As filed with the Securities and Exchange Commission on October 28, 2003
Registration Nos. 333-[__], 333-[__]-01 and 333-[__]-02
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
AMERICAN EXPRESS CREDIT ACCOUNT MASTER TRUST
(Issuer of the Certificates)
AMERICAN EXPRESS AMERICAN EXPRESS
CENTURION BANK RECEIVABLES FINANCING
CORPORATION II
(Originators of the Trust described herein)
(Exact Names of Registrants as Specified in Their Respective Charters)
Utah Delaware
(State or Other Jurisdiction (State or Other Jurisdiction
of Organization) of Organization)
11-2869526 13-3854638
(I.R.S. Employer (I.R.S. Employer
Identification Number) Identification Number)
4315 South 2700 West 200 Vesey Street
Salt Lake City, Utah 84184 Mail Stop 01-31-12
(801) 565-5000 New York, New York 10285
(212) 640-2000
(Address, Including Zip Code, and Telephone Number, Including Area
Code, of Registrants' Principal Executive Office)
Louise M. Parent, Esq.
Executive Vice President and General Counsel
American Express Company
200 Vesey Street
New York, New York 10285
(212) 640-2000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copies To:
Carol Schwartz, Esq. Kevin J. Cooper, Esq. Alan M. Knoll, Esq.
Group Counsel Group Counsel Orrick, Herrington & Sutcliffe LLP
American Express Company American Express Company 666 Fifth Avenue
200 Vesey Street 200 Vesey Street New York, New York 10103
New York, New York 10285 New York, New York 10285 (212) 506-5077
(212) 640-2000 (212) 640-2000
Approximate date of commencement of proposed sale to the public: From time
to time after this registration statement becomes effective as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering. [ ]
_____________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [ ] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------- ---------------- ---------------- --------------- ----------------
Proposed Proposed
maximum maximum
Amount to be aggregate aggregate Amount of
Title of securities registered price per offering registration
to be registered (a)(b) certificate(c) price(c) fee
- --------------------------------------------------- ---------------- ---------------- --------------- ----------------
Asset Backed Certificates...................... $1,000,000 100% $1,000,000 $80.90
- --------------------------------------------------- ---------------- ---------------- --------------- ----------------
(a) With respect to any Asset Backed Certificates issued with original issue
discount, the amount to be registered is calculated based on the initial
public offering price thereof.
(b) With respect to any Asset Backed Certificates denominated in any foreign
currency, the amount to be registered shall be the U.S. dollar equivalent
thereof based on the prevailing exchange rate at the time such Asset Backed
Certificate is first offered.
(c) Estimated solely for the purpose of calculating the registration fee.
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall subsequently become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
===============================================================================
INTRODUCTORY NOTE
This Registration Statement includes:
o a form of base prospectus relating to asset backed certificates of the
American Express Credit Account Master Trust; and
o a representative form of prospectus supplement to the base prospectus
relating to the offering by American Express Credit Account Master
Trust of a series of asset backed certificates.
Representative Form of Prospectus Supplement
[LOGO] SUBJECT TO COMPLETION, DATED OCTOBER [__], 2003
Prospectus Supplement to Prospectus Dated , 2003
American Express Credit Account Master Trust
Issuer
American Express Centurion Bank
American Express Receivables Financing Corporation II
Transferors
American Express Travel Related Services Company, Inc.
Servicer
SERIES 2003-
$ Class A Floating Rate Asset Backed Certificates
$ Class B Floating Rate Asset Backed Certificates
------------------------------
Consider carefully the risk factors beginning on page [__] in the prospectus.
-----------------------------
A certificate is not a deposit and neither the certificates nor the underlying
accounts or receivables are insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
The certificates will represent interests in the trust only and will not
represent interests in or obligations of American Express Company or any of its
affiliates.
This prospectus supplement may be used to offer and sell the certificates only
if accompanied by the prospectus.
------------------------------
The Trust will issue-
Class A certificates Class B certificates
-------------------- --------------------
Principal amount $ $
Certificate rate One-Month LIBOR plus One-Month LIBOR plus
% per year % per year
Interest paid Monthly Monthly
First interest payment date , 2003 , 2003
Expected final payment date
Legal final maturity
Price to public per certificate $__ (or __%) $__ (or __%)
Underwriting discount per
certificate $__ (or __%) $__ (or __%)
Proceeds to transferors per $__ (or __%) $__ (or __%)
certificate
Credit Enhancement-
The Class B certificates are subordinated to the Class A certificates.
Subordination of the Class B certificates provides credit enhancement for the
Class A certificates.
The trust is also issuing a collateral interest in the amount of $
that is subordinated to the Class A certificates and the Class B certificates.
Subordination of the collateral interest provides credit enhancement for both
the Class A certificates and the Class B certificates.
Neither the SEC nor any state securities commission has approved the
certificates or determined that this prospectus supplement or the prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
Underwriters of the Class A certificates
{A. Co.}
{B. Co.}
{C. Co.}
Underwriters of the Class B certificates
{A. Co.}
{B. Co.}
, 2003
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS
NOT COMPLETE AND MAY BE AMENDED. WE MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SEC IS EFFECTIVE AND WE DELIVER A FINAL
PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS ARE NOT AN OFFER TO SELL NOR ARE THEY SEEKING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS
PROHIBITED.
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the certificates in two separate
documents that progressively provide more detail: (a) the accompanying
prospectus, which provides general information about each series of certificates
which may be issued by the American Express Credit Account Master Trust, some of
which may not apply to your series of certificates, and (b) this prospectus
supplement, which describes the specific terms of your series of certificates.
This prospectus supplement may be used to offer and sell the Class A
certificates only if accompanied by the prospectus.
This prospectus supplement may supplement disclosure in the
accompanying prospectus. If the terms of your certificates vary between this
prospectus supplement and the accompanying prospectus, you should rely on the
information in this prospectus supplement.
You should rely only on the information in this prospectus supplement
and the accompanying prospectus, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the certificates in any state where the offer
is not permitted. We do not claim the accuracy of the information in this
prospectus supplement or the accompanying prospectus as of any date other than
the dates stated on their respective covers.
We include cross references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
additional related discussions. The Table of Contents in this prospectus
supplement and in the accompanying prospectus provide the pages on which these
captions are located.
Part of this prospectus supplement and the accompanying prospectus use
defined terms. You can find these terms and their definitions under the caption
"Glossary of Defined Terms" on page S-44 in this prospectus supplement and on
page 87 in the accompanying prospectus.
--------------------
S-2
Transaction Summary
- ------------------------------------ -----------------------------------------------------------
Trust and Issuer: American Express Credit Account Master Trust
- ----------------- --------------------------------------------
Transferors: American Express Centurion Bank and American Express
Receivables Financing Corporation II
Servicer: American Express Travel Related Services Company, Inc.
Trustee: The Bank of New York
Series Issuance Date: ____________, 2003
Servicing Fee Rate: 2.00% per year
Clearance and Settlement: DTC/Clearstream/Euroclear
Primary Trust Assets: Receivables generated in a portfolio
of designated American Express credit cards
- ------------------------------------ -----------------------------------------------------------
Class A Class B
------- -------
Principal Amount: $ $
Percentage of Series:* % %
Anticipated Ratings:** Aaa/AAA A2/A
(Moody's/Standard & Poor's)
Credit Enhancement: Subordination of Class B and Subordination of collateral interest
collateral interest
Certificate Rate: One-month LIBOR plus % per year One-month LIBOR plus % per
year
Interest Accrual Method: Actual/360 Actual/360
Distribution Dates: Monthly (15th) Monthly (15th)
Certificate Rate Index Reset Date: Two London business days before each Two London business days before each
distribution date distribution date
First Distribution Date: , 2003 , 2003
Commencement of Accumulation
Period (subject to adjustment):
Expected Final Payment Date:
Legal Final Maturity:
ERISA eligibility (investors are Yes, subject to important No, subject to important
cautioned to consult with their considerations described under "ERISA considerations described under "ERISA
counsel): Considerations" in this prospectus Considerations" in this prospectus
supplement and the accompanying supplement and the accompanying
prospectus prospectus
Debt for United States Federal Yes, subject to important No, subject to important
Income Tax Purposes (investors are considerations described under "Tax considerations described under "Tax
cautioned to consult with their Matters" in the accompanying Matters" in the accompanying
counsel): prospectus prospectus
- ----------------------
* The percentage of Series 2003- comprised by the collateral
interest is %.
** It is a condition to issuance of the Series 2003- certificates that
at least one of these ratings be obtained.
S-3
TABLE OF CONTENTS
Page
----
Summary of Series Terms ..................................................S-5
The Trust..............................................................S-5
The Transferors and the Servicer.......................................S-5
Offered Securities.....................................................S-5
Distribution Dates...................................................S-5
Interest.............................................................S-5
Principal............................................................S-5
The Collateral Interest................................................S-6
Credit Enhancement.....................................................S-6
Other Interests in the Trust...........................................S-7
Other Series of Certificates.........................................S-7
The Transferor Certificates..........................................S-7
The Receivables........................................................S-7
Collections by the Servicer............................................S-7
Allocations To You and Your Series.....................................S-7
Step 1: Allocations Among Series.....................................S-8
Step 2: Allocations Within Your Series...............................S-8
Step 3: Reallocations Among Series...................................S-8
Step 4: Final Allocations Among
Class A, Class B and the Collateral Interest.......................S-8
Applications of Collections............................................S-9
Finance Charge Collections...........................................S-9
Excess Spread........................................................S-9
Principal Collections................................................S-9
Pay-Out Events........................................................S-10
Reallocated Investor Finance Charge
Collections.........................................................S-10
Shared Principal Collections..........................................S-11
Excess Finance Charge Collections.....................................S-11
Optional Repurchase...................................................S-11
Registration..........................................................S-11
Tax Status............................................................S-12
ERISA Considerations..................................................S-12
Certificate Ratings...................................................S-12
Exchange Listing......................................................S-12
Introduction.............................................................S-13
Maturity Considerations..................................................S-13
The Total Portfolio......................................................S-16
General...............................................................S-16
Page
----
Loss and Delinquency Experience.......................................S-16
Revenue Experience....................................................S-17
Payment Rates.........................................................S-18
The Receivables..........................................................S-19
RFC II, Centurion and Credco.............................................S-21
RFC II................................................................S-21
Centurion.............................................................S-21
Credco................................................................S-21
The Servicer.............................................................S-21
Series Provisions........................................................S-22
Interest Payments.....................................................S-22
Principal Payments....................................................S-23
Subordination of the Class B Certificates
and the Collateral Interest.........................................S-25
Allocation Percentages................................................S-26
Principal Funding Account.............................................S-26
Reserve Account.......................................................S-27
Reallocation of Cash Flows............................................S-28
Application of Collections............................................S-30
Required Collateral Invested Amount...................................S-34
Defaulted Receivables; Investor
Charge - Offs.......................................................S-34
Paired Series.........................................................S-36
Pay-Out Events........................................................S-36
Servicing Compensation and Payment
of Expenses.........................................................S-37
Optional Repurchase...................................................S-38
Series Termination....................................................S-39
Reports...............................................................S-39
ERISA Considerations.....................................................S-40
Class A Certificates..................................................S-40
Class B Certificates..................................................S-40
The Department of Labor Authorization ................................S-40
Consultation with Counsel ............................................S-41
Underwriting.............................................................S-42
Glossary of Defined Terms................................................S-44
Annex I.................................................................. A-1
S-4
Summary of Series Terms
This summary highlights selected information about the certificates and does not
contain all the information that you need to consider in making your investment
decision. You should carefully read this entire document and the accompanying
prospectus before you purchase any certificates.
The Trust
The certificates will be issued by American Express Credit Account Master Trust,
which is a master trust formed in 1996.
The trustee is The Bank of New York.
The Transferors and the Servicer
American Express Centurion Bank and American Express Receivables Financing
Corporation II are the transferors of the receivables to the trust and American
Express Travel Related Services Company, Inc. is the servicer of the
receivables.
Offered Securities
American Express Credit Account Master Trust is offering:
$ of Class A certificates;
and
$ of Class B certificates.
In this document, references to Series 2003- certificates include both Class A
and Class B certificates.
Beneficial interests in the Series 2003- certificates may be purchased in
minimum denominations of $1,000 and integral multiples of $1,000.
The Series 2003- certificates are expected to be issued on , 2003.
Distribution Dates
Distribution dates for the Series 2003- certificates will commence , 2003
and, after that, will be the 15th day of each month, if the 15th is a business
day and, if not, the following business day.
Interest
Interest on the Series 2003- certificates will be paid on each distribution
date.
The Class A certificates will bear interest at one-month LIBOR as determined
each month plus % per annum.
The Class B certificates will bear interest at one-month LIBOR as determined
each month plus % per annum.
Interest on the Class A certificates and the Class B certificates for any
distribution date will be calculated as follows:
Principal amount Number of Rate for
at end of prior days in x interest period
month interest
x period
--------------
360
You may obtain the interest rate for the current period and immediately
preceding period by telephoning the trustee at (212) 328-7547.
See "Series Provisions--Interest Payments" in this prospectus supplement for a
description of how and when LIBOR will be determined, for a discussion of the
determination of amounts available to pay interest and for the definition of
business day.
Principal
Principal of the Series 2003- certificates is expected to be paid in full on
the distribution date. We are scheduled to begin accumulating collections of
principal receivables for payment to you on 200 , but we may begin accumulating
at a later date.
Although the Series 2003- certificates are expected to be paid on the date noted
above, principal may be paid earlier or later.
There is no penalty for early or late payment of principal. If certain adverse
events known as pay-out events occur, principal may be paid earlier than
expected. If collections of the credit card receivables are less than expected
or are collected more slowly than expected, then principal payments may be
delayed. No principal will be paid on the Class B certificates until the Class A
certificates are paid in full.
S-5
The final payment of principal and interest on the Series 2003-__ certificates
will be made no later than the ____ 20____ distribution date.
See "Maturity Considerations" and "Series Provisions--Allocation Percentages"
and "--Principal Payments" in this prospectus supplement for a discussion of the
determination of amounts available to pay principal.
The Collateral Interest
At the same time the Series 2003-__ certificates are issued, the trust will
issue an interest in the assets of the trust known as the collateral interest.
The initial amount of the collateral interest is $__, which represents __% of
the initial aggregate principal amount of the Series 2003-__ certificates plus
the collateral interest.
The holder of the collateral interest will have voting and certain other rights
as if the collateral interest were a subordinated class of certificates. The
collateral interest will be subordinated to the Class A certificates and the
Class B certificates.
The collateral interest is not offered by this prospectus supplement and the
accompanying prospectus.
Credit Enhancement
Subordination of the Class B certificates provides credit enhancement for the
Class A certificates. Subordination of the collateral interest provides credit
enhancement for both the Class A certificates and the Class B certificates. If,
on any distribution date, there are insufficient funds available to make
required Class A certificate payments, funds that would otherwise be used to
make required collateral interest and Class B certificate payments will be used
to make the required Class A certificate payments, and the collateral invested
amount and the Class B invested amount will be reduced accordingly. Similarly,
if on any distribution date, there are insufficient funds available to make
required Class B certificate payments, funds that would otherwise be used to
make required the collateral interest payments will be used to make the required
Class B certificate payments, and the collateral invested amount will be reduced
accordingly. The collateral invested amount and the Class B invested amount must
be reduced to zero before the Class A invested amount will suffer any loss of
principal or interest. The collateral invested amount must be reduced to zero
before the Class B invested amount will suffer any loss of principal or
interest.
Credit enhancement for the Series 2003-_ certificates is for the benefit of
Series 2003-_ only and you are not entitled to the benefits of any credit
enhancement available to other series.
See "Series Provisions--Reallocation of Cash Flows," "--Application of
Collections" and "--Defaulted Receivables; Investor Charge-Offs" in this
prospectus supplement for a description of the events which may lead to a
reduction of the Class A invested amount, the Class B invested amount and the
collateral invested amount.
Other Interests in the Trust
Other Series of Certificates
The trust has issued numerous other series of certificates and expects to issue
additional series. You can review a summary of each series previously issued and
currently outstanding under the caption "Annex I: Other Series" included at the
end of this prospectus supplement. Future series will be issued without prior
review or consent by you or any other certificateholder.
The Transferor Certificates
The interest in the trust not represented by your series or by any other series
is the transferors' interest, which is represented by the transferor
certificates. The transferors' interest does not provide credit enhancement for
your series or any other series.
The Receivables
The primary assets of the trust are receivables in designated consumer American
Express(R) credit card, Optima(R) Line of Credit and Sign & Travel(R)/Extended
Payment Option revolving credit accounts or features and, in the future, may
S-6
include other charge or credit accounts or features or products.* The
receivables consist of principal receivables and finance charge receivables.
The following information is as of _________, 2003:
o Receivables in the trust: $_____
o Accounts designated to the trust: ________
See "The Receivables" in this prospectus supplement, and "Centurion's Revolving
Credit Businesses" and "The Accounts" in the accompanying prospectus.
Collections by the Servicer
The servicer will collect payments on the receivables, will deposit those
collections in an account and will keep track of those collections that are
finance charge receivables and those that are principal receivables.
Allocations to you and your Series
Each month, the servicer will allocate collections of finance charge
receivables, collections of principal receivables and the amount of receivables
that are not collected and are written off as uncollectible, called the
defaulted amount. Set forth below, is a brief description of how these finance
charge collections, principal collections and defaulted amounts are allocated to
you and your series, addressed in four steps. Allocations of finance charge
collections involve each of Steps 1, 2, 3 and 4. However, allocations of
principal collections and the defaulted amount involve only Steps 1, 2 and 4.
The following discussion is a simplified description of certain allocation
provisions and is qualified by the full descriptions of these provisions in this
prospectus supplement and the accompanying prospectus.
Step 1: Allocations Among Series
Finance Charge Collections, Principal Collections and Defaulted Amount: Each
month, the servicer will allocate finance charge collections, principal
collections and the defaulted amount among:
o your series, based on the size of its invested amount at that time (which is
initially $____________, but may be reduced); and
o other outstanding series, based on the sizes of their respective invested
amounts at that time.
Step 2: Allocations Within Your Series
Finance Charge Collections, Principal Collections and Defaulted Amount: Finance
charge collections, principal collections and the defaulted amount that are
allocated to your series in Step 1 will then be further allocated, based on
varying percentages, among:
o the Series 2003-_ certificates and the collateral interest, based on
the size of its invested amount; and
o the transferors' interest, which will receive the remainder of these
finance charge collections, principal collections and defaulted amounts.
Step 3: Reallocations Among Series
Finance Charge Collections: Collections of finance charge receivables to be
allocated to the Series 2003-_ certificates and the collateral interest in Step
2 will then be combined with the collections of finance charge receivables to be
allocated to any other series in a group of series, designated as series which
will share finance charge collections pro rata, based upon the relative size of
the required payments to each series in that group as compared to the total
required payments of all series in that group. See "The Pooling and Servicing
Agreement Generally--Reallocations Among Different Series Within a Reallocation
Group" in the accompanying prospectus.
- --------------------
* American Express(R), Optima(R), and Sign & Travel(R) are federally
registered servicemarks of American Express Company and its affiliates.
S-7
Step 4: Final Allocations Among Class A, Class B and the Collateral Interest
Finance Charge Collections, Principal Collections and Defaulted Amount: The
finance charge collections reallocated in Step 3, together with the principal
collections and defaulted amount allocated in Step 2, will then be further
allocated, based on varying percentages, among:
o the Class A certificates, based on the Class A invested amount (which is
initially $___________, but may be reduced);
o the Class B certificates, based on the Class B invested amount (which is
initially $__________, but may be reduced); and
o the collateral interest, based on the collateral invested amount (which is
initially $__________, but may be reduced).
See "Series Provisions--Allocation Percentages" in this prospectus supplement
and "The Pooling and Servicing Agreement Generally--Reallocations Among
Different Series Within a Reallocation Group" in the accompanying prospectus.
The Series 2003-_ certificates will be the ________ series issued by the trust
in group II. Any issuance of a new series in group II may reduce or increase the
amount of finance charge collections allocated to the Series 2003-_
certificates.
You are entitled to receive payments of interest and principal based upon
allocations to your series. The invested amount, which is the primary basis for
allocations to your series, is the sum of:
(a) the Class A invested amount,
(b) the Class B invested amount and
(c) the collateral invested amount.
The Class A invested amount, the Class B invested amount and the collateral
invested amount will initially equal the outstanding principal amount of the
Class A certificates, the Class B certificates and the collateral interest. The
invested amount of a series or class will decline, however, as a result of
principal payments and may decline if receivables are written off or for other
reasons. If the invested amount for your series or class declines, amounts
allocated and available for payment to you may be reduced.
For a description of the events which may lead to these reductions, see "Series
Provisions--Reallocation of Cash Flows" in this prospectus supplement.
Applications of Collections
Finance Charge Collections
Collections of finance charge receivables allocated to the Class A certificates
will be used to pay interest due on the Class A certificates and Class A's
portion of the servicing fee due to the servicer and to cover Class A's portion
of receivables that are written off as uncollectible. Any remaining amount will
become excess spread and be applied as described below.
Collections of finance charge receivables allocated to the Class B certificates
will be used to pay interest due on the Class B certificates and Class B's
portion of the servicing fee due to the servicer. Any remaining amount will
become excess spread and be applied as described below.
Collections of finance charge receivables allocated to the collateral interest
will be used to pay the collateral interest's portion of the servicing fee due
to the servicer. Any remaining amount will become excess spread and be applied
as described below.
Excess Spread
Each month the excess spread will be used in the following order of priority:
o first to make up deficiencies to Class A;
o then to make up deficiencies to Class B;
o then to pay interest on the collateral interest and to make up
deficiencies to the collateral interest;
o then to make up deficiencies to the servicer;
o then to make up for reductions of the collateral invested amount if it is
below its minimum required amount;
o then to fund, if necessary, a reserve account maintained to cover certain
interest payment shortfalls, if any;
o then to pay any other amounts owing to the provider of the collateral
interest; and
o finally to other series or to the holders of the transferor certificates.
S-8
Principal Collections
Your series' share of principal collections will be applied each month as
follows:
Collections of principal receivables allocated to the collateral interest and
the Class B certificates may be reallocated, if necessary, to make required
payments on the Class A certificates that have not been paid by the Class A's
share of collections of finance charge receivables or by excess spread. If
required Class A amounts are satisfied, the collateral interest also provides
the same type of protection to the Class B certificates.
Collections of principal receivables allocated to your series and not used as
described in the preceding paragraph are combined with shared principal
collections from other series, to the extent necessary and available, and
treated as available principal collections.
Available principal collections may be paid, or accumulated and then paid, to
you as payments of principal. The amount, priority and timing of your principal
payments, if any, depend on whether your series is in the revolving period, the
controlled accumulation period or the early amortization period.
During the revolving period, no principal will be paid to you or accumulated in
a trust account.
During the controlled accumulation period, principal collections will be
deposited in a trust account, up to a controlled amount, first to pay the Class
A invested amount, then to pay the Class B invested amount and then to pay the
collateral invested amount on the expected final payment date. The controlled
accumulation period is scheduled to being on ________ 20__, but may begin at a
later date.
During the early amortization period, principal collections and any principal
amounts previously accumulated as described above, will be used first to pay the
Class A invested amount, then to pay the Class B invested amount and then to pay
the collateral invested amount.
As available principal collections are accumulated for the Class A certificates
and the Class B certificates, the collateral interest will decrease and the
available principal collections will be paid to the holder of the collateral
interest to the extent of this decrease.
Collections of principal receivables allocated to your series and not used as
described above may be paid to other series, to the extent necessary, or to the
holders of the transferor certificates.
See "Maturity Considerations," "Series Provisions--Principal Payments" and
"--Application of Collections" in this prospectus supplement.
Pay-Out Events
Certain adverse events called pay-out events might lead to the end of the
revolving period or controlled accumulation period and the start of an early
amortization period.
The pay-out events for your series are described in "Series Provisions--Pay-Out
Events" in this prospectus supplement. In addition, see "Description of the
Certificates--Pay-Out Events and Reinvestment Events" in the accompanying
prospectus for a discussion of the consequences of an insolvency or receivership
of either transferor.
Reallocated Investor Finance Charge Collections
Collections of finance charge receivables to be allocated to the investor
certificates of each series in group II will be combined and will be available
for certain required payments to all series in that group. These amounts will be
reallocated pro rata, based on the size of the required payment for each of the
series in group II as compared with the total required payments for all of the
series in that group.
S-9
See "The Pooling and Servicing Agreement Generally--Reallocations Among
Different Series Within a Reallocation Group" and "Risk Factors--Issuances of
additional series by the trust may adversely affect your certificates" in the
accompanying prospectus.
Shared Principal Collections
Your series will be included in a group of series designated as "principal
sharing series." To the extent that collections of principal receivables
allocated to your series are not needed to make payments or deposits to a trust
account for the benefit of your series, these collections will be applied to
cover principal payments for other principal sharing series, if any. Any
reallocation for this purpose will not reduce the invested amount for your
series. In addition, you may receive the benefits of collections of principal
receivables and certain other amounts allocated to other principal sharing
series. However, there can be no assurance that the trust will issue additional
principal sharing series designated to share principal receivables with your
series.
See "The Pooling and Servicing Agreement Generally--Sharing of Principal
Collections Among Principal Sharing Series" in the accompanying prospectus.
Excess Finance Charge Collections
Your series will be included in a group of series designated as "excess
allocation series." To the extent that collections of finance charge receivables
allocable to your series exceed the amount necessary to make required payments
for your series payable from collections of finance charge receivables, such
excess collections may be applied to cover shortfalls of collections of finance
charge receivables allocable to other excess allocation series. In addition, you
may receive the benefits of collections of finance charge receivables allocated
to other excess allocation series designated to share collections of finance
charge receivables with your series. However, there can be no assurance that the
trust will issue additional excess allocation series designated to share
collections of finance charge receivables with your series.
See "The Pooling and Servicing Agreement Generally--Sharing of Excess Finance
Charge Collections Among Excess Allocation Series" in the accompanying
prospectus.
Optional Repurchase
So long as a transferor is the servicer or an affiliate of the servicer, that
transferor will have the option to repurchase your Series 2003-_ certificates
when the invested amount for your series has been reduced to 5% or less of the
initial invested amount for your series. See "Series Provisions--Optional
Repurchase" in this prospectus supplement.
Registration
The Series 2003-_ certificates will be in book-entry form and will be registered
in the name of Cede & Co., as the nominee of The Depository Trust Company.
Except in limited circumstances, you will not receive a definitive certificate
representing your interest. See "Description of the Certificates--Definitive
Certificates" in the accompanying prospectus.
You may elect to hold your Series 2003-_ certificates through DTC, in the United
States, or Clearstream, Luxembourg or the Euroclear System in Europe. See
"Description of the Certificates--Book-Entry Registration" in the accompanying
prospectus.
Tax Status
Subject to important considerations described under "Tax Matters" in the
accompanying prospectus, Orrick, Herrington & Sutcliffe LLP, as special tax
counsel to the transferors, is of the opinion that under existing law your
certificates will be characterized as debt for federal income tax purposes. By
your acceptance of a certificate, you will agree to treat your certificates as
debt for federal, state and local income and franchise tax purposes. See "Tax
Matters" in the accompanying prospectus for additional information concerning
the application of federal income tax laws.
S-10
ERISA Considerations
Subject to important considerations described under "ERISA Considerations" in
this prospectus supplement and the accompanying prospectus, the Class A
certificates are eligible for purchase by persons investing assets of employee
benefit plans or individual retirement accounts.
For reasons discussed under "ERISA Considerations" in this prospectus supplement
and the accompanying prospectus, the Class B certificates are not eligible for
purchase by persons investing assets of employee benefit plans or individual
retirement accounts, other than insurance companies investing assets solely of
their general accounts.
Certificate Ratings
At issuance, the Class A certificates will be rated in the highest rating
category by at least one nationally recognized rating organization. The Class B
certificates will be rated in one of the three highest rating categories by at
least one nationally recognized rating organization. See "Risk Factors" in the
accompanying prospectus.
Exchange Listing
An application has been made to list the Series 2003-_ certificates on the
Luxembourg Stock Exchange. We cannot guarantee that the application for the
listing will be accepted. You should consult with Deutsche Bank Luxembourg S.A.,
the Luxembourg listing agent, for the Series 2003-_ certificates, Boulevard
Konrad Adenauer 2, Luxembourg, phone number 352-4212-2643 to determine whether
or not the Series 2003-_ certificates are listed on the Luxembourg Stock
Exchange.
S-11
Introduction
The following provisions of this prospectus supplement contain more
detailed information concerning the certificates offered hereby. The
certificates will be issued by the trust pursuant to the terms of a pooling and
servicing agreement dated as of May 16, 1996, as amended from time to time,
among American Express Travel Related Services Company, Inc., as servicer,
American Express Centurion Bank and American Express Receivables Financing
Corporation II, as transferors, and The Bank of New York, as trustee.
On or about _________, 2003, the trust will issue $___________ of its
Class A Series 2003-_ Floating Rate Asset Backed Certificates and $________ of
its Class B Series 2003-_ Floating Rate Asset Backed Certificates. In addition,
the trust will issue a specified undivided Collateral Interest in the Trust
Assets in the initial amount of $__________ which will be subordinated to the
Series 2003-_ certificates as described herein. For purposes of this prospectus
supplement, the Collateral Interest shall be deemed to be the Collateral
Invested Amount for the Series 2003-_ certificates for all purposes under the
accompanying prospectus.
Maturity Considerations
The Pooling and Servicing Agreement and the Series 2003-_ supplement
for this series provide that the Class A certificateholders will not receive
payments of principal until 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 Special Payment Date until the Class A Invested Amount has
been paid in full or the Series 2003-_ 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" in this prospectus supplement) for the related Monthly Period on
deposit in the Collection Account,
(b) the Controlled Deposit Amount, which is equal to the sum of the
Controlled Accumulation Amount for such Monthly Period and any Deficit
Controlled Accumulation Amount, 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 2003-_ held by the
trustee until the Expected Final Payment Date or the first Special Payment Date.
See "Series Provisions--Principal Payments" in this prospectus supplement 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 begins for
Series 2003-_, 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
2003-_ 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 2003-_. 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 2003-_ 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 2003-_ 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
2003-_ 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 2003-_ certificates, the final
payment of principal to the Series 2003-_ certificateholders may be delayed.
S-12
Should a Pay-Out Event occur with respect to the Series 2003-_
certificates and the Early Amortization Period begin, any amount on deposit
(a) in the Principal Funding Account will be paid to the Series 2003-_
certificateholders on the first Special Payment Date and the Series 2003-_
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 2003-_ 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 2003-_, entitled to
the benefits of Shared Principal Collections. See "Description of the
Certificates--Pay-Out Events and Reinvestment Events" in the accompanying
prospectus and "Series Provisions--Pay-Out Events" in this prospectus
supplement.
