair or has failed to take any action, the result of which would impair, the
rights of the Trust or the Certificateholders therein and (k) which constitutes
either an 'account' or a 'general intangible' under the applicable UCC as then
in effect. As used in this paragraph, the term 'PERMITTED LIENS' means liens for
municipal or other local taxes of a Transferor or an Account Owner if such taxes
are not then due and payable or if such Transferor or such Account Owner is then
contesting the validity thereof in good faith by appropriate proceedings and has
set aside adequate reserves with respect thereto.
An Ineligible Receivable will be reassigned to the Transferors on or before
the end of the Monthly Period in which such reassignment obligation arises by
the Transferors directing the Servicer to deduct the portion of such Ineligible
Receivable which is a Principal Receivable from the aggregate amount of the
Principal Receivables used to calculate the Transferor Amount. In the event that
the exclusion of the principal portion of an Ineligible Receivable from the
calculation of the Transferor Amount would cause the Transferor Amount to be
less than the Required Transferor Amount, on the Distribution Date following the
Monthly Period in which such reassignment obligation arises the Transferors will
make a deposit into the Special Funding Account in immediately available funds
in an amount equal to the amount by which the Transferor Amount would be reduced
below the Required Transferor Amount. The reassignment of any Ineligible
Receivable to the Transferors, and the obligation of the Transferors to make any
deposits into the Special Funding Account as described in this paragraph, is the
sole remedy respecting any breach of the representations and warranties
described in the preceding paragraph with
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respect to such Receivable available to the Certificateholders or the Trustee on
behalf of Certificateholders. Credco, in the RFC II Purchase Agreement, has
agreed to repurchase from RFC II certain Ineligible Receivables reassigned to
RFC II and to promptly pay to RFC II the principal amount thereof plus
applicable finance charges. The term 'TRANSFEROR AMOUNT' means, at any time of
determination, an amount equal to the sum of (i) the total aggregate amount of
Principal Receivables in the Trust and (ii) the amount on deposit in the Special
Funding Account at such time minus the aggregate 'Adjusted Invested Amounts' for
all outstanding Series (specified in the Prospectus Supplements related to the
offering of such Series) at such time.
Each Transferor will also make representations and warranties to the Trust
to the effect, among other things, that as of each Series Closing Date it is a
state-chartered bank or corporation, as applicable, it has the authority to
consummate the transactions contemplated by the Pooling and Servicing Agreement
and each Supplement and further represents to the Trust on each Series Closing
Date and, with respect to the Additional Accounts, as of each addition date (a)
the Pooling and Servicing Agreement and each Supplement constitutes a valid,
binding and enforceable agreement of such Transferor and (b) the Pooling and
Servicing Agreement and each Supplement constitutes either a valid sale,
transfer and assignment to the Trust of all right, title and interest of such
Transferor in the Receivables, whether then existing or thereafter created and
the proceeds thereof (including proceeds in any of the accounts established for
the benefit of the Certificateholders) and in Recoveries or the grant of a
first-priority perfected security interest under the applicable UCC in such
Receivables and the proceeds thereof (including proceeds in any of the accounts
established for the benefit of the Certificateholders) and in Recoveries, which
is effective as to each Receivable then existing on such date. In the event of a
material breach of any of the representations and warranties described in this
paragraph that has a material adverse effect on the Certificateholders' Interest
in the Receivables or the availability of the proceeds thereof to the Trust
(which determination will be made without regard to whether funds are then
available pursuant to any Series Enhancement), either the Trustee or
Certificateholders holding Certificates evidencing not less than 50% of the
aggregate unpaid principal amount of all outstanding Certificates, by written
notice to the Transferors and the Servicer (and to the Trustee if given by the
Certificateholders), may direct the Transferors to accept the reassignment of
the Receivables in the Trust within 60 days of such notice, or within such
longer period specified in such notice. The Transferors will be obligated to
accept the reassignment of such Receivables on the Distribution Date following
the Monthly Period in which such reassignment obligation arises. Such
reassignment will not be required to be made, however, if at the end of such
applicable period, the representations and warranties shall then be true and
correct in all material respects and any material adverse effect caused by such
breach shall have been cured. The price for such reassignment will be an amount
equal to the sum of the amounts specified therefor with respect to each Series
in the related Supplement. The payment of such reassignment price in immediately
available funds will be considered a payment in full of the Certificateholders'
Interest and such funds will be distributed upon presentation and surrender of
the Certificates. If the Trustee or Certificateholders give a notice as provided
above, the obligation of the Transferors to make any such deposit will
constitute the sole remedy respecting a breach of the representations and
warranties available to Certificateholders or the Trustee on behalf of
Certificateholders. See 'Description of the Purchase Agreements--Representations
and Warranties.'
It is not 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,
the compliance by Credco and the Transferors of their respective 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 Pooling and Servicing Agreement, any Supplement or for any
other purpose. The Servicer, however, will deliver to the Trustee on or before
March 31 of each calendar year an opinion of counsel with respect to the
perfection of the interest of the Trust in and to the Receivables and certain
other components of the Trust.
THE TRANSFEROR CERTIFICATES; ADDITIONAL TRANSFERORS
The Pooling and Servicing Agreement provides that the Transferors may
exchange a portion of the Original Transferor Certificate for one or more
additional certificates (each, a 'SUPPLEMENTAL CERTIFICATE') for transfer or
assignment to a person designated by the Transferors upon the execution and
delivery of a supplement to the
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Pooling and Servicing Agreement (which supplement shall be subject to the
amendment section of the Pooling and Servicing Agreement to the extent that it
amends any of the terms of the Pooling and Servicing Agreement; see
'--Amendments'); provided, that (a) the Rating Agency Condition is satisfied for
such exchange, (b) each Transferor shall have delivered to the Trustee an
officer's certificate to the effect that such Transferor reasonably believes
that such exchange will not, based on the facts known to such officer at the
time of such certification, have an Adverse Effect, (c) the Transferors shall
have delivered to the Trustee a Tax Opinion (as defined herein) with respect to
such exchange, (d) the aggregate amount of Principal Receivables in the Trust as
of the date of such exchange will be greater than the Required Minimum Principal
Balance as of such date and (e) the Transferors or other holders of the Original
Transferor Certificate as of the date of such exchange shall have a remaining
interest in the Trust of not less than, in the aggregate, 2% of the total amount
of Principal Receivables and funds on deposit in the Special Funding Account,
the Principal Funding Account and any other similar account. The primary purpose
for such a transfer would be to convey an interest in the Original Transferor
Certificate to another person. Any transfer or assignment of a Supplemental
Certificate is subject to the condition set forth in (c) above.
If an affiliate of the Transferors owns Eligible Accounts, the receivables
of which are eligible for transfer to the Trust, the Transferors may wish to
designate such affiliate to be included as a 'Transferor' ('ADDITIONAL
TRANSFERORS') under the Pooling and Servicing Agreement (by means of an
amendment to the Pooling and Servicing Agreement that will not require the
consent of any Certificateholder; see '--Amendments'). In connection with the
designation of an Additional Transferor, the Transferors will surrender the
Transferor Certificate to the Trustee in exchange for a newly issued Transferor
Certificate modified to reflect such Additional Transferor's interest in the
Transferors' Interest; provided, however, that (i) the conditions set forth in
clauses (a) and (c) in the preceding paragraph with respect to a transfer of a
Supplemental Certificate shall have been satisfied with respect to such
designation and transfer and (ii) any applicable conditions described in
'--Additions of Accounts or Participation Interests' shall have been satisfied
with respect to the transfer of Receivables or Participation Interests by any
Additional Transferor to the Trust. Following the inclusion of an Additional
Transferor, the Additional Transferor will be treated in the same manner as a
Transferor, and each Additional Transferor generally will have the same
obligations and rights as a Transferor described herein.
ADDITIONS OF ACCOUNTS OR PARTICIPATION INTERESTS
Under the Pooling and Servicing Agreement, the Transferors will be
obligated, in certain circumstances described below, to designate from time to
time Additional Accounts to be included as Accounts. In connection with any such
designation, the Transferors (pursuant to the Pooling and Servicing Agreement)
will convey to the Trust, and, to the extent that Credco owns any Receivables
arising in such Accounts, Credco (pursuant to the RFC II Purchase Agreement)
shall be required to convey to RFC II for conveyance by RFC II to the Trust, all
of their respective interests in all Receivables arising from such Additional
Accounts, subject to the following conditions, among others: (i) each such
Additional Account must be an Eligible Account and (ii) except for the addition
of New Accounts (a) the selection of the Aggregate Addition Accounts is done in
a manner which the relevant Transferor reasonably believes will not result in an
Adverse Effect and (b) except for the addition of New Accounts, the Rating
Agency Condition shall have been satisfied. The Transferors will be obligated to
designate Additional Accounts (to the extent available) if the aggregate amount
of Principal Receivables in the Trust at the end of any Monthly Period is less
than the Required Minimum Principal Balance as of the end of such Monthly
Period. In lieu of adding Additional Accounts, the Transferors may convey
Participation Interests to the Trust. 'REQUIRED MINIMUM PRINCIPAL BALANCE' as of
any date of determination means the sum of the Series Invested Amounts for all
outstanding Series plus the sum of the Series Required Transferor Amounts (as
defined herein) for each such Series minus the amount on deposit in the Special
Funding Account. The 'SERIES INVESTED AMOUNT' for a Series will be the amount
set forth in the related Supplement and, for each Series offered hereby, in the
related Supplement for such Series, but will generally equal the initial
Invested Amount for a Series.
Each Additional Account must be an Eligible Account at the time of its
designation. However, since Additional Accounts or Participation Interests,
which may be created after the Initial Selection Date, may not have been a part
of the portfolio of accounts of Centurion as of the Initial Selection Date, they
may not be of the same credit quality as the Initial Accounts because such
Additional Accounts or Participation Interests may have
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been originated at a later date using credit, origination or underwriting
criteria different from those which were applied to the Initial Accounts or may
have been acquired from another revolving credit issuer or entity that had
different credit, origination or underwriting criteria. Consequently, the
performance of such Additional Accounts or Participation Interests may be better
or worse than the performance of the Initial Accounts.
REMOVAL OF ACCOUNTS
Subject to the conditions set forth in this paragraph, on any day of any
Monthly Period, the Transferors may, but shall not be obligated to, acquire all
Receivables and proceeds thereof with respect to Removed Accounts and
Participation Interests, and Credco may, but shall not be obligated to, acquire
from RFC II the Receivables and proceeds thereof transferred by Credco to RFC II
in the Removed Accounts. The designation of Removed Accounts and Participation
Interests and the acquisition by the Transferors of the Receivables and proceeds
thereof could occur for a number of reasons including, among others, a
determination by the Transferors that the Trust contains more Receivables than
the Transferors are obligated to retain in the Trust under the Pooling and
Servicing Agreement and any applicable Supplements and a determination that the
Transferors do not desire to obtain additional financing through the Trust at
such time. The only limitation on the right of the Transferors to require the
reassignment of the Receivables in designated Removed Accounts are those
described herein and in the related Prospectus Supplement. The Transferors are
permitted to designate and require reassignment of the Receivables from Removed
Accounts and Participation Interests only upon satisfaction of the following
conditions: (i) the Transferors shall have delivered to the Trustee a computer
file or microfiche list containing a true and complete list of all Removed
Accounts, such Accounts to be identified by, among other things, account number
and their aggregate amount of Receivables; (ii) each Transferor shall have
delivered an officer's certificate to the trustee to the effect that in the
reasonable belief of such Transferor (a) no selection procedure believed by such
Transferor to be materially adverse to the interests of the Certificateholders
or such Transferor was utilized in removing the Removed Accounts from among any
pool of Accounts of a similar type, (b) such removal will not have an Adverse
Effect and (c) such removal will not result in the occurrence of a Pay-Out Event
or a Reinvestment Event and (iii) the Transferors shall have delivered 8
business days' prior written notice of the removal to each Rating Agency, the
Trustee and the Servicer and prior to the date on which such Receivables are to
be removed the Rating Agency Condition shall have been satisfied with respect to
such removal.
DISCOUNT OPTION
The Pooling and Servicing Agreement provides that the Transferors may at
any time and from time to time, but without any obligation to do so, designate a
specified fixed or variable percentage (the 'DISCOUNT PERCENTAGE') of the amount
of Receivables existing and arising in all or any specified portion of the
Accounts on and after the date such designation becomes effective that otherwise
would have been treated as Principal Receivables to be treated as Finance Charge
Receivables (the 'DISCOUNT RECEIVABLES'). After any such designation, pursuant
to the Pooling and Servicing Agreement, the Transferors may, without notice to
or consent of the Certificateholders, from time to time increase, reduce or
withdraw the Discount Percentage. The Transferors must provide 30 days prior
written notice to the Servicer, the Trustee, each Rating Agency and any provider
of Series Enhancement of any such designation or increase, reduction or
withdrawal, and such designation or increase, reduction or withdrawal will
become effective on the date specified therein only if (a) each Transferor will
have delivered to the Trustee and certain providers of Series Enhancement a
certificate of an authorized officer of such Transferor to the effect that,
based on the facts known to such Transferor at the time, such designation or
increase, reduction or withdrawal will not at the time of its occurrence cause a
Pay-Out Event or Reinvestment Event or an event that, with notice or the lapse
of time or both, would constitute a Pay-Out Event or Reinvestment Event, to
occur with respect to any Series, (b) the Rating Agency Condition will have been
satisfied with respect to such designation or increase, reduction or withdrawal,
and (c) only in the case of a reduction or withdrawal of the Discount
Percentage, the Transferors will have (i) delivered to the Trustee an opinion of
counsel to the effect that such reduction of the Discount Percentage will not
adversely affect the tax characterization as debt of any Certificates of any
outstanding Series or Class that were characterized as debt at the time of their
issuance and (ii) in certain circumstances, obtained the prior written consent
of each provider of Series Enhancement entitled to consent thereto. On the Date
of Processing of any collections on or after the date the exercise of the
discount option takes effect, the product of (i) the Discount Percentage then in
effect and
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(ii) collections of Receivables with respect to the Accounts on or after the
date such option is exercised that otherwise would be Principal Receivables will
be deemed collections of Finance Charge Receivables and will be applied
accordingly, unless otherwise provided in the related Supplement. Although,
except as described in the next paragraph, there can be no assurance that the
Transferors will do so, any such designation may occur because the Transferors
determine that the exercise of the discount option is needed to provide a
sufficient yield on the Receivables to cover interest and other amounts due and
payable from collections of Finance Charge Receivables or to avoid the
occurrence of a Pay-Out Event or Reinvestment Event relating to the reduction of
the average Portfolio Yield of Accounts in the Trust, if the related Supplement
provides for such a Pay-Out Event or Reinvestment Event. The existence of
Discount Receivables will result in an increase in the amount of collections of
Finance Charge Receivables and a reduction in the balance of Principal
Receivables outstanding and a reduction in the Transferor Amount.
On the first Series Closing Date, the Transferors designated an initial
Discount Percentage equal to 2.0%. Any increase, reduction or withdrawal of such
Discount Percentage will be made in accordance with the conditions described in
the preceding paragraph.
