As filed with the Securities and Exchange Commission on March 12, 2004
Registration Nos. 333-[__], 333-[__]-01, 333-[__]-02 and 333-[__]-03
===============================================================================
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 AMERICAN EXPRESS
RECEIVABLES FINANCING RECEIVABLES FINANCING RECEIVABLES FINANCING
CORPORATION II CORPORATION III LLC CORPORATION IV LLC
(Originators of the Trust described herein)
(Exact Names of Registrants as Specified in Their Respective Charters)
Delaware Delaware Delaware
(State or Other Jurisdiction of (State or Other Jurisdiction of (State or Other Jurisdiction of
Organization) Organization) Organization)
13-3854638
(I.R.S. Employer Identification (I.R.S. Employer Identification (I.R.S. Employer Identification
Number) Number) Number)
200 Vesey Street
Mail Stop 01-31-12 4315 South 2700 West 4315 South 2700 West
New York, New York 10285 Salt Lake City, Utah 84184 Salt Lake City, Utah 84184
(212) 640-2000 (801) 565-5000 (801) 565-5000
(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.
Group Counsel Group Counsel Alan M. Knoll, Esq.
American Express Company American Express Company Orrick, Herrington & Sutcliffe LLP
200 Vesey Street 200 Vesey Street 666 Fifth Avenue
New York, New York 10285 New York, New York 10285 New York, New York 10103
(212) 640-2000 (212) 640-2000 (212) 506-5077
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 maximum Proposed maximum
Title of securities Amount to be aggregate price per aggregate offering Amount of
to be registered registered (a)(b) certificate(c) price(c) registration fee
- -----------------------------------------------------------------------------------------------------------------------------------
Asset Backed Certificates..................... $1,000,000 100% $1,000,000 $126.70
- -----------------------------------------------------------------------------------------------------------------------------------
(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.
A-1
Representative Form of Prospectus Supplement
[AMERICAN SUBJECT TO COMPLETION, DATED MARCH 12, 2004
EXPRESS
Logo] Prospectus Supplement to Prospectus Dated March , 2004
American Express Credit Account Master Trust
Issuer
American Express Receivables Financing Corporation II
American Express Receivables Financing Corporation III LLC
American Express Receivables Financing Corporation IV LLC
Transferors
American Express Travel Related Services Company, Inc.
Servicer
SERIES 2004-[__]
$[__] Class A Floating Rate Asset Backed Certificates
$[__] Class B Floating Rate Asset Backed Certificates
The Trust will issue-
Class A certificates Class B certificates
-------------------- --------------------
Principal amount $[__] $[__]
Certificate rate One-Month LIBOR One-Month LIBOR
plus [__]% per year plus [__]% per year
Interest paid Monthly Monthly
First interest payment date [__] [__]
Expected final payment date [__] [__]
Legal final maturity [__] [__]
Price to public per certificate [__] (or [__]%) [__] (or [__]%)
Underwriting discount per certificate $[__] (or [__]%) $[__] (or [__]%)
Proceeds to transferors per certificate $[__] (or [__]%) $[__] (or [__]%)
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.
This prospectus supplement and the accompanying prospectus relate only to the
offering of 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.]
Underwriter of the Class B certificates
[A Co.]
March [__], 2004
Consider carefully the risk factors beginning on page 10 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 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 jurisdiction 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 and the Class B 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-45 in this prospectus supplement
and on page 94 in the accompanying prospectus.
------------------
S-2
Transaction Summary
Trust and Issuer: American Express Credit Account Master Trust
Transferors: American Express Receivables Financing Corporation II,
American Express Receivables Financing Corporation III LLC
and American Express Receivables Financing Corporation IV LLC
Servicer: American Express Travel Related Services Company, Inc.
Trustee: The Bank of New York
Series Issuance Date: [__], 2004
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(R)
credit cards, Optima(R) Line of Credit and Sign & Travel(R)/Extended
Payment Option revolving credit accounts or features*
Group: Group II
Principal Sharing Series: Yes
Excess Allocation Series: Yes
Class A Class B
------- -------
Principal Amount: $[__] $[__]
Percentage of Series:** [__]% [__]%
Anticipated Ratings:***
(Moody's/Standard & Poor's) Aaa/AAA A1/A
Credit Enhancement: Subordination of Class B and Subordination of collateral
collateral interest interest
Certificate Rate: One-month LIBOR plus [__]% One-month LIBOR plus [__]%
per year per year
Interest Accrual Method: Actual/360 Actual/360
Distribution Dates: Monthly (15th) Monthly (15th)
Certificate Rate Index Reset Date: Two London business days Two London business days
before each distribution date before each distribution date
First Distribution Date: [__] [__]
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 considerations described
counsel): under "ERISA Considerations" under "ERISA Considerations"
in this prospectus supplement in this prospectus supplement
and the accompanying and the accompanying
prospectus prospectus
Debt for United States Federal Yes, subject to important Yes, subject to important
Income Tax Purposes (investors considerations described considerations described
are cautioned to consult with under "Tax Matters" in the under "Tax Matters" in the
their counsel): accompanying prospectus accompanying prospectus
- ---------------
* American Express(R), Optima(R), and Sign & Travel(R) are federally
registered servicemarks of American Express Company and its affiliates.
** The percentage of Series 2004-[__] comprised by the collateral interest
is [__]%.