The ability of the Series 2003-_ 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" in this prospectus supplement. 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 2003-_ 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--Payment patterns of
account holders may not be consistent over time and variations in these payment
patterns may result in reduced payment of principal, or receipt of payment of
principal earlier or later than expected" and "The Pooling and Servicing
Agreement Generally--Sharing of Principal Collections Among Principal Sharing
Series" in the accompanying 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 2003-_ certificateholders could expect to receive payments of
principal on their Series 2003-_ certificates during an 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" in this prospectus
supplement. As described under "Series Provisions--Principal Payments" in this
prospectus supplement, 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 2003-_ 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.
S-13
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--Payment patterns of account
holders may not be consistent over time and variations in these payment patterns
may result in reduced payment of principal, or receipt of payment of principal
earlier or later than expected" in the accompanying prospectus.
The Total Portfolio
General
The primary assets of the trust are receivables generated from time to
time in a portfolio of designated American Express credit cards (whether branded
Optima Cards or otherwise), Optima Line of Credit and Sign & Travel/Extended
Payment Option consumer revolving credit accounts or features and, in the
future, may include other charge or credit accounts or products.
The accounts were selected from 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--Addition of accounts to the trust may decrease the credit quality of
the assets securing the repayment of your certificates. If this occurs, your
receipt of payments of principal and interest may be reduced, delayed or
accelerated" in the accompanying 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 accompanying 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 _________, 2003, the receivables in the Trust Portfolio represented
approximately __% 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.
S-14
Loss Experience of the Total Portfolio
(Dollars in Thousands)
Year Ended December 31,
[____] Months Ended --------------------------------------------------------------------------
[____] 2003 2002 2001 2000 1999 1998
--------------- --------------------------------------------------------------------------
Average Receivables $[ ] $25,232,901 $24,312,940 $21,743,575 $16,188,623 $13,696,794
Outstanding(1)............
Total Gross Charge-Offs(2) [ ] 1,560,585 1,430,243 1,059,267 948,192 971,091
Total Recoveries.......... [ ] 189,720 155,180 129,445 128,362 118,332
----------- ----------- ----------- ----------- ----------- -----------
Total Net Charge-Offs(3).. $[ ] $ 1,370,865 $ 1,275,063 $ 929,822 $ 819,830 $ 852,759
=========== =========== =========== =========== =========== ===========
Total Net Charge-Offs as
Percentage of Average
Receivables Outstanding... [ ]%(4) 5.43% 5.24% 4.28% 5.06% 6.23%
(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)
Year Ended December 31,
[____] Months Ended ---------------------------------------------------------
[___] 2003 2002 2001
Percentage of Percentage of Percentage of
Average Average Average
Dollar Receivables Dollar Receivables Dollar Receivables
Amount Outstanding(2) Amount Outstanding(2) Amount Outstanding(2)
---------- -------------- ---------- -------------- ---------- --------------
Average
Receivables
Outstanding(3).... $[_______] 100.00% $25,232,901 100.00% $24,312,940 100.00%
Average
Receivables
Delinquent .......
31 to 60 Days..... [_______] 318,158 1.26 310,657 1.28
61 to 90 Days..... [_______] 184,436 0.73 165,490 0.68
91 Days or More .. [_______] 285,846 1.13 238,437 0.98
Total ............ % $ 788,439 3.12% $ 714,585 2.94%
$[-------]
Year Ended December 31,
----------------------------------------------------------------------------------------------------
2000 1999 1998
Percentage of Percentage of Percentage of
Average Average Average
Dollar Receivables Dollar Receivables Dollar Receivables
Amount Outstanding(2) Amount Outstanding(2) Amount Outstanding(2)
---------- -------------- ---------- -------------- ---------- --------------
Average
Receivables
Outstanding(3).... $21,743,575 100.00% $16,188,623 100.00% $13,696,794 100.00%
Average
Receivables
Delinquent .......
31 to 60 Days..... 258,514 1.19 219,678 1.36 216,515 1.58
61 to 90 Days..... 126,472 0.58 110,170 0.68 108,157 0.79
91 Days or More... 170,182 0.78 142,603 0.88 142,760 1.04
Total ............ $ 555,168 2.55% $ 472,451 2.92% $ 467,433 3.41%
(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 accompanying prospectus.
S-15
Revenue Experience of the Total Portfolio
(Dollars in Thousands)
[____] Months Ended Year Ended December 31,
-----------------------------------------------------------------
[___] 2003 2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
Average Receivables Outstanding(1)...... $[________] $25,232,901 $24,312,940 $21,743,575 $16,188,623 $13,696,794
Total Finance Charges and Fess Billed(2) [________] 3,325,870 3,528,958 3,283,319 2,501,139 2,223,302
Total Finance Charges and Fees Billed
as a Percentage of Average Receivables
Outstanding............................. [____]%(3) 13.18% 14.51% 15.10% 15.45% 16.23%
(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 comprise 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 accompanying 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
[____] Months Ended Year Ended December 31,
---------------------------------------------------------------
[____] 2003 2002 2001 2000 1999 1998
----------- --------- --------- --------- --------- ---------
Lowest Month........................ [____]% 18.67% 16.81% 15.56% 14.26% 14.53%
Highest Month....................... [____]% 21.71% 19.22% 17.22% 16.06% 15.33%
Monthly Average..................... [____]% 20.49% 18.19% 16.57% 15.32% 15.02%]
S-16
The Receivables
The receivables (including receivables in accounts closed at the
request of account holders) in the accounts, as of __________, 2003, totaled
$___________, comprised of $__________ of principal receivables and $_________
of finance charge receivables.
In the following tables and the remainder of this section, references
to "accounts," "receivables," "receivables outstanding" and "total receivables"
include, respectively, all accounts other than accounts that were closed at the
request of account holders, and all receivables (including both finance charge
receivables and principal receivables) in accounts other than accounts closed at
the request of account holders.
The following tables, together with the last paragraph of this section,
summarize the trust portfolio by various criteria as of _______, 2003. 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 _________, 2003.
Composition By Account Balance
Trust Portfolio
Percentage Percentage
of Total of Total
Number of Number of Receivables Receivables
Account Balance Range Accounts Accounts Outstanding Outstanding
--------------------- ----------- ----------- ----------- -----------
% $ %
Credit Balance...............................
Zero Balance.................................
$1 to $1,000.................................
$1,001 to $5,000.............................
$5,001 to 10, 000............................
$10,001 or More..............................
----------- ----------- ----------- -----------
Total % % $ %
=========== =========== =========== ===========
Composition By Credit Limit
Trust Portfolio
Percentage Percentage
of Total of Total
Number of Number of Receivables Receivables
Credit Limit Range Accounts Accounts Outstanding Outstanding
--------------------- ----------- ----------- ----------- -----------
% $ %
Less than $1,000 ..............................
$1,001 to $5,000...............................
$5,001 to 10,000...............................
$10,001 or More................................
Total (Optima Accounts.............
No Pre-Set Spending Limit (Sign & Travel)
Accounts)......................................
----------- ----------- ----------- -----------
Grand Total % $ %
=========== =========== =========== ===========
S-17
Composition by Period of Delinquency
Trust Portfolio
Percentage Percentage
of Total of Total
Period of Delinquency Number of Number of Receivables Receivables
(Days Contractually Delinquent) Accounts Accounts Outstanding Outstanding
------------------------------ ----------- ----------- ----------- -----------
% $ %
Current to 30 days ..........................
31 to 60 Days................................
61 to 90 Days................................
91 or More Days..............................
----------- ----------- ----------- -----------
Total % % $ %
=========== =========== =========== ===========
Composition by Account Age
Trust Portfolio
Percentage Percentage
of Total of Total
Number of Number of Receivables Receivables
Account Age Accounts Accounts Outstanding Outstanding
------------------------------ ----------- ----------- ----------- -----------
% $ %
Not More than 12 Months .....................
12 Months to 17 Months.......................
18 Months to 23 Months.......................
24 Months to 35 Months.......................
36 Months to 47 Months.......................
48 Months to 59 Months.......................
60 Months to 71 Months.......................
72 Months or More............................
----------- ----------- ----------- -----------
Total % % $ %
=========== =========== =========== ===========
As of ________, 2003, approximately ____%, ____%, ___%, ___% and ___%
of the receivables related to account holders having billing addresses in
_______, _______, ________, _____, and _________, respectively. Not more than
[5]% of the receivables related to account holders having billing addresses in
any other single state.
RFC II, Centurion and Credco
RFC II
American Express Receivables Financing Corporation II, or 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., or TRS. TRS is a wholly owned subsidiary of American
Express Company, 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 World Financial Center, Room 138, 200 Vesey Street, New
York, New York 10285-4405.
S-18
Centurion
American Express Centurion Bank, or 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 4315 South 2700 West,
Salt Lake City, Utah 84184. Centurion is a wholly owned subsidiary of TRS.
Centurion is the surviving company of a 1996 merger with an affiliated bank that
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, 2002, Centurion had total deposits of approximately
$7.4 billion, total assets of approximately $18.3 billion and total equity
capital of approximately $1.9 billion. Centurion had net income of approximately
$766 million for the year ended December 31, 2002.
Credco
Credco is a wholly owned subsidiary of TRS primarily engaged in the
business of purchasing charge card account receivables generated by TRS and
Centurion 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, 2002, and based upon the Annual Report on Form 10-K
of Credco at such date, Credco had total assets of approximately $27.7 billion
and total equity capital of approximately $2.3 billion. Credco had net income of
approximately $228 million for the one-year period ended December 31, 2002.
The Servicer
As of December 31, 2002, TRS, the servicer, had approximately $74.0
billion in total assets, approximately $67.1 billion in total liabilities and
redeemable preferred stock and approximately $6.9 billion in shareholder's
equity.
Series Provisions
The Series 2003-_ certificates will be issued pursuant to the pooling
and servicing agreement and the Series 2003-_ supplement specifying the
principal terms of the certificates, 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 2003-_ certificates. Reference should be made to the
prospectus for additional information concerning the Series 2003-_ certificates
and the pooling and servicing agreement. See "The Pooling and Servicing
Agreement Generally" in the accompanying 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 on each
Distribution Date, beginning _______, 2003, to the Series 2003-_
certificateholders in whose names the Series 2003-_ certificates were registered
on the relevant 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
S-19
(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). For the first Distribution Date, however, interest on the
Class A certificates will equal $[________].
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 ______, 2003, and during each Interest Period thereafter, at the rate of
% per annum above LIBOR prevailing on the related LIBOR Determination Date with
respect to each such period.
On each Distribution Date, Class A Outstanding Monthly Interest 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 interest
of the holders of the Class A certificates for such Monthly Period are
insufficient to pay such interest, Excess Spread and Excess Finance Charge
Collections allocated to Series 2003-_ 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.
Interest will accrue on the Class B certificates at the Class B
certificate rate from the closing date. Interest will be distributed on _______,
2003 and on each Distribution Date, beginning ______, 2003, 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 Class B Invested Amount as of the preceding Record Date (or,
in the case of the first Distribution Date, as of the closing date). For the
first Distribution Date, however, interest on the Class B certificates will
equal $____.
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 _______, 2003, and during each Interest Period thereafter, at the rate
of ___% per annum above LIBOR prevailing on the related LIBOR Determination Date
with respect to each such period.
On each Distribution Date, Class B Outstanding Monthly Interest 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 interest
of the holders of the Class B certificates for such Monthly Period are
insufficient to pay such interest, Excess Spread and Excess Finance Charge
Collections allocated to Series 2003-_ 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.
S-20
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)
815-2793.
Principal Payments
The Revolving Period 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. During the Revolving Period, no principal
payments will be made to or for the benefit of the Series 2003-_
certificateholders. Unless a Pay-Out Event has occurred, the Controlled
Accumulation Period is expected to begin at the close of business on the last
day of the __________ Monthly Period, but may be delayed as described herein,
and ends on the earliest to occur of
(a) the commencement of an Early Amortization Period,
(b) the payment in full of the Invested Amount and
(c) the Series 2003-_ Termination Date.
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 2003-_ 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 amount on deposit in the principal funding account 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 2003-_____
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.
S-21
The Controlled Accumulation Period is expected to begin at the close of
business on the last day of the _____ Monthly Period. However, the date on which
the Controlled Accumulation Period actually begins may be delayed if--after
making a calculation prescribed by the pooling and servicing agreement--the
servicer determines, in effect, that enough Shared Principal Collections are
expected to be available for your series from principal sharing series that will
be in their revolving periods during the Controlled Accumulation Period to delay
the start of the Controlled Accumulation Period, without affecting the payment
in full of the certificates of your series by the Expected Final Payment Date.
This calculation will take into account 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 2003-_.
If the beginning of your series' Controlled Accumulation Period is
delayed and then a Pay-Out Event or Reinvestment Event occurs with respect to
any outstanding principal sharing series, your series' Controlled Accumulation
Period will start on (i) the first day of the Monthly Period immediately
succeeding the date on which the Pay-Out Event or Reinvestment Event occurred
or, if sooner, (ii) the date on which the Controlled Accumulation Period is then
scheduled to start.
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 2003-_
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 2003-_ Termination
Date. After payment in full of the Class B Invested Amount, the holder of the
Collateral Interest 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 2003-_ 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.
S-22
Allocation Percentages
Pursuant to the pooling and servicing agreement, the servicer will
allocate among Series 2003-_ 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 accompanying prospectus and,
with respect to Series 2003-_ specifically, as described below.
Pursuant to the pooling and servicing agreement, during each Monthly
Period, the servicer will allocate to Series 2003-_ its Series Allocable Finance
Charge Collections, Series Allocable Principal Collections and Series Allocable
Defaulted Amount.
The Series Allocable Finance Charge Collections and the Series
Allocable Defaulted Amount for Series 2003-_ with respect to any Monthly Period
will be allocated to the Series 2003-_ 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 interest of the holders of the transferor certificates.
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
the second group of series known as Group II as set forth in "The Pooling and
Servicing Agreement Generally--Reallocations Among Different Series Within a
Reallocation Group" in the accompanying prospectus. Reallocated Investor Finance
Charge Collections allocated to Series 2003-_ and the Investor Default Amount
will be further allocated among the Class A certificateholders, the Class B
certificateholders and the holder of the Collateral Interest in accordance with
the Class A Floating Percentage, the Class B Floating Percentage and the
Collateral Floating Percentage, respectively.
Series Allocable Principal Collections for Series 2003-_ will be
allocated to the Series 2003-_ 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.
Such amounts so allocated to the Series 2003-_ certificates and the
Collateral Interest will be further allocated to the Class A certificateholders,
the Class B certificateholders and the holder of the Collateral Interest based
on the Class A Principal Percentage, the Class B Principal Percentage and the
Collateral Principal Percentage, respectively.
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 an Eligible Deposit
Account held for the benefit of the Series 2003-_ certificateholders. During the
Controlled Accumulation Period, the servicer will transfer collections in
respect of principal receivables, Shared Principal Collections allocated to
Series 2003-_ 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 below under "--Application of
Collections."
Unless a pay-out event has occurred with respect to the Series 2003-_
certificates, all amounts on deposit in the Principal Funding Account 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 through 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 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 Covered Amount, such shortfall will be
funded from other Class A Available Funds (including a withdrawal from the
Reserve Account, if necessary, as described below under "--Reserve Account").
The Available Reserve Account Amount at any time will be limited and there can
be no assurance that sufficient funds will be available to fund any such
shortfall.
S-23
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 holder of the Collateral Interest. The Reserve
Account is established to assist with 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
funding of the Reserve Account begins, 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 2003-_ (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.
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
holder of the Collateral Interest for application in accordance with the terms
of the loan agreement.
If 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 to mature on or before 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 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 2003-_.
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 for such Distribution Date or
Special Payment Date, and
(b) the amount, if any, by which the Covered Amount for such
Distribution Date or Special Payment Date exceeds the investment earnings (net
of losses and investment expenses), if any, in the Principal Funding Account for
the related Distribution 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 will equal the
Available Reserve Account Amount.
S-24
The Reserve Account will be terminated following the earliest to occur
of:
(a) the termination of the trust pursuant to the pooling and servicing
agreement,
(b) the date on which the Series 2003-_ 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 2003-_ 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 holder of the Collateral
Interest for application in accordance with the terms of the loan agreement. Any
amounts withdrawn from the Reserve Account and distributed to the holder of the
Collateral Interest as described above will not be available for distribution to
the Class A certificateholders and the Class B certificateholders.
Reallocation of Cash Flows
Class A Required Amount
On each Determination Date, the servicer will calculate the Class A
Required Amount. If the Class A Required Amount is greater than zero, the
following reallocations will occur:
o Excess Spread and Excess Finance Charge Collections allocated to
Series 2003-_ and available for such purpose will be used to fund
the Class A Required Amount for the related Distribution Date;
o if such Excess Spread and Excess Finance Charge Collections are
insufficient to fund the Class A Required Amount, Reallocated
Principal Collections allocable first to the Collateral Interest and
then to the Class B certificates will be used to fund the remaining
Class A Required Amount; and
o if Reallocated Principal Collections for the related Monthly Period,
together with Excess Spread and Excess Finance Charge Collections
allocated to Series 2003-_, 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
related 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 for 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 may 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" below.
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 to Series 2003-_
and available to reimburse such reductions. See "Application of
Collections--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 in a similar manner.
S-25
Class B Required Amount
On each Determination Date, the servicer will calculate the Class B
Required Amount. If the Class B Required Amount is greater than zero, the
following reallocations will occur:
o Excess Spread and Excess Finance Charge Collections allocated to
Series 2003-_ 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 for the related Distribution Date;
o if such Excess Spread and Excess Finance Charge Collections are
insufficient to fund the Class B Required Amount, Reallocated
Principal Collections allocable first to the Collateral Interest and
not required to pay the Class A Required Amount will then be used to
fund the remaining Class B Required Amount; and
o if such Reallocated Principal Collections allocable to the
Collateral Interest for 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
related 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). Any such reduction may have the effect of slowing or reducing the
return of principal and interest to the Class B certificateholders. In that
case, 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" in this prospectus supplement.
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) an amount equal to the Class A Available Funds will be
distributed in the following priority:
(i)an amount equal to Class A Monthly Interest for
such Distribution Date, plus the amount of any Class A
Outstanding Monthly Interest, plus the amount of any Class A
Additional Interest for such Distribution Date and any Class A
Additional Interest previously due but not distributed to the
Class A certificateholders on a prior Distribution Date will
be distributed to the Class A certificateholders;
(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;
S-26
(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 as described
under "--Excess Spread; Excess Finance Charge Collections"
below.
(B) an amount equal to the Class B Available Funds will be
distributed in the following priority:
(i) an amount equal to Class B Monthly Interest for
such Distribution Date, plus the amount of any Class B
Outstanding Monthly Interest, plus the amount of any Class B
Additional Interest for such Distribution Date and any Class B
Additional Interest previously due but not distributed to the
Class B certificateholders on a prior Distribution Date will
be distributed to the Class B certificateholders;
(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 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 as described
under "--Excess Spread; Excess Finance Charge Collections"
below.
(C) an amount equal to the Collateral Available Funds will be
distributed 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 as
described under "--Excess Spread; Excess Finance Charge
Collections" below.
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 2003-_ for the related Monthly Period to make
the following distributions in the following priority:
(a) an amount equal to the Class A Required Amount, if any,
for such Distribution Date will be used to fund the Class A Required
Amount, and if the Class A Required Amount for such Distribution Date
exceeds the amount of Excess Spread and Excess Finance Charges
allocated to Series 2003-__, such Excess Spread and Excess Finance
Charges will be applied:
o first, to pay shortfalls in the payment of amounts described
in clause (A)(i) under "--Payment of Interest, Fees and Other
Items" in this prospectus supplement,
o second, to pay shortfalls in the payment of amounts described
in clause (A)(ii) under "--Payment of Interest, Fees and Other
Items" in this prospectus supplement, and
S-27
o third, to pay shortfalls in the payment of amounts described
in clause (A)(iii) under "--Payment of Interest, Fees and
Other Items" in this prospectus supplement;
(b) an amount equal to the aggregate amount of Class A
Investor Charge-Offs that 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" in this
prospectus supplement;
(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 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,
for such Distribution Date will be (I) used to fund the Class B
Required Amount and (II) applied, 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 (but not in excess of
the aggregate amount of such reductions that 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 holder of the collateral
interest on a prior Distribution Date and any Collateral Additional
Interest previously due but not distributed to the holder of the
collateral interest on a prior Distribution Date, will be distributed
to the holder of the collateral interest 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 (but not
in excess of the aggregate amount of such reductions that 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 is funded, 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 holder of the collateral
interest (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 holder of the
Collateral Interest for application in accordance with the loan
agreement; and
S-28
(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 accompanying
prospectus.
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 for 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 holder of the collateral
interest; 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
accompanying 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 holder of the collateral interest, 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 holder of the Collateral Interest; and
(D) for each Distribution Date, the balance, if any,
of Available Principal Collections not applied pursuant to
paragraphs (A), (B) and (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 accompanying 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;
S-29
(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 holder of the Collateral Interest; 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.
Required Collateral Invested Amount
For 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. 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 2003-_ 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 2003-_ 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."
Class A Investor Charge-Offs
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 2003-_ 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 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. Such Class A Investor Charge-Off will have the effect of
slowing or reducing the return of principal to the Class A certificateholders.
If the Class A Invested Amount has been reduced by the amount of any Class A
Investor Charge-Offs, it will 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 2003-_ available for such purpose as described above under
"--Application of Collections--Excess Spread; Excess Finance Charge
Collections."
S-30
Class B Investor Charge-Offs
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 2003-_ 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. 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
2003-_ available for such purpose as described above under "--Application of
Collections--Excess Spread; Excess Finance Charge Collections."
On each Distribution Date, if the Collateral Default Amount for such
Distribution Date exceeds the amount of Excess Spread and Excess Finance Charge
Collections allocated to Series 2003-_ which is allocated and available to fund
such amount as described above 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. 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 2003-_ allocated and available for that purpose as described above under
"--Application of Collections--Excess Spread; Excess Finance Charge
Collections."
Paired Series
Series 2003-_ may be paired with one or more other series (each called
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 2003-_ 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 2003-_ certificateholders after the Series 2003-_
certificates were paired with the paired series. The issuance of a paired series
will be subject to the 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 2003-_
certificateholders. See "Risk Factors--Issuances of additional series by the
trust may adversely affect your certificates" and "The Pooling and Servicing
Agreement Generally--Paired Series" in the accompanying prospectus.
S-31
Pay-Out Events
The Pay-Out Events with respect to the Series 2003-_ 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 2003-_
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 2003-_ supplement, which
failure has a material adverse effect on the Series 2003-_
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 2003-_ 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 2003-_ 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 2003-_ 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 2003-_ supplement.
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 2003-_ certificates evidencing more
than 50% of the aggregate unpaid principal amount of Series 2003-_ certificates
by notice then given in writing to the transferors and the servicer (and to the
trustee if given by the Series 2003-_ certificateholders) may declare that a
Pay-Out Event has occurred with respect to Series 2003-_ 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 2003-_
without any notice or other action on the part of the trustee immediately upon
the occurrence of such event.
S-32
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
accompanying 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 Bankruptcy,
Conservatorship and Receivership" in the accompanying 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 Series 2003-__ for any
Distribution Date, called the Monthly Servicing Fee, will be equal to one-
twelfth of the product of:
(a) the Servicing Fee Rate, and
(b) the Servicing Base Amount.
The share of the Monthly Servicing Fee allocable to the Class A
certificateholders for any Distribution Date, called 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 for any Distribution Date, called 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 holder of the
Collateral Interest for any Distribution Date, called the Collateral 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). In no event will the trust, the trustee or the
Series 2003-__ 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.
S-33
Optional Repurchase
So long as a transferor is the servicer or an affiliate of the
servicer, on any Distribution Date occurring on or after the date that the sum
of the Class A Invested Amount, the Class B Invested Amount and the Collateral
Invested Amount is reduced to $____________ (5% of the initial outstanding
aggregate principal amount of the Class A certificates, the Class B certificates
and the Collateral Interest) or less, that transferor will have the option to
repurchase the Class A certificateholders' interest, the Class B
certificateholders' interest and the Collateral Interest. 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 Class A
certificates, the Class B certificates and the Collateral Interest (and accrued
and unpaid interest with respect to interest amounts that were due but not paid
on such distribution date or any prior distribution date) through (a) if the day
on which such repurchase 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. Such proceeds will be allocated first to pay amounts due to the Class A
certificateholders, then, to pay amounts due to the Class B certificateholders
and finally, to pay amounts due to the holder of the Collateral Interest.
Following any such repurchase, the Receivables will be assigned to the
transferors and the Class A certificateholders, the Class B certificateholders
and the holder of the Collateral Interest will have no further rights with
respect thereto. In the event that the transferors fail for any reason to
deposit the aggregate purchase price for such receivables, the trust will
continue to hold the receivables and payments will continue to be made to the
Class A certificateholders, Class B certificateholders and the holder of the
Collateral Interest as described herein.
Series Termination
If on the Distribution Date which is two months prior to the Series
2003-_ 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 Series
2003-_ Termination Date (after giving effect to all distributions required to be
made on the Series 2003-_ Termination Date other than from the proceeds of the
sale). The transferors and the holder of the Collateral Interest 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 and (b) the amount which otherwise would be available in the Collection
Account on the Series 2003-_ Termination Date for distribution to the Series
2003-_ certificateholders and the holder of the Collateral Interest. The
servicer will sell such receivables on the Series 2003-_ Termination Date to the
bidder who provided the highest cash purchase offer and will deposit the
proceeds of such sale in the Collection Account for allocation (together with
the amount which otherwise would be available in the Collection Account on the
Series 2003-_ Termination Date for distribution to the Series 2003-_
certificateholders and the holder of the Collateral Interest) to Series 2003-_.
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 holder of the Collateral Interest, a monthly report prepared by the
servicer setting forth certain information with respect to the trust, 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 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;
S-34
(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 interest of the holders of the
Series 2003-_ certificates;
(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 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
Investor Charge-Offs 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
(1) Shared Principal Collections.
ERISA Considerations
Class A Certificates
Subject to the considerations described below and in the accompanying
prospectus, the Class A certificates may be purchased by, on behalf of, or with
"plan assets" of any Plan. Any Plan fiduciary that proposes to cause a Plan to
acquire any of the Class A certificates should consult with its counsel with
respect to the potential consequences of the Plan's acquisition and ownership of
such Class A certificates under ERISA and the Internal Revenue Code. See "ERISA
Considerations" in the accompanying prospectus.
Class B Certificates
The Class B certificates may not be acquired or held by, on behalf of,
or with "plan assets" of any Plan other than insurance companies investing
solely assets of their general accounts. By its acceptance of a Class B
certificate, each Class B certificateholder will be deemed to have represented
and warranted that either (i) it is not and will not be, and is not acquiring
the Class B certificates with "plan assets" of, a Plan or (ii) it is an
insurance company, it acquired and will hold the Class B certificates solely
with assets of its general account, and such acquisition and holding satisfies
the conditions applicable under Sections I and III of Department of Labor
Prohibited Transaction Class Exemption 95-60.
S-35
The Department of Labor Authorization
The Department of Labor has authorized the trust to rely upon the
exemptive relief from certain of the prohibited transaction provisions of ERISA
and Section 4975 of the Internal Revenue Code available under PTCE 96-62
relating to (i) the initial purchase, the holding and the subsequent resale by
Plans of senior certificates representing an undivided interest in a credit card
trust with respect to which Centurion, RFC II or any of their affiliates is the
sponsor; and (ii) the servicing, operation and management of such trust;
provided that the general conditions and certain other conditions set forth in
such authorization are satisfied. The authorization will apply to the
acquisition, holding and resale of the Class A certificates by, on behalf of or
with "plan assets" of a Plan; provided that the conditions described in "ERISA
Considerations" in the accompanying prospectus are met.
The transferors believe that the authorization will apply to the
acquisition and holding of the Class A certificates by Plans and that all
conditions of the authorization, other than those that are within the control of
the investors, will be met.
Consultation With Counsel
In light of the foregoing fiduciaries or other persons contemplating
purchasing the Class A certificates on behalf of or with "plan assets" of any
Plan should consult their own counsel regarding whether the trust's assets
represented by the Class A certificates would be considered "plan assets," the
consequences that would apply if the trust's assets were considered "plan
assets," and the availability of exemptive relief from the prohibited
transaction rules.
Finally, Plan fiduciaries and other Plan investors should consider the
fiduciary standards under ERISA or other applicable law in the context of the
Plan's particular circumstances before authorizing an investment of a portion of
the Plan's assets in the Class A certificates. Accordingly, among other factors,
Plan fiduciaries and other Plan investors should consider whether the investment
(i) satisfies the diversification requirement of ERISA or other applicable law,
(ii) is in accordance with the Plan's governing instruments, and (iii) is
prudent in light of the "Risk Factors" and other factors discussed in the
accompanying prospectus.
Underwriting
Subject to the terms and conditions set forth in the underwriting
agreement among the transferors, TRS, the underwriters of the Class A
certificates named below and the underwriters of the Class B certificates named
below, 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:
Aggregate Principal Amount
Underwriters of the Class A Certificates of Class A Certificates
.............................................................. $
..............................................................
..............................................................
..............................................................
.............................................................. ----------------------------
Total......................................................... $
============================
Aggregate Principal Amount
Underwriters of the Class B Certificates of Class B Certificates
..............................................................
..............................................................
.............................................................. ----------------------------
Total......................................................... $
============================
S-36
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 2003-_
certificates offered hereby will be issued if any are issued. Offering expenses
are estimated to be $_______.
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 ____% 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 ____% 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 ____% 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 ____% 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 of these Series 2003-__ certificates has agreed that:
o it has not offered or sold, and prior to the date which is six
months after the date of issue of the Series 2003-__ certificates
will not offer or sell any Series 2003-__ certificates to persons in
the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which do not constitute an
offer to the public in the United Kingdom for the purposes of the
Public Offers of Securities Regulations 1995, which are referred to
in this section as the Regulations, and the Financial Services and
Markets Act 2000, or the FSMA;
o it has complied and will comply with all applicable provisions of
the Regulations and the FSMA with respect to anything done by it in
relation to the Series 2003-__ certificates in, from or otherwise
involving the United Kingdom; and
o it has only communicated or caused to be communicated and it will
only communicate or cause to be communicated any invitation or
inducement to engage in investment activity (within the meaning of
Section 21 of the FSMA) received by it in connection with the issue
or sale of any Series 2003-__ certificates in circumstances in which
Section 21(1) of the FSMA does not apply to the issuer.
S-37
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Series 2003-_ certificates in accordance with Regulation M under the
Securities Exchange Act of 1934, as amended. 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 2003-_
certificates so long as the stabilizing bids do not exceed a specified maximum.