PREMIUM OPTION
The Pooling and Servicing Agreement provides that the Transferors may at
any time and from time to time, but without any obligation to do so, designate a
specified fixed or variable percentage (the 'PREMIUM PERCENTAGE') of the amount
of Receivables existing arising in all or any specified portion of the Accounts
existing on and after the date such designation becomes effective that otherwise
would have been treated as Finance Charge Receivables to be treated as Principal
Receivables (the 'PREMIUM RECEIVABLES'). After any such designation, pursuant to
the Pooling and Servicing Agreement, the Transferors may, without notice to or
consent of the Certificateholders, from time to time increase, reduce or
withdraw the Premium Percentage. The Transferors must provide 30 days prior
written notice to the Servicer, the Trustee, each Rating Agency and any provider
of Series Enhancement of any such designation or increase, reduction or
withdrawal, and such designation or increase, reduction or withdrawal will
become effective on the date specified therein only if (a) each Transferor will
have delivered to the Trustee and certain providers of Series Enhancement a
certificate of an authorized officer of such Transferor to the effect that,
based on the facts known to such Transferor at the time, such designation or
increase, reduction or withdrawal will not at the time of its occurrence cause a
Pay-Out Event or Reinvestment Event or an event that, with notice or the lapse
of time or both, would constitute a Pay-Out Event or Reinvestment Event, to
occur with respect to any Series, (b) the Rating Agency Condition will have been
satisfied with respect to such designation or increase, reduction or withdrawal,
(c) in the case of a designation or increase of the Premium Percentage, the
Transferors will have delivered to the Trustee an opinion of counsel to the
effect that such designation or increase of the Premium Percentage will not
adversely affect the tax characterization as debt of any Certificates of any
outstanding Series or Class that were characterized as debt at their time of
issuance, and (d) in certain circumstances, the Transferors will have obtained
the prior written consent of each provider of Series Enhancement entitled to
consent thereto. On the Date of Processing of any collections on or after the
date the exercise of the premium option takes effect, the product of (i) the
Premium Percentage then in effect and (ii) collections of Receivables with
respect to the Accounts on or after the date such option is exercised that
otherwise would be Finance Charge Receivables will be deemed collections of
Principal Receivables and will be applied accordingly, unless otherwise provided
in the related Supplement. Any such designation would result in an increase in
the amount of collections of Principal Receivables and a lower Portfolio Yield
with respect to collections of Finance Charge Receivables than would otherwise
occur. Although there can be no assurance that the Transferors will exercise the
option to designate Premium Receivables, the Transferors may do so if, among
other things, the Transferors determine that the exercise of such option is
needed to cover shortfalls of the Principal Receivables available to make
scheduled principal payments on the Certificates or scheduled deposits into the
Principal Funding Account, as applicable, or to avoid the occurrence of a
Pay-Out Event or a Reinvestment Event relating to the existence of such
shortfalls.
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INDEMNIFICATION
The Pooling and Servicing Agreement will provide that the Servicer will
indemnify the Trust and the Trustee from and against any loss, liability,
expense, damage or injury suffered or sustained arising out of certain of the
Servicer's actions or omissions with respect to the Trust pursuant to the
Pooling and Servicing Agreement.
Under the Pooling and Servicing Agreement, the Transferors will agree to be
liable directly to an injured party for the entire amount of any liabilities of
the Trust (other than those incurred by a Certificateholder in the capacity of
an investor in the Certificates of any Series) arising out of or based on each
of the arrangements created by the Pooling and Servicing Agreement and the
actions of the Servicer taken pursuant thereto as though the Pooling and
Servicing Agreement created a partnership under the New York Uniform Partnership
Act in which each Transferor was a general partner.
Except as provided in the preceding paragraph, the Pooling and Servicing
Agreement will provide that neither the Transferors nor the Servicer nor any of
their respective directors, officers, employees or agents will be under any
other liability to the Trust, the Trustee, the Certificateholders, any Credit
Enhancer or any other person for any action taken, or for refraining from taking
any action, in good faith pursuant to the Pooling and Servicing Agreement.
However, neither the Transferors nor the Servicer will be protected against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence of a Transferor, the Servicer or any such person in
the performance of their duties or by reason of reckless disregard of their
obligations and duties thereunder.
In addition, the Pooling and Servicing Agreement will provide 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
Pooling and Servicing 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 Pooling and Servicing
Agreement and the rights and duties of the parties thereto and the interests of
the Certificateholders thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Pooling and Servicing Agreement, the Servicer will be
responsible for servicing, collecting, enforcing and administering the
Receivables in accordance with customary and usual procedures for servicing
similar credit or charge receivables, but in any event at least comparable with
the policies and procedures and the degree of skill and care applied or
exercised with respect to any other credit, charge or similar receivables it, or
its affiliates, service.
Pursuant to the Pooling and Servicing Agreement or the Receivables Purchase
Agreements, except as otherwise required by any requirement of law or as is
deemed by an Account Owner to be necessary in order for it to maintain its
credit or charge business or a program operated in connection with its credit or
charge business on a competitive basis based on a good faith assessment by it of
the nature of the competition in such credit or charge business or such program,
no Account Owner will take any action that will have the effect of reducing the
Portfolio Yield to a level that could reasonably be expected to cause any Series
to experience a Pay-Out Event or Reinvestment Event based on the insufficiency
of the Portfolio Yield or take any action that would have the effect of reducing
the Portfolio Yield to less than the then-current highest Average Rate for any
Group. Each Account Owner also will covenant that it may only change the terms
relating to the Accounts owned by it if the change made with respect to a
specific program is made applicable to substantially all of the Accounts owned
by it subject to such program.
Servicing activities to be performed by the Servicer include collecting and
recording payments, communicating with Account holders, investigating payment
delinquencies, evaluating the increase of credit limits and the issuance of
credit cards and credit accounts, providing billing and tax records to Account
holders and maintaining internal records with respect to each Account.
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 Accounts and Receivables by the Trustee pursuant to the
Pooling and Servicing Agreement, maintaining the agreements, documents and files
relating to the Accounts and Receivables as custodian for the Trust and
providing related data processing and reporting services for Certificateholders
and on behalf of the Trustee.
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<PAGE>
The Pooling and Servicing Agreement provides that the Servicer may delegate
its duties under that agreement to any entity that agrees to conduct such duties
in accordance with the Pooling and Servicing Agreement and the credit account
guidelines set forth therein. Notwithstanding any such delegation the Servicer
will continue to be liable for all of its obligations under the Pooling and
Servicing Agreement.
NEW ISSUANCES
The Pooling and Servicing Agreement provides that, pursuant to any one or
more Supplements, the Transferors may direct the Trustee to authenticate from
time to time new Series subject to the conditions described below (each such
issuance, a 'NEW ISSUANCE'). Each New Issuance will have the effect of
decreasing the Transferor Amount to the extent of the initial Invested Amount of
such new Series. Under the Pooling and Servicing Agreement, the Transferors may
designate, with respect to any newly issued Series: (a) its name or designation;
(b) its initial principal amount (or method for calculating such amount) and its
invested amount in the Trust (the 'INVESTED AMOUNT'), which is generally based
on the aggregate amount of Principal Receivables in the Trust allocated to such
Series, and its Series Invested Amount; (c) its certificate rate (or formula for
the determination thereof); (d) the interest payment date or dates (each, an
'INTEREST PAYMENT DATE') and the date or dates from which interest shall accrue;
(e) the method for allocating collections to Certificateholders of such Series;
(f) any bank accounts to be used by such Series and the terms governing the
operation of any such bank accounts; (g) the percentage used to calculate the
Monthly Servicing Fee; (h) the provider and terms of any form of Series
Enhancement with respect thereto; (i) the terms on which the Certificates of
such Series may be repurchased or remarketed to other investors; (j) the Series
Termination Date; (k) the number of Classes of Certificates of such Series, and
if such Series consists of more than one Class, the rights and priorities of
each such Class; (l) the extent to which the Certificates of such Series will be
issuable in temporary or permanent global form (and, in such case, the
depositary for such global certificate or certificates, the terms and
conditions, if any, upon which such global certificate or certificates may be
exchanged, in whole or in part, for definitive certificates, and the manner in
which any interest payable on such global certificate or certificates will be
paid); (m) whether the Certificates of such Series may be issued in bearer form
and any limitations imposed thereon; (n) the priority of such Series with
respect to any other Series; (o) the Group, if any, in which such Series will be
included; and (p) any other relevant terms (all such terms, the 'PRINCIPAL
TERMS' of such Series). None of the Transferors, the Servicer, the Trustee or
the Trust is required or intends to obtain the consent of any Certificateholder
of any outstanding Series to issue any additional Series. The Transferors may
offer any Series to the public under a Prospectus Supplement or other Disclosure
Document, in transactions either registered under the Securities 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 in the manner discussed under 'Plan of Distribution.' Any such Series
may be issued in fully registered or book-entry form in minimum denominations
determined by the Transferors. The Transferors intend to offer, from time to
time, additional Series.
The Pooling and Servicing Agreement provides that the Transferors may
designate Principal Terms such that each Series has a Controlled Accumulation
Period or a Controlled Amortization Period that may have a different length and
begin on a different date than such periods for any other Series. Further, one
or more Series may be in their Controlled Accumulation Period or Controlled
Amortization Period while other Series are not. Moreover, each Series may have
the benefits of Series Enhancement issued by enhancement providers different
from the providers of Series Enhancement with respect to any other Series. Under
the Pooling and Servicing Agreement, the Trustee shall hold any such Series
Enhancement only on behalf of the Certificateholders of the Series to which such
Series Enhancement relates. With respect to each such Series Enhancement, the
Transferors may deliver a different form of Series Enhancement agreement. The
Transferors also have the option under the Pooling and Servicing Agreement to
vary among Series the terms upon which a Series may be repurchased by the
Transferors or remarketed to other investors. There is no limit to the number of
New Issuances the Transferors may cause under the Pooling and Servicing
Agreement. The Trust will terminate only as provided in the Pooling and
Servicing Agreement. There can be no assurance that the terms of any Series
might not have an impact on the timing and amount of payments received by a
Certificateholder of another Series.
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<PAGE>
Under the Pooling and Servicing Agreement and pursuant to a Supplement, a
New Issuance may only occur upon the satisfaction of certain conditions provided
in the Pooling and Servicing Agreement. The obligation of the Trustee to
authenticate the Certificates of such new Series and to execute and deliver the
related Supplement is subject to the satisfaction of the following conditions:
(a) on or before the fifth day immediately preceding the date upon which the New
Issuance is to occur, the Transferors shall have given the Trustee, the Servicer
and each Rating Agency written notice of such New Issuance and the date upon
which the New Issuance is to occur; (b) the Transferors shall have delivered to
the Trustee the related Supplement, in form satisfactory to the Trustee,
executed by each party to the Pooling and Servicing Agreement other than the
Trustee; (c) the Transferors shall have delivered to the Trustee any related
Series Enhancement agreement executed by each of the parties to such agreement;
(d) the Rating Agency Condition shall have been satisfied with respect to such
New Issuance; (e) the Transferors shall have delivered to the Trustee and
certain providers of Series Enhancement a certificate of an authorized
representative, dated the date upon which the New Issuance is to occur, to the
effect that such Transferor reasonably believes that such issuance will not,
based on the facts known to such representative at the time of such
certification, have an Adverse Effect; (f) the Transferors shall have delivered
to the Trustee, each Rating Agency and certain providers of Series Enhancement
an opinion of counsel acceptable to the Trustee that for federal income tax
purposes (i) following such New Issuance the Trust will not be deemed to be an
association (or publicly traded partnership) taxable as a corporation, (ii) such
New Issuance will not adversely affect the tax characterization as debt of
Certificates of any outstanding Series or Class that were characterized as debt
at the time of their issuance, (iii) such New Issuance will not cause or
constitute an event in which gain or loss would be recognized by any
Certificateholders, and (iv) except as is otherwise provided in a Supplement
with respect to any Series, the Certificates of such Series will be properly
characterized as debt (an opinion of counsel to the effect referred to in
clauses (i), (ii) and (iii) with respect to any action is referred to herein as
a 'TAX OPINION'), and the Transferors or other holders of the Original
Transferor Certificate shall have a remaining interest in the Trust of not less
than, in the aggregate, 2% of the total amount of Principal Receivables and
funds on deposit in the Special Funding Account and the Principal Funding
Account; (g) the aggregate amount of Principal Receivables plus the principal
amount of any Participation Interest shall be greater than the Required Minimum
Principal Balance as of the date upon which the New Issuance is to occur after
giving effect to such issuance; and any other conditions specified in any
Supplement. Upon satisfaction of the above conditions, the Trustee shall execute
the Supplement and issue to the Transferors the Certificates of such new Series
for execution and redelivery to the Trustee for authentication.
COLLECTION ACCOUNT
The Servicer 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, an account (the 'COLLECTION ACCOUNT') with an Eligible
Institution. 'ELIGIBLE INSTITUTION' means the Trustee or any other depository
institution organized under the laws of the United States, any one of the states
thereof or the District of Columbia (or any domestic branch of a foreign bank)
which at all times has a long-term unsecured debt rating or certificate of
deposit rating that is acceptable to each Rating Agency and is a member of the
FDIC. Notwithstanding the preceding sentence, any institution the appointment of
which satisfies the Rating Agency Condition will be an Eligible Institution.
Funds in the Collection Account generally will be invested in (i) obligations
fully guaranteed by the United States of America, (ii) demand deposits, time
deposits or certificates of deposit of depository institutions or trust
companies incorporated under the laws of the United States of America or any
state thereof and subject to supervision and examination by federal or state
banking or depository institution authorities; provided that, at the time of the
Trust's investment therein, the short-term debt of such depository institution
or trust company shall be rated at least 'A-1+' (or any other rating subject to
receipt by the Transferors, the Servicer and the Trustee of written notification
from S&P that investments of such type at such other minimum rating will not
result in S&P reducing or withdrawing its then existing rating of the
Certificates of any outstanding Series or Class with respect to which it is a
Rating Agency) by S&P and shall be satisfactory to each other Rating Agency,
(iii) commercial paper that, at the time of the Trust's investment or a
contractual commitment to invest therein, shall be rated at least 'A-1+' (or any
other rating subject to receipt by the Transferors, the Servicer and the Trustee
of written notification from S&P that investments of such type at such other
minimum rating will not result in S&P reducing or withdrawing its then existing
rating of the Certificates of any outstanding Series or Class with respect to
which it is a Rating Agency) by S&P and shall be satisfactory to
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<PAGE>
each other Rating Agency, (iv) demand deposits, time deposits or certificates of
deposit which are fully insured by the FDIC having, at the time of the Trust's
investment therein, a rating satisfactory to each Rating Agency, (v) bankers'
acceptances issued by any depository institution or trust company described in
(ii) above, (vi) time deposits, other than as referred to in (iv) above (having
maturities not later than the business day preceding the next Distribution
Date), with an entity, the commercial paper of which shall be rated at least
'A-1+' (or any other rating subject to receipt by the Transferors, the Servicer
and the Trustee of written notification from S&P that investments of such type
at such other minimum rating will not result in S&P reducing or withdrawing its
then existing rating of the Certificates of any outstanding Series or Class with
respect to which it is a Rating Agency) by S&P and shall be satisfactory to each
other Rating Agency, and (vii) only to the extent permitted by Rule 3a-7 under
the Investment Company Act of 1940, as amended, (a) money market funds that, at
the time of the Trust's investment therein, shall be rated at least 'AAA-m' or
'AAAm-G' by S&P (or any other rating subject to receipt by the Transferors, the
Servicer and the Trustee of written notification from S&P that investments of
such type at such other minimum rating will not result in S&P reducing or
withdrawing its then existing rating of the Certificates of any outstanding
Series or Class with respect to which it is a Rating Agency) and shall be
satisfactory to each other Rating Agency, or (b) any other investment if the
Rating Agency Condition has been satisfied (collectively, 'ELIGIBLE
INVESTMENTS'). Any earnings (net of losses and investment expenses) on funds in
the Collection Account will be paid to the Transferors. 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 its duties under the Pooling and
Servicing Agreement and any Supplement.