*** It is a condition to issuance of the Series 2004-[__] 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-6
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 Trust Portfolio............................................... 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-9
Applications of Collections....................................... S-9
Finance Charge Collections....................................... S-9
Excess Spread.................................................... S-9
Principal Collections............................................ S-10
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
Page
----
General........................................................... S-16
Loss and Delinquency Experience................................... S-16
Revenue Experience................................................ S-17
Payment Rates..................................................... S-18
The Trust Portfolio................................................. S-19
The Transferors..................................................... S-21
RFC II............................................................ S-21
RFC III........................................................... S-21
RFC IV............................................................ S-22
Centurion, FSB and Credco........................................... S-22
Centurion......................................................... S-22
FSB............................................................... S-22
Credco............................................................ S-22
The Servicer........................................................ S-23
Series Provisions................................................... S-23
Interest Payments................................................. S-23
Principal Payments................................................ S-25
Subordination of the Class B Certificates and the Collateral
Interest......................................................... S-27
Allocation Percentages............................................ S-27
Principal Funding Account......................................... S-28
Reserve Account................................................... S-28
Reallocation of Cash Flows........................................ S-30
Application of Collections........................................ S-32
Defaulted Receivables; Investor Charge-Offs....................... S-35
Paired Series..................................................... S-37
Pay-Out Events.................................................... S-37
Servicing Compensation and Payment of Expenses.................... S-39
Optional Repurchase............................................... S-40
Series Termination................................................ S-40
Reports........................................................... S-41
ERISA Considerations................................................ S-42
Class A Certificates.............................................. S-42
Class B Certificates.............................................. S-42
The Department of Labor Authorization ............................ S-42
Consultation with Counsel ........................................ S-42
Underwriting........................................................ S-43
Glossary of Defined Terms .......................................... S-45
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 Receivables Financing Corporation II, American Express
Receivables Financing Corporation III LLC and American Express Receivables
Financing Corporation IV LLC 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 2004-[_] certificates include only the
Class A and Class B certificates and references to Series 2004-[_] include the
Series 2004-[_] certificates and collateral interest.
Only the Class A certificates and the Class B certificates are offered by this
prospectus supplement and the accompanying prospectus.
Beneficial interests in the Series 2004-[_] certificates may be purchased in
minimum denominations of $1,000 and integral multiples of $1,000.
The Series 2004-[_] certificates are expected to be issued on [_____], 2004.
Distribution Dates
Distribution dates for the Series 2004-[_] certificates will commence
[____________] 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 2004-[_] 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 year.
The Class B certificates will bear interest at one-month LIBOR as determined
each month plus [____]% per year.
Interest on the Class A certificates and the Class B certificates for any
distribution date will be calculated as follows:
Number of
Principal days in Rate for
amount at end interest period interest
of prior month x --------------- x period
360
You may obtain the interest rate for the current period and immediately
preceding period by telephoning the trustee at (212) 815-6258.
See "Series Provisions--Interest Payments" in this prospectus supplement for a
description of how and when LIBOR will be determined and for a discussion of
the determination of amounts available to pay interest.
S-5
Principal
Principal of the Series 2004-[_] certificates is expected to be paid in full
on the [______] distribution date, which is the expected final payment date.
On [_______], we are scheduled to begin accumulating collections of principal
receivables for payment to you, but we may begin accumulating at a later date.
Although the Series 2004-[_] 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.
The final payment of principal and interest on the Series 2004-[_]
certificates will be made no later than the [_______] 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 2004-[_] 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 2004-[_]
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, certain funds that would otherwise be
used to make required collateral interest and Class B certificate payments
will be used to make 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, certain funds that would
otherwise be used to make required collateral interest payments will be used
to make 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. The collateral invested amount must
be reduced to zero before the Class B
S-6
invested amount will suffer any loss of principal.
Credit enhancement for the Series 2004-[_] certificates is for the benefit of
Series 2004-[_] 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 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 Trust Portfolio
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 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 [_______]:
o Receivables in the trust:
$[____________]
o Accounts designated to the trust:
[____________]
See "The Trust Portfolio" 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
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.
Each month, the servicer will allocate collections of finance charge
receivables, collections of principal receivables and the amount of principal
receivables that are not collected and are written off as
- ---------------
* American Express(R), Optima(R), and Sign & Travel(R) are federally registered
servicemarks of American Express Company and its affiliates.
S-7
uncollectible, called the defaulted amount. Set forth below, is a brief
description of how these finance charge collections, principal collections and
the defaulted amount 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.
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 the defaulted amount is not covered by
collections of finance charges allocated to your series or for other reasons.
If the invested amount of your series or class declines, amounts allocated and
available for payment to you will 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.
Step 1: Allocations Among Series
Finance Charge Collections, Principal Collections and the 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 the 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, between:
o your series, based on the size of its invested amount; and
o the holders of the transferor certificates, which will receive the remainder
of these finance charge collections, principal collections and the defaulted
amount.
Step 3: Reallocations Among Series
Finance Charge Collections: Collections of finance charge receivables
allocated to the Series 2004-[_] certificates and the collateral interest in
Step 2 will then be combined with the collections of finance charge
receivables allocated to any other series in group II. Group II is a group of
series which share finance charge collections pro rata, based upon the
relative size of the required payments to each series in group II as compared
to the total required payments of all series in group II. See "The Pooling and
Servicing Agreement Generally--Reallocations Among Different Series Within a
Reallocation Group" in the accompanying prospectus.
S-8
Series 2004-[_] will be the [__________] outstanding 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 your series.
Step 4: Final Allocations Among Class A, Class B and the Collateral Interest
Finance Charge Collections, Principal Collections and the Defaulted Amount:
The finance charge collections reallocated in Step 3, together with the
principal collections and the 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.