Syndicate covering transactions involve purchases of the Series 2003-_
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 2003-_
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 2003-_ certificates to be higher than they would be in the
absence of such transactions. Neither the transferors 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 of 1933, as amended,
or contribute to payments the underwriters may be required to make in respect
thereof.
S-38
Glossary of Defined Terms
"Adjusted Invested Amount" for any date of determination means the sum
of the Class A Adjusted Invested Amount and the Class B Adjusted Invested Amount
and the Collateral Invested Amount as of such date.
"Available Principal Collections" means, with respect to any Monthly
Period, an amount equal to the sum of:
(i) 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 Class A Required Amount and the
Class B Required Amount),
(ii) any Shared Principal Collections with respect to other
principal sharing series that are allocated to Series 2003-__, and
(iii) certain other amounts which pursuant to the Series
2003-__ supplement are to be treated as Available Principal Collections
with respect to the related Distribution Date.
"Available Reserve Account Amount" means, on each Distribution Date,
the amount available to be withdrawn from the Reserve Account 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.
"Base Rate" means, for any Monthly Period, the annualized percentage
equivalent (which percentage shall never exceed 100%) of a fraction:
o the numerator of which is equal to the sum of Class A Monthly
Interest, Class B Monthly Interest (calculated as if the Class B
Invested Amount equals the outstanding principal balance of the
Class B certificates), Collateral Monthly Interest, the Monthly
Servicing Fee for Series 2003- __ and the Collateral Interest for
the related Distribution Date, and
o the denominator of which is the Invested Amount as of the last day
of the preceding Monthly Period.
"Business Day" means, for purposes of this prospectus supplement and
the accompanying prospectus (unless otherwise indicated), any day other than (a)
a Saturday or Sunday, or (b) any other day on which banking institutions in New
York, New York or any other state in which the principal executive offices of
Centurion or the trustee are located are authorized or obligated by law or
executive order to be closed.
"Class A Additional Interest" means an amount paid on each Distribution
Date, if applicable, equal to the product of:
(i) a fraction, the numerator of which is the actual number of
days from and including the immediately preceding Distribution Date to
but excluding such Distribution Date and the denominator of which is
360,
(ii) the Class A certificate rate for the related Interest
Period plus 2.0% per year, and
(iii) the amount payable on interest amounts that were due but
not distributed to the Class A certificateholders on a prior
Distribution Date.
"Class A Adjusted Invested Amount" for any date of determination means
an amount equal to the Class A Invested Amount minus the funds on deposit in the
Principal Funding Account (up to the Class A Invested Amount) on such date.
S-39
"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 2003-__ 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 2003-__ in accordance with the pooling and servicing agreement
and the Series 2003-__ supplement),
(ii) if such Monthly Period relates to a Distribution Date
with respect to the Controlled Accumulation Period, the net investment
earnings, if any, in the Principal Funding Account for 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 2003-__ supplement with respect to the related Distribution
Date.
"Class A Floating Percentage" means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction:
o 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
o 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).
"Class A Initial Invested Amount" means $__.
"Class A Invested Amount" for any date of determination means an amount
equal to:
(i) the Class A Initial Invested Amount, minus
(ii) the amount of principal payments made to the Class A
certificateholders on or prior to such date, minus
(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;
provided, however, that the Class A Invested Amount may not be reduced below
zero.
"Class A Investor Charge-Off" has the meaning described in "Series
Provisions--Defaulted Receivables; Investor Charge-Offs--Class A Investor
Charge-Offs" in this prospectus supplement.
"Class A Investor Default Amount" means, for any Distribution Date, the
portion of the Investor Default Amount allocated to the Class A certificates 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.
"Class A Monthly Interest" means, for any Distribution Date, an amount
equal to the product of:
(i) 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,
(ii) the Class A certificate rate in effect for that period,
and
S-40
(iii) the outstanding principal amount of the Class A
certificates as of the preceding Record Date;
provided, however, that for the first Distribution Date, Class A Monthly
Interest shall be equal to the interest accrued on the initial principal amount
of the Class A certificates at the Class A certificate rate for the period from
and including the closing date to but excluding the first Distribution Date.
"Class A Outstanding Monthly Interest" means, for any Distribution
Date, the amount of Class A Monthly Interest previously due but not paid to
Class A certificateholders.
"Class A Principal Percentage" means, with respect to any Monthly
Period:
o during the Revolving Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction:
(i) the numerator of which is the Class A Invested Amount as
of the last day of the immediately preceding Monthly Period (or, with
respect to the first Monthly Period, the Class A Initial Invested
Amount), and
(ii) the denominator of which is the Invested Amount as of
such day (or, with respect to the first Monthly Period, the Initial
Invested Amount), and
o during the Controlled Accumulation Period or the Early Amortization
Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction:
(i) the numerator of which is the Class A Invested Amount as
of the end of the Revolving Period, and
(ii) the denominator of which is the Invested Amount as of
such day.
"Class A Required Amount" means, for any Determination Date, the amount
equal to:
(i) Class A Monthly Interest for the related Distribution
Date, plus
(ii) any Class A Outstanding Monthly Interest, plus
(iii) any Class A Additional Interest, plus
(iv) the Class A Servicing Fee for such Distribution Date and
any unpaid Class A Servicing Fee, plus
(v) the Class A Investor Default Amount, if any, for the
related Distribution Date, minus
(vi) Class A Available Funds for the related Distribution
Date.
"Class A Servicing Fee" has the meaning described in "Series
Provisions--Servicing Compensation and Payment of Expenses" in this prospectus
supplement.
"Class B Additional Interest" means an amount paid on each Distribution
Date, if applicable, equal to the product of:
(i) a fraction, the numerator of which is the actual number of
days from and including the immediately preceding Distribution Date to
but excluding such Distribution Date and the denominator of which is
360,
(ii) the Class B certificate rate for the related Interest
Period plus 2.0% per year, and
(iii) the amount payable on interest amounts that were due but
not distributed to the Class B certificateholders on a prior
Distribution Date.
S-41
"Class B Adjusted Invested Amount" for any date of determination means
an amount equal to the Class B Invested Amount minus the funds on deposit in the
Principal Funding Account (up to the Class B Invested Amount) on such date.
"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 2003-__ 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 2003-__ in
accordance with the pooling and servicing agreement and the Series 2003-__
supplement).
"Class B Floating Percentage" means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction:
o 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
o 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).
"Class B Initial Invested Amount" means $__.
"Class B Invested Amount" for any date of determination means an amount
equal to:
(i) the Class B Initial Invested Amount, minus
(ii) the amount of principal payments made to Class B
certificateholders on or prior to such date, minus
(iii) the aggregate amount of Class B Investor Charge-Offs for
all prior Distribution Dates, minus
(iv) the aggregate amount of Reallocated Principal Collections
for all prior Distribution Dates which have been used to fund the Class
A Required Amount with respect to such Distribution Dates (excluding
any Reallocated Principal Collections that have resulted in a reduction
of the Collateral Invested Amount), minus
(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 under "Series
Provisions--Defaulted Receivables; Investor Charge-Offs" in this
prospectus supplement, plus
(vi) the aggregate amount of Excess Spread and Excess Finance
Charge Collections allocated to Series 2003-__ and applied on all prior
Distribution Dates for the purpose of reimbursing amounts deducted as
described in clauses (iii), (iv) and (v) above;
provided, however, that the Class B Invested Amount may not be reduced
below zero.
"Class B Investor Charge-Off" has the meaning described in "Series
Provisions--Defaulted Receivables; Investor Charge-Offs--Class B Investor
Charge-Offs" in this prospectus supplement.
"Class B Investor Default Amount" means, for any Distribution Date, the
portion of the Investor Default Amount allocated to the Class B certificates 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.
S-42
"Class B Monthly Interest" means, for any Distribution Date, an amount
equal to the product of:
(i) 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,
(ii) the Class B certificate rate in effect for that period, and
(iii) the outstanding principal amount of the Class B certificates as
of the preceding Record Date;
provided, however, that for the first Distribution Date, Class B
Monthly Interest shall be equal to the interest accrued on the initial principal
amount of the Class B certificates at the Class B certificate rate for the
period from and including the closing date to but excluding the first
Distribution Date.
"Class B Outstanding Monthly Interest" means, for any Distribution
Date, the amount of Class B Monthly Interest previously due but not paid to the
Class B certificateholders.
"Class B Principal Percentage" means, with respect to any Monthly
Period:
o during the Revolving Period, the percentage equivalent
(which percentage shall never exceed 100%) of a fraction:
(i) the numerator of which is the Class B Invested Amount as
of the last day of the immediately preceding Monthly Period (or,
with respect to the first Monthly Period, the Class B Initial
Invested Amount), and
(ii) the denominator of which is the Invested Amount as of
such day (or, with respect to the first Monthly Period, the
Initial Invested Amount), and
o during the Controlled Accumulation Period or the Early
Amortization Period, the percentage equivalent (which percentage
shall never exceed 100%) of a fraction:
(i) the numerator of which is the Class B Invested Amount as
of the end of the Revolving Period, and
(ii) the denominator of which is the Invested Amount as of
such day.
"Class B Required Amount" means, for any Determination Date, the amount
equal to:
(i) Class B Monthly Interest for the related Distribution
Date, plus
(ii) any Class B Outstanding Monthly Interest, plus
(iii) any Class B Additional Interest, plus
(iv) the Class B Servicing Fee for such Distribution Date and
any unpaid Class B Servicing Fee, plus
(v) the Class B Investor Default Amount, if any, for the
related Distribution Date, minus
(vi) Class B Available Funds for the related Distribution
Date.
"Class B Servicing Fee" has the meaning described in "Series
Provisions--Servicing Compensation and Payment of Expenses" in this prospectus
supplement.
"Collateral Additional Interest" means, for any Distribution Date,
additional interest on Collateral Monthly Interest due but not paid to the
holder of the Collateral Interest on a prior Distribution Date at a rate equal
to the Collateral Rate.
S-43
"Collateral Available Funds" means, for 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 2003-__ in accordance with the pooling and servicing agreement and the
Series 2003-__ supplement).
"Collateral Charge-Off" has the meaning described in "Series
Provisions--Defaulted Receivables; Investor Charge-Offs--Collateral Charge-
Offs" in this prospectus supplement.
"Collateral Default Amount" means, with respect to any Distribution
Date, the product of the Investor Default Amount for the related Monthly Period
and the Collateral Floating Percentage.
"Collateral Floating Percentage" means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction:
o 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
o 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).
"Collateral Initial Invested Amount" means $_________.
"Collateral Interest" means an uncertificated interest in the trust
assets that is subordinated to, and serves as credit enhancement for, the Series
2003-_ certificates.
"Collateral Interest Servicing Fee" has the meaning described in
"Series Provisions--Servicing Compensation and Payment of Expenses" in this
prospectus supplement.
"Collateral Invested Amount" for any date of determination means an
amount equal to:
(i) the Collateral Initial Invested Amount, minus
(ii) the amount of principal payments made to the holder of
the Collateral Interest on or prior to such date, minus
(iii) the aggregate amount of Collateral Charge-Offs for all
prior Distribution Dates, minus
(iv) the aggregate amount of Reallocated Principal Collections
for all prior Distribution Dates, minus
(v) an amount equal to the amount by which the Collateral
Invested Amount has been reduced to cover the Class A Investor Default
Amount and the Class B Investor Default Amount on all prior
Distribution Dates as described under "Series Provisions--Defaulted
Receivables; Investor Charge-Offs" in this prospectus supplement, plus
(vi) the aggregate amount of Excess Spread and Excess Finance
Charge Collections allocated to Series 2003-__ and applied on all prior
Distribution Dates for the purpose of reimbursing amounts deducted as
described in clauses (iii), (iv) and (v) above;
provided, however, that the Collateral Invested Amount may not be reduced below
zero.
"Collateral Monthly Interest" means, for any Distribution Date, an
amount equal to the product of:
S-44
(i) 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,
(ii) the Collateral Rate in effect for the related Interest
Period, and
(iii) the Collateral Invested Amount as of the close of
business on the last day of the preceding Monthly Period;
provided, however, that for 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 Principal Percentage" means, with respect to any Monthly
Period:
o during the Revolving Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction:
(i) the numerator of which is the Collateral Invested Amount
as of the last day of the immediately preceding Monthly Period
(or, with respect to the first Monthly Period, the Collateral
Initial Invested Amount), and
(ii) the denominator of which is the Invested Amount as of
such day (or, with respect to the first Monthly Period, the
Initial Invested Amount), and
o during the Controlled Accumulation Period or the Early
Amortization Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction:
(i) the numerator of which is the Collateral Invested Amount
as of the end of the Revolving Period, and
(ii) the denominator of which is the Invested Amount as of
such day.
"Collateral Rate" means a rate specified in the loan agreement not to
exceed one-month LIBOR plus __% per year.
"Controlled Accumulation Amount" means $_______; provided, however,
that, if the start of the Controlled Accumulation Period is delayed and,
therefore, the length of the Controlled Accumulation Period is shortened as
described under "Series Provisions--Principal Payments" in this prospectus
supplement, the Controlled Accumulation Amount may be different for each
Distribution Date for the Controlled Accumulation Period and will be determined
by the transferors in accordance with the Series 2003-__ 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
able to create Shared Principal Collections during the Controlled Accumulation
Period.
"Controlled Deposit Amount" means, for any Distribution Date relating
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.
"Covered Amount" means, 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 B Invested
Amount, an amount equal to the sum of:
(i) the product of:
(a) a fraction, the numerator of which is the actual
number of days from the prior Distribution Date to but
excluding such Distribution Date and the denominator of which
is 360,
S-45
(b) the Class A certificate rate in effect for the
related Interest Period, and
(c) the aggregate amount on deposit in the Principal
Funding Account, if any, as of the preceding Distribution Date
that is allocable to the principal of the Class A
certificates, plus
(ii) the product of:
(a) a fraction, the numerator of which is the actual
number of days from the prior Distribution Date to but
excluding such Distribution Date and the denominator of which
is 360,
(b) the Class B certificate rate in effect for the
related Interest Period, and
(c) the aggregate amount on deposit in the Principal
Funding Account, if any, as of the preceding Distribution Date
that is allocable to the principal of the Class B
certificates.
"Deficit Controlled Accumulation Amount" means:
(a) on the first Distribution Date for 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 for 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.
"Excess Spread" means, for any Distribution Date, an amount equal to
the sum of the amounts described in clause (A)(iv), clause (B)(iii) and clause
(C)(ii) in "Series Provisions--Application of Collections--Payment of Interest,
Fees and Other Items" in this prospectus supplement.
"Expected Final Payment Date" means the ______ Distribution Date.
"Floating Allocation Percentage" means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction:
o 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
o the denominator of which is the product of:
(i) the sum of the total amount of the principal
receivables in the trust as of such day (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, and
(ii) the Series Allocation Percentage.
However, the amount calculated above pursuant to clause (i) of the denominator
shall be increased by the aggregate amount of principal receivables in
Additional Accounts added to the trust during such Monthly Period and decreased
by the aggregate amount of principal receivables in Additional Accounts removed
from the trust during such Monthly Period, as though such receivables had been
added to or removed from, as the case may be, the trust as of the first day of
such Monthly Period.
S-46
"Initial Invested Amount" means $________.
"Interest Period" means, for any Distribution Date, a period from and
including the preceding Distribution Date to but excluding such Distribution
Date; provided, however, that the first Interest Period will be the period from
and including the closing date to but excluding the __________ Distribution
Date.
"Invested Amount" for any date of determination means an amount equal
to the sum of the Class A Invested Amount, the Class B Invested Amount and the
Collateral Invested Amount.
"Investor Default Amount" means, for any Monthly Period, the product of
(i) the Floating Allocation Percentage for such Monthly Period and (ii) the
Series Allocable Defaulted Amount for such Monthly Period.
"LIBOR" means, as of any LIBOR Determination Date, the rate for
deposits in United States dollars for a one-month period which appears on
Telerate Page 3750 as of 11:00 a.m., London time, on such 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 dollars are offered by four reference 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
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 for the immediately
preceding Interest Period.
"LIBOR Determination Date" means, for each of the Class A certificate
rate, the Class B certificate rate and the Collateral Rate, (i) for the initial
Interest Period, the second London business day prior to the closing date and
(ii) for each Interest Period following the initial Interest Period, the second
London business day prior to the first day of such Interest Period. For purposes
of the LIBOR Determination Date, a London business day is any day on which
dealings in deposits in United States dollars are transacted in the London
interbank market.
"Monthly Servicing Fee" has the meaning described in "Series
Provisions--Servicing Compensation and Payment of Expenses" in this prospectus
supplement.
"Principal Allocation Percentage" means, with respect to any Monthly
Period, the percentage equivalent (which percentage shall never exceed 100%) of
a fraction:
o the numerator of which is:
(i) during the Revolving Period, the Series Adjusted Invested
Amount for Series 2003-__ as of the last day of the immediately preceding
Monthly Period (or, with respect to the first Monthly Period, the closing
date), and
(ii) during the Controlled Accumulation Period or the Early
Amortization Period, the Series Adjusted Invested Amount for Series 2003-__
as of the last day of the Revolving Period, and
o 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 and
the principal amount on deposit in the Special Funding Account as of such
last day (or, with respect to the first Monthly Period, the closing date),
and
S-47
(ii) the Series Allocation Percentage for Series 2003-__ as of the
last day of the immediately preceding Monthly Period.
However, the amount calculated above pursuant to clause (i) of the denominator
shall be increased by the aggregate amount of principal receivables in
Additional Accounts added to the trust during such Monthly Period and decreased
by the aggregate amount of principal receivables in Additional Accounts removed
from the trust during such Monthly Period, as though such receivables had been
added to or removed from, as the case may be, the trust as of the first day of
such Monthly Period.
Because the Series 2003-__ certificates are subject to being paired
with a future series, if a Pay-Out Event or a Reinvestment Event occurs with
respect to a paired series during the Controlled Accumulation Period for Series
2003- __, the transferors may, by written notice 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 transferors shall
have received written notice from each Rating Agency that such designation will
satisfy the Rating Agency Condition and shall have delivered copies of each such
written notice to the servicer and the trustee. In addition, each 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 such 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 2003- __.
"Principal Funding Account" means the account established as described
under "Series Provisions--Principal Funding Account" in this prospectus
supplement.
"Reallocated Principal Collections" means, for any Distribution Date,
the collections of principal receivables allocable first to the Collateral
Invested Amount and then, in the case of the Class A Required Amount, to the
Class B certificates that are used to fund the excess, if any, of the Class A
Required Amount and the Class B Required Amount remaining after Excess Spread
and Excess Finance Charges allocated to Series 2003-__ and available for such
purpose have been used to fund the Class A Required Amount and the Class B
Required Amount.
"Record Date" means, for any Distribution Date, the last day of the
calendar month immediately preceding that Distribution Date.
"Required Collateral Invested Amount" means, for any Distribution Date,
(i) initially, $_________, and
(ii) on each Distribution Date thereafter, an amount equal to
the greater of:
(a) __% 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) $_______;
provided, however, that:
(1) if certain reductions in the Collateral Invested 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 2003-__ 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
S-48
(3) the Required Collateral Invested Amount may be reduced to a lesser
amount at any time if the Rating Agency Condition is satisfied.
"Required Reserve Account Amount" for any Distribution Date on or after
the Reserve Account must be funded will be equal to:
(i) 0.50% of the Class A Invested Amount as of the preceding
Distribution Date (after giving effect to all changes therein on such
date), or
(ii) such other amount designated by the transferors, provided
that the holder of the collateral interest shall have consented to such
designation and such designation satisfies the Rating Agency Condition.
"Series 2003-__ Termination Date" means the ____________ 20__
Distribution Date.
"Series Adjusted Invested Amount" means, with respect to Series
2003-__, for any Monthly Period, the Initial Invested Amount for Series 2003-__,
less the excess, if any, of all reductions in the Invested Amount (other than
any reductions occasioned by payments of principal to the Series 2003-__
certificateholders or to the holder of the collateral interest ) 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.
"Series Adjusted Portfolio Yield" means, for any Monthly Period, the
annualized percentage equivalent of a fraction:
o the numerator of which is equal to:
(i) 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 2003-__ in accordance with the pooling and servicing agreement)
for such Monthly Period, plus
(ii) the amount of investment earnings, if any, in the
Principal Funding Account for the related Distribution Date, plus
(iii) any Excess Finance Charge Collections that are allocated
to Series 2003-__, plus
(iv) the amount of funds withdrawn from the Reserve Account
and which are required to be included as Class A Available Funds for
the Distribution Date for such Monthly Period, minus
(v) the Investor Default Amount for the Distribution Date for
such Monthly Period, and
o the denominator of which is the Invested Amount as of the last day
of the preceding Monthly Period.
"Series Allocable Finance Charge Collections," "Series Allocable Principal
Collections" and "Series Allocable Defaulted Amount" mean, with respect to
Series 2003-__, for any Monthly Period, the product of (i) the Series Allocation
Percentage for Series 2003-__ and (ii) 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 Series 2003-__,
for any Monthly Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is the sum of the Series
Adjusted Invested Amount for Series 2003-__ as of the last day of the
immediately preceding Monthly Period and the denominator of which is the Trust
Adjusted Invested Amount.
S-49
"Series Required Transferor Amount" for any date of determination means
7% of the Invested Amount.
"Telerate Page 3750" means the display page currently so designated on
the Bridge Telerate Market Report (or such other page as may replace that page
on that service for the purpose of displaying comparable rates or prices).
"Trust Portfolio" means certain accounts selected from the Total
Portfolio and included in the trust as of the Initial Cut-Off Date and
subsequent additional cut-off dates, based on the eligibility criteria specified
in the pooling and servicing agreement.
S-50
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 2003-___ certificates, a copy
of the prospectus supplement for any series listed below.