DEPOSITS IN COLLECTION ACCOUNT
The Servicer, no later than two business days after each Date of
Processing, will deposit all collections received with respect to the
Receivables in each Monthly Period into the Collection Account, and the Servicer
will make the deposits and payments to the accounts and parties shown below on
the date of such deposit. Notwithstanding the foregoing, for as long as TRS or
an affiliate of TRS remains the Servicer under the Pooling and Servicing
Agreement and (i) the Servicer maintains a short-term credit rating (which may
be an implied rating) of not less than P-1 from Moody's and A-1 from S&P (or
such other rating below P-1 or A-1, as the case may be, which is acceptable to
such Rating Agency), which is currently the case, or (ii) the Servicer obtains a
guarantee with respect to its deposit and payment obligations under the Pooling
and Servicing Agreement (in form and substance satisfactory to the Rating
Agencies) from a guarantor having a short-term credit rating of not less than
P-1 from Moody's and A-1 from S&P (or such other rating below P-1 or A-1, as the
case may be, which is acceptable to such Rating Agency), or (iii) the Rating
Agency Condition will have been satisfied despite Servicer's inability to
satisfy the rating requirement specified in clause (i) above and for five
business days following any such reduction of any such rating or failure to
satisfy the conditions specified in clause (ii) or (iii) above, the Servicer
need not deposit collections into the Collection Account on the day indicated in
the preceding sentence but may use for its own benefit all such collections
until the related Transfer Date at which time the Servicer will make such
deposits in an amount equal to the net amount of such deposits and withdrawals
which would have been made had the conditions of this sentence not applied. With
respect to the Certificateholders' Interest, if the net amount in respect of
Finance Charge Receivables to be deposited into the Collection Account on any
Transfer Date pursuant to the preceding sentence exceeds the sum of the interest
payments due to Certificateholders for the related Distribution Date, the
Defaulted Amount and the Servicing Fee plus certain amounts payable with respect
to any Series Enhancement, the Servicer may deduct the Servicing Fee and, during
the Revolving Period, the Defaulted Amount (which will be distributed to the
Transferors, but not in an amount exceeding the Transferors' Interest in
Principal Receivables on such day, after giving effect to any new Receivables
transferred to the Trust on such day) from the net amount to be deposited into
the Collection Account. In addition, on each Distribution Date with respect to
any Controlled Amortization Period or Controlled Accumulation Period, the
Servicer may deduct the amount of any Shared Principal Collections not required
to cover Principal Shortfalls (which will be distributed to the Transferors, but
not in an amount exceeding the Transferors' Interest in Principal Receivables on
such day, after giving effect to any new Receivables transferred to the Trust on
such day) from the net amount to be deposited into the Collection Account. The
Trustee may not have a perfected security interest in collections held by the
Servicer that are commingled with other funds of the
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<PAGE>
Servicer or used by the Servicer in the event of the bankruptcy, insolvency,
liquidation, conservatorship or receivership of the Servicer or, in certain
circumstances, the lapse of certain time periods.
On the day any such deposit is made into the Collection Account, the
Servicer will withdraw from the Collection Account and pay to the Transferors to
the extent not deducted from collections as described above, (i) an amount equal
to the excess, if any, of the aggregate amount of such deposits in respect of
Principal Receivables treated as Shared Principal Collections for all Series
over the aggregate amount of Principal Shortfalls for all Series and, without
duplication, (ii) the aggregate amount of Series Allocable Principal Collections
for all outstanding Series to be paid to the Transferors with respect to such
date. Any amounts in respect of Principal Receivables not distributed to the
Transferors on any day because the Transferor Amount does not exceed zero on
such day (after giving effect to any Principal Receivables transferred to the
Trust on such day) shall be deposited into the Special Funding Account.
ALLOCATIONS
Pursuant to the Pooling and Servicing Agreement, during each Monthly Period
the Servicer will allocate to each outstanding Series its Series Allocable
Finance Charge Collections, Series Allocable Principal Collections and Series
Allocable Defaulted Amount.
'SERIES ADJUSTED INVESTED AMOUNT' means, with respect to any Series and for
any Monthly Period, the Series Invested Amount for such Series for such Monthly
Period, less the excess, if any, of the cumulative amount (calculated in
accordance with the terms of the related Supplement) of investor charge-offs
allocable to the Invested Amount for such Series as of the last day of the
immediately preceding Monthly Period over the aggregate reimbursement of such
investor charge-offs as of such last day, or such lesser amount as may be
provided in the Prospectus Supplement for such Series.
'SERIES ALLOCABLE FINANCE CHARGE COLLECTIONS,' 'SERIES ALLOCABLE PRINCIPAL
COLLECTIONS' and 'SERIES ALLOCABLE DEFAULTED AMOUNT' mean, with respect to any
Series and for any Monthly Period, the product of (a) the Series Allocation
Percentage and (b) the amount of collections of Finance Charge Receivables
deposited in the Collection Account, the amount of collections of Principal
Receivables deposited in the Collection Account and the amount of all Defaulted
Amounts with respect to such Monthly Period, respectively.
'SERIES ALLOCATION PERCENTAGE' means, with respect to any Series and for
any Monthly Period, the percentage equivalent of a fraction, the numerator of
which is the Series Adjusted Invested Amount as of the last day of the
immediately preceding Monthly Period and the denominator of which is the Trust
Adjusted Invested Amount.
'SERIES REQUIRED TRANSFEROR AMOUNT' means for any Series an amount
specified in the Prospectus Supplement for such Series.
'TRUST ADJUSTED INVESTED AMOUNT' means, with respect to any Monthly Period,
the sum of the Series Adjusted Invested Amounts (as adjusted in any Prospectus
Supplement) for all outstanding Series.
The Servicer will then allocate amounts initially allocated to a particular
Series between the Certificateholders' Interest and the Transferors' Interest
for such Monthly Period as follows:
(a) Series Allocable Finance Charge Collections and the Series
Allocable Defaulted Amount will at all times be allocated to the
Invested Amount of a Series based on the Floating Allocation
Percentage of such Series; and
(b) Series Allocable Principal Collections will at all times be
allocated to the Invested Amount of such Series based on the
Principal Allocation Percentage of such Series.
The 'FLOATING ALLOCATION PERCENTAGE' and the 'PRINCIPAL ALLOCATION
PERCENTAGE' with respect to any Series will be determined as set forth in the
related Prospectus Supplement. Amounts not allocated to the Invested Amount of
any Series as described above will be allocated to the Transferors' Interest.
GROUPS OF SERIES
If so specified in the related Prospectus Supplement, the Certificates of a
Series may be included in a Reallocation Group, which is a Group of Series
subject to reallocations of collections of Receivables and other amounts or
obligations among Series in such Group in the manner described below under
'--Reallocations Among Different Series Within a Reallocation Group.'
Collections of Finance Charge Receivables allocable to
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<PAGE>
each Series in a Reallocation Group will be aggregated and made available for
certain required payments for all Series in such Group. Consequently, the
issuance of new Series in such Group may have the effect of reducing or
increasing the amount of collections of Finance Charge Receivables allocable to
the Certificates of other Series in such Group. See 'Risk Factors--Effect of the
Issuance of New Series.' The Prospectus Supplement with respect to a Series
offered hereby will specify whether such Series will be included in a
Reallocation Group or another type of Group, whether any previously issued
Series have been included in such a Group and whether any such Series or any
previously issued Series may be removed from such a Group.
REALLOCATIONS AMONG DIFFERENT SERIES WITHIN A REALLOCATION GROUP
Group Investor Finance Charge Collections. Any Series offered hereby may,
if so specified in the related Prospectus Supplement, be included in a
Reallocation Group. Other Series issued in the future may also be included in
such Reallocation Group.
For each Monthly Period, the Servicer will calculate the Group Investor
Finance Charge Collections (as defined herein) for a particular Reallocation
Group and, on the following Distribution Date, will allocate such amount among
the Certificateholders' Interest (including any Collateral Invested Amount) for
all Series in such Group in the following priority:
(i) Group Investor Monthly Interest (as defined herein);
(ii) Group Investor Default Amount (as defined herein);
(iii) Group Investor Monthly Fees (as defined herein);
(iv) Group Investor Additional Amounts (as defined herein); and
(v) the balance pro rata among each Series in such Group based on the
current Invested Amount of each such Series.
In the case of clauses (i), (ii), (iii) and (iv) above, if the amount of
Group Investor Finance Charge Collections (as defined herein) is not sufficient
to cover each such amount in full, the amount available will be allocated among
the Series in such Group pro rata based on the claim that each Series has under
the applicable clause. This means, for example, that if the amount of Group
Investor Finance Charge Collections is not sufficient to cover Group Investor
Monthly Interest, each Series in such Group will share such amount pro rata and
any other Series in such Group with a claim with respect to monthly interest,
overdue monthly interest and interest on such overdue monthly interest, if
applicable, which is larger than the claim for such amounts for any other Series
in such Group offered hereby (due to a higher certificate rate) will receive a
proportionately larger allocation.
The amount of Group Investor Finance Charge Collections allocated to the
Certificateholders' Interest (including any Collateral Invested Amount) for a
particular Series offered hereby as described above is referred to herein as
'REALLOCATED INVESTOR FINANCE CHARGE COLLECTIONS.'
'GROUP INVESTOR ADDITIONAL AMOUNTS' means for any Distribution Date the sum
of the amounts determined with respect to each Series in such Group equal to (a)
an amount equal to the amount by which the Invested Amount of any Class of
Certificates or any Collateral Invested Amounts have been reduced as a result of
investor charge-offs, subordination of principal collections and funding the
investor default amount for any other Class of Certificates or Collateral
Invested Amounts of such Series and (b) if the related Prospectus Supplement so
provides, the amount of interest at the applicable certificate rate that has
accrued on the amount described in the preceding clause (a).
'GROUP INVESTOR DEFAULT AMOUNT' means for any Distribution Date the sum of
the amounts determined with respect to each Series in such Group (the 'INVESTOR
DEFAULT AMOUNT') equal to the product of the Series Allocable Defaulted Amount
for such Distribution Date and the applicable Floating Allocation Percentage for
such Distribution Date.
'GROUP INVESTOR FINANCE CHARGE COLLECTIONS' means for any Distribution Date
the aggregate amount of Investor Finance Charge Collections for such
Distribution Date for all Series in such Group.
'GROUP INVESTOR MONTHLY FEES' means for any Distribution Date the Monthly
Servicing Fee for each Series in such Group, any Series Enhancement fees and any
other similar fees which are paid out of Reallocated Investor Finance Charge
Collections for such Series pursuant to the applicable Prospectus Supplement.
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<PAGE>
'GROUP INVESTOR MONTHLY INTEREST' means for any Distribution Date the sum
of the aggregate amount of monthly interest, including overdue monthly interest
and interest on such overdue monthly interest, if applicable, for all Series in
such Group for such Distribution Date.
The chart that follows demonstrates the manner in which collections of
Finance Charge Receivables are allocated and reallocated among Series in such a
Group. The chart assumes that the Trust has issued three Series (Series 1, 2 and
3), and that each such Series is in its Revolving Period.
In Step 1, total collections of Finance Charge Receivables are allocated
among the three Series based on the Series Allocation Percentage for each
Series. The amounts allocated to each Series pursuant to Step 1 are referred to
as 'SERIES ALLOCABLE FINANCE CHARGE COLLECTIONS.' See '--Allocations' above.
In Step 2, the amount of collections of Finance Charge Receivables
allocable to the Invested Amount (including any Collateral Invested Amount) of a
Series (the 'INVESTOR FINANCE CHARGE COLLECTIONS') is determined by multiplying
Series Allocable Finance Charge Collections for each Series by the applicable
Floating Allocation Percentages. See '--Allocations' above.
Investor Finance Charge Collections for all Series in a particular
Reallocation Group (or Group Investor Finance Charge Collections) are pooled as
shown above in Step 3 for reallocation to each such Series as shown in Step 4.
In Step 4 Group Investor Finance Charge Collections are reallocated to each
Series in such Group as described above based on the respective claim of each
Series with respect to interest payable on the Certificates or Collateral
Invested Amount (if any) of such Series, the Defaulted Amount allocable to the
Certificateholders' Interest of such Series and the Monthly Servicing Fee and
certain other amounts in respect to such Series. The excess is allocated pro
rata among the Series in such Group based on each Series' respective Invested
Amounts.