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 the defaulted amount. 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 invested amount of 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 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;
o then to make up deficiencies to the servicer;
o then to make up for reductions of the collateral invested amount;
o then to fund, if necessary, a reserve account maintained to assist in
certain interest payments; and
o finally to pay all other amounts to the holder of the collateral interest.
See "Series Provisions--Application of Collections--Excess Spread; Excess
Finance Charge Collections" in this prospectus supplement.
S-9
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, collections of principal receivables
allocated to the collateral interest also provide 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 for your series.
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 and then to pay the Class B invested amount. No
principal will be paid to the holder of the collateral interest until the
Class B invested amount is paid in full. The controlled accumulation period is
scheduled to begin on [____________], but may begin at a later date.
During the early amortization period, principal collections (including 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.
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 allocated to each series in group II
will be combined and will be available for certain required payments to all
series in group II. These amounts will be reallocated pro rata, based on the
size of the required payment for each of the series in group II as
S-10
compared with the total required payments for all of the series in group II.
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 collections of
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 2004-[_]
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 2004-[_] 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 2004-[_] certificates through DTC, in the
United States, or Clearstream, Luxembourg or the Euroclear System in Europe.
See "Description of the Certificates--Book-
S-11
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.
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 2004-[_] 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 2004-[_] certificates,
Boulevard Konrad Adenauer 2, Luxembourg, phone number 352-4212-2643 to
determine whether or not the Series 2004-[_] certificates are listed on the
Luxembourg Stock Exchange.
S-12
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 an amended and restated
pooling and servicing agreement, dated as of [_____], 2004, as amended from
time to time, among American Express Travel Related Services Company, Inc., as
servicer, American Express Receivables Financing Corporation II, American
Express Receivables Financing Corporation III LLC and American Express
Receivables Financing Corporation IV LLC, as transferors, and The Bank of New
York, as trustee.
On or about [____], 2004, the trust will issue $[_______] of Class A Series
2004-[_] Floating Rate Asset Backed Certificates and $[_______] of Class B
Series 2004-[_] 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
2004-[_] certificates as described herein. For purposes of this prospectus
supplement, the Collateral Interest shall be deemed to be the "collateral
invested amount" for all purposes under the accompanying prospectus.
Maturity Considerations
The pooling and servicing agreement and the Series 2004-[_] 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 2004-[_] 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.
The holder of the Collateral Interest will not begin to receive payments of
principal until the final principal payment on the Class B 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, 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 2004-[_] 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 2004-[_], cause the trust
S-13
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 2004-[_] 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 2004-[_]. 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
Series 2004-[_]), 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 2004-[_] 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 2004-[_] 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 2004-[_] certificates and the Collateral Interest, the
final payment of principal to the Series 2004-[_] certificateholders and the
holder of the Collateral Interest may be delayed.
Should a Pay-Out Event occur with respect to the Series 2004-[_]
certificates and the Collateral Interest and the Early Amortization Period
begin, any amount on deposit:
(a) in the Principal Funding Account will be paid to the Series 2004-[_]
certificateholders on the first Special Payment Date, and the Series 2004-[_]
certificateholders and the holder of the Collateral Interest 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, the Class B Invested Amount and the Collateral Invested
Amount are paid in full or until the Series 2004-[_] 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 2004-[_], 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 2004-[_] certificateholders and the holder of the
Collateral Interest to receive payments of principal on the Expected Final
Payment Date depends on the payment rates of 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 of 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 due 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
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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 2004-[_] certificates and the
Collateral Interest 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 2004-[_] certificateholders and the holder of the Collateral
Interest could expect to receive payments of principal on the Series 2004-[_]
certificates and the Collateral Interest 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 2004-[_] certificateholders. Further, if a
Pay-Out Event occurs and the Early Amortization Period begins, the average
life and maturity of the Class A certificates and the Class B certificates
could be significantly reduced, thereby reducing the anticipated yield on such
certificates.
Due to the reasons set forth above, there can be no assurance that deposits
in the Principal Funding Account will be made on or prior to the Expected
Final Payment Date in an amount equal to the sum of the Class A Invested
Amount and the Class B Invested Amount or that the actual number of months
elapsed from the date of issuance of the Class A certificates and Class B
certificates to their respective final distribution dates will equal the
expected number of months. See "Risk Factors--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.
S-15
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 "The Pooling and
Servicing Agreement Generally--Conveyance of Receivables," "--Addition of
Accounts or Participation Interests" and "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 discussion 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 [_______________], the receivables in
the Trust Portfolio represented approximately [__]% of the Total Portfolio.
Because the Trust Portfolio is only a portion of the Total Portfolio, yield,
loss, delinquency and payment rate experience with respect to the receivables
in the Trust Portfolio may be different from that set forth below for the
Total Portfolio. There can be no assurance that the yield, loss, delinquency
and payment rate experience relating to the receivables in the Trust Portfolio
will be comparable to the historical experience relating to the receivables in
the Total Portfolio set forth below.
Loss and Delinquency Experience
The following tables set forth the loss and delinquency experience for the
Total Portfolio for each of the periods shown.
Loss Experience of the Total Portfolio
(Dollars in Thousands)
Year Ended December 31,
---------------------------------------------------------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Average Receivables Outstanding(1)........................ $28,201,408 $25,232,901 $24,312,940 $21,743,575 $16,188,623
Total Gross Charge-Offs(2)................................ 1,575,743 1,560,585 1,430,243 1,059,267 948,192
Total Recoveries.......................................... 203,161 189,720 155,180 129,445 128,362
----------- ----------- ----------- ----------- -----------
Total Net Charge-Offs(3).................................. $ 1,372,582 $ 1,370,865 $ 1,275,063 $ 929,822 $ 819,830
=========== =========== =========== =========== ===========
Total Net Charge-Offs as a Percentage of Average
Receivables Outstanding................................. 4.87% 5.43% 5.24% 4.28% 5.06%
(Footnotes on next page)
S-16
- ---------------
(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 Total Recoveries during such period.