Series 1999-1
Initial Invested Amounts.............................................................................$1,000,000,000
Class A Initial Invested Amount........................................................................$865,000,000
Class A Certificate Rate.............................................................................5.60% per year
Class B Initial Invested Amount.........................................................................$60,000,000
Class B Certificate Rate.............................................................................5.85% per year
Controlled Accumulation Amount (subject to adjustment)...............................................$77,083,333.34
Commencement of Controlled Accumulation Period (subject to adjustment)................................April 1, 2003
Annual Servicing Fee Percentage.......................................................................2.0% per year
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............................................................April 2004 Distribution Date
Series Issuance Date.................................................................................April 21, 1999
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group.......................................................................................................Group I
Series 1999-2
Initial Invested Amounts...............................................................................$500,000,000
Class A Initial Invested Amount........................................................................$432,500,000
Class A Certificate Rate.............................................................................5.95% per year
Class B Initial Invested Amount.........................................................................$30,000,000
Class B Certificate Rate.............................................................................6.10% per year
Controlled Accumulation Amount (subject to adjustment)...............................................$38,541,666.67
Commencement of controlled accumulation period (subject to adjustment)..................................May 1, 2003
Annual Servicing Fee Percentage.......................................................................2.0% per year
Collateral Initial Invested Amount......................................................................$37,500,000
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 2004 Distribution Date
Series Issuance Date...................................................................................May 19, 1999
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group.......................................................................................................Group I
A-1
Series 1999-3
Initial Invested Amounts.............................................................................$1,000,000,000
Class A Initial Invested Amount........................................................................$825,000,000
Class A Certificate Rate........................................................One-Month LIBOR plus 0.14% per year
Class B Initial Invested Amount.........................................................................$80,000,000
Class B Certificate Rate........................................................One-Month LIBOR plus 0.34% per year
Controlled Accumulation Amount (subject to adjustment)...............................................$75,416,666.67
Commencement of Controlled Accumulation Period (subject to adjustment)..................................May 1, 2003
Annual Servicing Fee Percentage.......................................................................2.0% per year
Collateral Initial Invested Amount......................................................................$95,000,000
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 2004 Distribution Date
Series Issuance Date...................................................................................May 19, 1999
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
Series 1999-5
Initial Invested Amounts...............................................................................$500,000,000
Class A Initial Invested Amount........................................................................$412,500,000
Class A Certificate Rate........................................................One-Month LIBOR plus 0.24% per year
Class B Initial Invested Amount.........................................................................$40,000,000
Class B Certificate Rate........................................................One-Month LIBOR plus 0.48% per year
Controlled Accumulation Amount (subject to adjustment)...............................................$37,708,333.33
Commencement of Controlled Accumulation Period (subject to adjustment).................................July 1, 2003
Annual Servicing Fee Percentage.......................................................................2.0% per year
Collateral Initial Invested Amount......................................................................$47,500,000
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.............................................................July 2004 Distribution Date
Series Issuance Date................................................................................August 17, 1999
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
A-2
Series 2000-1
Initial Invested Amount................................................................................$500,000,000
Class A Initial Invested Amount........................................................................$432,500,000
Class A Certificate Rate.............................................................................7.20% per year
Class B Initial Invested Amount.........................................................................$30,000,000
Class B Certificate Rate.............................................................................7.40% per year
Controlled Accumulation Amount (subject to adjustment)...............................................$38,541,666.67
Commencement of Controlled Accumulation Period (subject to adjustment).............................February 1, 2004
Annual Servicing Fee Percentage.......................................................................2.0% per year
Collateral Initial Invested Amount......................................................................$37,500,000
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.........................................................February 2005 Distribution Date
Series Issuance Date..............................................................................February 16, 2000
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group.......................................................................................................Group I
Series 2000-2
Initial Invested Amount................................................................................$500,000,000
Class A Initial Invested Amount........................................................................$412,500,000
Class A Certificate Rate.......................................................One-Month LIBOR plus 0.165% per year
Class B Initial Invested Amount.........................................................................$40,000,000
Class B Certificate Rate.......................................................One-Month LIBOR plus 0.350% per year
Controlled Accumulation Amount (subject to adjustment)...............................................$37,708,333.33
Commencement of Controlled Accumulation Period (subject to adjustment).............................February 1, 2004
Annual Servicing Fee Percentage.......................................................................2.0% per year
Collateral Initial Invested Amount......................................................................$47,500,000
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.........................................................February 2005 Distribution Date
Series Issuance Date..............................................................................February 16, 2000
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
A-3
Series 2000-3
Initial Invested Amount..............................................................................$1,000,000,000
Class A Initial Invested Amount........................................................................$825,000,000
Class A Certificate Rate........................................................One-Month LIBOR plus 0.16% per year
Class B Initial Invested Amount.........................................................................$80,000,000
Class B Certificate Rate........................................................One-Month LIBOR plus 0.35% per year
Controlled Accumulation Amount (subject to adjustment)...............................................$75,416,666.67
Commencement of Controlled Accumulation Period (subject to adjustment)................................April 1, 2004
Annual Servicing Fee Percentage.......................................................................2.0% per year
Collateral Initial Invested Amount......................................................................$95,000,000
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............................................................April 2005 Distribution Date
Series Issuance Date....................................................................................May 3, 2000
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
Series 2000-4
Initial Invested Amount..............................................................................$1,212,122,000
Class A Initial Invested Amount......................................................................$1,000,000,000
Class A Certificate Rate.....................................................Three-Month LIBOR plus 0.125% per year
Class B Initial Invested Amount.........................................................................$96,970,000
Class B Certificate Rate.....................................................Three-Month LIBOR plus 0.350% per year
Controlled Accumulation Amount (subject to adjustment)...............................................$91,414,166.67
Commencement of Controlled Accumulation Period (subject to adjustment)............................September 1, 2004
Annual Servicing Fee Percentage.......................................................................2.0% per year
Collateral Initial Invested Amount.....................................................................$115,152,000
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 2005 Distribution Date
Series Issuance Date..................................................................................June 22, 2000
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
A-4
Series 2000-5
Initial Invested Amount................................................................................$787,878,000
Class A Initial Invested Amount........................................................................$650,000,000
Class A Certificate Rate.......................................................One-Month LIBOR plus 0.140% per year
Class B Initial Invested Amount.........................................................................$63,030,000
Class B Certificate Rate.......................................................One-Month LIBOR plus 0.380% per year
Controlled Accumulation Amount (subject to adjustment)...............................................$59,419,166.67
Commencement of Controlled Accumulation Period (subject to adjustment)............................September 1, 2004
Annual Servicing Fee Percentage.......................................................................2.0% per year
Collateral Initial Invested Amount......................................................................$74,848,000
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 2005 Distribution Date
Series Issuance Date.............................................................................September 15, 2000
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
Series 2001-1
Initial Invested Amount................................................................................$750,000,000
Class A Initial Invested Amount........................................................................$618,750,000
Class A Certificate Rate.......................................................One-Month LIBOR plus 0.140% per year
Class B Initial Invested Amount.........................................................................$60,000,000
Class B Certificate Rate.......................................................One-Month LIBOR plus 0.420% per year
Controlled Accumulation Amount (subject to adjustment)...............................................$56,562,500.00
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment)............................................................................February 1, 2005
Annual Servicing Fee Percentage.......................................................................2.0% per year
Collateral Initial Invested Amount......................................................................$71,250,000
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.........................................................February 2006 Distribution Date
Series Issuance Date..............................................................................February 23, 2001
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
A-5
Series 2001-2
Initial Invested Amount...........................................................................................$250,000,000
Class A Initial Invested Amount...................................................................................$216,250,000
Class A Certificate Rate........................................................................................5.53% per year
Class B Initial Invested Amount....................................................................................$15,000,000
Class B Certificate Rate........................................................................................5.83% per year
Controlled Accumulation Amount (subject to adjustment)..........................................................$19,270,834.34
Approximate Commencement of Controlled Accumulation Period (subject to adjustment)...............................March 1, 2005
Annual Servicing Fee Percentage..................................................................................2.0% per year
Collateral Initial Invested Amount.................................................................................$18,750,000
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.......................................................................March 2006 Distribution Date
Series Issuance Date............................................................................................March 23, 2001
Principal Sharing Series...................................................................................................Yes
Excess Allocation Series...................................................................................................Yes
Group..................................................................................................................Group I
Series 2001-3
Initial Invested Amount...........................................................................................$750,000,000
Class A Initial Invested Amount...................................................................................$618,750,000
Class A Certificate Rate...................................................................One-Month LIBOR plus 0.13% per year
Class B Initial Invested Amount....................................................................................$60,000,000
Class B Certificate Rate...................................................................One-Month LIBOR plus 0.38% per year
Controlled Accumulation Amount (subject to adjustment)..........................................................$56,562,500.00
Approximate Commencement of Controlled Accumulation Period (subject to adjustment)...............................March 1, 2005
Annual Servicing Fee Percentage..................................................................................2.0% per year
Collateral Initial Invested Amount.................................................................................$71,250,000
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.......................................................................March 2006 Distribution Date
Series Issuance Date.............................................................................................April 3, 2001
Principal Sharing Series...................................................................................................Yes
Excess Allocation Series...................................................................................................Yes
Group.................................................................................................................Group II
A-6
Series 2001-4
Initial Invested Amount................................................................................$725,000,000
Class A Initial Invested Amount........................................................................$598,125,000
Class A Certificate Rate........................................................One-Month LIBOR plus 0.13% per year
Class B Initial Invested Amount.........................................................................$58,000,000
Class B Certificate Rate........................................................One-Month LIBOR plus 0.38% per year
Controlled Accumulation Amount (subject to adjustment)...............................................$54,677,083.34
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment)...............................................................................April 1, 2005
Annual Servicing Fee Percentage.......................................................................2.0% per year
Collateral Initial Invested Amount......................................................................$68,875,000
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............................................................April 2006 Distribution Date
Series Issuance Date.................................................................................April 19, 2001
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
Series 2001-5
Initial Invested Amount................................................................................$500,000,000
Class A Initial Invested Amount........................................................................$412,500,000
Class A Certificate Rate........................................................One-Month LIBOR plus 0.18% per year
Class B Initial Invested Amount.........................................................................$40,000,000
Class B Certificate Rate........................................................One-Month LIBOR plus 0.45% per year
Controlled Accumulation Amount (subject to adjustment)...............................................$37,708,333.34
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment)...............................................................................April 1, 2007
Annual Servicing Fee Percentage.......................................................................2.0% per year
Collateral Initial Invested Amount......................................................................$47,500,000
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............................................................April 2008 Distribution Date
Series Issuance Date....................................................................................May 9, 2001
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
A-7
Series 2001-6
Initial Invested Amount................................................................................$700,000,000
Class A Initial Invested Amount........................................................................$577,500,000
Class A Certificate Rate........................................................One-Month LIBOR plus 0.12% per year
Class B Initial Invested Amount.........................................................................$56,000,000
Class B Certificate Rate........................................................One-Month LIBOR plus 0.35% per year
Controlled Accumulation Amount (subject to adjustment)...............................................$52,791,666.67
Approximate Commencement of Controlled Accumulation Period (subject to adjustment)......................May 1, 2005
Annual Servicing Fee Percentage.......................................................................2.0% per year
Collateral Initial Invested Amount......................................................................$66,500,000
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 2006 Distribution Date
Series Issuance Date..................................................................................June 12, 2001
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
Series 2001-7
Initial Invested Amount................................................................................$650,000,000
Class A Initial Invested Amount........................................................................$536,250,000
Class A Certificate Rate........................................................One-Month LIBOR plus 0.12% per year
Class B Initial Invested Amount.........................................................................$52,000,000
Class B Certificate Rate........................................................One-Month LIBOR plus 0.36% per year
Controlled Accumulation Amount (subject to adjustment)...............................................$49,020,833.34
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment)................................................................................July 1, 2005
Annual Servicing Fee Percentage.......................................................................2.0% per year
Collateral Initial Invested Amount......................................................................$61,750,000
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.............................................................July 2006 Distribution Date
Series Issuance Date................................................................................August 21, 2001
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
A-8
Series 2002-1
Initial Invested Amount................................................................................$920,000,000
Class A Initial Invested Amount........................................................................$759,000,000
Class A Certificate Rate.......................................................One-Month LIBOR plus 0.11% per annum
Class B Initial Invested Amount.........................................................................$73,600,000
Class B Certificate Rate.......................................................One-Month LIBOR plus 0.40% per annum
Controlled Accumulation Amount (subject to adjustment)...............................................$69,383,333.34
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment)............................................................................February 1, 2006
Annual Servicing Fee Percentage......................................................................2.0% per annum
Collateral Initial Invested Amount......................................................................$87,400,000
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.........................................................February 2007 Distribution Date
Series Issuance Date..............................................................................February 21, 2002
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
Series 2002-2
Initial Invested Amount................................................................................$940,000,000
Class A Initial Invested Amount........................................................................$775,500,000
Class A Certificate Rate.......................................................One-Month LIBOR plus 0.11% per annum
Class B Initial Invested Amount.........................................................................$75,200,000
Class B Certificate Rate.......................................................One-Month LIBOR plus 0.39% per annum
Controlled Accumulation Amount (subject to adjustment)...............................................$70,891,666.67
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment)...............................................................................April 1, 2006
Annual Servicing Fee Percentage......................................................................2.0% per annum
Collateral Initial Invested Amount......................................................................$89,300,000
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............................................................April 2007 Distribution Date
Series Issuance Date.................................................................................April 25, 2002
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
A-9
Series 2002-3
Initial Invested Amount................................................................................$920,000,000
Class A Initial Invested Amount........................................................................$759,000,000
Class A Certificate Rate.......................................................One-Month LIBOR plus 0.11% per annum
Class B Initial Invested Amount.........................................................................$73,600,000
Class B Certificate Rate.......................................................One-Month LIBOR plus 0.38% per annum
Controlled Accumulation Amount (subject to adjustment)...............................................$69,383,333.34
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment).................................................................................May 1, 2006
Annual Servicing Fee Percentage......................................................................2.0% per annum
Collateral Initial Invested Amount......................................................................$87,400,000
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 2007 Distribution Date
Series Issuance Date...................................................................................May 16, 2002
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
Series 2002-4
Initial Invested Amount................................................................................$500,000,000
Class A Initial Invested Amount........................................................................$412,500,000
Class A Certificate Rate.......................................................One-Month LIBOR plus 0.04% per annum
Class B Initial Invested Amount.........................................................................$40,000,000
Class B Certificate Rate.......................................................One-Month LIBOR plus 0.31% per annum
Controlled Accumulation Amount (subject to adjustment)...............................................$37,708,333.34
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment)................................................................................July 1, 2004
Annual Servicing Fee Percentage......................................................................2.0% per annum
Collateral Initial Invested Amount......................................................................$47,500,000
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.............................................................July 2005 Distribution Date
Series Issuance Date..................................................................................July 17, 2002
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
A-10
Series 2002-5
Initial Invested Amount................................................................................$600,000,000
Class A Initial Invested Amount........................................................................$495,500,000
Class A Certificate Rate.......................................................One-Month LIBOR plus 0.17% per annum
Class B Initial Invested Amount.........................................................................$48,000,000
Class B Certificate Rate.......................................................One-Month LIBOR plus 0.45% per annum
Controlled Accumulation Amount (subject to adjustment)..................................................$45,250,000
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment)................................................................................July 1, 2008
Annual Servicing Fee Percentage......................................................................2.0% per annum
Collateral Initial Invested Amount......................................................................$57,000,000
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.............................................................July 2009 Distribution Date
Series Issuance Date..................................................................................July 17, 2002
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
Series 2002-6
Initial Invested Amount................................................................................$720,000,000
Class A Initial Invested Amount........................................................................$594,000,000
Class A Certificate Rate.......................................................One-Month LIBOR plus 0.14% per annum
Class B Initial Invested Amount.........................................................................$57,600,000
Class B Certificate Rate.......................................................One-Month LIBOR plus 0.45% per annum
Controlled Accumulation Amount (subject to adjustment)..................................................$54,300,000
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment)..............................................................................August 1, 2006
Annual Servicing Fee Percentage......................................................................2.0% per annum
Collateral Initial Invested Amount......................................................................$68,400,000
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...........................................................August 2007 Distribution Date
Series Issuance Date................................................................................August 15, 2002
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
A-11
Series 2003-1
Initial Invested Amount................................................................................$920,000,000
Class A Initial Invested Amount........................................................................$759,000,000
Class A Certificate Rate.......................................................One-Month LIBOR plus 0.11% per annum
Class B Initial Invested Amount.........................................................................$73,600,000
Class B Certificate Rate.......................................................One-Month LIBOR plus 0.40% per annum
Controlled Accumulation Amount (subject to adjustment)...............................................$69,383,333.34
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment)............................................................................February 1, 2007
Annual Servicing Fee Percentage......................................................................2.0% per annum
Collateral Initial Invested Amount......................................................................$87,400,000
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.........................................................February 2008 Distribution Date
Series Issuance Date..............................................................................February 20, 2003
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
Series 2003-2
Initial Invested Amount..............................................................................$1,100,000,000
Class A Initial Invested Amount........................................................................$907,500,000
Class A Certificate Rate.......................................................One-Month LIBOR plus 0.11% per annum
Class B Initial Invested Amount.........................................................................$88,000,000
Class B Certificate Rate.......................................................One-Month LIBOR plus 0.37% per annum
Controlled Accumulation Amount (subject to adjustment)...............................................$82,958,333.34
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment)...............................................................................March 1, 2007
Annual Servicing Fee Percentage......................................................................2.0% per annum
Collateral Initial Invested Amount.....................................................................$104,500,000
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............................................................March 2008 Distribution Date
Series Issuance Date..................................................................................April 2, 2003
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
A-12
Series 2003-3
Initial Invested Amount................................................................................$750,000,000
Class A Initial Invested Amount........................................................................$618,750,000
Class A Certificate Rate.......................................................One-Month LIBOR plus 0.11% per annum
Class B Initial Invested Amount.........................................................................$60,000,000
Class B Certificate Rate.......................................................One-Month LIBOR plus 0.35% per annum
Controlled Accumulation Amount (subject to adjustment)..................................................$58,562,500
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment)...............................................................................April 1, 2007
Annual Servicing Fee Percentage......................................................................2.0% per annum
Collateral Initial Invested Amount......................................................................$71,250,000
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............................................................April 2008 Distribution Date
Series Issuance Date....................................................................................May 7, 2003
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group......................................................................................................Group II
Series 2003-4
Initial Invested Amount................................................................................$680,000,000
Class A Initial Invested Amount........................................................................$588,200,000
Class A Certificate Rate............................................................................1.69% per annum
Class B Initial Invested Amount.........................................................................$40,800,000
Class B Certificate Rate............................................................................1.90% per annum
Controlled Accumulation Amount (subject to adjustment)...............................................$52,416,666.67
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment)................................................................................June 1, 2005
Annual Servicing Fee Percentage......................................................................2.0% per annum
Collateral Initial Invested Amount......................................................................$51,000,000
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.............................................................June 2006 Distribution Date
Series Issuance Date..................................................................................June 18, 2003
Principal Sharing Series........................................................................................Yes
Excess Allocation Series........................................................................................Yes
Group.......................................................................................................Group I
A-13
[LOGO]
SUBJECT TO COMPLETION, DATED OCTOBER [__], 2003
Prospectus
American Express Credit Account Master Trust
Issuer
American Express Centurion Bank
American Express Receivables Financing Corporation II
Transferors
American Express Travel Related Services Company, Inc.
Servicer
Asset Backed Certificates
The Trust-
o may periodically issue asset backed certificates in one or more series
with one or more classes; and
o will own-
o receivables in a portfolio of consumer charge or revolving credit
accounts;
o payments due on those receivables; and
o other property described in this prospectus and in the
accompanying prospectus supplement.
The Certificates-
o will represent interests in the trust and will be paid only from the
trust assets;
o offered with this prospectus will be rated in one of the four highest
rating categories by at least one nationally recognized rating
organization;
o may have one or more forms of enhancement; and
o will be issued as part of a designated series which may include one or
more classes of certificates and enhancement.
The Certificateholders-
o will receive interest and principal payments from a varying percentage
of credit card account collections.
Neither the SEC nor any state securities commission has approved the
certificates or determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
Consider carefully the risk factors beginning on page [__] in this prospectus.
A certificate is not a deposit and neither the certificates nor the underlying
accounts or receivables are insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
The certificates will represent interests in the trust only and will not
represent interests in or obligations of American Express Company or any of its
affiliates.
This prospectus may be used to offer and sell any series of certificates only if
accompanied by the prospectus supplement for that series.
October [__], 2003
The information in this prospectus supplement and the accompanying prospectus is
not complete and may be amended. We may not sell these securities until the
registration statement filed with the SEC is effective and we deliver a final
prospectus supplement and accompanying prospectus. This prospectus supplement
and the accompanying prospectus are not an offer to sell nor are they seeking an
offer to buy these securities in any state where the offer or sale is
prohibited.
Important Notice About Information Presented in This
Prospectus and the Accompanying Prospectus Supplement
We provide information to you about the certificates in two separate
documents that progressively provide more detail: (a) this prospectus, which
provides general information about each series of certificates which may be
issued by the American Express Credit Account Master Trust, some of which may
not apply to your series of certificates, and (b) the accompanying prospectus
supplement, which describes the specific terms of your series of certificates,
including:
o the timing of interest and principal payments;
o information about the receivables;
o information about credit enhancement, if any, for each class;
o the ratings for each class; and
o the method for selling the certificates.
If the terms of a particular series of certificates vary between the
description contained in this prospectus and the description contained in the
prospectus supplement, you should rely on the information in the prospectus
supplement.
You should rely only on the information provided in this prospectus and
the accompanying prospectus supplement, including the information incorporated
by reference. We have not authorized anyone to provide you with different
information. We are not offering the certificates in any state where the offer
is not permitted. We do not claim the accuracy of the information in this
prospectus or the accompanying prospectus supplement as of any date other than
the dates stated on their respective covers.
We include cross-references in this prospectus and in the accompanying
prospectus supplement to captions in these materials where you can find
additional, related discussions. The following table of contents and the table
of contents included in the accompanying prospectus supplement provide the pages
on which these captions are located.
Parts of this prospectus contain defined terms. You can find a listing
of the pages where defined terms in this prospectus are defined under the
caption "Glossary of Defined Terms" beginning on page [__] in this prospectus.
2
TABLE OF CONTENTS
Page Page
---- ----
Prospectus Summary ......................... 5 Book-Entry Registration.................. 30
The Trust and the Trustee................ 5 Definitive Certificates ................. 35
Trust Assets ............................ 5 Interest................................. 35
The Certificates ........................ 5 Principal ............................... 36
The Transferor Certificates.............. 5 Pay-Out Events and Reinvestment
Collections by the Servicer.............. 5 Events ................................ 38
Allocation of Trust Assets .............. 6 Servicing Compensation and
Interest Payments on the Certificates ... 6 Payment of Expenses.................... 40
Principal Payments on the The Pooling and Servicing Agreement
Certificates .......................... 6 Generally ............................... 40
Revolving Period....................... 6 Conveyance of Receivables................ 40
Principal Accumulation and Representations and Warranties .......... 40
Amortization Periods ................ 6 The Transferor Certificates;
Early Accumulation and Additional Transferors ................ 43
Amortization Periods ................ 6 Additions of Accounts or
Reallocated Investor Finance Charge Participation Interests ............... 44
Collections............................ 7 Removal of Accounts ..................... 45
Shared Excess Finance Charge Discount Option ......................... 45
Collections............................ 8 Premium Option .......................... 47
Shared Principal Collections ............ 8 Indemnification ......................... 48
Credit Enhancement ...................... 8 Collection and Other Servicing
Tax Status............................... 8 Procedures ............................ 48
Certificate Ratings...................... 8 New Issuances ........................... 49
Risk Factors................................ 9 Collection Account....................... 50
Use of Proceeds................................20 Deposits in Collection Account........... 50
The Trust .....................................20 Allocations ............................. 52
Centurion's Revolving Credit Groups of Series ........................ 52
Businesses .............................. 21 Reallocations Among Different
General ................................. 21 Series Within a Reallocation
Underwriting and Authorization Group.................................. 52
Procedures ............................ 23 Sharing of Excess Finance Charge
Billing and Payments..................... 24 Collections Among Excess
Collection Efforts ...................... 25 Allocation Series ..................... 55
RFC II, Credco, Centurion Sharing of Principal Collections
and TRS.................................. 26 Among Principal Sharing Series ........ 55
RFC II................................... 26 Paired Series............................ 56
Credco .................................. 26 Special Funding Account ................. 56
Centurion................................ 26 Funding Period .......................... 57
TRS...................................... 26 Defaulted Receivables; Rebates and
Merger or Consolidation of a Fraudulent Charges..................... 58
Transferor or the Servicer............... 27 Credit Enhancement ...................... 58
Assumption of a Transferor's Servicer Covenants....................... 61
Obligations ............................. 28 Certain Matters Regarding the
The Accounts................................ 29 Servicer............................... 62
Description of the Certificates............. 30 Servicer Default......................... 62
Evidence as to Compliance ............... 63
General ................................. 30 Amendments............................... 63
3
Page Page
---- ----
Defeasance .............................. 65 Treatment of the Trust................... 74
List of Certificateholders............... 66 Taxation of Interest Income of U.S.
The Trustee.............................. 66 Certificate Owners....................... 76
Description of the Purchase Sale or Exchange of Certificates ........ 77
Agreements............................... 67 Foreign Certificate Owners .............. 77
Certain Legal Aspects of the Backup Withholding and Information
Receivables.............................. 69 Reporting.............................. 79
Transfer of Receivables.................. 69 Tax Non-Confidentiality
Certain Matters Relating to.............. Agreement ............................. 79
Bankruptcy, Conservatorship and State and Local Taxation................. 80
Receivership .......................... 69 ERISA Considerations ....................... 80
Certain Regulatory Matters .............. 71 Plan of Distribution ....................... 84
Consumer Protection Laws ................ 72 Legal Matters............................... 85
Tax Matters ................................ 72 Reports to Certificateholders............... 85
Federal Income Tax Where You Can Find More
Consequences--General.................. 72 Information.............................. 85
Treatment of the Certificates as Debt.... 73 Glossary of Defined Terms .................. 87
4
Prospectus Summary
This summary does not contain all of the information you may need to make an
informed investment decision. You should read the entire prospectus and any
supplement to this prospectus before you purchase any certificates. The
accompanying supplement to this prospectus may supplement disclosure in this
prospectus.
The Trust and the Trustee
American Express Credit Account Master Trust was formed pursuant to a pooling
and servicing agreement among American Express Travel Related Services Company,
Inc., as servicer, American Express Centurion Bank and American Express
Receivables Financing Corporation II, as transferors, and The Bank of New York,
as trustee.
The trust is a master trust under which multiple series of certificates may be
issued. The trust issues each series pursuant to a supplement to the pooling and
servicing agreement. The terms of a series are set forth in the series
supplement.
Some classes or series may not be offered by this prospectus. They may be
offered, for example, in a private placement offering.
Trust Assets
The transferors have designated to the trust the receivables generated from time
to time in selected consumer American Express(R)* *credit card, Optima(R)* Line
of Credit and Sign & Travel(R)*/Extended Payment Option revolving credit
accounts or features, and have sold to the trust the receivables in such
accounts or features. The transferors may designate additional accounts to the
trust.
Each transferor selects the accounts to be designated to the trust from its
portfolio on the basis of criteria established in the pooling and servicing
agreement. All receivables in the accounts when designated to the trust were
transferred to the trust and all new receivables generated in those accounts
have been and will be transferred automatically to the trust.
The receivables transferred to the trust are the trust's primary assets. The
total amount of receivables in the trust fluctuates daily as new receivables are
generated and payments are received on existing receivables.
The trust's assets also include or may include:
o funds collected on the receivables;
o monies and investments in the trust's bank accounts;
o recoveries (net of collection expenses) and proceeds
of credit insurance policies relating to the
receivables; and
o credit enhancement that varies from one series to
another and, within a series, may vary from one class
to another.
The Certificates
The trust has issued, and in the future expects to issue, asset backed
certificates, each evidencing an undivided interest in the trust. The
certificates are issued in series. A series may contain one or more classes.
The terms of any future series or class will not be subject to your prior review
or consent. We cannot assure you that the terms of any future series might not
have an impact on the timing or amount of payments received by a
certificateholder.
The Transferor Certificates
The interest in the trust not represented by your series or by any other series
is the transferors' interest, which is represented by the transferor
certificates. The transferors' interest does not provide credit enhancement for
your series or any other series.
Collections by the Servicer
American Express Travel Related Services Company, Inc. services the receivables
under the pooling and servicing agreement. In limited cases, it may resign or be
removed, and either the trustee or a third party may be appointed as the new
servicer. The servicer receives a servicing fee from the trust, and each series
is obligated to pay a portion of the servicing fee.
- --------
* American Express(R), Optima(R), and Sign & Travel(R) are federally registered
servicemarks of American Express Company and its affiliates.
5
The servicer receives collections on the receivables, deposits those collections
in an account and keeps track of those collections for finance charge
receivables and principal receivables. The servicer then allocates those
collections as summarized below.
Allocation of Trust Assets
The trust assets are allocated among the series of certificates outstanding and
the transferors' interest. The servicer allocates (a) collections of finance
charge receivables and principal receivables and (b) receivables in accounts
written off as uncollectible, to each series based on varying percentages. The
accompanying prospectus supplement describes the allocation percentages
applicable to your series.
Certificateholders are only entitled to amounts allocated to their series equal
to the interest and principal payments on their certificates. See "The Pooling
and Servicing Agreement Generally--Allocations" in this prospectus.
Interest Payments on the Certificates
Each certificate entitles the holder to receive payments of interest as
described in the accompanying prospectus supplement. If a series of certificates
consists of more than one class, each class may differ in, among other things,
priority of payments, payment dates, interest rates, method for computing
interest and rights to series enhancement.
Each class of certificates may have fixed, floating or any other type of
interest rate. Generally, interest will be paid monthly, quarterly, semi-
annually or on other scheduled dates over the life of the certificates.
See "Description of the Certificates--Interest" in this prospectus.
Principal Payments on the Certificates
Each certificate entitles the holder to receive payments of principal as
described in the accompanying prospectus supplement. If a series of certificates
consists of more than one class, each class may differ in, among other things,
the amounts allocated for principal payments, priority of payments, payment
dates, maturity, and rights to series enhancement.
See "Description of the Certificates--Principal" in this prospectus.
Revolving Period
Each series of certificates will begin with a period, known as the revolving
period, during which the trust will not pay or accumulate principal for payment
to the certificateholders. During the revolving period, the trust will pay
available principal to the holders of the transferor certificates or to
certificateholders of other series.
The revolving period for a series begins on the series cut-off date described in
the accompanying prospectus supplement, and ends at the start of either an
amortization period or an accumulation period.
Following the revolving period, each class of certificates will have one or a
combination of the following periods in which:
o principal is accumulated in specified amounts per
month and paid on a scheduled date;
o principal is paid in fixed amounts at scheduled
intervals;
o principal is accumulated in varying amounts following
certain adverse events and paid on a scheduled date;
and
o principal is paid in varying amounts each month based
on the amount of principal receivables collected
following certain adverse events.
Principal Accumulation and Amortization Periods
The time at which principal payments will begin and the period over which
principal payments will be made will vary from one series to another and within
a series from one class to another. The principal payment provisions for each
series and class will be included in the accompanying prospectus supplement.
Early Accumulation and Amortization Periods
If a pay-out event has occurred with respect to a series, either an early
accumulation period or an early amortization period will begin. In that case,
the trust will either deposit available principal in a trust account for payment
on the expected final payment date or pay all available principal to the
certificateholders of that series on each distribution date. If the series has
more than one class, each class may have a different priority for these
payments. A pay-out event may affect more than one series.
6
For a detailed discussion of the pay-out events, see "Description of the
Certificates--Pay-Out Events and Reinvestment Events" in this prospectus and
"Series Provisions--Pay-Out Events" in the accompanying prospectus supplement.
Reallocated Investor Finance Charge Collections
The certificates of a series may be included in a group, called a "reallocation
group," that reallocates collections of receivables and other amounts or
obligations among the series in that group. Collections of finance charge
receivables which would otherwise be allocated to each series in the
reallocation group will instead be combined and will be available for certain
required payments to all series in that group. Any issuance of a new series in a
reallocation group may reduce or increase the amount of finance charge
collections allocated to any other series of certificates in that group.
For a more detailed discussion, see "The Pooling and Servicing Agreement
Generally--Reallocation Among Different Series Within a Reallocation Group" and
"Risk Factors--Issuances of additional series by the trust may adversely affect
your certificates" in this prospectus.
Shared Excess Finance Charge Collections
Any series may be included in a group of series. If specified in the
accompanying prospectus supplement, to the extent that collections of finance
charge receivables allocated to a series are not needed for that series, those
collections may be applied to cover certain shortfalls of other series in the
same group.
See "The Pooling and Servicing Agreement Generally--Sharing of Excess Finance
Charge Collections Among Excess Allocation Series" in this prospectus.
Shared Principal Collections
If specified in the accompanying prospectus supplement, to the extent that
collections of principal receivables allocated to any series are not needed for
that series, those collections may be applied to cover principal payments for
other series in the same group.
See "The Pooling and Servicing Agreement Generally--Sharing of Principal
Collections Among Principal Sharing Series" in this prospectus.
Credit Enhancement
Each class of a series may be entitled to credit enhancement. Credit enhancement
for the certificates of any class may take the form of one or more of the
following:
o subordination o collateral interest
o insurance policy o cash collateral
guaranty or account
o letter of credit
o spread account o surety bond
o swap arrangement o reserve account
The type, characteristics and amount of any credit enhancement will be:
o based on several factors, including the characteristics of the receivables
and accounts at the time a series of certificates is issued; and
o established based on the requirements of the rating agencies.
See "The Pooling and Servicing Agreement Generally--Credit Enhancement" and
"Risk Factors" in this prospectus.
7
Tax Status
For information concerning the application of the United States federal income
tax laws, including whether the certificates will be characterized as debt for
federal income tax purposes. See "Tax Matters" in this prospectus.
Certificate Ratings
Any certificate offered by this prospectus and the accompanying prospectus
supplement will be rated in one of the four highest rating categories by at
least one nationally recognized rating organization.
A rating is not a recommendation to buy, sell or hold securities and may be
revised or withdrawn at any time by the assigning agency. Each rating should be
evaluated independently of any other rating. See "Risk Factors--If the ratings
of the certificates are lowered or withdrawn, their market value could decrease"
in this prospectus.
8
Risk Factors
You should consider the following factors before you decide whether or not to
purchase the certificates.
There is no public market for the certificates. As a result, you may be unable
to sell your certificates or the price of the certificates may suffer.
The underwriters may assist in resales of the certificates but they are not
required to do so. A secondary market for any certificates may not develop. If a
secondary market does develop, it might not continue or it might not be
sufficiently liquid to allow you to resell any of your certificates.
In addition, some certificates have a more limited trading market and experience
more price volatility. There may be a limited number of buyers when you decide
to sell those certificates. This may affect the price you receive for the
certificates or your ability to sell the certificates. You should not purchase
certificates unless you understand and know you can bear the investment risks.
Some interests could have priority over the trustee's interest in the
receivables, which could cause your receipt of payments to be delayed or
reduced.
Credco represents and warrants that its transfer of receivables to RFC II is an
absolute sale of those receivables. RFC II and Centurion each represents and
warrants that its transfer of receivables to the trustee is either (i) an
absolute sale of those receivables or (ii) the grant of a security interest in
those receivables. For a description of the trustee's rights if these
representations and warranties are not true, see "The Pooling and Servicing
Agreement Generally--Representations and Warranties" in this prospectus.
Each of Centurion, Credco, and RFC II takes steps under the UCC to perfect its
transferee's interest in the receivables. Nevertheless, if the UCC does not
govern these transfers and if some other action is required under applicable law
and has not been taken, payments to you could be delayed or reduced.
Each of Centurion, Credco, and RFC II represents, warrants, and covenants that
its transfer of receivables is perfected and free and clear of the lien or
interest of any other entity, except for certain permitted liens. If this is not
true, the trustee's interest in the receivables could be impaired, and payments
to you could be delayed or reduced. For instance,
o a prior or subsequent transferee of receivables could have an interest in the
receivables superior to the interest of the trustee;
o a tax, governmental, or other nonconsensual lien that attaches to the property
of Centurion, Credco, or RFC II could have priority over the interest of the
trustee in the receivables;
9
o the administrative expenses of a conservator, receiver, or bankruptcy trustee
for Centurion, Credco, or TRS could be paid from collections on the
receivables before Certificateholders receive any payments; and
o if insolvency proceedings were commenced by or against TRS, or if certain time
periods were to pass, the trustee may lose any perfected interest in
collections held by TRS and commingled with other funds.
Regulatory action could result in accelerated delayed, or reduced payments to
you.
Centurion is chartered as a Utah industrial loan corporation and is regulated
and supervised by the Utah Department of Financial Institutions, which is
authorized to appoint the Federal Deposit Insurance Corporation as conservator
or receiver for Centurion Bank if certain events occur relating to Centurion's
financial condition or the propriety of its actions. In addition, the FDIC could
appoint itself as conservator or receiver for Centurion.
Although Centurion treats its transfer of receivables as a sale for accounting
purposes, arguments may be made that these transfers constitute the grant of a
security interest under general applicable law. Nevertheless, the FDIC has
issued regulations surrendering certain rights under the Federal Deposit
Insurance Act, as amended by the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, to reclaim, recover, or recharacterize a financial
institution's transfer of financial assets such as the receivables if (i) the
transfer involved a securitization of the financial assets and meets specified
conditions for treatment as a sale under relevant accounting principles, (ii)
the financial institution received adequate consideration for the transfer,
(iii) the parties intended that the transfer constitute a sale for accounting
purposes, and (iv) the financial assets were not transferred fraudulently, in
contemplation of the financial institution's insolvency, or with the intent to
hinder, delay, or defraud the financial institution or its creditors.
Centurion's transfer of the receivables, and the pooling and servicing
agreement, are intended to satisfy all of these conditions.
If a condition required under the FDIC's regulations were found not to have been
met, however, the FDIC could seek to reclaim, recover, or recharacterize
Centurion's transfer of the receivables. If the FDIC were successful, the FDIA
would limit any damages to "actual direct compensatory damages" determined as of
the date that the FDIC was appointed as conservator or receiver for Centurion.
The FDIC, moreover, could delay its decision whether to seek to reclaim,
recover, or recharacterize Centurion's transfer of the receivables for a
reasonable period following its appointment as conservator or receiver for
Centurion. Therefore, if the FDIC were to reclaim, recover, or recharacterize
Centurion's transfer of the receivables, payments to you could be delayed or
reduced.
10
Even if the conditions set forth in the regulations were satisfied and the FDIC
did not reclaim, recover, or recharacterize Centurion's transfer of the
receivables, you could suffer a loss on your investment if (i) the pooling and
servicing agreement or Centurion's transfer of the receivables were found to
violate the regulatory requirements of the FDIA, (ii) the Trustee were required
to comply with the claims process established under the FDIA in order to collect
payments on the receivables, (iii) the FDIC were to request a stay of any action
by the Trustee to enforce the pooling and servicing agreement or the
Certificates, or (iv) the FDIC were to repudiate other parts of the pooling and
servicing agreement.
If Credco, TRS, or any of their affiliates were to become a debtor in a
bankruptcy case, the court could exercise control over the receivables on an
interim or a permanent basis. Although steps have been taken to minimize this
risk, Credco, TRS, or any of their affiliates as debtor-in-possession or another
interested party could argue that -
o Credco did not sell the receivables to RFC II but instead borrowed money from
RFC II and granted a security interest in the receivables;
o RFC II and its assets (including the receivables) should be substantively
consolidated with the bankruptcy estate of Credco, TRS, or any of their
affiliates; or
o the receivables are necessary for Credco, TRS, or any of their affiliates to
reorganize.