54
<PAGE>
<TABLE>
<S> <C>
-------------------------------------
American Express Credit Account
Master Trust
Finance Charge Collections
-------------------------------------
|
<S> <C> |
---------------------------------------------------------------------------------
| | |
------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
Series 1 Series 2 Series 3
Series Allocable Finance Series Allocable Finance Series Allocable Finance
Step 1 Charge Collections Charge Collections Charge Collections
(based upon the Series (based upon the Series (based upon the Series
Allocation Percentage) Allocation Percentage) Allocation Percentage)
------------------------- -------------------------- --------------------------
| | |
--------------------- --------------------- ---------------------
| | | | | |
--------------- -------------------- --------------- -------------------- --------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Investor Finance Investor Finance Investor Finance
Transferors' Charge Transferors' Charge Transferors' Charge
Step 2 Finance Collections Finance Collections Finance Collections
Charge (based upon the Charge (based upon the Charge (based upon the
Collections Floating Collections Floating Collections Floating
Allocation Allocation Allocation
Percentage) Percentage) Percentage)
--------------- -------------------- --------------- -------------------- --------------- --------------------
| | |
------------------------------------------------------------------------------------
|
------------------------------------------------------------------------------------
<S> <C>
Group
Step 3 -------- Investor Finance Charge Collections
| ------------------------------------------------------------------------------------
|-------------------------------------------------
| |
| ----------------------------------------------------------
| | | |
| ------------------------------------------------------------------------------------
<S> <C> <C> <C>
| Series 1 Series 2 Series 3
Step 4 | Investor Monthly Interest Investor Monthly Interest Investor Monthly Interest
| ------------------------------------------------------------------------------------
|-------------------------------------------------
| |
| ----------------------------------------------------------
| | | |
| ------------------------------------------------------------------------------------
| Series 1 Series 2 Series 3
| Investor Default Amount Investor Default Amount Investor Default Amount
| ------------------------------------------------------------------------------------
|-------------------------------------------------
| |
| ----------------------------------------------------------
| | | |
| ------------------------------------------------------------------------------------
| Series 1 Series 2 Series 3
| Investor Monthly Fee Investor Monthly Fee Investor Monthly Fee
| ------------------------------------------------------------------------------------
|-------------------------------------------------
| |
| ----------------------------------------------------------
| | | |
| ------------------------------------------------------------------------------------
| Series 1 Series 2 Series 3
| Investor Additional Amounts Investor Additional Amounts Investor Additional Amounts
| ------------------------------------------------------------------------------------
|-------------------------------------------------
| |
| ----------------------------------------------------------
| | | |
| ------------------------------------------------------------------------------------
| Series 1 Series 2 Series 3
| Balance based upon Balance based upon Balance based upon
| Investor Amount Investor Amount Investor Amount
| ------------------------------------------------------------------------------------
55
</TABLE>
<PAGE>
SHARING OF EXCESS FINANCE CHARGE COLLECTIONS AMONG EXCESS ALLOCATION SERIES
Any Series offered hereby may be designated an Excess Allocation Series
(including a Series in a Reallocation Group or other type of Group). If the
Supplements for the related Excess Allocation Series so provide, collections of
Finance Charge Receivables and certain other amounts allocable to the
Certificateholders' Interest of any such Series in excess of the amounts
necessary to make required payments with respect to such Series (including
payments to the provider of any related Series Enhancement) that are payable out
of collections of Finance Charge Receivables (any such excess, the 'EXCESS
FINANCE CHARGE COLLECTIONS') may be applied to cover any shortfalls with respect
to amounts payable from collections of Finance Charge Receivables 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
that the sharing of Excess Finance Charge Collections among Excess Allocation
Series will cease if each Transferor shall deliver to the Trustee a certificate
of an authorized representative to the effect that, in the reasonable belief of
such Transferor, the continued sharing of Excess Finance Charge Collections
among Excess Allocation Series would have adverse regulatory implications with
respect to the Transferors or any Account Owner. Following the delivery by the
Transferors of any such certificates to the Trustee there will not be any
further sharing of Excess Finance Charge Collections among such Series in any
such Group. In all cases, any Excess Finance Charge Collections remaining after
covering shortfalls with respect to all outstanding Excess Allocation Series
will be paid to the holders of the Transferor Certificates. While any Series
offered hereby may be designated as an Excess Allocation Series, there can be no
assurance that (a) any other Series will be designated as an Excess Allocation
Series, (b) there will be any Excess Finance Charge Collections with respect to
any such other Series for any Monthly Period, (c) any agreement relating to any
Series Enhancement will not be amended in such a manner as to increase payments
to the providers of Series Enhancement and thereby decrease the amount of Excess
Finance Charge Collections available from such Series or (d) a Transferor 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 Finance Charge Collections among Excess Allocation
Series will not have adverse regulatory implications for it, or any Account
Owner, there can be no assurance that this will continue to be true in the
future.
SHARING OF PRINCIPAL COLLECTIONS AMONG PRINCIPAL SHARING SERIES
If the Prospectus Supplement for the related Series provides that such
Series is a Principal Sharing Series, collections of Principal Receivables for
any Monthly Period allocated to the Certificateholders' Interest of any such
Series will first be used to cover certain amounts described in the related
Prospectus Supplement (including any required deposits into a Principal Funding
Account or required distributions to Certificateholders of such Series in
respect of principal). The Servicer will determine the amount of collections of
Principal Receivables for any Monthly Period (plus certain other amounts
described in the related Prospectus Supplement) allocated to such Series
remaining after covering such required deposits and distributions and any
similar amount remaining for any other Series (collectively, 'SHARED PRINCIPAL
COLLECTIONS'). The Servicer will allocate the Shared Principal Collections to
cover any principal distributions to Certificateholders and deposits to
Principal Funding Accounts for any Principal Sharing Series that are either
scheduled or permitted and that have not been covered out of collections of
Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series (collectively, 'PRINCIPAL
SHORTFALLS'). If Principal Shortfalls exceed Shared Principal Collections for
any Monthly Period, Shared Principal Collections will be allocated pro rata
among the applicable Series based on the respective Principal Shortfalls of such
Series. To the extent that Shared Principal Collections exceed Principal
Shortfalls, the balance will be allocated to the holders of the Transferor
Certificates, provided that (a) such Shared Principal Collections will be
distributed to the holders of the Transferor Certificates only to the extent
that the Transferor Amount is greater than the Required Transferor Amount (see
'--Special Funding Account') and (b) in certain circumstances described below
under '--Special Funding Account,' such Shared Principal Collections will be
deposited in the Special Funding Account. Any such reallocation of collections
of Principal Receivables will not result in a reduction in the Invested Amount
of the Series to which such collections were initially allocated. There can be
no assurance that there will be any Shared Principal Collections with respect to
any Monthly Period or that any other Series will be designated as Principal
Sharing Series.
PAIRED SERIES
If so provided in the related Prospectus Supplement, a Prior Series may be
paired with a Paired Series issued by the Trust. As the Invested Amount of the
Prior Series is reduced, the Invested Amount in the Trust of the Paired Series
will increase by an equal amount. Upon payment in full of the Prior Series, the
Invested Amount of such Paired Series will be equal to the Invested Amount paid
to Certificateholders of such Prior Series. If a Pay-Out Event or Reinvestment
Event occurs with respect to the Prior Series or with respect to the Paired
Series when the Prior Series is in a Controlled Amortization Period or
Controlled Accumulation Period, the Series Allocation
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Percentage and the Principal Allocation Percentage for the Prior Series and the
Series Allocation Percentage and the Principal Allocation Percentage for the
Paired Series will be reset as provided in the related Prospectus Supplement and
the Early Amortization Period or Early Accumulation Period for such Series could
be lengthened.
SPECIAL FUNDING ACCOUNT
If, on any date, the Transferor Amount is less than or equal to the
Required Transferor Amount, the Servicer shall not distribute to the holders of
the Transferor Certificates any collections of Principal Receivables allocable
to a Series or a Group that otherwise would be distributed to such holders, but
shall deposit such funds in an account established with an Eligible Institution
and maintained by the Servicer for the benefit of the Certificateholders of each
Series, in the name of the Trustee, on behalf of the Trust, and bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Certificateholders of each Series (the 'SPECIAL FUNDING
ACCOUNT'). Funds on deposit in the Special Funding Account will be withdrawn and
paid to the holders of the Transferor Certificates on any Distribution Date to
the extent that, after giving effect to such payment, the Transferor Amount
exceeds the Required Transferor Amount on such date; provided, however, that if
a Controlled Accumulation Period, Early Accumulation Period, Controlled
Amortization Period or Early Amortization Period has commenced and is continuing
with respect to any Series, any funds on deposit in the Special Funding Account
will be released from the Special Funding Account, deposited in the Collection
Account and treated as collections of Principal Receivables to the extent needed
to make principal payments due to or for the benefit of the Certificateholders
of such Series, but only to the extent that doing so would not cause the
Transferor Amount to be less than the Required Transferor Amount. In addition,
if the Transferors determine that, by decreasing the amount on deposit in the
Special Funding Account, one or more Series, for which the Supplements related
thereto permit partial amortization, may be prevented from experiencing a
Pay-Out Event due to the insufficiency of yield, funds on deposit in the Special
Funding Account may be applied to each such Series (on a pro rata basis
according to each Series' Invested Amount) to reduce the Invested Amount thereof
and thereby to avoid such yield-insufficiency Pay-Out Event, but only to the
extent that doing so would not cause the Transferor Amount to be less than the
Required Transferor Amount.
The Transferors, at their option, may instruct the Trustee to deposit to
the Special Funding Account Shared Principal Collections that would otherwise be
payable to the holders of the Transferor Certificates in accordance with the
foregoing.
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 Monthly Period will be withdrawn from the
Special Funding Account and treated as collections of Finance Charge Receivables
with respect to such Monthly Period.
FUNDING PERIOD
For any Series of Certificates, the related Prospectus Supplement may
specify that during a Funding Period, the Pre-Funding Amount will be held in a
Pre-Funding Account pending the transfer of additional Receivables to the Trust
or pending the reduction of the Invested Amounts of other Series issued by the
Trust. The related Prospectus Supplement will specify the initial Invested
Amount with respect to such Series, the Full Invested Amount and the date by
which the Invested Amount is expected to equal the Full Invested Amount. The
Invested Amount will increase as Receivables are delivered to the Trust or as
the Invested Amounts of other Series of the Trust are reduced. The Invested
Amount may also decrease due to the occurrence of a Pay-Out Event with respect
to such Series as provided in the related Prospectus Supplement.
The Transferors do not have any present intention of permitting the
duration of any Funding Period to be greater than one year.
During the Funding Period, funds on deposit in the Pre-Funding Account for
a Series of Certificates will be withdrawn and paid to the Transferors to the
extent of any increases in the Invested Amount. If the Invested Amount does not
for any reason equal the Full Invested Amount by the end of the Funding Period,
any amount remaining in the Pre-Funding Account and any additional amounts
specified in the related Prospectus Supplement will be payable to the
Certificateholders of such Series in the manner and at such time as set forth in
the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, moneys in the
Pre-Funding Account will be invested by the Trustee in Eligible Investments or
will be subject to a guaranteed rate or investment agreement or other similar
arrangement, and, in connection with each Distribution Date during the Funding
Period, investment earnings on funds in the Pre-Funding Account during the
related Monthly Period will be withdrawn from the Pre-Funding Account and
deposited, together with any applicable payment under a guaranteed rate or
investment
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agreement or other similar arrangement, into the Collection Account for
distribution in respect of interest on the Certificates of the related Series in
the manner specified in the related Prospectus Supplement.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES
'DEFAULTED RECEIVABLES' for any Monthly Period are Principal Receivables
that were charged-off as uncollectible in such Monthly Period. The 'DEFAULTED
AMOUNT' for any Monthly Period will be an amount (not less than zero) equal to
(a) the amount of Defaulted Receivables for such Monthly Period minus (b) the
amount of any Defaulted Receivables with respect to which any Transferor or the
Servicer becomes obligated to accept reassignment or assignment during such
Monthly Period (unless an event relating to bankruptcy, receivership,
liquidation, conservatorship or insolvency has occurred with respect to such
Transferor or the Servicer, in which event the amount of such Defaulted
Receivables will not be added to the sum so subtracted). Receivables in any
Account will be charged-off as uncollectible in accordance with the account
guidelines and the Servicer's customary and usual policies and procedures for
servicing charge and other credit account receivables comparable to the
Receivables. The current policy of Centurion is to charge-off the receivables in
an Account when the Account is six contractual payments past due (i.e.,
approximately 180 days from initial billing) or sooner if the death or
bankruptcy of the Account holder has been confirmed, but such policy may change
in the future to conform with regulatory requirements and applicable law.
If the Servicer adjusts downward the amount of any Principal Receivable
(other than Ineligible Receivables that have been, or are to be, reassigned to a
Transferor) because of a rebate, refund, counterclaim, defense, error,
fraudulent charge or counterfeit charge to an Account holder, or such Principal
Receivable was created in respect of merchandise that was refused or returned by
an Account holder, or if the Servicer otherwise adjusts downward the amount of
any Principal Receivable without receiving collections therefor or charges off
such amount as uncollectible, the amount of the Principal Receivables in the
Trust with respect to the Monthly Period in which such adjustment takes place
will be reduced by the amount of the adjustment. Furthermore, in the event that
the exclusion of any such Receivables would cause the Transferor Amount at such
time to be less than the Required Transferor Amount, the Transferors will be
required to pay an amount equal to such deficiency into the Special Funding
Account.
CREDIT ENHANCEMENT
General. For any Series, Credit Enhancement may be provided with respect
to one or more Classes thereof. Credit Enhancement with respect to one or more
Classes of a Series offered hereby may include a letter of credit, cash
collateral guaranty, cash collateral account, collateral interest, surety bond,
insurance policy, spread account, guaranteed rate agreement, maturity liquidity
facility, tax protection agreement, interest rate swap agreement, interest rate
cap agreement, or any combination of the foregoing. Credit Enhancement may also
be provided to a Class or Classes of a Series by subordination provisions that
require distributions of principal or interest be made with respect to the
Certificates of such Class or Classes before distributions are made to one or
more Classes of such Series. If so specified in the related Prospectus
Supplement, any form of Credit Enhancement may be available to more than one
Class or Series to the extent described therein.
The presence of Credit Enhancement with respect to a Class is intended to
enhance the likelihood of receipt by Certificateholders of such Class of the
full amount of principal and interest with respect thereto and to decrease the
likelihood that such Certificateholders will experience losses. However, unless
otherwise specified in the related Prospectus Supplement, the Credit
Enhancement, if any, with respect thereto 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 that exceed
the amount covered by the Credit Enhancement or that are not covered by the
Credit Enhancement, Certificateholders will bear their allocable share of such
losses. In addition, if specific Credit Enhancement is provided for the benefit
of more than one Class or Series, Certificateholders of any such Class or Series
will be subject to the risk that such Credit Enhancement will be exhausted by
the claims of Certificateholders of other Classes or Series.
If Credit Enhancement is provided with respect to a Series offered hereby,
the related Prospectus Supplement will include a description of (a) the amount
payable under such Credit Enhancement, (b) any conditions to payment thereunder
not otherwise described herein, (c) the conditions (if any) under which the
amount payable under such Credit Enhancement may be reduced and under which such
Credit Enhancement may be terminated or replaced and (d) any provisions of any
agreement relating to such Credit Enhancement material to the Certificateholders
of such Series. Additionally, in certain cases, the related Prospectus
Supplement may set forth certain information with respect to the provider of any
third-party Credit Enhancement (the 'CREDIT ENHANCER'), including (i) a brief
description of its principal business activities, (ii) its principal place of
business, place of incorporation or the jurisdiction under which it is chartered
or licensed to do business, (iii) if
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applicable, the identity of regulatory agencies that exercise primary
jurisdiction over the conduct of its business and (iv) its total assets, and its
stockholders' or policyholders' surplus, if applicable, as of a date specified
in the Prospectus Supplement. If so described in the related Prospectus
Supplement, Credit Enhancement with respect to a Series offered hereby may be
available to pay principal of the Certificates of such Series following the
occurrence of certain Pay-Out Events or Reinvestment Events with respect to such
Series. In such event, the Credit Enhancer will have an interest in certain cash
flows in respect of the Receivables to the extent described in such Prospectus
Supplement (a 'COLLATERAL INVESTED AMOUNT') and may be entitled to the benefit
of the Trustee's security interest in the Receivables, in each case subordinated
to the interest of the Certificateholders of such Series.