Average Receivables Delinquent as a Percentage of the Total Portfolio(1)
(Dollars in Thousands)
Year Ended December 31,
--------------------------------------------------------------------------------------------
2003 2002 2001
---------------------------- ---------------------------- ----------------------------
Percentage Percentage Percentage
of Average of Average of Average
Dollar Receivables Dollar Receivables Dollar Receivables
Amount Outstanding(2) Amount Outstanding(2) Amount Outstanding(2)
----------- -------------- ----------- -------------- ----------- --------------
Average Receivables
Outstanding(3)................ $28,201,408 100.00% $25,232,901 100.00% $24,312,940 100.00%
Average Receivables Delinquent
31 to 60 Days ................ 320,694 1.14 318,158 1.26 310,657 1.28
61 to 90 Days ................ 186,354 0.66 184,436 0.73 165,490 0.68
91 Days or More .............. 291,436 1.03 285,846 1.13 238,437 0.98
----------- ------ ----------- ------ ----------- ------
Total.......................... $ 798,484 2.83% $ 788,439 3.12% $ 714,585 2.94%
=========== ====== =========== ====== =========== ======
Year Ended December 31,
------------------------------------------------------------
2000 1999
---------------------------- ----------------------------
Percentage Percentage
of Average of Average
Dollar Receivables Dollar Receivables
Amount Outstanding(2) Amount Outstanding(2)
----------- -------------- ----------- --------------
Average Receivables
Outstanding(3)................ $21,743,575 100.00% $16,188,623 100.00%
Average Receivables Delinquent
31 to 60 Days ................ 258,514 1.19 219,678 1.36
61 to 90 Days ................ 126,472 0.58 110,170 0.68
91 Days or More .............. 170,182 0.78 142,603 0.88
----------- ------ ----------- ------
Total.......................... $ 555,168 2.55% $ 472,451 2.92%
=========== ====== =========== ======
- ---------------
(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-17
Revenue Experience of the Total Portfolio
(Dollars in Thousands)
Year Ended December 31,
---------------------------------------------------------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Average Receivables Outstanding(1)........................ $28,201,408 $25,232,901 $24,312,940 $21,743,575 $16,188,623
Total Finance Charges and Fees Billed(2).................. $ 3,303,040 $ 3,325,870 $ 3,528,958 $ 3,283,319 $ 2,501,139
Total Finance Charges and Fees Billed as a Percentage of
Average Receivables Outstanding......................... 11.71% 13.18% 14.51% 15.10% 15.45%
- ---------------
(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.
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.
S-18
Account Holder Monthly Payment Rates of the Total Portfolio
Year Ended December 31,
----------------------------------------
2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Lowest Month........................................................................... 21.02% 18.67% 16.81% 15.56% 14.26%
Highest Month.......................................................................... 23.61% 21.71% 19.22% 17.22% 16.06%
Monthly Average........................................................................ 22.45% 20.49% 18.19% 16.57% 15.32%
The Trust Portfolio
The receivables (including receivables in accounts closed at the request of
account holders) in the accounts, as of [____________], 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 [____________].
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 [____________], 2004.
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 ................................................................. % $ %
= == == ==
S-19
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 to $15,000 .........................................................
$15,001 to $20,000 .........................................................
$20,001 to $25,000 .........................................................
$25,001 or More ............................................................
- - -- -
Total (Credit Card) ....................................................
Overlimit Feature (Credit Card)(1) .........................................
No Pre-Set Spending Limit
(Sign & Travel Accounts)..................................................
- - -- -
Total ..................................................................
- - -- -
Grand Total ........................................................... % %
= = == =
- ---------------
(1) "Overlimit Feature (Credit Card)" refers to those credit card accounts that
allow the related cardmember to make charges in excess of his or her stated
credit limit. Each of these credit card accounts has a stated credit limit,
and charges made within this credit limit may be repaid in minimum monthly
payments as described in the prospectus. However, on these credit cards, a
cardmember may, subject to Centurion's authorization, also make charges in
excess of his or her stated credit limit. All such charges above such
credit limit are due in full at the end of each billing cycle. Credit card
accounts with this feature are included in the table above according to
their respective stated credit limits, but the dollar value of the
outstanding receivables generated above such credit limit are reflected
separately in the line item for "Overlimit Feature (Credit Card)."
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 .................................................................. % $ %
= = == =
S-20
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 [_________], 2004, approximately [___]%, [___]%, [___]%, [___]% and
[___]% of the receivables related to account holders having billing addresses
in [California, New York, Florida, Texas and New Jersey], respectively. Not
more than [5]% of the receivables related to account holders having billing
addresses in any other single state.
The Transferors
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.
RFC III
American Express Receivables Financing Corporation III LLC, or RFC III, is a
limited liability company formed under the laws of the State of Delaware on
March 11, 2004 and is a wholly owned subsidiary of Centurion. RFC III 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 Centurion, as the sole member of RFC III, nor RFC III's
board of directors intends to change the business purpose of RFC III. RFC
III's executive offices are located at 4315 South 2700 West, Salt Lake City,
Utah 84184.