If these or similar arguments were made, whether successfully or not, payments
to you could be delayed or reduced.
If Credco, TRS, or any of their affiliates were to enter bankruptcy, moreover,
the trustee and the certificateholders could be prohibited from taking any
action to enforce the RFC II receivables purchase agreement or the pooling and
servicing agreement against Credco, TRS, or those affiliates without the
permission of the bankruptcy court. Certificateholders also may be required to
return payments already received if Credco were to become a debtor in a
bankruptcy case.
Regardless of any decision made by the FDIC or ruling made by a court, the fact
that Centurion has entered conservatorship or receivership or that a bankruptcy
case has been commenced by or against Credco, TRS, or their affiliates could
have an adverse effect on the liquidity and value of the certificates.
In addition, regardless of the terms of the pooling and servicing agreement or
any other transaction document, and regardless of the instructions of those
authorized to direct the trustee's actions, the FDIC as conservator or receiver
for Centurion or a court overseeing the bankruptcy case of Credco, TRS, or any
of their affiliates may have the power (i) to prevent or require the
commencement of an early amortization period, (ii) to prevent, limit, or require
the early liquidation of receivables and termination of the trust, or (iii) to
require, prohibit, or limit the continued transfer of receivables. Furthermore,
regardless of the terms of the pooling and servicing agreement or any other
transaction document, a bankruptcy court (i) could prevent the appointment of a
successor servicer or administrator or (ii) could authorize TRS to stop
servicing the receivables or providing administrative services for RFC II. If
any of these events were to occur, payments to you could be delayed or reduced.
11
Furthermore, at any time, if the appropriate banking regulatory authorities were
to conclude that any obligation of Centurion under the pooling and servicing
agreement or any other transaction document were an unsafe or unsound practice
or violated any law, regulation or written condition or agreement applicable to
Centurion or such affiliate, such regulatory authority has the power to order
Centurion or the related affiliate, among other things, to rescind the agreement
or contract, refuse to perform that obligation, terminate the activity, amend
the terms of such obligation or take such other action as such regulatory
authority determines to be appropriate. If such an order were issued, payments
to you could be delayed or reduced, and Centurion or such affiliate may not be
liable to you for contractual damages for complying with such an order and you
may have no recourse against the relevant regulatory authority. See "Certain
Legal Aspects of the Receivables--Certain Regulatory Matters."
Consumer protection laws may impede collection efforts or reduce collections.
Federal and state consumer protection laws regulate the creation and enforcement
of consumer loans. The United States Congress and the states may enact
additional laws and amend existing laws to regulate further the credit card and
consumer credit industry or to reduce finance charges or other fees or charges.
These laws, as well as many new laws, regulations or rulings which may be
adopted, may materially adversely affect the servicer's ability to collect the
receivables or Centurion's ability to maintain previous levels of finance
charges or fees.
Each of the transferors and Credco makes representations and warranties about
its compliance with legal requirements. Each of the transferors and Credco also
makes certain representations and warranties in the pooling and servicing
agreement about the validity and enforceability of the accounts and the
receivables. However, the trustee will not make any examination of the
receivables or the records about the receivables for the purpose of establishing
the presence or absence of defects, compliance with such representations and
warranties, or for any other purpose. If any such representation or warranty is
breached, the only remedy is that the transferors or the servicer, as the case
may be, must accept reassignment of receivables affected by the breach.
12
Receivables also may be written off as uncollectible if a debtor seeks relief
under federal or state bankruptcy laws. This could result in a loss of available
funds to pay the certificateholders. See "The Pooling and Servicing Agreement
Generally--Defaulted Receivables; Rebates and Fraudulent Charges" in this
prospectus.
Payment patterns of account holders may not be consistent over time and
variations in these payment patterns may result in reduced payment of principal,
or receipt of payment of principal earlier or later than expected.
The receivables may be paid at any time. We cannot assure you that the creation
of additional receivables in the accounts will occur or that any particular
pattern of account holder payments will occur. The timing of the payment of
principal on your certificates may be different than expected if the principal
payment pattern of the receivables is different than expected or if certain
adverse events happen to either transferor or the trust. A significant decline
in the amount of receivables generated could result in the occurrence of a
pay-out event for one or more series. If a pay-out event occurs for your series,
you could receive payment of principal sooner than expected. Centurion's ability
to compete in the current industry environment will affect its ability to
generate new receivables and might also affect payment patterns on the
receivables.
In addition to other factors discussed elsewhere in this "Risk Factors" section,
changes in finance charges can alter the monthly payment rates of
accountholders. A significant decrease in monthly payment rates could slow the
return or accumulation of principal during an amortization or an accumulation
period.
One development which affects the level of finance charge collections is the
increased convenience use of credit cards. Convenience use means that the
customers pay their account balances in full on or prior to the due date. The
customer, therefore, avoids all finance charges on his account. This decreases
the effective yield on the accounts and could cause an early payment of your
certificates.
The transferors may not be able to generate new receivables or designate new
accounts to the trust when required by the pooling and servicing agreement. This
could result in an acceleration of or reduction on payments on your
certificates.
The trust's ability to make payments on the certificates will be impaired if
sufficient new receivables are not generated by Centurion. We do not guarantee
that new receivables will be created, that any receivables will be added to the
trust or that receivables will be repaid at a particular time or with a
particular pattern.
The pooling and servicing agreement requires that the balance of principal
receivables in the trust not fall below a specified level. If the level of
principal receivables does fall below the required level, an early payment of
your certificates could occur. To maintain the level of principal receivables in
the trust, the transferors periodically add receivables through the designation
of additional accounts for inclusion in the trust. There is no guarantee that
the transferors will have enough receivables to add to the trust. If the
transferors are not able to add additional accounts when required, an early
payment of your certificates will occur.
13
See "Maturity Considerations" in the accompanying prospectus supplement.
Social, economic and geographic factors can affect credit card payments and may
cause a delay in or default on payments.
Changes in credit card use, payment patterns and the rate of defaults by
cardholders may result from a variety of social, economic and geographic
factors. Social factors include changes in consumer confidence levels and
attitudes towards incurring debt, the public's perception of the use of credit
cards and changing attitudes about incurring debt and the stigma of personal
bankruptcy. Economic factors include the rates of inflation, the unemployment
rates and the relative interest rates offered for various types of loans.
Moreover, adverse changes in economic conditions in states where cardholders are
located could have a direct impact on the timing and amount of payments on the
certificates of any series.
The acts of terrorism which occurred in the United States on September 11, 2001
had a significant impact on the overall economy in the United States, including
declines in corporate travel and entertainment spending and consumer travel
since September 11, 2001. The ongoing effect of these events and of other
terrorist acts on the U.S. economy and consumer spending is unclear. We cannot
predict how these or other factors will affect credit card use, payment patterns
and remittance practices. Political and military actions in response to these
events and other terrorist acts and the impact of those actions on credit card
use, payment patterns and remittance practices are also unclear. In addition,
existing and future legislation may affect the incurrence of consumer debt and
payment of credit card balances. In particular, under the Soldiers' and Sailors'
Civil Relief Act of 1940, as amended, members of the military, including
reservists, on active duty who have entered into obligations, such as incurring
consumer credit card debt, before being called to active duty may be entitled to
reductions in interest rates to a cap of 6% and a stay of collection efforts. We
have no information at this time concerning how many accounts in the trust
portfolio may be affected by the limitations and restrictions of the Soldiers'
and Sailors' Civil Relief Act.
We cannot predict how any of these or other factors will affect repayment
patterns or card use and, consequently, the timing and amount of payments on
your series. Any reductions in the amount or timing of interest or principal
payments will reduce the amount available for distribution on the certificates
of such series.
14
Competition in the credit card industry may result in a decline in Centurion's
ability to generate new receivables. This may result in the payment of principal
earlier or later than the expected final payment date, or in reduced amounts.
The credit card industry is highly competitive. The credit card programs
operated by American Express and its affiliates face substantial and
increasingly intense competition from other financial institutions that have
VISA(R)* and MasterCard(R)* credit card programs, such as MBNA, Citigroup and
Bank of America. As a network, TRS also faces intense competition from card
systems like VISA, MasterCard, Diners Club(R), Morgan Stanley Dean Witter &
Co.'s Discover(R)/ NOVUS(R) Network and JCB.
Competition also exists from businesses that issue their own cards or extend
credit in other ways to their customers, such as retailers and airline
associations. In addition, many United States banks issue credit cards which
have an annual fee in addition to interest charges where permitted by state law
while issuers of the Discover Card on the Discover/NOVUS Network, as well as
many issuers of VISA and MasterCard cards generally charge no annual fee.
Card issuers compete with each other by offering a variety of products and
services, including premium cards with enhanced services or lines of credit,
airline frequent flyer program mileage credits and other reward or rebate
programs, "teaser" promotional rates and co-branded arrangements with partners
that offer benefits to cardholders.
Recently, mergers and consolidations of banking and financial services companies
and credit card portfolio acquisitions by major issuers have produced larger
card issuers which compete with greater resources, economies of scale and
potential brand recognition. Consequently, a smaller number of dominant issuers
has emerged. There has also been an increased use of debit cards for point of
sale purchases as many banks have replaced traditional ATM cards with general
purpose debit cards bearing a VISA or MasterCard logo. Some bank debit cards
also offer reward programs and other benefits.
The principal competitive factors that affect the card business of American
Express and its affiliates are:
o the quality of the services and products, including rewards programs, provided
to cardmembers;
o the number, spending habits and credit performance of cardmembers;
- ---------
* VISA(R) and MasterCard(R) are federally registered trademarks of VISA U.S.A.,
Inc. and MasterCard International Incorporated, respectively.
15
o the quantity and quality of businesses that accept the card;
o the cost of cards to cardmembers;
o the payment terms available to cardmembers;
o the number and quality of other payment instruments available to cardmembers;
o the nature and quality of expense management data capture and reporting
capability;
o the success of targeted marketing and promotion programs;
o reputation and brand recognition; and
o the ability of issuers to implement operational and cost efficiencies.
The competitive nature of the credit card industry may result in a reduced
amounts of finance charge receivables collected and available to pay interest on
the certificates. This competition also may affect Centurion's ability to
originate new accounts and generate new receivables. Such events could cause a
pay-out event to occur and an early payment of your certificates.
See "Description of the Certificates--Pay-Out Events and Reinvestment Events" in
this prospectus.
Centurion may change the terms of the credit card accounts in a way that reduces
or slows collections. These changes may result in reduced, accelerated or
delayed payments to you.
As owner of the accounts, Centurion retains the right to change various credit
card account terms (including finance charges and other fees it charges and the
required minimum monthly payment). A pay-out event could occur if Centurion
reduced the finance charges and other fees it charges, and a corresponding
decrease in finance charges resulted. In addition, changes in the credit card
account terms may alter payment patterns. If payment rates decrease
significantly at a time when you are scheduled to receive principal, you might
receive principal more slowly than expected.
Centurion will not reduce the interest rate it charges on the receivables or
other fees if that action would result in a pay-out event, unless Centurion is
required by law to do so or it determines that such reduction is necessary to
maintain its credit card business on a competitive basis, based on its good
faith assessment of its business competition.
Centurion has no restrictions on its ability to change the terms of the credit
card accounts except as described above or in the accompanying prospectus
supplement. Changes in relevant law, changes in the marketplace or prudent
business practices could cause Centurion to change credit card account terms.
Credit card rates may decline without a corresponding change in the amounts
needed to pay the certificates, which could result in a delay or reduction in
payments of your certificates.
16
Some accounts may have finance charges set at variable rate based on a
designated index (for example, the prime rate). A series or class of
certificates may bear interest either at a fixed rate or at a floating rate
based on a different index. If the rate charged on the accounts declines,
collections of finance charge receivables may be reduced without a corresponding
reduction in the amounts payable as interest on the certificates and other
amounts paid from collections of finance charge receivables. This could result
in delayed or reduced principal and interest payments to you.
If the ratings of the certificates are lowered or withdrawn, their market value
could decrease.
The initial rating of a certificate addresses the likelihood of the payment of
interest on that certificate when due and the ultimate payment of principal of
that certificate by its legal maturity date. The ratings do not address the
likelihood of the payment of principal of a certificate on its expected final
payment date. In addition, the ratings do not address of early payment or
acceleration of a certificate, which could be caused by a pay-out event.
The ratings of the certificates are not a recommendation to buy, hold or sell
the certificates. The ratings of the certificates may be lowered or withdrawn
entirely at any time by the applicable rating agency. The market value of the
certificates could decrease if the ratings are lowered or withdrawn.
Issuances of additional series by the trust may adversely affect your
certificates.
The trust is a master trust that has issued other series of certificates and is
expected to issue additional series from time to time. All such certificates are
payable from the receivables in the trust. The trust may issue additional series
with terms that are different from your series without your prior review or
consent. Before the trust can issue a new series, each rating agency that has
rated an outstanding series must confirm in writing that the issuance of the new
series will not result in a reduction or withdrawal of its earlier rating.
Nevertheless, the terms of a new series could affect the timing and amounts of
payments on any other outstanding series.
The owners of the certificates of any new series will have voting rights that
will reduce the percentage interest represented by your series. Such voting
rights may relate to the ability to approve waivers and give consents. The
actions which may be affected include directing the appointment of a successor
servicer following a servicer default, amending the pooling and servicing
agreement and directing a reassignment of the entire portfolio of accounts.
See "The Pooling and Servicing Agreement Generally--Groups of Series" in this
prospectus.
17
Addition of accounts to the trust may decrease the credit quality of the assets
securing the repayment of your certificates. If this occurs, your receipt of
payments of principal and interest may be reduced, delayed or accelerated.
The assets of the trust change every day. The transferors may choose, or may be
required, to add receivables to the trust. The accounts from which these
receivables arise may have different terms and conditions from the accounts
already designated to the trust. For example, the new accounts may have higher
or lower fees or interest rates or different payment terms. We cannot guarantee
that new accounts will be of the same credit quality as the accounts currently
or historically designated to the trust. If the credit quality of the assets in
the trust were to deteriorate, the trust's ability to make payments on the
certificates could be adversely affected. See "The Pooling and Servicing
Agreement Generally--Additions of Accounts or Participation Interests."
Any amounts in a prefunding account that are not invested in receivables may
result in an early return of principal and may create a reinvestment risk for
you.
The transferors may, in connection with any series, create a prefunding account
and deposit a portion of the proceeds of the series into the account. Moneys in
the account will be invested in additional principal receivables. Any money in
the prefunding account not used by a specific date, however, must be paid to the
holders of the certificates of that series. This payment will result in an early
return of principal. In such an event, the transferors do not expect to pay a
prepayment penalty or premium.
If you receive an early payment of principal at a time when prevailing interest
rates are relatively low, you may not be able to reinvest the proceeds in a
comparable security with an effective interest rate equivalent to that of your
certificates.
18
Use of Proceeds
The net proceeds from the sale of the asset backed 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
American Express Credit Account Master Trust was formed pursuant to a
pooling and servicing agreement among American Express Travel Related Services
Company, Inc., or TRS, as servicer, American Express Centurion Bank, referred to
in this prospectus as Centurion, and American Express Receivables Financing
Corporation II, or RFC II, as transferors, and The Bank of New York, as trustee.
The trust, as a master trust, previously has issued other series of
asset backed certificates and expects to issue additional series from time to
time.
The trust's activities are limited to:
o acquiring and holding the receivables and the other trust
assets and the proceeds from these assets;
o issuing certificates;
o making payments on the certificates; and
o engaging in other activities that are necessary or incidental
to accomplish these limited purposes.
Consequently, the trust does not and is not expected to have any source of
capital resources other than the trust assets. The trust is formed under and
administered in accordance with the laws of the State of New York.
Each transferor has conveyed to the trust, without recourse, its
interest in all receivables arising under the portfolio of accounts in the
trust. The receivables consist of all amounts charged by account holders for
goods and services and cash advances, called principal receivables, and all
related periodic rate finance charges, annual membership fees, cash advance
fees, late charge fees, returned check charges, overlimit fees and any other
fees and charges billed on the accounts from time to time, collectively called
finance charge receivables.
The trust assets consist of such receivables, 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 Recoveries (net of collection expenses) received by the
servicer including proceeds from the sale or securitization of Defaulted
Receivables and proceeds of credit insurance policies relating to such
receivables.
The pooling and servicing agreement provides that, subject to certain
limitations and conditions, trust assets may also include participation
interests in receivables. Pursuant to the pooling and servicing agreement, a
transferor will have the right (subject to certain limitations and conditions
set forth therein), and in some circumstances will be obligated, to designate
from time to time additional eligible accounts to be included as accounts and to
transfer to the trust all receivables of such additional accounts, whether such
receivables are then existing or thereafter created, or to transfer to the trust
participations in receivables instead. See "The Pooling and Servicing Agreement
Generally--Additions of Accounts or Participation Interests" in this prospectus.
A transferor also has the right (subject to certain limitations and
conditions) to require the trustee to reconvey all receivables in accounts
designated by that transferor for removal, whether such receivables are then
existing or thereafter created. Once an account is removed, receivables existing
under that account are not transferred to the trust. See "The Pooling and
Servicing Agreement Generally--Removal of Accounts" in this prospectus.
19
Throughout the term of the trust, the accounts from which the
receivables arise will be the accounts designated by the transferors on the
Initial Cut- Off Date plus any Additional Accounts minus any accounts that have
been removed. With respect to each series of certificates issued by the trust,
the transferors will represent and warrant that, as of the date of issuance of
the related series and the date receivables are conveyed to the trust, such
receivables meet certain eligibility requirements.
The accompanying prospectus supplement will provide certain information
about the trust portfolio as of the date specified. Such information will
include, but not be limited to, the amount of principal receivables, the amount
of finance charge receivables, the range of principal balances of the accounts
and the average thereof, the range of credit limits of the accounts and the
average thereof, the range of ages of the accounts and the average thereof, and
delinquency statistics relating to the accounts.
Centurion's Revolving Credit Businesses
General
Pursuant to the RFC II purchase agreement, Credco transferred to RFC
II, and pursuant to the pooling and servicing agreement, RFC II and Centurion
transferred to the trust, certain receivables generated from transactions made
by persons who are holders of consumer American Express revolving credit card
accounts, whether branded "Optima" Card accounts or otherwise, Optima Line of
Credit accounts and Sign & Travel/Extended Payment Option revolving credit
accounts or features. Cards issued by Centurion are currently accepted
worldwide, and may be used for the purchase of merchandise and services. The
Sign & Travel/Extended Payment Option is currently available only to holders of
American Express Card, American Express Gold Card, Platinum Card and Centurion
Card accounts. Extended Payment Option is also available to certain corporate
account holders, and, in the future, Sign & Travel may also be available to
these account holders. The consumer American Express credit card accounts,
Optima Line of Credit accounts and the Sign & Travel/Extended Payment Option
accounts are owned by Centurion and are serviced by Centurion at its
headquarters, 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.
American Express Credit Card Accounts. The American Express credit card
accounts are accessed primarily by use of the credit cards and may be used to
purchase merchandise and services from participating service establishments, to
transfer balances from other credit accounts or to obtain cash advances through
check access or from automated teller machines. The American Express credit card
account was first offered in early 1987 and branded as the "Optima Card." All
American Express credit card accounts are originated by Centurion and are
primarily generated by direct mail solicitations, telemarketing to prospects and
Internet channels. Offers are made to existing cardmembers having a credit
history with a charge card account and to non-cardmembers. In addition,
Centurion offers American Express credit 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 American
Express credit 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. Currently, new customers are not being
enrolled in this product. 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.
20
Sign & Travel/Extended Payment Option Accounts. The Sign &
Travel/Extended Payment Option accounts are features currently associated with
charge card accounts. 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 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 the
preference to have such travel items billed to the Sign & Travel account. In
addition, all foreign charges will automatically be billed to the Sign & Travel
account. 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 above a designated amount, usually $200. This feature is referred
to as the "Extended Payment Option." 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/Extended Payment Option
accounts are owned by Centurion.
Over a period of time, beginning in the later half of 1998, some Sign &
Travel/Extended Payment Option accounts became a feature of a multi-functional
product offered by Centurion. This product combines the charge card and extended
payment options. It consists of a pay-in-full feature for purchasing merchandise
and one or more interest-bearing revolving credit features including the Sign &
Travel/Extended Payment Option. It is anticipated that, in addition to the
receivables generated by the Sign & Travel/Extended Payment Option accounts, the
receivables generated by such other revolving credit features may, in the
future, be conveyed to the trust. This conversion may continue in the future.
Underwriting and Authorization Procedures
American Express Credit Card Accounts. Centurion uses two types of
approval processes in determining whether to open an American Express credit
card account: the "pre-screened process" and the "full application process." The
pre-screened process involves determining in advance that a person will qualify
for an American Express credit 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). Additional screening is conducted on
applicants who reply to pre-screened offers.
The full application process is used for evaluation of unsolicited and
non- pre-screened applications. The primary sources of these applications are
the "inbound" telemarketing program that features a toll-free telephone number,
Internet channels and, on a limited basis, direct mail and 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 American Express credit card account utilizations.
Utilizations of such American Express credit card accounts are subject to
authorization at the time of such utilization based upon the cardmember's past
spending and payment activity, experience with other creditors 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 American
Express credit card accounts generally range from $500 to $15,000, although the
credit limits applicable to certain American Express credit card accounts may be
as high as $100,000.
21
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 American Express credit card accounts. Authorization based
on cardmembers' past spending and payment behavior and personal resources occurs
at the time of utilization.
Sign & Travel/Extended Payment Option Accounts. Centurion extends the
right to access a Sign & Travel/Extended Payment Option account to qualified
cardmembers after they have been charge card account holders in good standing
for one year. There is no preset spending limit on these accounts. However,
utilizations of the Sign & Travel/Extended Payment Option account are subject to
approval through a credit authorization process similar to credit authorization
procedures applicable to the American Express credit card account.
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 American Express credit card account, the Optima Line of Credit account and
the Sign & Travel/Extended Payment Option, as applicable. Pursuant to each such
agreement, Centurion reserves the right to add, change or terminate any terms,
conditions, services 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 annual percentage rate, or APR, or other change making the terms
of an account more stringent, generally becomes effective on a designated future
date.
American Express Credit Card Accounts. Generally, an American Express
credit card account holder is charged (i) an annual fee of $0.00 to $135.00,
(ii) finance charges on merchandise and services purchased and on cash advances
based on variable APRs equal to the prime rate as published in The Wall Street
Journal plus a spread ranging from 1.99% to 12.99%, depending on the
cardmember's tenure, spending and payment patterns and type of product (and a
fixed default rate of up to 23.99%) (some products have fixed standard APRs
currently ranging from 9.99% - 15.99%), (iii) amounts payable for certain uses
of the American Express credit card, including the standard network fee of 3% on
cash advances obtained through an automated teller machine, with a $5.00 minimum
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. American Express credit card accounts are billed by Centurion on a cycle
basis. Generally, American Express credit 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, (b) 1/50th of the new balance, plus any amount which is past
due, or (c) current billed finance charges. Payments on the American Express
credit 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. Certain introductory APRs are also made available to
cardholders with select acquisition promotions.
Optima Line of Credit Accounts. Billing and payment for Optima Line of
Credit accounts are the same as for credit card accounts as described
immediately above.
Sign & Travel/Extended Payment Option Accounts. There are no annual fee
or other fees imposed for the use of the Sign & Travel/Extended Payment Option
accounts except for a monthly finance charge, based on an APR, on the
outstanding balance on the Sign & Travel/Extended Payment Option accounts. The
APR for the Sign & Travel/Extended Payment Option account balances is a variable
rate equal to the prime rate plus 9.99%. Sign & Travel/Extended Payment Option
accounts not in good standing are assessed interest at a fixed APR of 23.99%.
The Sign & Travel/Extended Payment Option accounts are billed by Centurion on a
cycle basis at the same time as the obligor's charge card account. Generally,
Sign & Travel/Extended Payment Option 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, (b) 1/50th of the new balance or (c) current billed
finance charges, plus any amount which is past due. Currently, payments made on
the charge card or Sign & Travel/Extended Payment Option accounts are generally
applied first, to past due Sign & Travel/ Extended Payment Option account
balances, second, to past due charge card account balances, third, to current
Sign & Travel/Extended Payment Option account minimum payments, fourth, to
current charge card account balances, and finally, to outstanding Sign &
Travel/Extended Payment Option 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/Extended Payment Option Accounts into the multifunctional product
referred to under "--General--Sign & Travel/Extended Payment Option Accounts"
above, 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.
22
Collection Efforts
Efforts to collect delinquent American Express credit card accounts,
Optima Line of Credit accounts and Sign & Travel/Extended Payment Option
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 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 preempted
accounts and those reaching the 90-day 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
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 TRS.
TRS is a wholly owned subsidiary of American Express Company, 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 World Financial
Center, Room 138, 200 Vesey Street, New York, New York 10285-4405.
Credco
American Express Credit Corporation, or 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 One
Christina Center, 301 N. Walnut Street, Wilmington, Delaware 19801.
23
Centurion
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 4315 South 2700 West, Salt Lake City, Utah 84184.
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.
TRS
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 Company 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(R) Travelers Cheques, corporate
and consumer travel products and services, magazine publishing, database
marketing and management and insurance. TRS' principal office is located at 200
Vesey Street, World Financial Center, New York, New York 10285.
Merger or Consolidation of a Transferor or the Servicer
The pooling and servicing agreement provides that a transferor may not
consolidate with or merge into, or sell all or substantially all of its assets
as an entirety to, any other entity unless:
(i) the surviving entity is organized under the laws of the United
States of America, any state thereof or the District of Columbia;
(ii) the surviving entity, the transferors and the trustee shall have
entered into a supplement to the pooling and servicing agreement
providing for the entity's assumption of the applicable
transferor's obligations under the pooling and servicing
agreement;
(iii) the applicable transferor shall have delivered to the trustee
(a) an officer's certificate and an opinion of counsel regarding
the enforceability of such assumption agreement against the
surviving entity; and
(b) a Tax Opinion;
(iv) all filings required to perfect the trustee's interest in the
receivables to be conveyed by the surviving entity shall have
been duly made and copies thereof shall have been delivered to
the trustee;
(v) the trustee shall have received an opinion of counsel with
respect to clause (iv) above and certain other matters specified
in the pooling and servicing agreement; and
(vi) if the surviving entity is not subject to Title 11 of the United
States Code, the applicable transferor shall have delivered
notice to each Rating Agency of the transfer and assumption of
such transferor's obligations by the surviving entity. If the
surviving entity is not subject to Title 11 of the United States
Code, the applicable transferor shall have delivered the notice
described above and the transferors shall have received notice
that the Rating Agency Condition has been satisfied.
24
Under the pooling and servicing agreement, the servicer may not
consolidate with or merge into, or sell all or substantially all of its assets
as an entirety to, any other entity unless, among other things:
(i) the surviving entity is an eligible servicer under the pooling
and servicing agreement;
(ii) the surviving entity is a corporation organized and existing
under the laws of the United States of America, any state thereof
or the District of Columbia; and
(iii) in a supplement to the pooling and servicing agreement, the
surviving entity expressly assumes the servicer's obligations
under such agreement.
Assumption of a Transferor's Obligations
The pooling and servicing agreement permits a transfer of all or a
portion of a transferor's credit or charge accounts and the receivables arising
thereunder. This transfer may include all (but not less than all) of the
accounts and such transferor's remaining interest in the receivables arising
thereunder, its interest in participations in receivables and its interest in
the trust, together with all servicing functions and other obligations under the
pooling and servicing agreement or relating to the transactions contemplated
thereby, to another entity that may or may not be affiliated with that
transferor. Pursuant to the pooling and servicing agreement, each transferor is
permitted to assign, convey, and transfer these assets and obligations to such
other entity, without the consent or approval or any certificateholders, if the
following conditions, among others, are satisfied:
(i) the assuming entity is organized under the laws of the United
States of America, any state thereof or the District of Columbia;
(ii) the assuming entity, the transferors and the trustee shall have
entered into a supplement to the pooling and servicing agreement
providing for the entity's assumption of the applicable
transferor's obligations under the pooling and servicing
agreement;
(iii) the applicable transferor shall have delivered to the trustee
(a) an officer's certificate and an opinion of counsel regarding
the enforceability of such assumption agreement against the
assuming entity; and
(b) a Tax Opinion;
(iv) all filings required to perfect the trustee's interest in the
receivables to be conveyed by the assuming entity shall have been
duly made and copies thereof shall have been delivered to the
trustee;
(v) the trustee shall have received an opinion of counsel with
respect to clause (iv) above and certain other matters specified
in the pooling and servicing agreement; and
25
(vi) if the assuming entity is not subject to Title 11 of the United
States Code, the applicable transferor shall have delivered
notice to each Rating Agency of the transfer and assumption of
such transferor's obligations by the surviving entity. If the
assuming entity is not subject to Title 11 of the United States
Code, the applicable transferor shall have delivered the notice
described above and the transferors shall have received notice
that the Rating Agency Condition has been satisfied.
The pooling and servicing agreement provides that the transferors, the
surviving entity and the trustee may enter into amendments to that agreement to
permit the transfer and assumption described above without the consent of any
certificateholders. After any permitted transfer and assumption, the assuming
entity will be considered to be a "transferor" for all purposes hereof, and the
applicable transferor will have no further liability or obligation under the
pooling and servicing agreement.
The Accounts
The receivables have arisen or will arise in certain revolving credit
accounts that have been selected from the Total Portfolio, 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 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.
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.
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" in this prospectus
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" in this prospectus. 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.
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.
26
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.
Description of the Certificates
General
The certificates will be issued from time to time pursuant to the
pooling and servicing agreement and a 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. 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.
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, known as the record date, unless otherwise specified in the
related prospectus supplement.
Book-Entry Registration
The certificates offered by this prospectus and the accompanying
prospectus supplement will be delivered in book-entry form. This means that,
except in the limited circumstances described in "--Definitive Certificates"
below, purchasers of certificates will not be entitled to have the certificates
registered in their names. Furthermore, these purchasers will not be entitled to
receive physical delivery of the certificates in definitive paper form. Instead,
upon issuance, all the certificates of a class will be represented by one or
more fully registered permanent global certificates, without interest coupons.
Each global certificate will be deposited with a securities depository
named The Depository Trust Company and will be registered in the name of its
nominee, Cede & Co. No global certificate representing book-entry certificates
may be transferred except as a whole by DTC to a nominee of DTC, or by a nominee
of DTC to another nominee of DTC. Thus, DTC or its nominee will be the only
registered holder of the certificates and will be considered the sole
representative of the beneficial owners of certificates for purposes of the
pooling and servicing agreement.