Subordination. If so specified in the related Prospectus Supplement, one
or more Classes of a Series offered hereby may be subordinated to one or more
other Classes of such Series. If so specified in the related Prospectus
Supplement, the rights of the holders of the subordinated Certificates to
receive distributions of principal or interest on any payment date will be
subordinated to such rights of the holders of the Certificates that are senior
to such subordinated Certificates to the extent set forth in the related
Prospectus Supplement. 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 amounts
available from payments that would otherwise be made to holders of such
subordinated Certificates will be distributed to holders of Certificates that
are senior to such subordinated Certificates. The amount of subordination will
decrease whenever amounts otherwise payable to the holders of subordinated
Certificates are paid to the holders of the Certificates that are senior to such
subordinated Certificates.
Letter of Credit. If so specified in the related Prospectus Supplement, a
letter of credit with respect to a Series or Class of Certificates offered
hereby may be issued by a bank or financial institution specified in the related
Prospectus Supplement (the 'L/C ISSUER'). Subject to the terms and conditions
specified in the related Prospectus Supplement, the L/C Issuer will be obligated
to honor drawings under a letter of credit in an aggregate dollar amount (which
may be fixed or may be reduced as described in the related Prospectus
Supplement), net of unreimbursed payments thereunder, equal to the amount
described in the related Prospectus Supplement. The amount available under a
letter of credit will be reduced to the extent of the unreimbursed payments
thereunder.
Cash Collateral Guaranty or Account. If so specified in the related
Prospectus Supplement, the Certificates of any Class or Series offered hereby
may have the benefit of a guaranty (the 'CASH COLLATERAL GUARANTY') secured by
the deposit of cash or certain permitted investments in an account (the 'CASH
COLLATERAL ACCOUNT'). A Cash Collateral Guaranty or a Cash Collateral Account
with respect to a Class or Series may be fully or partially funded on the Series
Closing Date with respect thereto and the funds on deposit therein will be
invested in Eligible Investments. The amount available to be withdrawn from a
Cash Collateral Guaranty or a Cash Collateral Account will be the lesser of the
amount on deposit in the Cash Collateral Guaranty or the Cash Collateral Account
and an amount specified in the related Prospectus Supplement. The related
Prospectus Supplement will set forth the circumstances under which such
withdrawals will be made from the Cash Collateral Guaranty or the Cash
Collateral Account.
Collateral Interest. If so specified in the related Prospectus Supplement,
support for a Series of Certificates or one or more Classes thereof may be
provided initially by an uncertificated, subordinated interest in the Trust (the
'COLLATERAL INTEREST') in an amount initially equal to a percentage of the
Certificates of such Series specified in such Prospectus Supplement. References
to Collateral Invested Amounts herein include Collateral Interests, if any.
Insurance Policy or Surety Bond. If so specified in the related Prospectus
Supplement, insurance with respect to a Series or Class of Certificates offered
hereby may 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 may be
purchased for the benefit of the holders of any Series or Class of Certificates
offered hereby to assure distributions of interest or principal with respect to
such Series or Class of Certificates in the manner and amount specified in such
Prospectus Supplement.
Spread Account. If so specified in the related Prospectus Supplement,
support for a Series or one or more Classes of a Series offered hereby may be
provided by the periodic deposit of certain available excess cash flow from the
Trust Assets into a spread account intended to assure the subsequent
distributions of interest and principal on the Certificates of such Class or
Series in the manner specified in such Prospectus Supplement.
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Maturity Liquidity Facility. If so specified in the related Prospectus
Supplement, support for a Series or one or more Classes thereof will be provided
by a maturity liquidity facility, which is a financial contract that generally
provides that sufficient principal will be available to retire the Certificates
of such Class or Series at a certain date.
Tax Protection Agreement. If so specified in the related Prospectus
Supplement, the Trustee, on behalf of the Trust, may enter into one or more tax
protection agreements for the benefit of a Class or Series, pursuant to which,
and as more fully described in the related Prospectus Supplement, the provider
of such agreement will make payments to the Trust in the event any withholding
taxes are imposed on payments of interest or principal to the Certificateholders
of the related Series or Class.
Interest Rate Swap Agreements, Guaranteed Rate Agreements and Interest Rate
Cap Agreements. If so specified in the related Prospectus Supplement, the
Trustee, on behalf of the Trust, may enter into one or more interest rate swap
agreements, guaranteed rate agreements, interest rate floor and/or cap
agreements, currency exchange agreements or other derivatives securities
agreements for the benefit of a Class or Series, the terms of which will be
specified in the related Prospectus Supplement.
SERVICER COVENANTS
In the Pooling and Servicing Agreement, the Servicer has agreed, as to each
Receivable and related Account, that it will: (a) duly fulfill all obligations
on its part to be fulfilled under or in connection with the Receivables or the
related Accounts, and will maintain in effect all qualifications required and
comply in all material respects with all requirements of law in order to service
the Receivables and Accounts, the failure to maintain or comply with which would
have a material adverse effect on the Certificateholders; (b) not permit any
rescission or cancellation of the Receivables except as ordered by a court of
competent jurisdiction or other governmental authority; (c) do nothing to impair
the rights of the Certificateholders in the Receivables or the related Accounts;
and (d) not reschedule, revise or defer payments due on the Receivables except
in accordance with its guidelines for servicing receivables.
Under the terms of the Pooling and Servicing Agreement, all Receivables in
an Account will be assigned and transferred to the Servicer and such Account
will no longer be included as an Account if the Servicer discovers, or receives
written notice from the Trustee, that any covenant of the Servicer set forth
above has not been complied with in all material respects and such noncompliance
has not been cured within 60 days (or such longer period as may be agreed to by
the Trustee and the Transferors) thereafter and has a material adverse effect on
the Certificateholders' Interest in such Receivables. Such assignment and
transfer will be made when the Servicer deposits an amount equal to the amount
of such Receivables in the Collection Account on the business day preceding the
Distribution Date following the Monthly Period during which such obligation
arises. This 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 assigned Receivables will
be automatically assigned to the Servicer.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under the
Pooling and Servicing Agreement except (i) upon determination that the
performance of such obligations and duties is no longer permissible under
applicable law or (ii) if such obligations and duties are assumed by an entity
that has satisfied the Rating Agency Condition. No such resignation will become
effective until the Trustee or a successor to the Servicer has assumed the
Servicer's obligations and duties under the Pooling and Servicing Agreement.
Notwithstanding the foregoing, the Servicer may assign part or all of its
obligations and duties as Servicer under the Pooling and Servicing Agreement if
such assignment satisfies the Rating Agency Condition. TRS may assign or
delegate all or part of its rights, duties and obligations as Servicer to
Centurion within the next two years.
Any person into which, in accordance with the Pooling and Servicing
Agreement, the Servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which the Servicer is a party, or any person
succeeding to the business of the Servicer, will be the successor to the
Servicer under the Pooling and Servicing Agreement.
SERVICER DEFAULT
In the event of any Servicer Default (as defined below), either the Trustee
or Certificateholders holding Certificates evidencing more than 50% of the
aggregate unpaid principal amount of all Certificates, by written notice to the
Servicer (and to the Trustee if given by the Certificateholders) (a 'TERMINATION
NOTICE'), may terminate all of the rights and obligations of the Servicer, as
Servicer, under the Pooling and Servicing Agreement and in and to the
Receivables and the proceeds thereof and the Trustee will appoint a new Servicer
(a 'SERVICE TRANSFER'); provided, however, that if no Servicer Default other
than a bankruptcy-, insolvency-, receivership-, or conservatorship-related
Servicer Default exists, the bankruptcy trustee, the receiver or the
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conservator for the Servicer or the Servicer itself as debtor-in-possession may
have the power to prevent the Trustee or Certificateholders from appointing a
successor Servicer. The rights and interest of the Transferors under the Pooling
and Servicing Agreement in the Transferors' Interest will not be affected by any
Termination Notice or Service Transfer. If within 60 days of receipt of a
Termination Notice the Trustee does not receive any bids from eligible Servicers
to act as successor Servicer and receives an officer's certificate from each
Transferor to the effect that the Servicer cannot in good faith cure the
Servicer Default which gave rise to the Termination Notice, the Trustee shall
grant a right of first refusal to the Transferors which would permit the
Transferors at their option to purchase the Certificateholders' Interest on the
Distribution Date in the next calendar month. The purchase price for the
Certificateholders' Interest shall be equal to the sum of the amounts specified
therefor with respect to each outstanding Series in the related Prospectus
Supplement, and for any Certificates offered hereby, in such Prospectus
Supplement.
The Trustee will as promptly as possible, after the giving of a Termination
Notice, appoint a successor Servicer and if no successor Servicer has been
appointed by the Trustee and has accepted such appointment by the time the
Servicer ceases to act as Servicer, all rights, authority, power and obligations
of the Servicer under the Pooling and Servicing Agreement will 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 Pooling and Servicing Agreement to serve as a successor Servicer for
servicing compensation not in excess of the Servicing Fee plus any amounts
payable to the Transferors pursuant to the Pooling and Servicing Agreement.
A 'SERVICER DEFAULT' refers to any of the following events:
(a) failure by the Servicer to make any payment, transfer or deposit,
or to give instructions to the Trustee to make any payment, transfer or
deposit, on the date the Servicer is required to do so under the Pooling
and Servicing Agreement or any Supplement, which is not cured within a five
business day grace period;
(b) failure on the part of the Servicer duly to observe or perform in
any material respect any other covenants or agreements of the Servicer in
the Pooling and Servicing Agreement or any Supplement which has an Adverse
Effect and which continues unremedied for a period of 60 days after written
notice, or the Servicer assigns its duties under the Pooling and Servicing
Agreement, except as specifically permitted thereunder;
(c) any representation, warranty or certification made by the Servicer
in the Pooling and Servicing Agreement, any Supplement or in any
certificate delivered pursuant to the Pooling and Servicing Agreement or
any Supplement proves to have been incorrect in any material respect when
made, which has an Adverse Effect on the rights of the Certificateholders
of any Series, and which material adverse effect continues for a period of
60 days after written notice; or
(d) the occurrence of certain events of bankruptcy, insolvency,
liquidation, receivership or conservatorship with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (a) above for a period of 10 business days after the
applicable grace period or referred to under clauses (b) or (c) for a period of
60 business days after the applicable grace period, will 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 will not be relieved from using its best efforts to
perform its obligations in a timely manner in accordance with the terms of the
Pooling and Servicing Agreement and the Servicer must provide the Trustee, the
Transferors and any provider of Series Enhancement prompt notice of such failure
or delay by it, together with a description of its efforts to so perform its
obligations.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement provides that on or before March 31 of
each calendar year, the Servicer will cause a firm of nationally recognized
independent public accountants (who may also render other services to the
Servicer or the Transferors and any affiliates thereof) to furnish a report to
the effect that such firm has applied certain procedures agreed upon with the
Servicer and examined certain documents and records relating to the servicing of
the Accounts and that, on the basis of such agreed-upon procedures, nothing has
come to the attention of such firm that caused them to believe that such
servicing was not conducted in compliance with the Pooling and Servicing
Agreement and applicable provisions of each Supplement except for such
exceptions or errors as such firm shall believe to be immaterial and such other
exceptions as shall be set forth in such statement. Such report will set forth
the agreed-upon procedures performed.
The Pooling and Servicing 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
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to be, fully performed its obligations in all material respects under the
Pooling and Servicing Agreement throughout the preceding year or, if there has
been a default in the performance of any such obligation, specifying the nature
and status of the default.
Copies of all statements, certificates and reports furnished to the Trustee
may be obtained by a request in writing delivered to the Trustee.
AMENDMENTS
The Pooling and Servicing Agreement and any Supplement may be amended from
time to time (including, without limitation, in connection with the issuance of
a Supplemental Certificate, addition of a Participation Interest, allocation of
assets in the Trust to a Series or Group, the designation of Additional
Transferors, the addition to the Trust of receivables arising from charge or
credit accounts other than the Revolving Credit Accounts or to change the
definition of Monthly Period, Determination Date or Distribution Date) by the
Servicer, the Transferors and the Trustee, and without the consent of the
Certificateholders of any Series, provided that (x) the Rating Agency Condition
shall have been satisfied and (y) each Transferor shall have delivered to the
Trustee a certificate of an officer of such Transferor to the effect that such
Transferor reasonably believes that such amendment will not have an Adverse
Effect.
The Pooling and Servicing Agreement or any Supplement may be amended by the
Transferors, the Servicer and the Trustee with the consent of the
Certificateholders evidencing not less than 66 2/3% of the aggregate unpaid
principal amount of the Certificates of all affected Series for which the
Transferors have not delivered an officer's certificate stating that there will
be no Adverse Effect, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Pooling and Servicing
Agreement or any Supplement or of modifying in any manner the rights of
Certificateholders. No such amendment, however, may (a) reduce in any manner the
amount of, or delay the timing of, deposits or distributions on any Certificate
without the consent of each Certificateholder, (b) (i) change the definition or
the manner of calculating the Certificateholders' Interest or the Invested
Amount or (ii) reduce the aforesaid percentage of the aggregate unpaid principal
amount of the Certificates the holders of which are required to consent to any
such amendment, in each case without the consent of each Certificateholder or
(c) adversely affect the rating of any Series or Class by the Rating Agency
without the consent of the Holders of Certificates of such Series or Class
evidencing not less than 66 2/3% of the aggregate unpaid principal amount of the
Certificates of such Series or Class. Promptly following the execution of any
amendment to the Pooling and Servicing Agreement (other than an amendment
described in the preceding paragraph), the Trustee will furnish written notice
of the substance of such amendment to each Certificateholder. Notwithstanding
the foregoing, any Supplement executed in connection with the issuance of one or
more new Series of Certificates will not be considered an amendment to the
Pooling and Servicing Agreement.
Additionally, the Pooling and Servicing Agreement and any Supplement will
be amended by the Servicer and the Trustee at the direction of the Transferors
without the consent of any of the Certificateholders (i) to add, modify or
eliminate such provisions as may be necessary or advisable in order to enable
all or a portion of the Trust to qualify as, and to permit an election to be
made to cause all or a portion of the Trust to be treated as, a 'financial asset
securitization investment trust' as described in the provisions of the 'Seven
Year Balanced Budget Act of 1995,' H.R. 2491, 104th Cong., 1st Sess. (1995), or
to enable all or a portion of the Trust to qualify and an election to be made
for similar treatment under such comparable subsequent federal income tax
provisions as may ultimately be enacted into law, and (ii) in connection with
any such election, to modify or eliminate existing provisions of the Pooling and
Servicing Agreement and any Supplement relating to the intended federal income
tax treatment of the Certificates and the Trust in the absence of the election.
See 'Tax Matters--Federal Income Tax Consequences--General--Pending
Legislation.' It is a condition to any such amendment that each Rating Agency
will have notified the Transferors, the Servicer and the Trustee in writing that
the amendment will not result in a reduction or withdrawal of the rating of any
outstanding Series or Class to which it is a Rating Agency. The amendments which
the Transferors may make in connection with any election described above without
the consent of Certificateholders may include, without limitation, the
elimination of any sale of Receivables and subsequent termination of the Trust
upon the occurence of an Insolvency Event. See 'Certain Legal Aspects of the
Receivables--Certain Matters Relating to Insolvency and Receivership.'