S-21
RFC IV
American Express Receivables Financing Corporation IV LLC, or RFC IV, is a
limited liability company formed under the laws of the State of Delaware on
March 11, 2004 and is a wholly owned subsidiary of FSB. RFC IV 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 FSB, as the sole member of RFC IV, nor RFC IV's board of
directors intends to change the business purpose of RFC IV. RFC IV's executive
offices are located at 4315 South 2700 West, Salt Lake City, Utah 84184.
Centurion, FSB and Credco
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 [___________], Centurion had total deposits of approximately $[__]
billion, total assets of approximately $[__] billion and total equity capital
of approximately $[__] billion. Centurion had net income of approximately
$[__] million for the year ended [__].
FSB
American Express Bank, FSB, or FSB, was chartered by the Office of Thrift
Supervision under the laws of the United States of America as a federal
savings bank in 2000. It received FDIC insurance in 2000. Its principal office
is located at 4315 South 2700 West, Salt Lake City, Utah 84184. FSB is a
wholly owned subsidiary of TRS. In December 2003, FSB and certain of its
affiliates received OTS approval to, among other things, transfer ownership of
FSB from American Express Financial Corporation to TRS, relocate its
headquarters from Minneapolis, Minnesota to Salt Lake City, Utah, and amend
its business plan to permit FSB to offer certain credit, charge and consumer
lending products, small business loans, mortgages and mortgage-related
products and a transactional Internet site. The implementation of the changes
to FSB's business plan began in the first quarter of 2004 with the transfer of
certain credit card and charge accounts from Centurion to FSB.
As of [___________], FSB had total deposits of approximately $[__] billion,
total assets of approximately $[__] billion and total equity capital of
approximately $[__] billion. FSB had net income of approximately $[__] million
for the year ended [__].
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
S-22
TRS, Centurion and FSB and certain revolving credit account receivables
generated by Centurion. Its principal office is located at 301 N. Walnut
Street, Wilmington, Delaware 19801.
As of [__], and based upon the Annual Report on Form 10-K of Credco at such
date, Credco had total assets of approximately $[__] billion and total equity
capital of approximately $[__] billion. Credco had net income of approximately
$[__] million for the one-year period ended [___________].
The Servicer
As of [___________], TRS, the servicer, had approximately $[__] billion in
total assets, approximately $[__] billion in total liabilities and redeemable
preferred stock and approximately $[__] billion in shareholder's equity.
Series Provisions
The Series 2004-[_] certificates and the Collateral Interest will be issued
pursuant to the pooling and servicing agreement and the Series 2004-[_]
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 2004-[_] certificates and the
Collateral Interest. Reference should be made to the prospectus for additional
information concerning the Series 2004-[_] certificates, the Collateral
Interest 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 [_____], 2004, to the Series 2004-[_]
certificateholders in whose names the Series 2004-[_] 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 that Interest Period, and
(iii) the outstanding principal balance of the Class A certificates as of
the preceding Record Date (or, in the case of the first Distribution Date, as
of the closing date). For the first Distribution Date, however, interest on
the Class A certificates will equal the interest accrued on the initial
principal amount of the Class A certificates at the Class A certificate rate
for the initial Interest Period.
S-23
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
year. 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 and including the closing
date to but excluding [____], 2004, and during each Interest Period
thereafter, at the rate of [__]% per year 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 extent funds are available, 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 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 2004-[_] 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.
On each Distribution Date, interest due to the Class B 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 B certificate rate for that Interest Period, and
(iii) the outstanding principal balance of the Class B certificates as of
the preceding Record Date (or, in the case of the first Distribution Date, as
of the closing date). For the first Distribution Date, however, interest on
the Class B certificates will equal the interest accrued on the initial
principal amount of the Class B certificates at the Class B certificate rate
for the initial Interest Period.
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
year. 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 and including the closing
date to but excluding [_________], and during each Interest Period thereafter,
at the rate of [__]% per year 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 extent funds are available, to the Class B
certificateholders. Payments to the Class B certificateholders in
S-24
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 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 2004-
[_] 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.
Interest will accrue on the Collateral Interest at the Collateral Minimum
Interest Rate from the closing date. Interest will be distributed on each
Distribution Date, beginning [_________], to the holder of the Collateral
Interest in an amount equal to the product of:
(i) the actual number of days in the related Interest Period divided by 360,
(ii) the Collateral Minimum Interest Rate for that Interest Period, and
(iii) the Collateral Initial Invested Amount minus the aggregate amount of
principal payments made to the holder of the Collateral Interest on all prior
Distribution Dates (or, in the case of the first Distribution Date, as of the
closing date). For the first Distribution Date, however, interest on the
Collateral Interest will accrue on the Collateral Initial Invested Amount at
the Collateral Minimum Interest Rate for the initial Interest Period. The
Collateral Interest will also provide for additional interest as provided
herein and in the Series 2004-[_] supplement.
The Class A certificate rate, the Class B certificate rate and the
Collateral Minimum Interest 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) 815-6258.
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 2004-[_] certificateholders
or the holder of the Collateral Interest. Unless a Pay-Out Event has occurred,
the Controlled Accumulation Period is scheduled 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 2004-[_] 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.
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:
S-25
(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. 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.
The Controlled Accumulation Period is scheduled 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
2004-[_].
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.
If a Pay-Out Event with respect to Series 2004-[_] occurs 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 or if there are insufficient collections of principal
receivables to pay the Collateral Invested Amount, a Pay-Out Event will occur
and the Early Amortization Period will commence.