The registration of the global certificates in the name of Cede & Co.
will not affect beneficial ownership and is performed merely to facilitate
subsequent transfers. The book-entry system, which is also the system through
which most publicly traded common stock is held, is used because it eliminates
the need for physical movement of securities. The laws of some jurisdictions,
however, may require some purchasers to take physical delivery of their
certificates in definitive form. These laws may impair the ability to own or
transfer book-entry certificates.
Purchasers of certificates in the United States may hold interests in
the global certificates through DTC, either directly, if they are participants
in that system--such as a bank, brokerage house or other institution that
maintains securities accounts for its customers with DTC or its nominee--or
otherwise indirectly through a participant in DTC. Purchasers of certificates in
Europe may hold interests in the global certificates through Clearstream,
Luxembourg or through Euroclear Bank S.A./N.V., as operator of the Euroclear
system.
27
Because DTC will be the only registered owner of the global
certificates, Clearstream, Luxembourg and Euroclear will hold positions through
their respective U.S. depositories, which in turn will hold positions on the
books of DTC.
As long as the certificates are in book-entry form, they will be
evidenced solely by entries on the books of DTC, its participants and any
indirect participants. DTC will maintain records showing:
o the ownership interests of its participants, including the
U.S. depositories; and
o all transfers of ownership interests between its participants.
The participants and indirect participants, in turn, will maintain
records showing:
o the ownership interests of their customers, including indirect
participants, that hold the certificates through those
participants; and
o all transfers between these persons.
Thus, each beneficial owner of a book-entry certificate will hold its
certificate indirectly through a hierarchy of intermediaries, with DTC at the
"top" and the beneficial owner's own securities intermediary at the "bottom."
The trust, the trustee and their agents will not be liable for the
accuracy of, and are not responsible for maintaining supervising or reviewing
DTC's records or any participant's records relating to book-entry certificates.
The trust, the trustee and their agents also will not be responsible or liable
for payments made on account of the book-entry certificates.
Until definitive certificates are issued to the beneficial owners as
described under "--Definitive Certificates" in this prospectus, all references
to "holders" of certificates means DTC. The trust, the trustee and any paying
agent or transfer agent and registrar may treat DTC as the absolute owner of the
certificates for all purposes.
Beneficial owners of book-entry certificates should realize that the
trust will make all distributions of principal and interest on the certificates
to DTC and will send all required reports and notices solely to DTC as long as
DTC is the registered holder of the certificates. DTC and the participants are
generally required by law to receive and transmit all distributions, notices and
directions from the trustee to the beneficial owners through the chain of
intermediaries.
Similarly, the trustee will accept notices and directions solely from
DTC. Therefore, in order to exercise any rights of a holder of certificates
under the pooling and servicing agreement, each person owning a beneficial
interest in the certificates must rely on the procedures of DTC and, in some
cases, Clearstream, Luxembourg or Euroclear. If the beneficial owner is not a
participant in that system, then it must rely on the procedures of the
participant through which that person owns its interest. DTC has advised the
trust that it will take actions under the pooling and servicing agreement only
at the direction of its participants, which in turn will act only at the
direction of the beneficial owners. Some of these actions, however, may conflict
with actions it takes at the direction of other participants and beneficial
owners.
Notices and other communications by DTC to participants, by
participants to indirect participants, and by participants and indirect
participants to beneficial owners will be governed by arrangements among them.
Beneficial owners of book-entry certificates should also realize that
book- entry certificates may be more difficult to pledge because of the lack of
a physical certificate. Beneficial owners may also experience delays in
receiving distributions on their certificates since distributions will initially
be made to DTC and must be transferred through the chain of intermediaries to
the beneficial owner's account.
28
The Depository Trust Company
DTC is a limited-purpose trust company organized under the New York
Banking Law and is a "banking institution" within the meaning of the New York
Banking Law. DTC is also a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered under Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold securities deposited by its
participants and to facilitate the clearance and settlement of securities
transactions among its participants through electronic book-entry changes in
accounts of the participants, thus eliminating the need for physical movement of
securities. DTC is owned by a number of its participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc., and the National
Association of Securities Dealers, Inc. The rules applicable to DTC and its
participants are on file with the SEC.
Clearstream, Luxembourg
Clearstream, Luxembourg is registered as a bank in Luxembourg and is
regulated by the Banque Centrale du Luxembourg, the Luxembourg Central Bank,
which supervises Luxembourg banks. Clearstream, Luxembourg holds securities for
its customers and facilitates the clearance and settlement of securities
transactions by electronic book-entry transfers between their accounts.
Clearstream, Luxembourg provides various services, including safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream, Luxembourg also deals with
domestic securities markets in over 30 countries through established depository
and custodial relationships. Clearstream, Luxembourg has established an
electronic bridge with Euroclear in Brussels to facilitate settlement of trades
between Clearstream, Luxembourg and Euroclear. Clearstream, Luxembourg currently
accepts over 110,000 securities issues on its books.
Clearstream, Luxembourg's customers are worldwide financial
institutions including underwriters, securities brokers and dealers, banks,
trust companies and clearing corporations. Clearstream, Luxembourg's U.S.
customers are limited to securities brokers and dealers and banks. Currently,
Clearstream, Luxembourg has approximately 2,000 customers located in over 80
countries, including all major European countries, Canada, and the United
States. Indirect access to Clearstream, Luxembourg is available to other
institutions that clear through or maintain a custodial relationship with an
account holder of Clearstream, Luxembourg.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment. This system
eliminates the need for physical movement of securities and any risk from lack
of simultaneous transfers of securities and cash. Euroclear includes various
other services, including securities lending and borrowing and interfaces with
domestic markets in several countries. The Euroclear operator is Euroclear Bank,
S.A./N.V. The Euroclear operator conducts all operations. All Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear operator. The Euroclear operator establishes policy for Euroclear on
behalf of Euroclear participants. Euroclear participants include banks,
including central banks, securities brokers and dealers and other professional
financial intermediaries and may include the underwriters. Indirect access to
Euroclear is also available to other firms that clear through or maintain a
custodial relationship with a Euroclear participant, either directly or
indirectly.
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. These Terms and Conditions 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 securities to
specific securities clearance accounts. The Euroclear operator acts under the
Terms and Conditions only on behalf of Euroclear participants, and has no record
of or relationship with persons holding through Euroclear participants.
This information about DTC, Clearstream, Luxembourg and Euroclear has
been provided by each of them for informational purposes only and is not
intended to serve as a representation, warranty or contract modification of any
kind.
29
Distributions on Book-Entry Certificates
The trust will make distributions of principal of and interest on
book-entry certificates to DTC. These payments will be made in immediately
available funds by the trust's paying agent, The Bank of New York, at the office
of the paying agent in New York City that the trust designates for that purpose.
In the case of principal payments, the global certificates must be presented to
the paying agent in time for the paying agent to make those payments in
immediately available funds in accordance with its normal payment procedures.
Upon receipt of any payment of principal of or interest on a global
certificate, DTC will immediately credit the accounts of its participants on its
book-entry registration and transfer system. DTC will credit those accounts with
payments in amounts proportionate to the participants' respective beneficial
interests in the stated principal amount of the global certificate as shown on
the records of DTC. Payments by participants to beneficial owners of book-entry
certificates will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of those
participants.
Distributions on book-entry certificates held beneficially through
Clearstream, Luxembourg will be credited to cash accounts of Clearstream,
Luxembourg customers in accordance with its rules and procedures, to the extent
received by its U.S. depository.
Distribution on book-entry certificates held beneficially through
Euroclear will be credited to the cash accounts of Euroclear participants in
accordance with the Terms and Conditions, to the extent received by its U.S.
depository.
In the event definitive certificates are issued, distributions of
principal of and interest on definitive certificates will be made directly to
the holders of the definitive certificates in whose names the definitive
certificates were registered at the close of business on the related Record
Date.
Global Clearance and Settlement Procedures
Initial settlement for the certificates will be made in immediately
available funds. Secondary market trading between DTC participants will occur in
the ordinary way in accordance with DTC's rules and will be settled in
immediately available funds using DTC's Same-Day Funds Settlement System.
Secondary market trading between Clearstream, Luxembourg customers and/or
Euroclear participants will occur in the ordinary way in accordance with the
applicable rules and operating procedures of Clearstream, Luxembourg and
Euroclear. Such secondary market trading will be settled using the procedures
applicable to conventional eurobonds in immediately available funds.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream,
Luxembourg customers or Euroclear participants, on the other, will be effected
in DTC in accordance with DTC's rules on behalf of the relevant European
international clearing system by the U.S. depositories. However, cross-market
transactions of this type will require delivery of instructions to the relevant
European international clearing system by the counterparty in that 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 U.S.
depository to take action to effect final settlement on its behalf by delivering
or receiving certificates in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Clearstream, Luxembourg customers and Euroclear participants may not deliver
instructions directly to DTC.
Because of time-zone differences, credits to certificates in
Clearstream, Luxembourg or Euroclear as a result of a transaction with a DTC
participant will be made during subsequent securities settlement processing and
will be credited the business day following a DTC settlement date. The credits
to or any transactions in the certificates settled during processing will be
reported to the relevant Euroclear participants or Clearstream, Luxembourg
customers on that business day. Cash received in Clearstream, Luxembourg or
Euroclear as a result of sales of certificates by or through a Clearstream,
Luxembourg customer or a Euroclear participant to a DTC participant will be
received with value on the DTC settlement date, but will be available in the
relevant Clearstream, Luxembourg or Euroclear cash account only as of the
business day following settlement in DTC.
30
Although DTC, Clearstream, Luxembourg and Euroclear have agreed to
these procedures in order to facilitate transfers of certificates among
participants of DTC, Clearstream, Luxembourg and Euroclear, they are under no
obligation to perform or continue to perform these procedures and these
procedures may be discontinued at any time.
Definitive Certificates
Beneficial owners of book-entry certificates may exchange those
certificates for definitive certificates registered in their name only if:
o DTC is unwilling or unable to continue as depository for the
global certificates or ceases to be a registered "clearing
agency" and the trust is unable to find a qualified
replacement for DTC;
o the transferors, at their option, elect to terminate the
book-entry system through DTC; or
o after the occurrence of a servicer default, certificate owners
evidencing not less than 50% of the unpaid outstanding
principal amount of the certificates advise the trustee and
DTC that the continuation of a book- entry system is no longer
in the best interests of those certificate owners.
If any of these three events occurs, DTC is required to notify the
beneficial owners through the chain of intermediaries that the definitive
certificates are available. The appropriate global certificate will then be
exchangeable in whole for definitive certificates in registered form of like
tenor and of an equal aggregate stated principal amount, in specified
denominations. Definitive certificates will be registered in the name or names
of the person or persons specified by DTC in a written instruction to the
registrar of the certificates. DTC may base its written instruction upon
directions it receives from its participants. Thereafter, the holders of the
definitive certificates will be recognized as the "holders" of the certificates
under the pooling and servicing agreement.
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
with that registration.
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. If the prospectus supplement for
a series of certificates so provides, the interest rate and interest payment
dates applicable to each certificate of that series may be subject to adjustment
from time to time. Any such interest rate adjustment would be determined by
reference to one or more indices or by a remarketing firm, in each case as
described in the prospectus supplement for such series. Except as otherwise
provided in this prospectus or in the related prospectus supplement, collections
of finance charge receivables and certain other amounts allocable to the series
offered hereby will be used to make interest payments to certificateholders of
such series on each interest payment date specified in the related prospectus
supplement; provided that if an Early Amortization Period or Early Accumulation
Period begins for such series, interest will thereafter 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.
31
Principal
The method for payment of principal for each series of certificates
offered by this prospectus will be described in the prospectus supplement for
that series. Generally, the principal for a series will be scheduled to be paid
either (a) in full on an expected date specified in the related prospectus
supplement, in which case such series will have a Controlled Accumulation Period
as described below or (b) in installments commencing on a date specified in the
related prospectus supplement, in which case such series generally will have a
Controlled Amortization Period as described below. If a series has more than one
class of certificates, each class may have a different method of paying
principal, a different expected final payment date or a different principal
commencement date. The payment of principal on the certificates of a series or
class may begin 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. See "Risk Factors-Payment
patterns of account holders may not be consistent over time and variations in
these payment patterns may result in reduced payment of principal, or receipt of
payment of principal earlier or later than expected" in this prospectus for a
description of factors that may affect the timing of principal payments on
certificates.
The certificates of each series will have a Revolving Period. During
the Revolving Period, collections of principal receivables and certain other
amounts otherwise allocable to the invested amount of that series will:
o if that 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
the same group; or
o if that series is not a principal sharing series, 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.
The certificates of any series may have a Controlled Accumulation
Period. During the Controlled Accumulation Period for a series, collections of
principal receivables and certain other amounts allocable to that series
(including Shared Principal Collections, if any) will be deposited on each
Distribution Date in a principal funding account established for the benefit of
the certificateholders of that series and used to make principal distributions
to the certificateholders of that series when due on the expected final payment
date. The amount to be deposited in a principal funding account for any series
on any Distribution Date may, but will not necessarily, be limited to a
controlled accumulation amount specified in the related prospectus supplement.
If a series has more than one class of certificates that has a Controlled
Accumulation Period, 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 the principal funding accounts.
The certificates of any series may have a Controlled Amortization
Period. During the Controlled Amortization Period for a series, collections of
principal receivables and certain other amounts allocable to that series
(including Shared Principal Collections, if any) will be used on each
Distribution Date to make principal distributions to any class of
certificateholders then scheduled to receive those distributions. The amount to
be distributed on any Distribution Date to certificateholders of any series
offered by this prospectus may, but will not necessarily, be limited to a
controlled amortization amount specified in the related prospectus supplement
plus any existing controlled amortization amounts arising from prior
Distribution Dates. If a series has more than one class of certificates that has
a Controlled Amortization Period, 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.
If so specified and under the conditions set forth in the related
prospectus supplement for a series having a Controlled Accumulation Period, the
certificates of that series may have an Early Accumulation Period. During the
Early Accumulation Period for a series, collections of principal receivables and
certain other amounts allocable to that series (including Shared Principal
Collections, if any) will be deposited on each Distribution Date in a principal
funding account and used to make distributions of principal to the
certificateholders of that series on the expected final payment date. See
"Series Provisions--Pay-Out Events" in the accompanying prospectus supplement
for a discussion of the events that might lead to the commencement of the Early
Accumulation Period for a series.
32
The certificates of any series may have an Early Amortization Period.
During the Early Amortization Period, collections of principal receivables and
certain other amounts allocable to that series (including Shared Principal
Collections, if any) will be distributed monthly as principal payments to the
applicable certificateholders, beginning with the first Special Payment Date.
During the Early Amortization Period for a series, distributions of principal to
certificateholders of that series will not be limited to any controlled
accumulation amount or controlled amortization amount. In addition, upon the
start of the Early Amortization Period for a series, any funds on deposit in a
principal funding account for that 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 accompanying prospectus supplement for a
discussion of the events that might lead to the commencement of the Early
Amortization Period for a series.
Funds on deposit in any principal funding account established for a
class or series offered by this prospectus 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 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. A
maturity liquidity facility is a financial contract that generally provides that
sufficient principal will be available to retire the certificates on a certain
date.
Pay-Out Events and Reinvestment Events
The Revolving Period for a series will continue until the start of the
Controlled Amortization Period or the Controlled Accumulation Period, unless a
Pay-Out Event or Reinvestment Event occurs.
A Pay-Out Event may include, but is not required to include and is not limited
to:
o certain events of bankruptcy, insolvency, liquidation,
receivership, or conservatorship relating to a transferor or
holder of the original transferor certificate;
o the trust becoming an "investment company" within the meaning
of the Investment Company Act of 1940, as amended;
o a transferor's failure to make any payment or deposit on the
date required in the pooling and servicing agreement (or
within the applicable grace period);
o 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 that
such breach has a material adverse effect on the related
certificateholders);
o the failure by Centurion to convey receivables under
Additional Accounts to the trust when required by the pooling
and servicing agreement;
o a reduction in the series adjusted portfolio yield below the
rates, and for the period, specified in the related prospectus
supplement; and
o any Servicer Default occurs.
An Early Amortization Period for a series will begin on the day on
which a Pay-Out Event occurs or is deemed to occur. Monthly distributions of
principal to the certificateholders of that series will begin on the Special
Payment Date in the Monthly Period following the Monthly Period in which such
Pay-Out Event occurred. Any amounts then on deposit in a principal funding
account or an interest funding account for that series will be distributed on
that first Special Payment Date to the relevant certificateholders. 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 by this
prospectus, will be described in the related prospectus supplement.
33
A particular series may have no Pay-Out Events or only limited Pay-Out
Events, but may have Reinvestment Events. A Reinvestment Event may include all
or some of the events that constitute Pay-Out Events for other series. The Early
Accumulation Period for a series will begin on the day on which a Reinvestment
Event occurs or is deemed to have occurred. If a series has more than one class
of certificates, each class may have different Reinvestment Events (or may only
have Pay-Out Events) which, in the case of any series of certificates offered by
this prospectus, 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 occurs, the transferors
immediately will stop transferring principal receivables to the trust. They also
will promptly notify the trustee of the insolvency event. Within 15 days of the
insolvency event, the trustee will publish a notice of the occurrence of such
event stating that the trustee intends to sell, dispose of or otherwise
liquidate the receivables 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, for any series with two or
more classes of certificates, 50% of the invested amount of each class, which
may include a collateral invested amount) to the effect that such persons
disapprove of the liquidation of receivables. The trustee will use its best
efforts to sell, dispose of or otherwise liquidate the receivables by the
solicitation of competitive bids and on terms equivalent to the best purchase
offer as determined by the trustee. The proceeds from the sale, disposition or
liquidation or the receivables will be treated as collections on the receivables
and applied as provided above and in each prospectus supplement.
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.
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 for any Monthly Period will be a Servicing Fee
payable monthly. The share of the Servicing Fee allocable to each series of
certificates on any Distribution Date generally will be equal to one-twelfth of
the product of:
(i) the applicable servicing fee percentage for that series; and
34
(ii) the invested amount of that series for the related Monthly
Period.
The Servicing Fee will be allocated among the transferors' interest,
certificateholders of that series and, if any, the holder of the collateral
interest of that series.
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:
o 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 Initial Cut-Off Date, all
Recoveries allocable to the trust, and the proceeds of all of
the foregoing, and
o the transferors assigned to the trust their respective
interests in the receivables in the initial accounts existing
at 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.
From time to time, Centurion may assign to the trust the receivables in
designated Additional Accounts existing at the close of business on each
applicable date of designation. To the extent that Credco owns any receivables
arising in any designated Additional Accounts, it may assign those receivables
to RFC II. RFC II may then assign those receivables to the trust. In addition,
each of Centurion and RFC II may assign to the trust its interest in
participations, all Recoveries allocable to the trust, and the proceeds of all
of the foregoing.
Representations and Warranties
Under the pooling and servicing agreement, Centurion makes
representations and warranties to the trust about the accounts, and both
Centurion and RFC make representations and warranties to the trust about the
receivables, to the effect, among other things, that:
(i) as of each applicable selection date, each account was an
Eligible Account;
(ii) as of each applicable selection date, each of the receivables
then existing in the initial accounts or in the Additional
Accounts, as the case may be, was an Eligible Receivable; and
(iii) as of the date of creation of any new receivable, such
receivable is an Eligible Receivable.
If a transferor materially breaches any representation and warranty
described in this paragraph, and such breach remains uncured for 60 days (or
such longer period as to which the servicer and the trustee agree) after the
earlier to occur of the discovery of the breach by either transferor and receipt
of written notice of the breach by either transferor, and the breach has a
material adverse effect on the certificateholders' interest in such receivable,
all of the Ineligible Receivables will be reassigned to the transferors on the
terms and conditions set forth below. In such case, the account will no longer
be included as an account in the trust portfolio.
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An Ineligible Receivable will be reassigned to the transferors on or
before the Monthly Period in which such reassignment obligation arises by the
transferors directing the servicer to deduct the portion of such Ineligible
Receivable that is a principal receivable from the aggregate amount of principal
receivables used to calculate the Transferor Amount. In the event that the
exclusion 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 deposits into the Special Funding
Account as described in the preceding paragraph, is the sole remedy respecting
any breach of the representations and warranties described in the preceding
paragraphs with respect to such receivable available to the certificateholders
or the trustee on behalf of the certificateholders. In the RFC II purchase
agreement, Credco has agreed to repurchase from RFC II certain Ineligible
Receivables reassigned to RFC II and to pay promptly to RFC II the principal
amount thereof plus any applicable finance charges.
Each transferor will also make representations and warranties to the
trust to the effect, among other things, that, as of each series closing date:
(i) it is a state-chartered bank or corporation, as applicable;
(ii) it has the authority to consummate the transactions
contemplated by the pooling and servicing agreement and each
supplement; and
(iii) the pooling and servicing agreement and each supplement
constitute:
(a) a valid, binding and enforceable agreement of such
transferor and
(b) 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 the above paragraphs 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:
(i) at the end of such applicable period, the representations and
warranties shall then be true and correct in all material
respects, and
(ii) any material adverse effect caused by such breach shall have
been cured.
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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" in this prospectus.
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
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
those 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 has
filed and is required to file UCC financing statements for the transfer of the
receivables to the trust meeting the requirements of applicable state law. See
"Certain Legal Aspects of the Receivables" in this prospectus.
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 validity 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 a Supplemental
Certificate for transfer or assignment to a person designated by the transferors
upon the execution and delivery of a supplement to the 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 prior to
such transfer or assignment:
(a) the Rating Agency Condition is satisfied,
(b) each transferor shall have delivered to the trustee an
officer's certificate to the effect that such transferor
reasonably believes that such transfer or assignment will not,
based on the facts known to such officer at the time of such
certification, have an adverse effect,
37
(c) the transferors shall have delivered to the trustee a Tax
Opinion with respect to such transfer or assignment,
(d) the aggregate amount of principal receivables in the trust as
of the date of such transfer or assignment 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 transfer or assignment
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" 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" below). 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" below 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 may
designate from time to time Additional Accounts to be included as accounts in
the trust. In connection with any such designation, the transferors will convey
to the trust all of their respective interests in all receivables arising from
those Additional Accounts. To the extent that Credco owns any receivables
arising in such Additional Accounts, Credco will be required to convey to RFC
II, for conveyance by RFC II to the trust, all of its interests in all
receivables arising from such Additional Accounts. The conveyance by any of
Centurion, Credco or RFC II is subject to the following conditions, among
others:
o each such Additional Account must be an Eligible Account, and
o except for the addition of new accounts,
38
(a) the selection of the Additional Accounts is done in a manner
which the relevant transferor reasonably believes will not
result in an adverse effect, and
(b) the Rating Agency Condition will 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 that Monthly Period. Instead of adding
Additional Accounts, the transferors may convey participation interests to the
trust.
Each Additional Account must be an Eligible Account at the time of its
designation. Because Additional Accounts or participation interests may be
created after the initial selection date and may not have been a part of
Centurion's portfolio of accounts as of the initial selection date, they may not
be of the same credit quality as the initial accounts. The Additional Accounts
or participation interests may have been originated at a later date using
credit, origination or underwriting criteria different from those which were
applied to the initial accounts. Furthermore, they 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
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. Similarly, 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 removal could occur
for a number of reasons, including 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 transferors are permitted to designate and require reassignment of
the receivables from removed accounts and participation interests upon
satisfaction of the conditions listed in the pooling and servicing agreement,
including:
o delivery by the transferors to the trustee of 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;
o the delivery by each transferor to the trustee of an officer's
certificate to the effect that, in the reasonable belief of
such transferor,
(i) no selection procedure believed by such transferor to
be materially adverse to, or materially beneficial
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,
(ii) such removal will not have an adverse effect, and
(iii) such removal will not result in the occurrence of a
Pay-Out Event or a Reinvestment Event;
o at least eight Business Days prior to the removal, the
transferors shall have delivered written notice of the removal
to each Rating Agency, the trustee; and
o the Rating Agency Condition shall have been satisfied with
respect to such removal.
39
In addition, the transferors' designation of any account as a removed
account shall be random, unless the removed accounts are accounts (i) originated
or acquired under a specific affinity agreement, private label agreement,
merchant agreement, co-branding agreement or other program which is co-owned,
operated or promoted, provided that such agreement has terminated in accordance
with the terms therein or (ii) being removed due to other circumstances caused
by requirements of agreements in which the right to such removed accounts or
control thereof is determined by a party or parties to such agreements other
than the transferors, any affiliate of the transferors or any agent of the
transferors.
Discount Option
The pooling and servicing agreement provides that the transferors may
at any time and from time to time designate a fixed or variable percentage,
known as the discount percentage, of the amount of principal receivables
existing and arising in all or any specified portion of the accounts on and
after the date such designation becomes effective to be treated as finance
charge receivables, which will be called discount receivables. Although there
can be no assurance that the transferors will do so, 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 yield on the portfolio 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, a reduction in the balance of
principal receivables outstanding and a reduction in the Transferor Amount.
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
percentage of receivables subject to such designation. 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. Such designation or increase, reduction or
withdrawal will become effective on the date specified therein only if
o each transferor delivers to the trustee and certain providers
of series enhancement a certificate of an authorized officer
of that transferor to the effect that, based on the facts
known to that 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,
o the Rating Agency Condition is satisfied with respect to such
designation or increase, reduction or withdrawal, and
o 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 percentage of
discount receivables 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:
o the discount percentage then in effect, and
o 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 prospectus
supplement.
40
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 paragraphs.
Premium Option
The pooling and servicing agreement provides that the transferors may
at any time and from time to time designate a specified fixed or variable
percentage, known as the premium percentage, of the amount of finance charge
receivables existing arising in all or any specified portion of the accounts
existing on and after the date such designation becomes effective to be treated
as principal receivables, which will be called premium receivables. 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. Any such
designation would result in an increase in the amount of collections of
principal receivables and a lower yield on the portfolio with respect to
collections of finance charge receivables than would otherwise occur.
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. Such designation
or increase, reduction or withdrawal will become effective on the date specified
therein only if:
o each transferor delivers to the trustee and certain providers
of series enhancement a certificate of an authorized officer
of that transferor to the effect that, based on the facts
known to that 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,
o the Rating Agency Condition will have been satisfied with
respect to such designation or increase, reduction or
withdrawal,
o 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
o 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:
o the premium percentage then in effect and
o 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.
41
Indemnification
The pooling and servicing agreement provides 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 have agreed
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 two preceding paragraphs, the pooling and
servicing agreement provides 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
provider of Series Enhancement 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 provides that the
servicer is not under any obligation to appear in, prosecute or defend any legal
action which is not incidental to its servicing responsibilities under the
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 is
responsible for servicing, collecting, enforcing and administering the
receivables in accordance with customary and usual procedures for servicing
similar credit or charge receivables.
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.
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 one or
more supplements, the transferors may cause the trustee to issue one or more
series of certificates and may define all principal terms of such series. Each
series may have different terms and enhancements than any other 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 other series issued prior
to the issuance of a new 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 of 1933, as amended, or
exempt from registration thereunder directly, through one or more underwriters
or placement agents, in fixed-price offerings or in negotiated transactions or
otherwise. The transferors intend to offer, from time to time, additional
series. Each issuance of a new series will have the effect of decreasing the
Transferor Amount to the extent of the initial invested amount of such new
series.
42
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.
Under the pooling and servicing agreement and pursuant to a supplement,
a new issuance may only occur upon the satisfaction of certain conditions. 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:
o on or before the fifth day immediately preceding the date upon
which the new issuance is to occur, the transferors will give
to 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;
o the transferors will deliver to the trustee the related
supplement, specifying the terms of the series;
o the transferors will deliver to the trustee any related Series
Enhancement agreement;
o the Rating Agency Condition will be satisfied with respect to
the new issuance;
o each transferor will deliver to the trustee and certain
providers of Series Enhancement an officer's certificate of
that transferor to the effect that such issuance will not have
an adverse effect;
o the transferors will deliver to the trustee, each Rating
Agency and certain providers of Series Enhancement a Tax
Opinion;
o the transferors or other holders of the original transferor
certificate shall have a remaining interest in the trust of
not less than 2% of the total amount of principal receivables
and funds on deposit in the Special Funding Account and the
principal funding account; and
o 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.
Collection Account
The servicer has established and maintains for the benefit of the
certificateholders of each series, in the name of the trustee, on behalf of the
trust, an Eligible Deposit Account called the Collection Account. The Collection
Account, which is maintained with The Bank of New York, bears a designation
clearly indicating that the funds deposited therein are held for the benefit of
the certificateholders of each series. If at any time the Collection Account is
no longer an Eligible Deposit Account, the Collection Account must be moved so
that it will again be qualified as an Eligible Deposit Account.
43
Funds on deposit in the Collection Account generally will be invested
in 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. It will then
make the deposits and payments to the accounts and parties shown below on the
date of such deposit.
For as long as TRS or an affiliate of TRS remains the servicer under
the pooling and servicing agreement and any of:
(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 (however, on September 20, 2001, S&P
placed the rating of the servicer on negative outlook), 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
the 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. Instead it may use for its own benefit all
such collections until the Business Day immediately preceding the related
Distribution Date. On that Business Day, 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.
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.
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 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.
44
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 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.
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.
Amounts not allocated to the invested amount of any series as described
above will be allocated to the Transferors' Interest.
Groups of Series
The certificates of a series may be included in 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 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--Issuances of additional series by the
trust may adversely affect your certificates" in this prospectus. 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.
45
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 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;
(ii) Group Investor Default Amount;
(iii) Group Investor Monthly Fees;
(iv) Group Investor Additional Amounts; 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 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 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 I are
referred to as "Series Allocable Finance Charge Collections." See
"--Allocations" above.
In Step 2, the amount of 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 with respect to such series. The excess is allocated pro
rata among the series in such group based on each series' respective invested
amounts.
[graphic]
46
Sharing of Excess Finance Charge Collections Among Excess Allocation Series
The prospectus supplement for any series offered by this prospectus
will designate whether that series is an Excess Allocation Series. If a series
is an Excess Allocation Series, collections on finance charge receivables and
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.
The sharing of Excess Finance Charge Collections among Excess Allocation Series
will stop if each transferor delivers to the trustee a certificate of an
authorized representative to the effect that, in the reasonable belief of that
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, there will be no 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:
o any other series will be designated as an Excess Allocation
Series,
o there will be any Excess Finance Charge Collections for any
such other series for any Monthly Period,
o 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
o a transferor will not at any time deliver a certificate as
described above.
Although 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
The prospectus supplement for any series offered by this prospectus
will designate whether a series is a principal sharing series. If a 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 principal sharing series, collectively called "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.
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:
o 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, and
47
o 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 a principal sharing series.