DEFEASANCE
Pursuant to the Pooling and Servicing Agreement, the Transferors may
terminate their substantive obligations in respect of a Series or the Pooling
and Servicing Agreement (the 'DEFEASED SERIES') by depositing with the Trustee,
under the terms of an irrevocable trust agreement satisfactory to the Trustee,
from amounts representing or acquired with collections on the Receivables
(allocable to the Defeased Series and available to purchase additional
Receivables) monies or Eligible Investments sufficient to make all remaining
scheduled
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interest and principal payments on the Defeased Series on the dates scheduled
for such payments and to pay all amounts owing to any provider of Series
Enhancement. To achieve that end, Transferors have the right to use collections
on Receivables to purchase Eligible Investments rather than additional
Receivables. Prior to the first exercise of their right to substitute monies or
Eligible Investments for Receivables, the Transferors shall deliver (i) to the
Trustee an opinion of counsel with respect to such deposit and termination of
obligations to the effect that, for federal income tax purposes, such action
would not cause the Trust to be deemed to be an association (or publicly traded
partnership) taxable as a corporation; and (ii) to the Servicer and the Trustee
written notice from each Rating Agency that the Rating Agency Condition shall
have been satisfied. In addition, the Transferors must comply with certain other
requirements set forth in the Pooling and Servicing Agreement, including
requirements that the Transferors deliver to the Trustee an opinion of counsel
to the effect that the deposit and termination of obligations will not require
the Trust to register as an 'investment company' within the meaning of the
Investment Company Act of 1940, as amended, and that the Transferors deliver to
the Trustee and certain providers of Series Enhancement a certificate of an
authorized officer stating that, based on the facts known to such officer at the
time, in the reasonable opinion of the Transferors, such deposit and termination
of obligations will not at the time of its occurrence cause a Pay-Out Event or a
Reinvestment Event or an event that, after the giving of notice or the lapse of
time would constitute a Pay-Out Event or a Reinvestment Event, to occur with
respect to any Series. If the Transferors discharge their substantive
obligations in respect of the Defeased Series, any Series Enhancement for the
affected Series might no longer be available to make payments with respect
thereto.
Upon the making of any deposit described in the preceding paragraph, the
holders of the Certificates of the Defeased Series could recognize taxable gain
for federal income tax purposes to the extent that the value of the affected
Certificates exceeds the tax basis therein, but in no event would be allowed to
deduct a taxable loss for such purposes.
LIST OF CERTIFICATEHOLDERS
Upon written request of any Holder or group of Holders of Certificates of
any Series or of all outstanding Series of record holding Certificates
evidencing not less than 10% of the aggregate unpaid principal amount of the
Certificates of such Series or all Series, as applicable, the Trustee will
afford such Holder or Holders of Certificates access during business hours to
the current list of Certificateholders of such Series or of all outstanding
Series, as the case may be, for purposes of communicating with other Holders of
Certificates with respect to their rights under the Pooling and Servicing
Agreement. See 'Description of the Certificates--Book-Entry Registration' and
'--Definitive Certificates.'
The Pooling and Servicing Agreement will not provide for any annual or
other meetings of Certificateholders.
THE TRUSTEE
The Bank of New York will act as trustee under the Pooling and Servicing
Agreement. The Corporate Trust Department of The Bank of New York is located at
101 Barclay Street, New York, New York 10286. The Transferors and 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 or
the Transferors 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. In
addition, for purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee shall have the power to appoint a co-trustee or
separate trustees of all or any part of the Trust. In the event of such
appointment, all rights, powers, duties and obligations shall be conferred or
imposed upon the Trustee and such separate trustee or co-trustee jointly, or, in
any jurisdiction in which the Trustee shall be incompetent or unqualified to
perform certain acts, singly upon such separate trustee or co-trustee, who shall
exercise and perform such rights, powers, duties and obligations solely at the
direction of the Trustee.
DESCRIPTION OF THE PURCHASE AGREEMENTS
The following summary is qualified in its entirety by reference to the
Credco Purchase Agreement and the RFC II Purchase Agreement, forms of which are
filed as exhibits to the Registration Statement of which this Prospectus is a
part and which are incorporated by reference herein.
Sale of Receivables. The Receivables transferred to the Trust by RFC II
were acquired by RFC II from Credco pursuant to the RFC II Purchase Agreement.
The Receivables transferred to RFC II by Credco have been acquired by Credco
from Centurion pursuant to the Credco Purchase Agreement entered into between
Centurion, as seller of certain of the Receivables, and Credco, as purchaser. In
connection with such sale of the Receivables to Credco, Centurion has (i) filed
appropriate UCC financing statements to evidence such sale and perfect
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Credco's right, title and interest in such Receivables and (ii) indicated in its
computer files that the Receivables have been sold to Credco by Centurion and
that such Receivables will be sold or transferred by Credco to RFC II.
Pursuant to the RFC II Purchase Agreement, Credco (the 'SELLER' under the
RFC II Purchase Agreement) sold to RFC II all of its right, title and interest
in and to (i) all of the Receivables existing in the Accounts as of the Initial
Cut-Off Date and (ii) Recoveries allocable to such Receivables. In addition,
Credco may also sell the Receivables in Additional Accounts designated from time
to time for inclusion as Accounts as of the date of such designation.
In connection with such sale of Receivables to RFC II, Credco will indicate
in its files that such Receivables have been sold to RFC II by Credco and that
such Receivables will be sold or transferred by RFC II to the Trust. The records
and agreements relating to the Accounts and Receivables may not be segregated by
Credco from other documents and agreements relating to other credit accounts and
receivables. Credco and RFC II will file UCC financing statements meeting the
requirements of applicable state law in each of the jurisdictions necessary to
perfect the ownership or security interest of RFC II in such Receivables. See
'Risk Factors--Potential Priority of Certain Liens' and '--Certain Matters
Relating to the Insolvency or Receivership of a Transferor or Other Holder of
the Original Transferor Certificate' and 'Certain Legal Aspects of the
Receivables.'
Pursuant to the Pooling and Servicing Agreement, Centurion will, subject to
certain conditions, designate Additional Accounts to be included as Accounts,
the Receivables of which will be conveyed by Centurion to the Trust pursuant to
the Pooling and Servicing Agreement and, if Credco owns any such Receivables, by
Credco to RFC II, for conveyance by RFC II to the Trust, pursuant to the RFC II
Purchase Agreement. See 'The Pooling and Servicing Agreement
Generally--Additions of Accounts or Participation Interests.'
Representations and Warranties. In the RFC II Purchase Agreement, Credco
represents and warrants to RFC II to the effect that, among other things, as of
the date of the RFC II Purchase Agreement and, if Credco will own any
Receivables in any designated Additional Accounts, as of the date of designation
of such Additional Accounts, it is duly organized and in good standing and has
the authority to consummate the transactions contemplated by such RFC II
Purchase Agreement. In the RFC II Purchase Agreement, Credco additionally
represents and warrants that as of the Initial Cut-Off Date and, if Credco will
own any Receivables in any designated Additional Accounts, as of each date of
designation of such Additional Accounts, each Receivable transferred thereunder
was, or is on such date of designation, an Eligible Receivable. In the event of
a breach of any representation and warranty set forth in the RFC II Purchase
Agreement which results in the requirement that RFC II accept retransfer of an
Ineligible Receivable under the Pooling and Servicing Agreement, then Credco
shall repurchase such Ineligible Receivable from RFC II on the date of such
retransfer. The purchase price for such Ineligible Receivables shall be the
principal amount thereof plus applicable finance charges.
Credco also represents and warrants to RFC II in the RFC II Purchase
Agreement that, among other things, as of the date of the RFC II Purchase
Agreement and, if Credco will own any Receivables in any designated Additional
Accounts, as of each date of designation of such Additional Accounts (a) the RFC
II Purchase Agreement constitutes a valid and binding obligation of Credco and
(b) the RFC II Purchase Agreement constitutes a valid sale to RFC II of all
right, title and interest of Credco in and to the Receivables existing in the
Accounts as of the Initial Cut-Off Date and, if Credco will own any Receivables
in any designated Additional Accounts, as of each date of designation of such
Additional Accounts and in the proceeds thereof. If the breach of any of the
representations and warranties described in this paragraph results in the
obligation of RFC II under the Pooling and Servicing Agreement to accept
retransfer of the Receivables, Credco will repurchase the Receivables
retransferred to RFC II for an amount of cash at least equal to the amount of
cash RFC II is required to deposit under the Pooling and Servicing Agreement in
connection with such retransfer.
Amendments. The RFC II Purchase Agreement may be amended by RFC II and
Credco without the consent of the Certificateholders. No such amendment,
however, may have an Adverse Effect and no such amendment may change, modify,
delete or add any other obligation of Credco or RFC II unless the Rating Agency
Condition has been satisfied with respect to such amendment.
Termination. The RFC II Purchase Agreement will terminate immediately
after the Trust terminates. In addition, if a bankruptcy trustee, receiver or
conservator is appointed for Centurion or Credco or certain other liquidation,
bankruptcy or insolvency events occur, Credco will immediately cease to sell
Receivables to RFC II and promptly give notice of such event to RFC II and the
Trustee, unless the bankruptcy trustee, receiver or conservator instructs
otherwise.
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CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
Each of Centurion and RFC II in the Pooling and Servicing Agreement, and
Credco in the RFC II Purchase Agreement, will represent and warrant that its
respective transfers of Receivables constitute valid sales and assignments of
all of its respective right, title and interest in and to the Receivables,
except for the interest of each Transferor as a holder of a Transferor
Certificate. Each Transferor will also represent and warrant that, if the
transfer of Receivables by such Transferor to the Trust is deemed to create a
security interest under the UCC, there will exist a valid first-priority
perfected security interest in such Transferor's rights in the Receivables in
existence at the time of the formation of the Trust or at the date of
designation of any Additional Accounts that include Receivables owned by it, as
the case may be, in favor of the Trust and a valid first-priority perfected
security interest in such Transferor's rights in the Receivables created
thereafter in favor of the Trust on and after their creation, in each case until
termination of the Trust. For a discussion of the Trust's rights arising from
these representations and warranties not being satisfied, see 'The Pooling and
Servicing Agreement Generally-- Representations and Warranties.'
Each of Centurion and RFC II in the Pooling and Servicing Agreement, and
Credco in the RFC II Purchase Agreement, will represent that the Receivables are
'accounts' or 'general intangibles' for purposes of the UCC. Both the sale of
accounts and the transfer of accounts as security for an obligation are treated
under the UCC as creating a security interest therein and are subject to its
provisions and the filing of an appropriate financing statement or statements is
required to perfect the interest of the Trust in the Receivables. If a transfer
of general intangibles is deemed to create a security interest, the UCC applies
and filing an appropriate financing statement or statements is also required in
order to perfect the Trust's security interest. Financing statements covering
the Receivables will be filed under the UCC to protect the Transferors and the
Trust if any of the transfers of Receivables is deemed to be subject to the UCC.
If a transfer of general intangibles is deemed to be a sale, then the UCC is not
applicable and no further action under the UCC is required although action may
be required under other applicable law to protect the Trust's interest from
third parties.
There are certain limited circumstances under the UCC in which prior or
subsequent transferees of Receivables coming into existence after a Series
Closing Date could have an interest in such Receivables with priority over the
Trust's interest. A tax, governmental lien or other nonconsensual lien on
property of a Transferor or Credco arising prior to the time a Receivable comes
into existence may also have priority over the interest of the Trust in such
Receivable. Furthermore, if the FDIC were appointed as a receiver or conservator
of Centurion, certain administrative expenses of the receiver or conservator may
also have priority over the interest of the Trust in such related Receivables.
Under the RFC II Purchase Agreement, however, Credco will warrant that it has
transferred the Receivables to RFC II free and clear of the lien of any third
party. In addition, Credco will covenant that it will not sell, pledge, assign,
transfer or grant any lien on any Receivable (or any interest therein) other
than to RFC II. Similarly, under the Pooling and Servicing Agreement, each
Transferor will warrant that it has transferred the Receivables to the Trust
free and clear of the lien of any third party, and each Transferor will covenant
that it will not sell, pledge, assign, transfer, or grant any lien on any
Receivables (or any interest therein) other than to the Trust. While TRS or an
affiliate of TRS is the Servicer, cash collections on the Receivables may be
held by TRS or an affiliate of TRS and commingled with its funds for brief
periods and, in the event of the bankruptcy, insolvency, receivership or
conservatorship of TRS or an affiliate of TRS, the Trust may not have a
perfected interest in such commingled collections.
CERTAIN MATTERS RELATING TO INSOLVENCY AND RECEIVERSHIP
Centurion has represented and warranted that the transfer of Receivables to
Credco pursuant to the Credco Purchase Agreement is a valid sale and assignment
of such Receivables from Centurion to Credco. Centurion also represents and
warrants in the Pooling and Servicing Agreement that the transfer of the
Receivables by it to the Trust pursuant to the Pooling and Servicing Agreement
is either a valid sale and assignment of such Receivables to the Trust or the
grant to the Trust of a security interest in the Receivables. The FDIA, as
amended, sets forth certain powers that the FDIC could exercise if it were
appointed conservator or receiver of Centurion. Subject to clarification by
regulations or interpretations, positions taken by the staff of the FDIC prior
to the passage of FIRREA do not suggest that the FDIC, as receiver or
conservator for Centurion, would interfere with the timely transfer to the Trust
of payments collected on the Receivables. If, however, the FDIC were to assert a
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contrary position, such as requiring Credco or the Trustee to establish its
right to payments by submitting to and completing the administrative claims
procedures under the FDIA, or the conservator or receiver were to request a stay
of proceedings with respect to Centurion as provided under the FDIA, delays in
payment on outstanding Series of Certificates and possible reductions in the
amount of those payments could occur. In the event Centurion's transfer of
Receivables to the Trust or Centurion's sale of the Receivables to Credco, as
applicable, is deemed to constitute the creation of a security interest, such a
security interest, to the extent it was validly perfected before the insolvency
of Centurion and was not taken or granted in contemplation of insolvency, or
with the intent to hinder, delay or defraud Centurion, the FDIA provides that
such security interest should not be subject to avoidance by the FDIC, as
receiver or conservator. If, however, the FDIC were to assert a contrary
position, such as requiring Credco, RFC II or 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 as provided under the FDIA, delays in
payments on the Certificates and possible reductions in the amount of those
payments could occur. Upon the occurrence of an Insolvency Event with respect to
Centurion, if no Pay-Out Event other than such Insolvency Event exists, the FDIC
may have the power to continue to require Centurion to transfer new Principal
Receivables to the Trust and to prevent the early sale, liquidation, foreclosure
or disposition of the Receivables and the commencement of an Early Amortization
Period or Reinvestment Period. A conservator or receiver of Centurion may also
have the power to cause the early sale of the Receivables and the early
retirement of the Certificates of each Series. A receiver or conservator also
may disaffirm or repudiate Centurion's obligations under the Pooling and
Servicing Agreement to accept reassignment of Receivables from the Trust under
certain conditions.