On each Distribution Date with respect to the Early Amortization Period
until the Class A Invested Amount has been paid in full or the Series 2004-[_]
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
S-26
Date, Available Principal Collections until the earlier of the date the Class
B Invested Amount is paid in full and the Series 2004-[_] 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 2004-[_] Termination Date.
Subordination of the Class B Certificates and the Collateral Interest
The Class B certificates 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" and "--Application of
Collections--Excess Spread; Excess Finance Charge Collections" below.
Allocation Percentages
Pursuant to the pooling and servicing agreement, the servicer will allocate
among Series 2004-[_] 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 2004-[_] specifically, as described below.
Pursuant to the pooling and servicing agreement, during each Monthly Period,
the servicer will allocate to Series 2004-[_] 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 2004-[_] with respect to any Monthly Period will
be allocated to the Series 2004-[_] 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.
S-27
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, including
Series 2004-[_], 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 2004-[_]
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 2004-[_] will be allocated
to the Series 2004-[_] 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 holders of the transferor
certificates. Such principal collections so allocated to the Series 2004-[_]
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 2004-[_] certificateholders. During
the Controlled Accumulation Period, the servicer will transfer collections in
respect of principal receivables allocated to Series 2004-[_], Shared
Principal Collections allocated to Series 2004-[_] 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 and the Early Amortization Period has
begun with respect to Series 2004-[_], 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 Class A Available Funds
(including a withdrawal from the Reserve Account, if necessary, as described
below under "--Reserve Account") and from Class B Available Funds. 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.
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, the Class B
S-28
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 2004-[_] (in the order of priority described below under "--Application
of Collections--Payment of Interest, Fees 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.
If the Reserve Account has not terminated as described below, all amounts
remaining 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
2004-[_].
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-29
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 Invested Amount is paid in full, and
(c) if the Controlled Accumulation Period has not commenced, the occurrence
of a Pay-Out Event with respect to Series 2004-[_] 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. 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
2004-[_] 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 2004-[_], 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
S-30
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 and Class B Invested Amount will
thereafter be reimbursed and the Class A Invested Amount and 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 2004-[_] 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 will be reimbursed and the
Collateral Invested Amount increased in a similar manner.
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
2004-[_] 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 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 in the Class B Invested Amount 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" below.
S-31
Application of Collections
Payment of Interest, Fees 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 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;
(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
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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 2004-[_] 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 Charge Collections allocated to Series
2004- [_], such Excess Spread and Excess Finance Charge Collections 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
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
aggregate outstanding 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 year;
(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
applied first, to pay shortfalls in the payment of amounts described in
clause (B)(i) under "--Payment of Interest, Fees and Other Items" in this
prospectus supplement, and second, to pay shortfalls in the payment of
amounts described in clause (B)(ii) under "--Payment of Interest, Fees and
Other Items" in this prospectus supplement and then (II) treated up to the
Class B Investor Default Amount, as a portion of Available Principal
Collections for such Distribution Date;
(e) an amount equal to the aggregate amount by which the Class B
Invested Amount has been reduced pursuant to clauses (iii), (iv) and (v) of
the definition of Class B Invested
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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 Minimum Monthly Interest for such
Distribution Date, plus the amount of any Collateral Minimum 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;
(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 for 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 date on which 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; and
(k) the balance, if any, will be distributed to the holder of the
Collateral Interest.
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 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 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
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(C) for each Distribution Date, the balance, if any, of Available
Principal Collections not applied pursuant to paragraphs (A) and (B) (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;
(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 distributed 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.
Defaulted Receivables; Investor Charge-Offs
On each Determination Date, the servicer will calculate the Investor Default
Amount for the related Distribution Date. An amount equal to the Class A
Investor Default Amount for each Distribution Date will be paid from Class A
Available Funds, Excess Spread and Excess Finance Charge Collections allocated
to Series 2004-[_] and from Reallocated Principal Collections, if applicable,
and applied as described above in "--Application of Collections--Payment of
Interest, Fees and Other Items." An amount equal to the Class B Investor
Default Amount for each Distribution Date will be paid from Excess Spread and
Excess Finance Charge Collections allocated to Series 2004-[_] 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 (i) Excess Spread and Excess Finance
Charge Collections allocable to Series 2004-[_] and (ii) 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
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Investor Default Amount 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 of the Class B Invested Amount with respect to such Distribution
Date as described above. A reduction in the Class A Invested Amount as
described in the preceding sentence is a "Class A Investor Charge-Off." Such
Class A Investor Charge-Offs will reduce the amounts allocable and available
for payment and may have the effect of slowing or reducing the return of
principal to your series. 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 2004-[_] available for
such purpose as described above under "--Application of Collections--Excess
Spread; Excess Finance Charge Collections."
Reductions in Class B Invested Amount and Collateral Invested Amount
On each Distribution Date, if the Class B Required Amount for such
Distribution Date exceeds the sum of (i) Excess Spread and Excess Finance
Charge Collections allocable to Series 2004-[_] and not required to pay the
Class A Required Amount or reimburse Class A Investor Charge-Offs, and (ii)
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 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 B Investor Default Amount for such
Distribution Date over the amount of such reduction, if any, of the Collateral
Invested Amount for such Distribution Date. A reduction in the Class B
Invested Amount as described in the preceding sentence is a "Class B Investor
Charge-Off."
The Class B Invested Amount will also be reduced by the amount of
Reallocated Principal Collections in excess of the Collateral Invested Amount
and the amount of any portion of the Class B Invested Amount allocated to the
Class A certificates to avoid a reduction in the Class A Invested Amount. Any
reductions in the Class B Invested Amount will reduce the amounts allocable
and available for payment and may have the effect of slowing or reducing the
return of principal to your series. 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 2004-[_] available for such purpose as described above under
"--Application of Collections--Excess Spread; Excess Finance Charge
Collections."