Paired Series
If so provided in the prospectus supplement for a series offered by
this prospectus, a series of certificates may be paired with another series
issued by the trust. As the invested amount of the series having a paired series
is reduced, the invested amount in the trust of the paired series will increase
by an equal amount. If a Pay-Out Event or Reinvestment Event occurs with respect
to the series having a paired series or with respect to the paired series when
the series is in a Controlled Amortization Period or Controlled Accumulation
Period, the Series Allocation Percentage and the Principal Allocation Percentage
for the series having a paired 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. In addition, 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 will 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.
Instead it will deposit such funds in an Eligible Deposit Account, called the
Special Funding Account, established 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. The Special Funding Account will bear a designation clearly
indicating that the funds deposited therein are held for the benefit of the
certificateholders of each series.
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. If a Controlled
Accumulation Period, Early Accumulation Period, Controlled Amortization Period
or Early Amortization Period starts and is continuing for any series, any funds
on deposit in the Special Funding Account will be released, 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.
If the transferors determine that by decreasing the amount on deposit
in the Special Funding Account, one or more series for which the related
supplements 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. Such reduction would enable that series to avoid a yield insufficiency
Pay-Out Event, but may be done only to the extent that it 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 any 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
for that Monthly Period.
48
Funding Period
For any series, the related prospectus supplement may specify that
during a 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. If so specified in the related prospectus
supplement, the amount of the such deficiency, called the Prefunding Amount,
will be held in a prefunding 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 prospectus supplement
will specify the initial invested amount for such series, the aggregate
principal amount of the certificates of such series and the date by which the
invested amount is expected to equal the aggregate principal amount of the
certificates. 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
for that series.
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 prefunding 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 aggregate principal amount of the certificates by
the end of the Funding Period, any amount remaining in the prefunding 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
prefunding 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. In connection with each Distribution Date during the Funding
Period, investment earnings on funds in the prefunding account during the
related Monthly Period will be withdrawn from the prefunding account and
deposited, together with any applicable payment under a guaranteed rate or
investment 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
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. This 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. The credit enhancement for one or more classes of a
series offered by this prospectus 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. Any form of credit enhancement may be available to
more than one class or series to the extent described therein.
49
The presence of credit enhancement for a class is intended to enhance
the likelihood of receipt by certificateholders of such class of the full amount
of principal and interest 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, for a
series 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 for a series offered by this
prospectus, the related prospectus supplement will include a description of:
o the amount payable under such credit enhancement,
o any conditions to payment thereunder not otherwise described
in this prospectus,
o 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
o any material provisions of any agreement relating to such
credit enhancement.
Additionally, in certain cases, the related prospectus supplement may
set forth certain information about the provider of any credit enhancement,
including:
o a brief description of its principal business activities,
o its principal place of business, place of incorporation or the
jurisdiction under which it is chartered or licensed to do
business,
o if applicable, the identity of regulatory agencies that
exercise primary jurisdiction over the conduct of its
business, and
o 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 for a series offered by this prospectus may be available to pay
principal of the certificates of such series following the occurrence of certain
Pay-Out Events or Reinvestment Events for that series. In such event, the credit
enhancement provider may have a subordinated interest in the receivables or
certain cash flows in respect of the receivables to the extent described in such
prospectus supplement, called the collateral invested amount.
Subordination
One or more classes of certificates offered by this prospectus may be
subordinated to one or more other classes of certificates. If so specified in
the related prospectus supplement, the rights of the holders of the subordinated
certificates to receive distributions of principal and/or interest on any
payment date will be subordinated to the 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 the holders of
such subordinated certificates will be distributed to the 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.
50
Letter of Credit
A letter of credit for a series or class of certificates offered by
this prospectus may be issued by a bank or financial institution specified in
the related prospectus supplement. Subject to the terms and conditions specified
in the related prospectus supplement, the letter of credit 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 Cash Collateral Account
The certificates of any class or series offered by this prospectus may
have the benefit of a cash collateral guaranty secured by the deposit of cash or
certain permitted investments in a cash collateral account. A cash collateral
guaranty or a cash collateral account for a class or series may be fully or
partially funded on the related series closing date 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
Support for a series of certificates or one or more classes thereof may
be provided initially by an uncertificated, subordinated interest in the trust
known as 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
Insurance for a series or class of certificates offered by this
prospectus may be provided by one or more insurance companies. Such insurance
will guarantee, for one or more classes of the related series, distributions of
interest or principal in the manner and amount 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 by this prospectus to assure
distributions of interest or principal for such series or class of certificates
in the manner and amount specified in the related prospectus supplement.
Spread Account
Support for a series or one or more classes of a series offered by this
prospectus may be provided by the periodic deposit of certain available excess
cash flow from the trust assets into a spread account intended to assist with
the subsequent distributions of interest and principal on the certificates of
such class or series in the manner specified in the related prospectus
supplement.
Maturity Liquidity Facility
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
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.
51
Interest Rate Swap Agreements, Guaranteed Rate Agreements and Interest Rate Cap
Agreements
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 in
order to service the receivables or accounts, the failure to
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) take no action 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, if the servicer
discovers, or receives written notice from the trustee, that:
o any covenant of the servicer set forth in clauses (a) through
(d) above has not been complied with in all material respects
and
o 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,
then all receivables in the related account will be assigned and transferred to
the servicer and the account will no longer be included as an account in the
trust portfolio.
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.
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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, 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), may terminate
all of the rights and obligations of the servicer, as servicer, under the
pooling and servicing agreement. The trustee will appoint a new servicer. If the
only Servicer Default is bankruptcy-, insolvency-, receivership-, or
conservatorship-related, however, the bankruptcy trustee, the receiver or the
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 but 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, then the trustee shall, except when the
Servicer Default is caused by certain events of bankruptcy, insolvency,
conservatorship or receivership of the servicer, offer the transferors a right
of first refusal to purchase the certificateholders' interest on the
Distribution Date in the next calendar month. The purchase price for the
certificateholders' interest will be equal to the sum of the amounts specified
therefor for 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 a termination notice,
appoint a successor servicer. 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.
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 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.
53
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 in connection with:
o the issuance of a Supplemental Certificate,
o the addition to the trust of a participation interest,
o the designation of additional transferors,
o the addition to the trust of receivables arising from charge
or credit accounts other than the revolving credit accounts,
or
o to change the definition of Monthly Period, Determination Date
or Distribution Date.
Amendments to the pooling and servicing agreement and any supplement
may be made by agreement of the trustee, the transferors and the servicer
without the consent of the certificateholders of any series, so long as:
o the Rating Agency Condition shall have been satisfied,
o each transferor delivers to the trustee an officer's
certificate to the effect that such amendment will not have an
adverse effect, and
o such amendment will not effect a change in the permitted
activities of the trust except for those changes necessary for
compliance with accounting requirements or tax requirements or
required to cure any ambiguity or correct or supplement any
provision contained in the pooling and servicing agreement or
any supplement which may be defective or inconsistent with any
provisions thereof.
The pooling and servicing agreement or any supplement also may be
amended by the trustee, the transferors and the servicer:
(a) in the case of a change in the permitted activities
of the trust which is not materially adverse to
holders of certificates, with the consent of
certificateholders evidencing not less than 50% of
the aggregate unpaid principal amount of the
certificates of each outstanding series affected by
such change, unless such change is necessary for
compliance with accounting requirements or tax
requirements or required to cure any ambiguity or
correct or supplement any provision contained in the
pooling and servicing agreement or any supplement
which may be defective or inconsistent with any
provisions thereof, and
(b) in all other cases 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 specified in clause (b) above, however, may:
o reduce in any manner the amount of, or delay the timing of,
deposits or distributions on any certificate without the
consent of each certificateholder,
54
o change the definition or the manner of calculating the
certificateholders' interest or the invested amount without
the consent of each certificateholder,
o reduce the percentage required to consent to any such
amendment without the consent of each certificateholder, or
o adversely affect the rating of any series or class by any
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 first 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" in this prospectus.
It is a condition to any such amendment that the Rating Agency
Condition be satisfied. 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 occurrence of an
insolvency event. See "Certain Legal Aspects of the Receivables--Certain Matters
Relating to Bankruptcy, Conservatorship and Receivership" in this prospectus.
In addition to being subject to amendment pursuant to the provisions
described above, the pooling and servicing agreement and the related supplement
may be amended by the transferors without the consent of the servicer, the
trustee or any certificateholder to account for the transfer of assets as sales
in accordance with FASB Statement No. 140, including providing for the transfer
of receivables from Centurion to a bankruptcy-remote special purpose entity and
from that entity to the trust. Promptly after the effectiveness of any such
amendment, the transferors shall deliver a copy of such amendment to each of the
servicer, the trustee, each Rating Agency and any other party entitled to
receive it pursuant to the relevant supplement. Furthermore, such amendment
shall be subject to the delivery by the transferors of a Tax Opinion.
Defeasance
If the deposit referred to in this sentence is funded solely from
collections of receivables, or, if funded from any other sources, if so provided
in the applicable supplement, then 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 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 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.
55
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:
o 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
o to the trustee and certain providers of Series Enhancement an
officer's certificate 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 may no
longer be available to make payments with respect to that series.
Upon the making of any deposit described in the preceding paragraph,
the certificateholders 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" in this prospectus.
The pooling and servicing agreement will not provide for any annual or
other meetings of certificateholders.
56
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, 8 West, 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, which is the receivables purchase agreement between
Centurion and Credco, and the RFC II purchase agreement, which is the
receivables purchase agreement between Credco and RFC II. Forms of the purchase
agreements are filed as exhibits to this registration statement, of which this
prospectus is a part.
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 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 sold to RFC II all of
its right, title and interest in and to (i) all of the receivables existing in
the initial accounts as of the Initial Cut-Off Date and in the Additional
Accounts as of the addition 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--Some interests could have priority over
the trustee's interest in the receivables, which could cause your receipt of
payments to be delayed or reduced" and "--Certain Matters Relating to
Bankruptcy, Conservatorship and Receivership" and "Certain Legal Aspects of the
Receivables" in this prospectus.
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" in this
prospectus.
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.
57
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.
Certain Legal Aspects of the Receivables
Transfer of Receivables
Credco represents and warrants that its transfer of receivables to RFC
II is an absolute sale of those receivables. RFC II and Centurion each
represents and warrants that its transfer of receivables to the trustee is
either (i) an absolute sale of those receivables or (ii) the grant of a security
interest in those receivables. For a description of the trustee's rights if
these representations and warranties are not true, see "The Pooling and
Servicing Agreement Generally -- Representations and Warranties" in this
prospectus.
Each of Centurion, Credco, and RFC II takes steps under the UCC to
perfect its transferee's interest in the receivables. Nevertheless, if the UCC
does not govern these transfers and if some other action is required under
applicable law and has not been taken, payments to you could be delayed or
reduced.
Each of Centurion, Credco, and RFC II represents, warrants, and
covenants that its transfer of receivables is perfected and free and clear of
the lien or interest of any other entity, except for certain permitted liens. If
this is not true, the trustee's interest in the receivables could be impaired,
and payments to you could be delayed or reduced. For instance,
o a prior or subsequent transferee of receivables could have an
interest in the receivables superior to the interest of the
trustee;
o a tax, governmental, or other nonconsensual lien that attaches
to the property of Centurion, Credco, or RFC II could have
priority over the interest of the trustee in the receivables;
58
o the administrative expenses of a conservator, receiver, or
bankruptcy trustee for Centurion, Credco, or TRS could be paid
from collections on the receivables before certificateholders
receive any payments; and
o if insolvency proceedings were commenced by or against TRS, or
if certain time periods were to pass, the trustee may lose any
perfected interest in collections held by TRS and commingled
with other funds.
Certain Matters Relating to Bankruptcy, Conservatorship and Receivership
Centurion is chartered as a Utah industrial loan corporation and is
regulated and supervised by the Utah Department of Financial Institutions, which
is authorized to appoint the Federal Deposit Insurance Corporation as
conservator or receiver for Centurion if certain events occur relating to
Centurion's financial condition or the propriety of its actions. In addition,
the FDIC could appoint itself as conservator or receiver for Centurion.
Although Centurion treats its transfer of receivables as a sale for
accounting purposes, arguments may be made that these transfers constitute the
grant of a security interest under general applicable law. Nevertheless, the
FDIC has issued regulations surrendering certain rights under the Federal
Deposit Insurance Act, as amended by the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, to reclaim, recover, or recharacterize a financial
institution's transfer of financial assets such as the receivables if:
(i) the transfer involved a securitization of the
financial assets and meets specified conditions for
treatment as a sale under relevant accounting
principles,
(ii) the financial institution received adequate
consideration for the transfer,
(iii) the parties intended that the transfer constitute a
sale for accounting purposes, and
(iv) the financial assets were not transferred
fraudulently, in contemplation of the financial
institution's insolvency, or with the intent to
hinder, delay, or defraud the financial institution
or its creditors.
Centurion's transfer of the receivables, and the pooling and servicing
agreement, are intended to satisfy all of these conditions.
If a condition required under the FDIC's regulations were found not to
have been met, however, the FDIC could seek to reclaim, recover, or
recharacterize Centurion's transfer of the receivables. If the FDIC were
successful, the FDIA would limit any damages to "actual direct compensatory
damages" determined as of the date that the FDIC was appointed as conservator or
receiver for Centurion. The FDIC, moreover, could delay its decision whether to
seek to reclaim, recover, or recharacterize Centurion's transfer of the
receivables for a reasonable period following its appointment as conservator or
receiver for Centurion. Therefore, if the FDIC were to reclaim, recover, or
recharacterize Centurion's transfer of the receivables, payments to you could be
delayed or reduced.
Even if the conditions set forth in the regulations were satisfied and
the FDIC did not reclaim, recover, or recharacterize Centurion's transfer of the
receivables, you could suffer a loss on your investment if:
(i) the pooling and servicing agreement or Centurion's
transfer of the receivables were found to violate the
regulatory requirements of the FDIA,
(ii) the trustee were required to comply with the claims
process established under the FDIA in order to
collect payments on the receivables,
(iii) the FDIC were to request a stay of any action by the
trustee to enforce the pooling and servicing
agreement or the certificates, or
59
(iv) the FDIC were to repudiate other parts of the pooling
and servicing agreement.
If Credco, TRS, or any of their affiliates were to become a debtor in a
bankruptcy case, the court could exercise control over the receivables on an
interim or a permanent basis. Although steps have been taken to minimize this
risk, Credco, TRS, or any of their affiliates as debtor-in-possession or another
interested party could argue that -
o Credco did not sell the receivables to RFC II but instead
borrowed money from RFC II and granted a security interest in
the receivables;
o RFC II and its assets (including the receivables) should be
substantively consolidated with the bankruptcy estate of
Credco, TRS, or any of their affiliates; or
o the receivables are necessary for Credco, TRS, or any of their
affiliates to reorganize.
If these or similar arguments were made, whether successfully or not,
payments to you could be delayed or reduced.
If Credco, TRS, or any of their affiliates were to enter bankruptcy,
moreover, the trustee and the certificateholders could be prohibited from taking
any action to enforce the RFC II purchase agreement or the pooling and servicing
agreement against Credco, TRS, or those affiliates without the permission of the
bankruptcy court. Certificateholders also may be required to return payments
already received if Credco were to become a debtor in a bankruptcy case.
Regardless of any decision made by the FDIC or ruling made by a court,
the fact that Centurion has entered conservatorship or receivership or that a
bankruptcy case has been commenced by or against Credco, TRS, or their
affiliates could have an adverse effect on the liquidity and value of the
certificates.
In addition, regardless of the terms of the pooling and servicing
agreement or any other transaction document, and regardless of the instructions
of those authorized to direct the trustee's actions, the FDIC as conservator or
receiver for Centurion or a court overseeing the bankruptcy case of Credco, TRS,
or any of their affiliates may have the power (i) to prevent or require the
commencement of an Early Amortization Period, (ii) to prevent, limit, or require
the early liquidation of receivables and termination of the trust, or (iii) to
require, prohibit, or limit the continued transfer of receivables. Furthermore,
regardless of the terms of the pooling and servicing agreement or any other
transaction document, a bankruptcy court (i) could prevent the appointment of a
successor servicer or administrator or (ii) could authorize TRS to stop
servicing the receivables or providing administrative services for RFC II. If
any of these events were to occur, payments to you could be delayed or reduced.
Certain Regulatory Matters
The operations and financial condition of Centurion is subject to
extensive regulation and supervision under federal and state law. The
appropriate banking regulatory authorities, including the United States Federal
Deposit Insurance Corporation, have broad enforcement powers over Centurion.
These enforcement powers may adversely affect the operation and financial
condition of the trust and your rights under the pooling and servicing agreement
prior to the appointment of a receiver or conservator.
If United States federal bank regulatory authorities supervising any
bank were to find that any obligation of such bank or an affiliate under a
securitization or other agreement, or any activity of such bank or affiliate,
constituted an unsafe or unsound practice or violated any law, rule, regulation
or written condition or agreement applicable to the related bank, such federal
bank regulatory authorities have the power under the United States Federal
Deposit Insurance Act to order such bank or affiliate, among other things, to
rescind such agreement or contract, refuse to perform that obligation, terminate
the activity, amend the terms of such obligation or take such other action as
such regulatory authorities determine to be appropriate. In such an event, the
banks may not be liable to you for contractual damages for complying with such
an order and you may have no recourse against the relevant regulatory authority.
60
Recently, after the Office of the Comptroller of the Currency found
that a national bank was, contrary to safe and sound banking practices,
receiving inadequate servicing compensation under its securitization agreements,
that bank agreed to a consent order with the OCC. Such consent order requires
that bank, among other things, to resign as servicer by June 30, 2003, to
immediately withhold and segregate funds from collections for payment of its
servicing fee (notwithstanding the priority of payments in the securitization
agreements and the perfected security interest of the relevant trust in those
funds) and to increase its servicing fee percentage above that which was
originally agreed upon in its securitization agreements.
While Centurion and its affiliates have no reason to believe that any
obligation of Centurion or an affiliate under the securitization agreements, is
unsafe or unsound or violative of any law, rule or regulation applicable to
them, there can be no assurance that any such regulatory authority would not
conclude otherwise in the future. If such a bank regulatory authority did reach
such a conclusion, and ordered Centurion or an affiliate to rescind or amend the
securitization agreements, payments to you could be delayed or reduced.
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 Collection Practices Acts. These statutes impose
disclosure requirements before and when an account is opened 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. 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" in
this prospectus.
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" in
this prospectus.
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.
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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 IRS to treat a transaction in accordance with its
economic substance, as determined under federal income tax law, even though the
participants in the transaction have characterized it differently for non- tax
purposes.
The determination of whether the economic substance of a purchase of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed to
determine whether the 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, 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, special federal income 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, special federal income 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 special federal income 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.
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If the trust were treated in whole or in part as a partnership in which
some or all holders of interests in the publicly offered certificates were
partners, that partnership could be classified as a publicly traded partnership,
and so could be taxable as a corporation. Further, regulations published by the
Treasury Department under the publicly traded partnership provisions of the
Internal Revenue Code 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 publicly traded partnership regulations
generally apply to taxable years beginning after December 31, 1995, and thus
could affect the classification of then-existing entities and the ongoing tax
treatment of already completed transactions. Although the publicly traded
partnership regulations provide for a 10-year grandfather period for a
partnership actively engaged in an activity before December 4, 1995, it is not
clear whether the trust would qualify for this grandfather period. If the trust
were classified as a publicly traded partnership, whether by reason of the
treatment of publicly offered certificates as equity or by reason of the
publicly traded partnership regulations, it would avoid taxation as a
corporation if its income was not derived in the conduct of a "financial
business"; however, whether the income of the trust would be so classified is
unclear.
Under the Internal Revenue Code and the publicly traded partnership
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 have taken and 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.
However, certain of the actions that may be necessary for avoiding the treatment
of such interests as "readily tradable on a secondary market (or the substantial
equivalent thereof)" 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 was treated as a partnership but nevertheless was not
treated as a publicly traded partnership taxable as a corporation, that
partnership would not be subject to federal income tax. Rather, each item of
income, gain, loss and deduction of the partnership generated through the
ownership of the related receivables would be taken into account directly in
computing taxable income of the transferors (or the holders of the 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 related 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).
63
Treatment of the Trust as a FASIT
Congress recently amended the Internal Revenue Code to recognize a new
type of entity for federal income tax purposes called a "financial asset
securitization investment trust" or "FASIT." The Internal Revenue Code generally
provides that certain arrangements similar to the trust may elect to be treated
as a FASIT. Under the FASIT provisions of the Internal Revenue Code, 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 or 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" in this prospectus.
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
not loss) with respect to its certificate, even though special federal income
tax 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, the
provisions of Sections 1271 through 1273 and 1275 of the Internal Revenue 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
original issue discount on its interest in a certificate in income for federal
income tax purposes on a constant yield basis, resulting in the inclusion of
original issue discount in income somewhat in advance of the receipt of cash
attributable to that income. In general, a certificate will be treated as having
original issue discount to the extent that its "stated redemption price" exceeds
its "issue price," if such excess equals or exceeds 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 Internal
Revenue 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.
64
Market Discount
A U.S. certificate owner who purchases an interest in a certificate at
a discount that exceeds any unamortized original issue discount may be subject
to the "market discount" rules of Sections 1276 through 1278 of the Internal
Revenue 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 Internal Revenue 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" in this prospectus. The adjusted basis in the interest in
the certificate will equal its cost, increased by any original issue discount 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.
Foreign Certificate Owners
Under United States federal income tax law now in effect, payment of
interest by the trust to a certificate owner who, for United States federal
income tax purposes, is a nonresident alien individual or a foreign corporation
(a "foreign person"), generally will be considered "portfolio interest" and
generally will not be subject to U.S. federal income tax and withholding tax,
provided the interest is not effectively connected with the conduct of a trade
or business within the United States by the foreign person, unless:
(i) the foreign person 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 in the
trust if characterized as a partnership),
(ii) the foreign person is a controlled foreign
corporation that is related to the transferors (or
the trust if treated as a partnership) through stock
ownership,
(iii) the foreign person is a bank receiving interest
described in Internal Revenue Code Section
881(c)(3)(A),
(iv) such interest is contingent interest described in
Internal Revenue Code Section 871(h)(4), or
(v) the foreign person bears certain relationships to any
holder of either (x) the original transferor
certificate other than the transferors or (y) any
other interest in the trust not properly
characterized as debt.
To qualify for the exemption from taxation, the withholding agent, who
generally is the last U.S. Person in the chain of payment prior to payment to a
foreign person, 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:
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(vi) is signed by the foreign person under penalties of
perjury,
(vii) certifies that the foreign person is not a U.S.
person, and
(viii) provides the name and address of, and certain
additional information concerning, the foreign
person.
The statement generally may be made on a Form W-8BEN or substantially
similar substitute form, and the foreign person 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 generally must be accompanied by a Form W-8BEN or substitute
form provided by the foreign person to the organization or institution holding
the certificate on behalf of the foreign person. If interest is not portfolio
interest, then it will be subject to United States federal income and
withholding tax at a rate of 30 percent, unless reduced or eliminated under an
applicable tax treaty or interest is effectively connected with the conduct of a
trade or business within the United States and, in either case, the appropriate
statement has been provided. Special rules apply to partnerships, estates and
trusts, and in certain circumstances certifications as to foreign status and
other matters may be required to be provided by partners and beneficiaries
thereof.
Generally, any gain or income realized by a foreign person 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,
(ii) in the case of gain representing accrued interest,
the conditions for exemption from withholding
described above are satisfied, and
(iii) such gain is not effectively connected with the
conduct of a trade or business in the United States
by the foreign person.
Certain exceptions may be applicable, and an individual foreign person
is cautioned to consult a tax advisor.
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 the
highest applicable marginal rate. 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.
The U.S. Treasury Department has recently issued final Treasury
regulations which revise various procedural matters relating to withholding
taxes. Certificate owners are cautioned to consult their tax advisors regarding
the procedures whereby they may establish an exemption from withholding.
66
Backup Withholding and Information Reporting
Payments of principal and interest, as well as payments of proceeds
from the sale, retirement or other disposition of a certificate, may be subject
to "backup withholding" tax under the Internal Revenue Code if a recipient of
such payments fails to furnish to the payor certain identifying information. Any
amounts deducted and withheld would be allowed as a credit against such
recipient's United States federal income tax, provided that appropriate proof is
provided under rules established by the IRS. Furthermore, certain penalties may
be imposed by the IRS on a recipient of payments that is required to supply
information but that does not do so in the proper manner. Backup withholding
will not apply with respect to payments made to certain exempt recipients, such
as corporations and financial institutions. Information may also be required to
be provided to the IRS concerning payments, unless an exemption applies.
Certificate owners are cautioned to consult their tax advisors regarding their
qualification for exemption from backup withholding and information reporting
and the procedure for obtaining such an exemption.
Tax Non-Confidentiality Agreement
Treasury regulations require taxpayers to report participation in a
"confidential transaction," defined by those regulations in broad terms. In
order to comply with the regulations' requirements and minimize the possibility
that any transaction relating to the trust or the certificates might constitute
a "confidential transaction" subject to reporting by any person, the
transferors, the trust, the underwriters and each recipient of this prospectus
are deemed to agree that each of them and each of their employees,
representatives, and other agents may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of any transaction
relating to the trust or the certificates and all materials of any kind
(including opinions or other tax analyses) that are provided to any of them
relating to such tax treatment and tax structure. For purposes of this
agreement, "tax treatment" refers to the purported or claimed federal income tax
treatment of the issuer and the certificates, and "tax structure" refers to any
fact that may be relevant to understanding such tax treatment.
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 is cautioned to
consult its own tax advisor regarding state and local tax consequences.
ERISA Considerations
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended, and Section 4975 of the Internal Revenue Code prohibit a Plan from
engaging in certain transactions involving "plan assets" with persons that are
"parties in interest" under ERISA or "disqualified persons" under the Internal
Revenue 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 Section 4975 of the Internal Revenue Code for
such persons, unless a statutory, regulatory or administrative exemption is
available. Plans that are government plans (as defined in Section 3(32) of
ERISA) and certain church plans (as defined in Section 3(33) of ERISA) are not
subject to ERISA requirements.
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 has issued a final regulation, referred to
as the plan asset regulation, concerning the definition of what constitutes
"plan assets" of a Plan subject to ERISA or Section 4975 of the Internal Revenue
Code. Under the plan asset 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" and result in non-exempt prohibited transactions, unless
either of the following exceptions applies.
The first exception applies to a "publicly-offered security." A
publicly- offered security is a security that is:
(i) freely transferable,
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(ii) part of a class of securities that is owned,
immediately subsequent to the initial offering, by
100 or more investors who are independent of the
issuer and of one another, and
(iii) either is
(A) part of a class of securities registered under Section 12(b) or
12(g) of the Securities Exchange Act of 1934, as amended, or
(B) sold to the Plan as part of an offering of securities to the public
pursuant to an effective registration statement under the Securities
Act of 1933, as amended, 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 SEC) after the end of the
fiscal year of the issuer during which the offering of such securities
to the public occurred.
For purposes of the 100 independent investor criterion, except to the
extent otherwise disclosed in the accompanying prospectus supplement, each class
of certificates should be deemed to be a "class" of securities that would be
tested separately from any other securities that may be issued by the trust.
If so specified in the related prospectus supplement, a second
exception may also be available. On July 16, 2000, the Department of Labor
authorized Centurion and RFC II to rely upon the exemptive relief from certain
of the prohibited transaction provisions of ERISA and Section 4975 of the
Internal Revenue Code available under Prohibited Transaction Class Exemption
96-62 relating to
(i) the initial purchase, the holding and the subsequent
resale by Plans of classes of senior certificates
representing an undivided interest in a credit card
trust with respect to which Centurion, RFC II or any
of their affiliates is the sponsor; and
(ii) the servicing, operation and management of such trust
if, in either case, the general conditions and
certain other conditions set forth in Centurion and
RFC II's authorization are satisfied.
The authorization will apply to the acquisition, holding and resale of
the senior certificates by, on behalf of or with "plan assets" of a Plan if the
conditions are met.
Among the conditions that must be satisfied for the authorization to
apply are the following:
(a) the acquisition of the senior certificates by a Plan
is on terms (including the price for such senior
certificates) that are at least as favorable to the
investing Plan as they would be in an arm's-length
transaction with an unrelated party;
(b) the rights and interests evidenced by the senior
certificates acquired by the Plan are not
subordinated to the rights and interests evidenced by
other certificates of the trust;
(c) the senior certificates acquired by the Plan have
received a rating at the time of such acquisition
that is either in one of the two highest generic
rating categories from a Rating Agency or, for senior
certificates that have a maturity of one year or
less, the highest short-term generic rating category
from a Rating Agency; provided that, notwithstanding
such rating, credit support is provided to the senior
certificates through a senior-subordinated structure
or other form of third-party credit support which, at
a minimum, represents 5% of the outstanding principal
balance of the senior certificates at the time of
such acquisition;
68
(d) the trustee is not an affiliate of any member of the
restricted group (as defined below);
(e) the sum of all payments made to and retained by the
underwriters in connection with the distribution of
the senior certificates represents not more than
reasonable compensation for underwriting such senior
certificates; the consideration received by the
transferors as a consequence of the assignment of
receivables to the trust, to the extent allocable to
the senior certificates, represents not more than the
fair market value of such receivables; and the sum of
all payments made to and retained by the servicer, to
the extent allocable to the senior certificates,
represents not more than reasonable compensation for
the servicer's services under the related supplement
to the pooling and servicing agreement and
reimbursement of the servicer's reasonable expenses
in connection therewith;
(f) the Plan investing in the senior certificates is an
"accredited investor" as defined in Rule 501(a)(1) of
Regulation D of the Securities Act;
(g) the trustee is a substantial financial institution or
trust company experienced in trust activities; is
familiar with its duties, responsibilities and
liabilities as a fiduciary under ERISA; and, as the
legal owner of (or holder of a perfected security
interest in) the receivables, enforces all the rights
created in favor of the certificateholders, including
Plans;
(h) prior to the issuance of any new series, confirmation
is received from the Rating Agencies that such
issuance will not result in the reduction or
withdrawal of the then-current rating of the senior
certificates held by any Plan pursuant to the
authorization;
(i) to protect against fraud, chargebacks or other
dilution of the receivables, the pooling and
servicing agreement and the Rating Agencies require
the transferors to maintain a transferors' interest
of not less than 2% of the principal balance of the
receivables contained in the trust;
(j) each receivable is an Eligible Receivable, based on
criteria of the Rating Agencies and as specified in
the pooling and servicing agreement, and the pooling
and servicing agreement requires that any change in
the terms of the cardholder agreements must be made
applicable to a comparable segment of accounts which
are owned or serviced by Centurion, RFC II or any of
their affiliates and are part of the same program or
have the same or substantially similar
characteristics. The pooling and servicing agreement
complies with this condition by specifying that any
such change either must be required by law, or, if
not so required, must not have a material adverse
effect on the trust or the certificateholders;
69
(k) the pooling and servicing agreement must limit the
number of receivables in newly originated accounts to
be designated to the trust, without the Rating
Agencies' prior written consent, to the following
amounts: (i) with respect to any three-month period,
15% of the number of existing accounts designated to
the trust as of the first day of such period, and
(ii) with respect to any twelve-month period, 20% of
the number of existing accounts designated to the
trust as of the first day of such twelve-month
period. The pooling and servicing agreement complies
with this condition by specifying that the Rating
Agencies' prior written consent is required for any
designation of newly originated accounts to the
trust.