In addition, if Credco were to become a debtor in a bankruptcy case and a
creditor or bankruptcy trustee of Credco or Credco as a debtor-in-possession
were to take the position that the sale of Receivables from Credco to RFC II
should be recharacterized as a pledge of such Receivables to secure a borrowing
by Credco, then delays in payments of collections of Receivables to RFC II (and
therefore to the Trust and the Certificateholders) could occur and possible
reductions in the amount of such payments could result.
In a case decided by the U.S. Court of Appeals for the Tenth Circuit,
Octagon Gas System, Inc. v. Rimmer, the court determined that 'accounts,' as
defined under the UCC, and which could include the Receivables, may properly be
included in the bankruptcy estate of a transferor regardless of whether the
transfer of such Receivables is treated as a sale or a secured loan. The
circumstances under which the Octagon ruling would apply are not fully known and
the extent to which the Octagon decision will be followed in other courts or
outside of the Tenth Circuit is not certain. Substantially all of Credco's
business is conducted outside the geographic area subject to the jurisdiction of
the Tenth Circuit. However, TRS has an operation center in, and Centurion is
based in Utah, which is inside the geographic area subject to the jurisdiction
of the Tenth Circuit. If the findings in the Octagon case were applied in a
Credco bankruptcy, the Receivables would be part of its bankruptcy estate, would
be subject to claims of creditors of Credco and would be subject to the
potential delays and reductions in payments to RFC II and the Certificateholders
described in the preceding paragraph even if the transfer is treated as a sale.
While TRS or an affiliate of TRS is the Servicer, for as long as the
Servicer's short-term credit rating (which may be an implied rating) is at least
A-1 by S&P and P-1 by Moody's cash collections held by the Servicer may be
commingled and used for the benefit of the Servicer prior to each Distribution
Date and, in the event of the bankruptcy, insolvency, receivership or
conservatorship of the Servicer or, in certain circumstances, the lapse of
certain time periods, the Trust may not have a perfected security interest in
such collections. However, if, while TRS or an affiliate of TRS is the Servicer,
the short-term credit rating of the Servicer (which may be an implied rating) is
reduced below A-1 by S&P and P-1 by Moody's (or such other rating below A-1 or
P-1, as the case may be, which is acceptable to such Rating Agency), within five
business days of such reduction, the Servicer will begin to deposit collections
directly into the Collection Account within two business days of each Date of
Processing unless (i) the Servicer has obtained a guarantee with respect to its
deposit and payment obligations under the Pooling and Servicing Agreement
pursuant to a guaranty (in form and substance satisfactory to the Rating
Agencies) from a guarantor that has a short-term credit rating of at least A-1
or P-1 from each applicable Rating Agency (or such other rating below A-1 or
P-1, as the case may be, which is acceptable to such Rating Agency) or (ii) the
Rating Agency Condition shall be satisfied with respect to the Servicer's
inability to satisfy the rating requirement described above. In the event of a
Servicer Default relating to the bankruptcy or insolvency of the Servicer, if no
Servicer Default other than such bankruptcy-, insolvency-, receivership- or
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conservatorship- related Servicer Default exists, the bankruptcy trustee,
receiver or conservator for the Servicer or the Servicer itself as
debtor-in-possession may have the power to prevent either the Trustee or the
Certificateholders from appointing a successor Servicer. In addition, if the
Servicer becomes a debtor-in-possession in a bankruptcy case, the Servicer's
rights under the Pooling and Servicing Agreement (including the right to service
the Receivables) would be property of the estate of the Servicer and, therefore,
under the Bankruptcy Code, subject to the Servicer's right to assume or reject
such agreement. See 'The Pooling and Servicing Agreement Generally--Servicer
Default.'
RFC II has been structured such that (i) the voluntary or involuntary
petition for relief by or against RFC II under the Bankruptcy Code and (ii) the
substantive consolidation of the assets and liabilities of RFC II with those of
TRS are unlikely. RFC II is a separate, limited purpose subsidiary, the
certificate of incorporation of which contains limitations on the nature of RFC
II's business and restrictions on the ability of RFC II to commence a voluntary
case or proceeding under such laws without the prior unanimous consent of all
directors. See 'RFC II, Credco, Centurion and TRS--RFC II.'
Each Transferor will take all actions that are required under the UCC to
perfect the Trust's interest in the Receivables and each Transferor has
warranted to the Trust that the Trust will have a first-priority security
interest therein and, with certain exceptions, in the proceeds thereof.
Nevertheless, a tax or government lien or other non-consensual lien on property
of a Transferor arising prior to the time a Receivable is conveyed to the Trust
may have priority over the interest of the Trust in such Receivable. Pursuant to
the Pooling and Servicing Agreement, the Trustee will covenant that it will not
at any time institute against a Transferor any bankruptcy, reorganization,
liquidation, receivership, conservatorship or other proceedings under any
federal or state bankruptcy or similar law. Notwithstanding such steps, if a
Transferor were to become a debtor in a bankruptcy case, and a bankruptcy
trustee, receiver or conservator for such Transferor or a creditor of such
Transferor or the costs and liabilities such Transferor as a
debtor-in-possession were to take the position that the transfer of the
Receivables from such Transferor to the Trust should be recharacterized as a
pledge of such Receivables, then delays in payments on the Certificates and
possible reductions in the amount of such payments could result.
If an Insolvency Event occurs, the Transferors will promptly give notice
thereof to the Trustee and a Pay-Out Event or Reinvestment Event will occur with
respect to each Series. Pursuant to the Pooling and Servicing Agreement, newly
created Receivables will not be transferred to the Trust on and after any such
Insolvency Event unless the bankruptcy trustee, receiver or conservator
instructs otherwise. Following the occurrence of an Insolvency Event with
respect to any Transferor or holder of the Original Transferor Certificate, the
Trustee will proceed to sell, dispose of or otherwise liquidate the Receivables
in a commercially reasonable manner and on commercially reasonable terms, unless
within a specified period of time Certificateholders representing undivided
interests aggregating more than 50% of the Invested Amount of each Series of
Certificates issued and outstanding (or, with respect to any Series with two or
more Classes, 50% of the Invested Amount of each Class), each Transferor (or
other holder of the Original Transferor Certificate) not then subject to an
Insolvency Event, each holder of a Supplemental Certificate, and possibly
certain other persons designated by the Transferors to the Trustee prior to the
Insolvency Event instruct otherwise (assuming that the bankruptcy trustee,
conservator or receiver does not order such a sale despite such instructions).
The proceeds from the sale of the Receivables would be treated as collections of
the Receivables and deposited into the Collection Account and after distribution
of such amounts the Trust will terminate. This procedure could be delayed and
proceeds may be insufficient to pay Certificateholders in full, as described
above. In addition, upon the occurrence of an Insolvency Event with respect to
any Transferor or holder of the Original Transferor Certificate, if no Pay-Out
Event or Reinvestment Event other than such Insolvency Event exists, the
bankruptcy trustee, receiver or conservator for such Transferor or holder, or
such Transferor or holder as a debtor-in-possession, may have the power to
prevent the early sale, liquidation or disposition of the Receivables and the
commencement of the Early Amortization Period or Early Accumulation Period. See
'Description of the Certificates--Pay-Out Events and Reinvestment 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, the most significant federal
laws include the Federal Truth-in-Lending, Equal Credit Opportunity, Fair Credit
Reporting and Fair Debt
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Collection Practices Acts. These 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 the revolving
credit account 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 revolving 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 Pooling and Servicing Agreement to indemnify the
Trust, among other things, for any liability arising from such violations. For a
discussion of the Trust's rights if the Receivables were not created in
compliance in all material respects with applicable laws, see 'The Pooling and
Servicing Agreement Generally--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 'The Pooling and Servicing
Agreement Generally--Defaulted Receivables; Rebates and Fraudulent Charges.'
TAX MATTERS
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 Pooling and Servicing 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 Pooling and Servicing 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, the Pooling and Servicing Agreement generally refers to the
transfer of Receivables as a 'sale,' and because different criteria are used in
determining the non-tax accounting treatment of the transaction, the Transferors
will treat the Pooling and Servicing 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
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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 transferor has 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
federal income tax counsel to the Transferors ('TAX COUNSEL'), is of the opinion
that, under current law as in effect on the Series 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 Pooling and Servicing 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 Original Transferor Certificate) in the Trust
were characterized as debt, the Trust might be characterized as a security
arrangement for debt collateralized by the Receivables and issued directly by
the Transferors (or other holders of the Original Transferor Certificate). Under
such a view, the Trust would be disregarded for federal income tax purposes.
Alternatively, if some of the Transferor Certificate, the Certificates and other
interests in the Trust were characterized as equity therein, 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 Original
Transferor Certificate) and any other holders of equity interests in the Trust.
However, Tax Counsel is of the opinion that, under current law as in effect on
the Series Closing Date, any such entity constituted by the Trust will not be an
association or publicly traded partnership taxable as a corporation.
Possible Treatment of the Trust as a Partnership or a Publicly Traded
Partnership. Although, as described above, Tax Counsel is of the opinion that
the Certificates will properly be treated as debt for federal income tax
purposes and that the Trust will not be treated as an association or publicly
traded partnership taxable as a corporation, such opinion does not bind the IRS
and thus no assurance can be given that such treatment will prevail. Further,
such opinion is made with respect to current law, which is subject to change. If
the IRS were to contend successfully that some or all of the Transferor
Certificates, the Certificates or any other interests 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 Tax 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, applicable Treasury
regulations (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, the Trust would not 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
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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 Transferor expects 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 were treated as a partnership other than 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 Original 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. 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
the Trust to elect to be an 'electing large partnership.' The consequence of
such election to investors could include the determination of certain tax items
at the partnership level and the disallowance of otherwise allowable deductions.
No representation is made as to whether such election will be made.
If the arrangement created by the Pooling and Servicing 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).
TREATMENT OF THE TRUST AS A FASIT
The Small Business Job Protection Act of 1996 (the 'BILL'), enacted on
August 20, 1996, created a new type of entity for federal income tax purposes
called a 'financial asset securitization investment trust' or 'FASIT.' The Bill
generally provides that certain arrangements similar to the Trust may elect to
be treated as a FASIT. Under the FASIT provisions of the Bill, a FASIT will
generally 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. Upon satisfying certain conditions set forth in the
Pooling and Servicing Agreement, the Transferors will be permitted to amend the
Pooling and Servicing Agreement and any Supplement in order to enable all of a
portion of the Trust to qualify as a FASIT and to permit a FASIT election to be
made with respect thereto, and to make such modifications to the Pooling and
Servicing Agreement and any Supplement as may be permitted by reason of the
making of such election. See 'The Pooling and Servicing Agreement Generally--
Amendments.' 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 Pooling and Servicing Agreement or any Supplement in
connection with any election. If such election is made, it may cause a holder to
recognize gain (but
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not loss) 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. Additionally, any such election and any related
amendments to the Pooling and Servicing Agreement and any 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 permitted related amendments on them in
their particular circumstances.
TAXATION OF INTEREST INCOME OF U.S. CERTIFICATE OWNERS
General. Stated interest on a beneficial interest in a Certificate will be
includible in gross income in accordance with a U.S. Certificate Owner's method
of accounting.
Original Issue Discount. If the Certificates are issued with original
issue discount ('OID'), the provisions of sections 1271 through 1273 and 1275 of
the Internal Revenue Code of 1986 (the 'CODE') will apply to the Certificates.
Under those provisions, a U.S. Certificate Owner (including a cash basis holder)
generally would be required to accrue the OID on its interest in a Certificate
in income for federal income tax purposes on a constant yield basis, resulting
in the inclusion of OID in income somewhat in advance of the receipt of cash
attributable to that income. In general, a Certificate will be treated as having
OID to the extent that its 'stated redemption price' exceeds its 'issue price,'
if such excess is more than 0.25 percent multiplied by the weighted average life
of the Certificate (determined by taking into account only the number of
complete years following issuance until payment is made for any partial
principal payments). Under section 1272(a)(6) of the Code, special provisions
apply to debt instruments on which payments may be accelerated due to
prepayments of other obligations securing those debt instruments. However, no
regulations have been issued interpreting those provisions, and the manner in
which those provisions would apply to the Certificates is unclear. Additionally,
the IRS could take the position based on Treasury regulations that none of the
interest payable on a Certificate is 'unconditionally payable' and hence that
all of such interest should be included in the Certificate's stated redemption
price at maturity. If sustained, such treatment should not significantly affect
the tax liability of most Certificate Owners, but prospective U.S. Certificate
Owners should consult their own tax advisers concerning the impact to them in
their particular circumstances.
Market Discount. A U.S. Certificate Owner who purchases an interest in a
Certificate at a discount that exceeds any unamortized OID may be subject to the
'market discount' rules of sections 1276 through 1278 of the Code. These rules
provide, in part, that gain on the sale or other disposition of a Certificate
and partial principal payments on a Certificate are treated as ordinary income
to the extent of accrued market discount. The market discount rules also provide
for deferral of interest deductions with respect to debt incurred to purchase or
carry a Certificate that has market discount.
Market Premium. A U.S. Certificate Owner who purchases an interest in a
Certificate at a premium may elect to offset the premium against interest income
over the remaining term of the Certificate in accordance with the provisions of
section 171 of the Code.
SALE OR EXCHANGE OF CERTIFICATES
Upon a disposition of an interest in a Certificate, a U.S. Certificate
Owner generally will recognize gain or loss equal to the difference between the
amount realized on the disposition and the U.S. Certificate Owner's adjusted
basis in its interest in the Certificate. A taxable exchange of a Certificate
could also occur as a result of the Transferors' substitution of money or
investments for Receivables. See 'The Pooling and Servicing Agreement
Generally--Defeasance.' 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.
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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 Transferor entitled to vote (or of a profits or capital interest
of the Trust if characterized as a partnership), (ii) the non-U.S. Certificate
Owner is a controlled foreign corporation that is related to 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 the Original Transferor Certificate other
than the Transferors or any other interest in the Trust not properly
characterized as debt. To qualify for the exemption from taxation, under
currently applicable procedures, 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. 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 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. Certificate Owners should consult their tax
advisors concerning the impact to them, if any, of such revised procedures.
Generally, any gain or income realized by a non-U.S. Certificate Owner upon
retirement or disposition of an interest in a Certificate will not be subject to
U.S. federal income tax, provided that (i) in the case of a Certificate Owner
that is an individual, such Certificate Owner is not present in the United
States for 183 days or more during the taxable year in which such retirement or
disposition occurs and (ii) in the case of gain representing accrued interest,
the 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
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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; Certificate Owners should consult their tax advisors
concerning the impact to them, if any, of such revised procedures.