S-36
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 2004-[_] 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. A reduction in the Collateral Invested
Amount as described in the preceding sentence is a "Collateral Charge-Off."
The Collateral Interest will also be reduced by the amount of Reallocated
Principal Collections and the amount of any portion of the Collateral Invested
Amount allocated to the Class A certificates to avoid a reduction in the Class
A Invested Amount or to the Class B certificates to avoid a reduction in the
Class B Invested Amount. Any reductions in the Collateral Invested Amount will
reduce the amounts allocable and available for payment and may have the effect
of slowing or reducing the amount of payments to your series. 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 2004-[_] allocated and available for that
purpose as described above under "--Application of Collections--Excess Spread;
Excess Finance Charge Collections."
Paired Series
Series 2004-[_] 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 2004-[_] 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 2004-[_] certificateholders
after the Series 2004-[_] 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 2004-[_] 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.
Pay-Out Events
The Pay-Out Events with respect to the Series 2004-[_] certificates and the
Collateral Interest 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;
S-37
(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 2004-[_] 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 2004-[_] supplement, which failure has a material adverse effect
on the Series 2004-[_] certificateholders or the holder of the
Collateral Interest 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 2004-[_] 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 2004-[_] certificateholders and the holder of the Collateral
Interest 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 2004- [_] 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, the Class B
Invested Amount and the Collateral 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 2004-[_] 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 2004-[_] certificates and the
Collateral Interest evidencing more than 50% of the aggregate unpaid principal
amount of Series 2004-[_] certificates and the Collateral Interest by notice
then given in writing to the transferors and the servicer (and to the trustee
if given by the Series 2004-[_] certificateholders and the holder of the
Collateral Interest) may declare that a Pay-Out Event has occurred with
respect to Series 2004-[_] 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 2004-[_] without any notice or other
action on the part of the trustee immediately upon the occurrence of such
event.
S-38
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 or
the holder of the Collateral Interest. 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 2004-[_] 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 Interest
Servicing Fee, shall be equal to one-twelfth of the product of:
(a) the Collateral Floating Percentage,
(b) the Servicing Fee Rate, and
(c) the Servicing Base Amount.
The remainder of the Servicing Fee shall be paid by the holders of the
transferor certificates or the certificateholders of other series (as provided
in the related supplements). In no event will the trust, the trustee, the
Series 2004-[_] certificateholders or the holder of the Collateral Interest 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-39
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 Adjusted Invested Amount 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 2004-[_]
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 2004-[_] Termination Date (after giving effect to all
distributions required to be made on the Series 2004-[_] 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 2004-[_] Termination Date
for distribution to the Series 2004-[_] certificateholders and the holder of
the Collateral Interest. The servicer will sell such receivables on the Series
2004-[_] 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 2004-[_] Termination Date for distribution to
the Series 2004-[_] certificateholders and the holder of the Collateral
Interest) to Series 2004-[_].
S-40
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, the Class B certificates and the Collateral Interest,
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;
(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 2004-[_]
certificates and the holder of the Collateral Interest;
(e) the aggregate outstanding balance of accounts that were 31, 61 and 91
days or more delinquent as of the end of such Monthly Period;
(f) the Class A Investor Default Amount, the Class B Investor Default
Amount and the Collateral Default Amount and the Defaulted Amount with respect
to the related Distribution Date;
(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, Class B Investor Charge-Offs or
Collateral 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.
S-41
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.
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
S-42
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
---------------------------------------- --------------------------
[A Co.]........................................... $
[B Co.]...........................................
[C Co.]...........................................
--
Total............................................ $
==
Aggregate Principal Amount
Underwriter of the Class B Certificates of Class B Certificates
--------------------------------------- --------------------------
[A Co.]........................................... $
==
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 underwriter 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 2004-[_]
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 underwriter proposes 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 underwriter 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 underwriter.
Each underwriter of these Series 2004-[_] certificates has agreed that:
o it has not offered or sold and will not offer or sell any Series 2004-[_]
certificates to persons in the United Kingdom prior to the expiration of
the period six months from the
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date of their issuance, except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments
(as principal or as agent) for the purposes of their businesses or
otherwise in circumstances which do not constitute an offer to the public
in the United Kingdom, within the meaning 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 2004-[_] certificates in, from or otherwise involving the
United Kingdom; and
o it has only and 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 2004-[_] certificates in circumstances in
which Section 21(1) of the FSMA does not apply to the trust.
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the Series 2004-[_] 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 2004-[_] certificates so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Series 2004-[_] 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 2004-[_] 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 2004-[_] 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.
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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 2004-[_], and
(iii) certain other amounts which pursuant to the Series 2004-[_]
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 the Class A Monthly
Interest, the Class B Monthly Interest (calculated as if the Class B
Invested Amount equals the outstanding principal balance of the Class B
certificates), the Collateral Minimum Monthly Interest and the Monthly
Servicing Fee for the Series 2004-[_] certificates and for 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, FSB, any other account owner 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) the actual number of days in the related Interest Period divided by
360,
(ii) the Class A certificate rate for that Interest Period plus 2.0% per
year, and
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(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.
"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 2004-[_] 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 2004-[_] in accordance with
the pooling and servicing agreement and the Series 2004-[_] supplement),
(ii) if such Monthly Period relates to a Distribution Date with respect to
the Controlled Accumulation Period, the Class A Floating Percentage of net
investment earnings, if any, in the Principal Funding Account for such
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 2004-[_]
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, the Class A
Initial Invested Amount), 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.