(l) the pooling and servicing agreement requires the
transferors to deliver an opinion of counsel
semi-annually confirming the validity and perfection
of the transfer of receivables in newly originated
accounts to the trust if such an opinion is not
delivered with respect to each interim addition; and
(m) the pooling and servicing agreement requires the
transferors and the trustee to receive confirmation
from each Rating Agency that such Rating Agency will
not reduce or withdraw its then-current rating of the
senior certificates as a result of (i) a proposed
transfer of receivables in newly originated accounts
to the trust, or (ii) will have resulted from the
transfer of receivables in all newly originated
accounts added to the trust during the preceding
three-month period (beginning at quarterly intervals
specified in the pooling and servicing agreement and
ending in the calendar month prior to the date such
confirmation is issued); provided that a rating
agency confirmation shall not be required under
clause (ii) for any three-month period in which any
transfers of newly originated accounts occurred only
after receipt of prior rating agency confirmation
pursuant to clause (i) above. This condition is
complied with because the pooling and servicing
agreement currently in effect permits the transferors
to transfer newly originated accounts to the trust
only in compliance with clause (i) above.
The trust also must meet the following requirements:
(1) the corpus of the trust must consist only of receivables of the
type which have been included in other investment pools;
(2) certificates evidencing interests in such other investment pools
have been rated in one of the two highest generic rating categories by
at least one of the rating agencies for at least one year prior to the
Plan's acquisition of senior certificates; and
(3) certificates evidencing an interest in such other investment pools
have been purchased by investors other than Plans for at least one year
prior to any Plan's acquisition of senior certificates.
Moreover, the authorization provides relief from certain self-dealing/
conflict-of-interest prohibited transactions that may occur when a Plan
fiduciary causes a Plan to acquire senior certificates if the fiduciary (or its
affiliate) is an obligor on the receivables held in the trust; provided that
among other requirements:
(1) in the case of an acquisition in connection with the initial
issuance of senior certificates, at least 50% of each class of
certificates in which Plans have invested is acquired by persons
independent of the restricted group and at least 50% of the aggregate
interest in the trust is acquired by persons independent of the
restricted group;
70
(2) such fiduciary (or its affiliate) is an obligor with respect to
0.5% or less of the fair market value of the obligations contained in
the trust;
(3) the Plan's investment in senior certificates does not exceed 25% of
all of the senior certificates outstanding after the acquisition; and
(4) no more than 25% of the assets of the Plan are invested in
securities representing an interest in one or more trusts containing
assets sold or serviced by the same entity.
The authorization does not apply to Plans sponsored by the "restricted
group" which consists of the transferors, any underwriter of the senior
certificates, the trustee, the servicer, any obligor with respect to obligations
included in the trust constituting more than 0.5% of the fair market value of
the aggregate undivided interest in the trust allocated to the senior
certificates of a series, determined on the date of the initial issuance of such
series, or any affiliate of any such party.
The DOL has designated Centurion and RFC II's authorization as an
"underwriter exemption." As a result, an insurance company investing solely
assets of its general account may be able to acquire and hold certain
subordinated certificates of a series; provided that (i) the senior certificates
of that series are eligible for relief under the authorization and (ii) such
acquisition and holding satisfies the conditions applicable under Sections I and
III of DOL PTCE 95-60.
Moreover, as discussed above, while (unless provided otherwise in the
applicable prospectus supplement) special federal income 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 Internal Revenue
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 under the two exceptions described above or
otherwise and the applicability of the tax on unrelated business income and
unrelated debt- financed income.
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.
71
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 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.
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 Kevin J. Cooper, Group Counsel of TRS, and
certain legal matters relating to the certificates will be passed upon for RFC
II and the trust by David S. Carroll, Group Counsel of American Express. Mr.
Cooper and Mr. Carroll 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.
Reports to Certificateholders
The servicer will prepare monthly and annual reports that will contain
information about the trust. The financial information contained in the reports
will not be prepared in accordance with generally accepted accounting
principles. Unless and until definitive certificates are issued, the reports
will be sent to Cede & Co., which is the nominee of DTC and the registered
holder of the certificates. No financial reports will be sent to you. See
"Description of the Certificates--Book-Entry Registration" and "The Pooling and
Servicing Agreement Generally--Evidence as to Compliance" in this prospectus and
"Series Provisions--Reports" in the accompanying prospectus supplement.
Where You Can Find More Information
We filed a registration statement relating to the certificates with the
SEC. This prospectus is part of the registration statement, but the registration
statement includes additional information.
The servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the trust.
You may read and copy any reports, statements or other information we
file at the SEC's public reference room in Washington, D.C. You can request
copies of these documents, upon payment of a duplicating fee, by writing to the
SEC. Please call the SEC at (800) SEC-0330 for further information on the
operation of the public reference rooms. Our SEC filings are also available to
the public on the SEC Internet site (http:// www.sec.gov).
72
The SEC allows us to "incorporate by reference" information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus. Information that we file later with
the SEC will automatically update the information in this prospectus. In all
cases, you should rely on the later information over different information
included in this prospectus or the accompanying prospectus supplement. We
incorporate by reference any future annual, monthly and special SEC reports and
proxy materials filed by or on behalf of the trust until we terminate our
offering of the certificates.
As a recipient of this prospectus, you may request a copy of any
document we incorporate by reference, except exhibits to the documents (unless
the exhibits are specifically incorporated by reference), at no cost, by writing
or calling us at: American Express Travel Related Services Company, Inc., World
Financial Center, 200 Vesey Street, New York, New York 10048, Attention:
Secretary; (212) 640-5583.
73
Glossary of Defined Terms
"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.
"Additional Accounts" are any accounts in the Total Portfolio that are
designated to the trust pursuant to an addition.
"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:
(i) the numerator of which is the aggregate unpaid principal
amount of the certificates of such series or class, and
(ii) the denominator of which is the aggregate unpaid principal
amount of all certificates within such group.
"Business Day" is, unless otherwise indicated, any day other than a
Saturday, a Sunday or a day on which banking institutions in New York, New York
or any other state in which the principal executive offices of Centurion or the
trustee are located are authorized or obligated by law or executive order to be
closed.
"Collection Account" means the account established as described under
"Description of the Certificates--Collection Account" in this prospectus.
"Controlled Accumulation Period," for any applicable series or class of
such series, begins on a date certain or on a date determined in the manner
described in the related prospectus supplement and will continue until the
earliest of:
(i) the commencement of the Early Amortization Period or, if so
specified in the related prospectus supplement, an Early
Accumulation Period for that series,
(ii) payment in full of the certificates of that series or class,
and
(iii) the series termination date for that series.
"Controlled Amortization Period," for any applicable series or class of
such series, begins on a date certain or on a date determined in the manner
described in the related prospectus supplement and will continue until the
earliest of:
(i) the commencement of the Early Amortization Period for that
series,
(ii) payment in full of the certificates of that series or class,
and
(iii) the series termination date for that series.
74
"Date of Processing" means, 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).
"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).
"Defaulted Receivables," for any Monthly Period, are principal
receivables that were charged off as uncollectible in such Monthly Period.
"Determination Date" will be, unless otherwise indicated, the earlier
of the third Business Day and the fifth calendar day (or, if the fifth calendar
day is not a Business Day, the immediately preceding Business Day) preceding the
15th day of each calendar month.
"Distribution Date" will be, unless otherwise indicated, the 15th day
of each month (or, if such 15th day is not a Business Day, the next Business
Day).
"Early Accumulation Period," for any applicable series or class of such
series, begins on the day on which a Reinvestment Event for that series occurs
or is deemed to occur and will continue until the earliest of:
(i) the commencement of the Early Amortization Period for that
series,
(ii) payment in full of the certificates of that series or class,
and
(iii) the series termination date for that series.
"Early Amortization Period," for any applicable series or class of such
series, begins on the day on which a Pay-Out Event for that series occurs or is
deemed to occur and will continue until the earlier of:
(i) payment in full of the certificates of that series or class,
and
(ii) the series termination date for that series.
"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:
(i) in existence and maintained by an account owner or such
successors or assignees,
(ii) is payable in United States dollars,
(iii) 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,
75
(iv) 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,
(v) 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,
(vi) 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),
(vii) 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),
(viii) 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
(ix) with respect to Aggregate Addition Accounts, certain other
accounts or products which shall have satisfied the Rating
Agency Condition.
"Eligible Deposit Account" means either:
(a) a segregated account with an Eligible Institution, or
(b) a segregated trust account with the corporate trust department
of a depository institution organized under the laws of the
United States or any one of the states thereof, including the
District of Columbia (or any domestic branch of a foreign
bank), and acting as a trustee for funds deposited in such
account, so long as any of the unsecured, unguaranteed senior
debt securities of such depository institution shall have a
credit rating from each Rating Agency in one of its generic
credit rating categories that signifies investment grade.
"Eligible Institution" means either:
(a) a depository institution (which may be the trustee) organized
under the laws of the United States, any one of the states
thereof (including the District of Columbia) or any domestic
branch of a foreign bank, which at all times:
(i) has a long-term unsecured debt rating or certificate of
deposit rating that is acceptable to each Rating Agency, and
(ii) is a member of the FDIC; or
(b) any other institution that is acceptable to each Rating
Agency.
"Eligible Investment" means:
(i) obligations fully guaranteed by the United States of America,
76
(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 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,
(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, and
(viii) any other investment if the Rating Agency Condition has been
satisfied.
"Eligible Receivable" means each receivable:
(a) that has arisen in an Eligible Account;
77
(b) that was created in compliance in all material respects with
all requirements of law applicable to the account owner of
such Eligible Account and pursuant to an account agreement
that complies in all material respects with all requirements
of law applicable to such account owner, in either case, the
failure to comply with which would have a material adverse
effect on certificateholders;
(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 and performance by
such account owner of the account agreement pursuant to which
such receivable was created, have been duly obtained, effected
or given and are in full force and effect;
(d) as to which at the time of the transfer of such receivable to
the trust, a transferor or the trust will have good and
marketable title thereto, free and clear of all liens (other
than any lien 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 on its books
adequate reserves with respect thereto);
(e) that has been the subject of either a valid transfer and
assignment from a transferor to the trust of all of such
transferor's right, title and interest therein (including any
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) that at all times will be the legal, valid and binding payment
obligation of the obligor thereon, enforceable against such
obligor in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws,
now or hereafter in effect, affecting the enforcement of
creditors' rights in general and except as such enforceability
may be limited by general principles of equity (whether
considered in a suit at law or in equity);
(g) that, at the time of transfer to the trust, has not been
waived or modified except as permitted in accordance with the
credit guidelines and which waiver or modification is
reflected in the servicer's computer file of accounts;
(h) that, at the time of transfer to the trust, is not subject to
any right of rescission, setoff, counterclaim or any other
defense (including defenses arising out of violations of usury
laws) of the obligor, other than defenses arising out of
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors'
rights in general;
(i) as to which, at the time of transfer to the trust, the
transferor thereof has satisfied all its obligations required
to be satisfied by such time;
78
(j) as to which, at the time of transfer to the trust, none of the
transferors, Centurion, any other account owner or Credco, as
the case may be, has taken any action which would impair, or
omitted to take any action the omission of which would impair,
the rights of the trust or the certificateholders therein; and
(k) that constitutes either an "account" or a "general intangible"
under and as defined in Article 9 of the UCC as then in effect
in any state where the filing of a financing statement is then
required to perfect the trust's interest in the receivables
and the proceeds thereof.
"Excess Allocation Series" means any series that, as specified in the
related prospectus supplement, is entitled to receive Excess Finance Charge
Collections as more fully described under "The Pooling and Servicing Agreement
Generally--Sharing of Excess Finance Charge Collections Among Excess Allocation
Series" in this prospectus.
"Excess Finance Charge Collections" means collections of finance charge
receivables and certain other amounts allocable to the certificateholders'
interest of any Excess Allocation Series in excess of the amounts necessary to
make required payments with respect to such series (including payments to the
provider of any related Series Enhancement) that are payable out of collections
of finance charge receivables.
"Floating Allocation Percentage" for any series will be determined as
set forth in the related prospectus supplement.
"Funding Period" means, for the applicable series, a period beginning
on the series closing date for that series and ending on a specified date before
the start a Controlled Amortization Period or Controlled Accumulation Period for
that series.
"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 equal to
the product of:
o the Series Allocable Defaulted Amount for such Distribution
Date and
o 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
Servicing Fee payable monthly 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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"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.
"Ineligible Receivables" means all receivables with respect to an
affected account that has been reassigned to the transferors as a result of a
transferor's breach of certain representations and warranties described in "The
Pooling and Servicing Agreement Generally--Representations and Warranties" in
this prospectus.
"Initial Cut-Off Date" means April 25, 1996.
"Investor Finance Charge Collections," for any series, means the
collections of finance charge receivables allocable to the invested amount
(including any collateral invested amount) of that series.
"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 (21st) day and the twenty-fifth
(25th) 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.
"Pay-Out Event" with respect to a series are the events described in
"Description of the Certificates--Pay-Out Events and Reinvestment Events" in
this prospectus and any other events specified as such in the related prospectus
supplement.
"Plans" mean certain pension, profit sharing or other employee benefit
plans, individual retirement accounts or annuities and employee annuity plans
and Keogh plans regulated under Section 406 of ERISA and Section 4975 of the
Internal Revenue Code.
"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:
o the numerator of which is the aggregate of the sum of the
Series Allocable Finance Charge Collections for all series
during the immediately preceding Monthly Period calculated on
a cash basis after subtracting therefrom the Series Allocable
Defaulted Amount for all series for such Monthly Period and
o the denominator of which is the total amount of principal
receivables as of the last day of such immediately preceding
Monthly Period.
"Prefunding Amount" has the meaning described in "The Pooling and
Servicing Agreement Generally--Funding Period" in this prospectus.
"Principal Allocation Percentage" for any series will be determined as
set forth in the related prospectus supplement.
"Rating Agency" is a nationally recognized statistical rating
organization selected by the transferors to rate a series or class of
certificates.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have notified the transferors, the servicer and the trustee
in writing that such action will not result in a reduction or withdrawal of the
then existing rating of any outstanding series or class with respect to which it
is a Rating Agency.
"Reallocated Investor Finance Charge Collections" means the amount of
Group Investor Finance Charge Collections allocated to the certificateholders'
interest (including any collateral invested amount) for a particular series
offered by this prospectus.
"Reallocation Group" means, for any series, the group of series that
will be subject to reallocations of collections of receivables and other amounts
or obligations among the series in that group.
80
"Recoveries" means all amounts received (net of expenses of
collection), including insurance proceeds, with respect to Defaulted
Receivables, including the net proceeds of any sale of such Defaulted
Receivables.
"Reinvestment Event" with respect to a series are the events described
in "Description of the Certificates--Pay-Out Events and Reinvestment Events" in
this prospectus and any other events specified as such in the related prospectus
supplement.
"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 for each such series minus the
amount on deposit in the Special Funding Account. The "series invested amount"
will generally equal the initial invested amount for a series.
"Required Transferor Amount" means, at any time of determination, an
amount equal to the sum of the Series Required Transferor Amounts for each
outstanding series.
"Revolving Period," for any series of certificates, begins on the
series closing date or another date as specified in the related prospectus
supplement and continues until the earlier of:
o the commencement of the Early Amortization Period or Early
Accumulation Period for that series; and
o the date specified in the related prospectus supplement as the
end of the Revolving Period.
"Series Adjusted Invested Amount" means, for any series and for any
Monthly Period:
o the series invested amount for such series for that Monthly
Period, less
o 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, for 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 that
Monthly Period, respectively.
"Series Allocation Percentage" means, for any series and for any
Monthly Period, the percentage equivalent of a fraction:
o the numerator of which is the Series Adjusted Invested Amount
as of the last day of the immediately preceding Monthly
Period, and
o the denominator of which is the Trust Adjusted Invested
Amount.
"Series Enhancement" means any credit enhancement for the benefit of
the certificateholders of a particular series or class of certificates.
"Series Required Transferor Amount" means, for any series, an amount
specified in the prospectus supplement for that series.
"Servicer Default" refers to any of the following events:
81
(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. 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.
"Servicing Fee" has the meaning described in "The Pooling and Servicing
Agreement Generally--Servicing Compensation and Payment of Expenses" in this
prospectus.
"Shared Principal Collections" has the meaning described in "The
Pooling and Servicing Agreement Generally--Sharing of Principal Collections
Among Principal Sharing Series" in this prospectus.
"Special Funding Account" means the account established as described
under "The Pooling and Servicing Agreement Generally--Special Funding Account"
in this prospectus.
"Special Payment Date" means any Distribution Date in a Monthly Period
following a Monthly Period in which a Pay-Out Event occurs.
"Supplemental Certificate" means any certificate that is received by
the transferors in exchange for a portion of the Transferor Certificates.
"Tax Opinion" means, with respect to any action, an opinion of counsel
to the effect that, for federal income tax purposes, (a) such action will not
adversely affect the tax characterization as debt of the certificates of any
outstanding series or class that was characterized as debt at the time of its
issuance, (b) following such action the trust will not be deemed to be an
association (or publicly traded partnership) taxable as a corporation and (c)
such action will not cause or constitute an event in which gain or loss would be
recognized by any certificateholder.
82
"Total Portfolio" is the revolving credit account portfolio of consumer
American Express credit 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.
"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.
"Transferor Certificates" means, collectively, the original transferor
certificate and any outstanding Supplemental Certificates.
"Trust Adjusted Invested Amount" means, for any Monthly Period, the sum
of the Series Adjusted Invested Amounts (as adjusted in any prospectus
supplement) for all outstanding series.
83
American Express Credit Account Master Trust
Issuer
SERIES 2003 -
$
Class A Floating Rate Asset Backed Certificates
$
Class B Floating Rate Asset Backed Certificates
American Express Centurion Bank
American Express Receivables Financing Corporation II
Transferors
American Express Travel Related Services Company, Inc.
Servicer
[LOGO]
-------------------
PROSPECTUS SUPPLEMENT
-------------------
Underwriters of the Class A certificates
[A Co.]
[B Co.]
[C Co.]
Underwriters of the Class B certificates
[A Co.] [B Co.]
You should rely only on the information contained or incorporated by reference
in this prospectus supplement and the accompanying prospectus. We have not
authorized anyone to provide you with different information.
We are not offering the Class A certificates or the Class B certificates in any
state where the offer is not permitted.
We do not claim the accuracy of the information in this prospectus supplement
and the accompanying prospectus as of any date other than the dates stated on
their respective covers.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the Class A certificates and Class B certificates and with
respect to their unsold allotments or subscriptions. In addition, until the date
which is 90 days after the date of this prospectus supplement, all dealers
selling the Class A certificates or Class B certificates will deliver a
prospectus supplement and prospectus.
PART II
Item 14. Other Expenses of Issuance and Distribution.
The following is an itemized list of the estimated expenses to be
incurred in connection with the offering of the securities being offered
hereunder other than underwriting discounts and commissions.
Registration Fee........................................... $80.90**
Printing and Engraving..................................... [o]*
Trustee's Fees............................................. [o]*
Legal Fees and Expenses.................................... [o]*
Blue Sky Fees and Expenses................................. [o]*
Accountants' Fees and Expenses............................. [o]*
Rating Agency Fees......................................... [o]*
Miscellaneous Fees......................................... [o]*
------
Total...................................................... $[o]*
======
* To be filed by amendment
** Actual
Item 15. Indemnification of Directors and Officers.
American Express Centurion Bank
American Express Centurion Bank may indemnify, in accordance with and
to the full extent permitted by the laws of the State of Utah and regulations
promulgated by the Federal Deposit Insurance Corporation as in effect at the
time of the adoption of Article VIII of American Express Centurion Bank's Bylaws
or as such laws and regulations may be amended from time to time, and shall so
indemnify to the full extent permitted by such laws and regulations, any person
(and the heirs and legal representatives of any such person) made or threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person is or was a director, officer, employee, agent or
fiduciary of Centurion or of any constituent corporation absorbed in any
consolidation or merger, or serves as such with another corporation, or with a
partnership, joint venture, trust, employee benefit plan, or other enterprise at
the request of American Express Centurion Bank or any such constituent
corporation provided, however, such indemnification shall not cover any such
indemnified party for actions undertaken by such party in bad faith or involving
their deliberate dishonesty or personal gain.
American Express Receivables Financing Corporation II
The American Express Receivables Financing Corporation II's Certificate
of Incorporation provides for indemnification of directors and officers of
American Express Receivables Financing Corporation II to the fullest extent
permitted by Delaware law.
Section 145 of the Delaware General Corporation Law provides, in
substance, that Delaware corporations shall have the power, under specified
circumstances, to indemnify their directors, officers, employees and agents in
connection with actions, suits or proceedings brought against them by a third
party or in the right of the corporation, by reason of the fact that they are or
were such directors, officers, employees or agents, against expenses incurred in
any such action, suit or proceeding. The Delaware General Corporation Law also
provides that American Express Receivables Financing Corporation II may purchase
insurance on behalf of any such director, officer, employee or agent.
Article XII of American Express Receivables Financing Corporation II's
Certificate of Incorporation provides that, to the extent that a director,
officer, employee or agent of American Express Receivables Financing Corporation
II has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to above, or in defense of any claim, issue or matter
therein, he or she shall be indemnified by American Express Receivables
Financing Corporation II against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith, without the
necessity of any action being taken by American Express Receivables Financing
Corporation II other than the determination, in good faith, that such defense
has been successful. In all other cases wherein indemnification is provided by
Article XII, unless ordered by a court, indemnification shall be made by RFC II
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he or she has met the applicable standard of conduct
specified in Article XII. Such determination shall be made (i) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a quorum is not
obtainable, or even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion or (iii) by the
holders of a majority of the shares of capital stock of American Express
Receivables Financing Corporation II entitled to vote thereon.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person seeking
indemnification did not act in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interests of American
Express Receivables Financing Corporation II, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his or her conduct
was unlawful. Entry of a judgment by consent as part of a settlement shall not
be deemed a final adjudication of liability for negligence or misconduct in the
performance of duty, nor of any other issue or matter.
Expenses incurred by an officer or director in defending any civil or
criminal action, suit or proceeding may be paid by American Express Receivables
Financing Corporation II in advance of the final disposition of such action,
suit or proceeding as authorized by the Board of Directors in the specific case
upon receipt of an undertaking by or on behalf of such director or officer to
repay such amount unless it shall ultimately be determined that he or she is
entitled to be indemnified by American Express Receivables Financing Corporation
II. Expenses incurred by other employees or agents of American Express
Receivables Financing Corporation II in defending any civil or criminal action,
suit or proceeding may be paid by American Express Receivables Financing
Corporation II upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
No director shall be personally liable to American Express Receivables
Financing Corporation II or its stockholders for monetary damages for any breach
of fiduciary duty by such director as a director. Notwithstanding the foregoing
sentence, a director shall be liable to the extent provided by applicable law
(i) for breach of the director's duty of loyalty to American Express Receivables
Financing Corporation II or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the Delaware General Corporation Law or
(iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of subparagraph (e) to Article XII of the
Certificate of Incorporation shall apply to or have any effect on the liability
or alleged liability of any director of American Express Receivables Financing
Corporation II for or with respect to any acts or omissions of such director
occurring prior to such amendment. The indemnification provided by Article XII
of the Certificate of Incorporation shall not be deemed exclusive of any other
rights to which those seeking indemnification may be entitled under any By-law,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in an official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
II-2
Item 16. Exhibits.
1.1 - Form of Underwriting Agreement (incorporated herein by reference to
Exhibit 1.1 to Registration Statement No. 33-95784).
4.1 - Pooling and Servicing Agreement (incorporated herein by reference to
Exhibit 4.1 to the Form 8-A filed with the Securities and Exchange
Commission on May 30, 1996).
4.2 - First Amendment to Pooling and Servicing Agreement, dated as of March
30, 2001 (incorporated herein by reference to Exhibit 5.2 to the Form
8-K filed with the Securities and Exchange Commission on April 5,
2001).
4.3 - Form of Series Supplement, including form of Asset Backed Certificate
(incorporated herein by reference to Exhibit 4.2 to Registration
Statement No. 33-95784).
4.4 - Receivable Purchase Agreement (incorporated by reference to Exhibit
10.1 to Registration Statement No. 333-67567).
5.1 - Opinion of American Express Centurion Bank with respect to legality.*
5.2 - Opinion of American Express Receivables Financing Corporation II with
respect to legality.*
8.1 - Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax
matters.*
23.1 - Consent of American Express Centurion Bank (included in its opinion
filed as Exhibit 5.1).*
23.2 - Consent of American Express Receivables Financing Corporation II
(included in its opinion filed as Exhibit 5.2).*
23.3 - Consent of Orrick, Herrington & Sutcliffe LLP (included in itsopinion
filed as Exhibit 8.1).*
24.1 - Powers of Attorney of American Express Centurion Bank (included on
page II-5).
24.2 - Powers of Attorney of American Express Receivables Financing
Corporation II (included on page II-7).
- --------------
* To be filed by amendment
Item 17. Undertakings.
The undersigned registrants hereby undertake:
(a) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement; (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement; provided, however, that (a)(1)(i) and
(a)(1)(ii) will not apply if the information required to be included in a
post-effective amendment thereby is contained in periodic reports filed pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
II-3
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering hereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the termination of
the offering.
(b) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrants' annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrants pursuant to the provisions described under Item 15
above, or otherwise, the Registrants have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred or
paid by a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of each issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3, reasonably believes that the
security rating requirement contained in Transaction Requirement B.5 of Form S-3
will be met by the time of sale of the securities registered hereunder and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York, New York, on October 28,
2003.
AMERICAN EXPRESS CENTURION BANK,
as originator of the Trust and Co-Registrant
and as Transferor on behalf of the Trust as
Co-Registrant
By: /s/ Maureen A. Ryan
-------------------------------------
Name: Maureen A. Ryan
Title: Assistant Treasurer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Daniel L. Follet, Maureen A. Ryan and
Kevin J. Cooper, and each of them, his or her true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for and in his
or her name, place and stead, in any and all amendments (including
post-effective amendments) to this Registration Statement, any registration
statement filed pursuant to Rule 462(b), and any or all other documents in
connection therewith, and to file the same, with all exhibits thereto, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
might or could be done in person, hereby ratifying and confirming all said
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on October 28, 2003 by the following
persons in the capacities indicated.
Signature Title
--------- -----
/s/ Ashwini Gupta Director and Chairman
- -----------------------------
Ashwini Gupta
/s/ David E. Poulsen Director, President and
- ----------------------------- Chief Executive Officer
David E. Poulsen (Principal Executive Officer)
/s/ Daniel L. Follett Chief Financial Officer
- ----------------------------- (Principal Financial Officer and
Daniel L. Follett Principal Accounting Officer)
/s/ Maria J. Garciaz Director
- -----------------------------
Maria J. Garciaz
II-5
/s/ Roger Goldman Director
- -----------------------------
Roger Goldman
/s/ William M. Isaac Director
- -----------------------------
William M. Isaac
/s/ Peter A. Lefferts Director
- -----------------------------
Peter A. Lefferts
/s/ Frank L. Skillern Director
- -----------------------------
Frank L. Skillern
/s/ Jay B. Stevelman Director
- -----------------------------
Jay B. Stevelman
/s/ Roslyn M. Watson Director
- -----------------------------
Roslyn M. Watson
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3, reasonably believes that the
security rating requirement contained in Transaction Requirement B.5 of Form S-3
will be met by the time of sale of the securities registered hereunder and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York, New York, on October 28,
2003.
AMERICAN EXPRESS RECEIVABLES
FINANCING CORPORATION II,
as originator of the Trust and Co-Registrant
and as Transferor on behalf of the Trust as
Co-Registrant
By: /s/ John D. Koslow
--------------------------------------
Name: John D. Koslow
Title: Vice President and Treasurer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Leslie R. Scharfstein, Carol V. Schwartz
and John D. Koslow, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for and in his or her name, place and stead, in any and all
amendments (including post-effective amendments) to this Registration Statement,
any registration statement filed pursuant to Rule 462(b), and any or all other
documents in connection therewith, and to file the same, with all exhibits
thereto, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as might or could be done in person, hereby ratifying and
confirming all said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on October 28, 2003 by the following
persons in the capacities indicated.
Signature Title
--------- -----
/s/ Leslie R. Scharfstein President
- ----------------------------- (Principal Executive Officer)
Leslie R. Scharfstein
/s/ John D. Koslow Vice President and Treasurer
- ----------------------------- and Director (Principal Financial
John D. Koslow Officer and Principal Accounting
Officer)
/s/ Donald J. Puglisi Director
- -----------------------------
Donald J. Puglisi
/s/ David L. Yowan Director
- -----------------------------
David L. Yowan
II-7
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
1.1 - Form of Underwriting Agreement (incorporated herein by reference to
Exhibit 1.1 to Registration Statement No. 33-95784).
4.1 - Pooling and Servicing Agreement (incorporated herein by reference to
Exhibit 4.1 to the Form 8-A filed with the Securities and Exchange
Commission on May 30, 1996).
4.2 - First Amendment to Pooling and Servicing Agreement, dated as of March 30,
2001 (incorporated herein by reference to Exhibit 5.2 to the Form 8-K
filed with the Securities and Exchange Commission on April 5, 2001).
4.3 - Form of Series Supplement, including form of Asset Backed Certificate
(incorporated herein by reference to Exhibit 4.2 to Registration
Statement No. 33-95784).
4.4 - Receivable Purchase Agreement (incorporated by reference to Exhibit 10.1
to Registration Statement No. 333-67567).
5.1 - Opinion of American Express Centurion Bank with respect to legality.*
5.2 - Opinion of American Express Receivables Financing Corporation II with
respect to legality.*
8.1 - Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax
matters.*
23.1 - Consent of American Express Centurion Bank (included in its opinion filed
as Exhibit 5.1).*
23.2 - Consent of American Express Receivables Financing Corporation II
(included in its opinion filed as Exhibit 5.2).*
23.3 - Consent of Orrick, Herrington & Sutcliffe LLP (included in its opinion
filed as Exhibit 8.1).*
24.1 - Powers of Attorney of American Express Centurion Bank (included on page
II-5).
24.2 - Powers of Attorney of American Express Receivables Financing Corporation
II (included on page II-7).
* To be filed by amendment
II-8