STATE AND LOCAL TAXATION
The discussion above does not address the taxation of the Trust or the tax
consequences of the purchase, ownership or disposition of an interest in the
Certificates under any state or local tax law. Each investor should consult its
own tax adviser regarding state and local tax consequences.
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ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ('ERISA'), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan or an individual retirement account (a
'PLAN') from engaging in certain transactions involving 'plan assets' with
persons that are 'parties in interest' under ERISA or 'disqualified persons'
under the Code (collectively, 'Parties in Interest') with respect to the Plan. A
violation of these 'prohibited transaction' rules may generate excise tax and
other liabilities under ERISA and the Code for such persons. For example, a
prohibited transaction would arise, unless an exemption is applicable, if a
Certificate were viewed as debt of either Transferor and such Transferor were a
party in interest or a disqualified person with respect to a Plan that acquired
the Certificate.
Moreover, additional prohibited transactions could arise if the Trust
Assets were deemed to constitute 'plan assets' of any Plan that owned
Certificates. The Department of Labor ('DOL') has issued a final regulation (the
'FINAL REGULATION') concerning the definition of what constitutes 'plan assets'
of a Plan subject to ERISA or Section 4975 of the Code. Under the Final
Regulation, the assets and properties of corporations, partnerships and certain
other entities in which a Plan makes an investment in 'an equity interest' could
be deemed to be 'plan assets' of the Plan in certain circumstances. Accordingly,
if Plans (or other entities whose assets include 'plan assets') purchase
Certificates, the Trust could be deemed to hold 'plan assets' unless one of the
exceptions under the Final Regulation is applicable to 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) part of a class of securities registered under Section 12(b)
or 12(g) of the Exchange Act, or (B) sold to the Benefit 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 a 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) will be expected to be held by at
least 100 separately named persons at the conclusion of the offering. The
Transferor will not, however, determine whether there will, in fact, be at least
100 separately named persons or whether the 100-investor requirement 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 of a Series (or Class) fail to meet the criteria of
publicly-offered securities and the Trust Assets are deemed to include 'plan
assets' of Certificateholders that are plans, transactions involving the Trust
and parties in interest or disqualified persons with respect to 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 holding Certificates of such Series (or Class) is an
Account holder of one of the Accounts, under a DOL interpretation 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
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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 Assets.
Moreover, as discussed above, while (unless provided otherwise in the
applicable Prospectus Supplement) Tax 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 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 taxable to the investor.
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 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 Pooling and Servicing
Agreement, the Supplement and each such Certificate 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.
PLAN OF DISTRIBUTION
The Transferors may sell Certificates (a) through underwriters or dealers,
(b) directly to one or more purchasers, or (c) through agents. The related
Prospectus Supplement will set forth the terms of the offering of any
Certificates offered hereby, including, without limitation, the names of any
underwriters, the purchase price of such Certificates and the proceeds to the
Transferors from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers.
If underwriters are used in a sale of any Certificates of a Series offered
hereby, such Certificates will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices to be determined at the time of sale or at the time of commitment
therefor. Such Certificates may be offered to the public either through
underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate, including by an underwriter directly to a trust or other
special purpose funding vehicle. Unless otherwise set forth in the related
Prospectus Supplement, the obligations of the underwriters to purchase such
Certificates will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all of such Certificates if any of
such Certificates are purchased. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
Certificates of a Series offered hereby may also be offered and sold, if so
indicated in the related Prospectus Supplement, in connection with a remarketing
upon their purchase, in accordance with a redemption or repayment pursuant to
their terms, by one or more firms ('REMARKETING FIRMS') acting as principals for
their own accounts or as agents for the Transferors. Any Remarketing Firm will
be identified and the terms of its agreement, if any, with the Transferors and
its compensation will be described in the related Prospectus Supplement.
Remarketing Firms may be deemed to be underwriters in connection with the
Certificates remarketed thereby.
Certificates may also be sold directly by the Transferors or through agents
designated by the Transferors from time to time. Any agent involved in the offer
or sale of Certificates will be named, and any commissions payable by the
Transferors to such agent will be set forth, in the related Prospectus
Supplement. Unless otherwise indicated in the related Prospectus Supplement, any
such agent will act on a best efforts basis for the period of its appointment.
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Any underwriters, agents or dealers participating in the distribution of
Certificates may be deemed to be underwriters, and any discounts or commissions
received by them on the sale or resale of Certificates may be deemed to be
underwriting discounts and commissions, under the Securities Act. Agents and
underwriters may be entitled under agreements entered into with the Transferors
to indemnification by the Transferors against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments that the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may be affiliates or customers of, engage in
transactions with, or perform services for, the Transferors or their affiliates
in the ordinary course of business.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
Centurion and the Trust by Robert D. Kraus, Group Counsel to Centurion, and
certain legal matters relating to the Certificates will be passed upon for RFC
II and the Trust by Carol V. Schwartz, Group Counsel to American Express. Mr.
Kraus and Ms. Schwartz each own or have the right to acquire a number of shares
of common stock of American Express which in the aggregate is equal to less than
.05% of the outstanding common stock of American Express. Certain other legal
matters will be passed upon for the Transferors and the Trust by Orrick,
Herrington & Sutcliffe LLP. Certain legal matters will be passed upon for the
Underwriters by Orrick, Herrington & Sutcliffe LLP. Certain legal matters
relating to the federal tax consequences of the issuance of the Certificates and
certain other matters relating thereto will be passed upon for the Transferors
by Orrick, Herrington & Sutcliffe LLP.
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INDEX OF DEFINED TERMS
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Account Owner...................... 3
Account Owners..................... 3
Accounts........................... 1, 34
Additional Accounts................ 27
Additional Transferors............. 3, 45
Adverse Effect..................... 26
Aggregate Addition................. 27
Aggregate Addition Accounts........ 26
American Express................... 3, 32
APR................................ 31
Assigned Assets.................... 33
Assumed Obligations................ 33
Assuming Entity.................... 33
Average Rate....................... 24
Bankruptcy Code.................... 20
Bill............................... 70
Cardmember......................... 29
Cards.............................. 23
Cash Collateral Account............ 59
Cash Collateral Guaranty........... 59
CEBA............................... 22
Cede............................... 2, 35
Cedel.............................. 9
Cedel Participants................. 37
Centurion.......................... 1, 3, 32
Certificate Owners................. 2
Certificateholders' Interest....... 5
Certificates....................... 1, 4
Charge Card Account................ 29
Class.............................. 1
Code............................... 71
Collateral Interest................ 59
Collateral Invested Amount......... 5, 59
Collection Account................. 50
Commission......................... 2
Controlled Accumulation Amount..... 11
Controlled Accumulation Period..... 10
Controlled Amortization Amount..... 12
Controlled Amortization Period..... 11
Controlled Deposit Amount.......... 10
Controlled Distribution Amount..... 12
Cooperative........................ 37
Credco............................. 32
Credco Purchase Agreement.......... 7
Credit Enhancement................. 15
Credit Enhancer.................... 58
Date of Processing................. 16
Defaulted Amount................... 58
Defaulted Receivables.............. 58
Defeased Series.................... 62
Definitive Certificates............ 38
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
TERMS PAGE(S)
- ----------------------------------- ------------
<S> <C>
Depositaries....................... 36
Depository......................... 35
Determination Date................. 16
Disclosure Document................ 6
Discount Percentage................ 46
Discount Receivables............... 46
Distribution Date.................. 16
DOL................................ 74
DTC................................ 2
Early Accumulation Period.......... 11
Early Amortization Period.......... 12
Eligible Account................... 27
Eligible Institution............... 50
Eligible Investments............... 51
Eligible Receivable................ 43
ERISA.............................. 74
Euroclear.......................... 9
Euroclear Operator................. 37
Euroclear Participants............. 37
Euroclear Provisions............... 38
Excess Allocation Series........... 13
Excess Finance Charge
Collections...................... 56
Exchange Act....................... 2
Expected Final Payment Date........ 9
FASIT.............................. 70
FDIA............................... 20
FDIC............................... 19
Final Regulation................... 74
Finance Charge Receivables......... 8
FIRREA............................. 20
Floating Allocation Percentage..... 52
Full Invested Amount............... 15
Funding Period..................... 15
Group.............................. 4
Group Investor Additional
Amounts.......................... 53
Group Investor Default Amount...... 53
Group Investor Finance Charge
Collections...................... 53
Group Investor Monthly Fees........ 53
Group Investor Monthly Interest.... 54
Holders............................ 38
Indirect Participants.............. 36
Ineligible Receivables............. 43
Initial Accounts................... 7
Initial Cut-Off Date............... 7, 42
Initial Selection Date............. 8
Insolvency Event................... 21
Interest Funding Account........... 9
Interest Payment Date.............. 49
Invested Amount.................... 49
Investor Default Amount............ 53
Investor Finance Charge
Collections...................... 54
IRS................................ 68
L/C Issuer......................... 59
</TABLE>
78
<PAGE>
<TABLE>
<CAPTION>
TERMS PAGE(S)
- ----------------------------------- ------------
<S> <C>
MasterCard......................... 23
Monthly Period..................... 5
Monthly Servicing Fee.............. 41
Moody's............................ 21
New Accounts....................... 27
New Issuance....................... 49
OID................................ 71
Optima Accounts.................... 29
Optima Card Account................ 29
Optima Line of Credit Account...... 29
Original Transferor Certificate.... 6
Paired Series...................... 13
Participants....................... 36
Participation Interests............ 4
Pay-Out Event...................... 40
Permitted Liens.................... 43
Plan............................... 74
Pooling and Servicing Agreement.... 1
Portfolio Yield.................... 24
Pre-Funding Account................ 15
Pre-Funding Amount................. 15
Premium Percentage................. 47
Premium Receivables................ 47
Prime Rate......................... 25
Principal Allocation Percentage.... 14, 52
Principal Commencement Date........ 9
Principal Funding Account.......... 10
Principal Receivables.............. 8
Principal Sharing Series........... 13
Principal Shortfalls............... 56
Principal Terms.................... 49
Prior Series....................... 13
Prospectus Supplement.............. 1, 3
PTCE............................... 74
Rating Agency...................... 18
Rating Agency Condition............ 26
Reallocated Investor Finance Charge
Collections...................... 53
Reallocation Group................. 12
Receivables........................ 1, 4
Receivables Purchase Agreement..... 3
Record Date........................ 35
Recoveries......................... 7
Regulations........................ 69
Reinvestment Events................ 41
Remarketing Firms.................. 75
Removed Accounts................... 8
Required Minimum Principal
Balance.......................... 45
Required Transferor Amount......... 6
Revolving Credit Accounts.......... 29
Revolving Period................... 9
RFC II............................. 1, 3, 32
RFC II Purchase Agreement.......... 7
S&P................................ 21
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
TERMS PAGE(S)
- ----------------------------------- ------------
<S> <C>
Securities Act..................... 2
Seller............................. 64
Senior Certificates................ 25
Series............................. 1, 3
Series Adjusted Invested Amount.... 52
Series Allocable Defaulted
Amount........................... 52
Series Allocable Finance Charge
Collections...................... 52, 54
Series Allocable Principal
Collections...................... 52
Series Allocation Percentage....... 52
Series Closing Date................ 9
Series Cut-Off Date................ 10
Series Enhancement................. 4
Series Invested Amount............. 45
Series Required Transferor
Amount........................... 52
Series Termination Date............ 10
Service Transfer................... 60
Servicer........................... 1, 3
Servicer Default................... 61
Servicing Fee...................... 41
Shared Principal Collections....... 56
Sign & Travel Account.............. 29
Special Funding Account............ 57
Special Payment Date............... 41
Subordinated Certificates.......... 25
Supplement......................... 6
Supplemental Certificate........... 6, 45
Surviving Servicer Company......... 33
Surviving Transferor Company....... 33
Tax Counsel........................ 69
Tax Opinion........................ 50
Termination Notice................. 60
Total Portfolio.................... 34
Transferor......................... 1, 3
Transferor Amount.................. 5, 44
Transferor Certificates............ 6
Transferor Servicing Fee........... 41
Transferors' Interest.............. 5
TRS................................ 3, 32, 33
Trust.............................. 1, 3
Trust Adjusted Invested Amount..... 52
Trust Assets....................... 4
Trustee............................ 1, 3
Trust Portfolio.................... 34
UCC................................ 19
VISA............................... 23
Withholding Agent.................. 72
</TABLE>
80
<PAGE>
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE TRANSFERORS. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING
PROSPECTUS CONSTITUTES AN OFFER OR A SOLICITATION BY ANYONE IN ANY STATE IN
WHICH SUCH OFFER OR SOLICITATION IS NOT QUALIFIED OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE TRANSFERORS SINCE THE DATE HEREOF OR
THEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary of Series Terms........................ S-3
Risk Factors................................... S-13
Maturity Considerations........................ S-13
The Total Portfolio............................ S-15
The Receivables................................ S-17
Use of Proceeds................................ S-19
RFC II, Centurion and Credco................... S-19
The Servicer................................... S-20
Series Provisions.............................. S-20
Underwriting................................... S-38
Index of Defined Terms......................... S-40
Annex I........................................ A-1
PROSPECTUS
Prospectus Supplement.......................... 2
Reports to Certificateholders.................. 2
Available Information.......................... 2
Incorporation of Certain Documents
by Reference................................. 2
Prospectus Summary............................. 3
Risk Factors................................... 19
Use of Proceeds................................ 28
The Trust...................................... 28
Centurion's Revolving Credit Businesses........ 29
RFC II, Credco, Centurion and TRS.............. 32
Merger or Consolidation of a Transferor or the
Servicer..................................... 33
Assumption of a Transferor's Obligations....... 33
The Accounts................................... 34
Description of the Certificates................ 35
The Pooling and Servicing Agreement
Generally.................................... 42
Description of the Purchase Agreements......... 63
Certain Legal Aspects of the Receivables....... 65
Tax Matters.................................... 68
ERISA Considerations........................... 74
Plan of Distribution........................... 75
Legal Matters.................................. 76
Index of Defined Terms......................... 77
</TABLE>
UNTIL SEPTEMBER 15, 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE SERIES 1998-1 CERTIFICATES WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
AMERICAN EXPRESS
CREDIT ACCOUNT
MASTER TRUST
$825,000,000 Class A
Series 1998-1 Floating Rate
Asset Backed Certificates
$80,000,000 Class B
Series 1998-1 Floating Rate
Asset Backed Certificates
AMERICAN EXPRESS CENTURION BANK
AND
AMERICAN EXPRESS RECEIVABLES
FINANCING CORPORATION II
TRANSFERORS
AMERICAN EXPRESS TRAVEL
RELATED SERVICES
COMPANY, INC.
SERVICER
[LOGO]
PROSPECTUS SUPPLEMENT
UNDERWRITERS OF THE CLASS A CERTIFICATES
CREDIT SUISSE FIRST BOSTON
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
BLAYLOCK & PARTNERS L.P.
THE WILLIAMS CAPITAL GROUP, L.P.
UNDERWRITERS OF THE CLASS B CERTIFICATES
CREDIT SUISSE FIRST BOSTON
LEHMAN BROTHERS
DATED JUNE 17, 1998
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