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"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 Distribution Date.
"Class A Monthly Interest" means, for any Distribution Date, an amount 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 in effect for that Interest Period, and
(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
initial Interest Period.
"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 on a prior Distribution Date.
"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) if TRS or an affiliate is no longer the servicer, the Class A
Servicing Fee for the related Distribution Date and any unpaid Class A
Servicing Fee, plus
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(v) the Class A Investor Default Amount, if any, for the related
Distribution Date, minus
(vi) Class A Available Funds for the related Monthly Period.
"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) the actual number of days in the related Interest Period divided by
360,
(ii) the Class B certificate rate for that 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.
"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 sum of:
(i) the Class B Floating Percentage of Reallocated Investor Finance Charge
Collections allocated to the Series 2004-[_] 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 2004-[_] in
accordance with the pooling and servicing agreement and the Series
2004-[_] supplement), and
(ii) if such Monthly Period relates to a Distribution Date with respect to
the Controlled Accumulation Period, the Class B Floating Percentage of net
investment earnings, if any, in the Principal Funding Account for such
Distribution Date.
"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, the Class B
Initial Invested Amount), 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
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(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 2004-[_] 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--Reductions in Class B
Invested Amount and Collateral Invested Amount" 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 Distribution Date.
"Class B Monthly Interest" means, for any Distribution Date, 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 in effect for that Interest Period, and
(iii) the Class B Invested Amount 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
initial Interest Period.
"Class B Outstanding Monthly Interest" means, for any Distribution Date, the
amount of Class B Monthly Interest previously due but not paid to Class B
certificateholders on a prior Distribution Date.
"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
S-49
(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) if TRS or an affiliate is no longer the servicer, the Class B
Servicing Fee for the related 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 Monthly Period.
"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 Minimum 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 Minimum Interest Rate.
"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 2004-[_] in accordance with the pooling and servicing agreement and the
Series 2004-[_] supplement).
"Collateral Charge-Off" has the meaning described in "Series
Provisions--Defaulted Receivables; Investor Charge-Offs--Reductions in Class B
Invested Amount and Collateral Invested Amount" in this prospectus supplement.
"Collateral Default Amount" means, with respect to any Distribution Date,
the product of the Investor Default Amount for such Distribution Date 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:
S-50
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, the Collateral Initial
Invested Amount), 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
2004-[_] 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 2004-[_] 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 Minimum Interest Rate" means an annual rate specified in the
agreement among RFC II, RFC III, RFC IV, TRS and the holder of the Collateral
Interest relating to the transfer of the Collateral Interest from RFC II, RFC
III and RFC IV to the holder of the Collateral Interest, which rate will not
exceed LIBOR for one-month United States dollar deposits, determined as of the
related LIBOR Determination Date, plus [____]%.
"Collateral Minimum Monthly Interest" means, for any Distribution Date, an
amount equal to the product of:
(i) the actual number of days in the related Interest Period divided by
360,
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(ii) the Collateral Minimum Interest Rate in effect for that Interest
Period, and
(iii) the Collateral Initial Invested Amount minus the aggregate amount of
principal payments made to the holder of the Collateral Interest on all
prior Distribution Dates.
"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.
"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 servicer in accordance with the Series 2004-[_] 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 A
Invested Amount, an amount equal to the sum of:
(i) the product of:
(a) the actual number of days in the related Interest Period divided by
360,
(b) the Class A certificate rate in effect for that Interest Period, and
S-52
(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) the actual number of days in the related Interest Period divided by
360,
(b) the Class B certificate rate in effect for that 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 for such 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.
S-53
"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 initial 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 as of such date, the Class B Invested
Amount as of such date and the Collateral Invested Amount as of such date.
"Investor Default Amount" means, for any Distribution Date, the product of
(i) the Floating Allocation Percentage for the related 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 Minimum Interest 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 2004-[_] as of the last day of the immediately preceding Monthly
Period (or, with respect to the first Monthly Period, the Initial Invested
Amount), and
S-54
(ii) during the Controlled Accumulation Period or the Early Amortization
Period, the Series Adjusted Invested Amount for Series 2004-[_] 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, as of the closing
date), and
(ii) the Series Allocation Percentage for Series 2004-[_] 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 2004-[_] 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 2004-
[_], 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 2004-
[_].
"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
Interest 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 Charge Collections allocated to Series 2004-[_] 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 Reserve Account Amount" for any Distribution Date on or after the
Reserve Account must be funded will be equal to:
S-55
(i) [__]% 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 2004-[_]" means the series of Class A certificates, Class B
certificates and Collateral Interest, the terms of which are described in this
prospectus supplement and the accompanying prospectus.
"Series 2004-[_] Termination Date" means the [__________] Distribution Date.
"Series Adjusted Invested Amount" means, with respect to Series 2004-[_],
for any Monthly Period, the Initial Invested Amount for Series 2004-[_], less
the excess, if any, of all reductions in the Invested Amount (other than any
reductions occasioned by payments of principal to the Series 2004-[_]
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 2004-[_] 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
2004-[_], plus
(iv) the amount of funds withdrawn from the Reserve Account and which
are required to be deposited into the Collection Account and 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 2004-[_], for any Monthly Period, the product of (i) the Series
Allocation Percentage for Series 2004-[_] 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.
S-56
"Series Allocation Percentage" means, with respect to Series 2004-[_], 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 2004-[_] as of the last day of the
immediately preceding Monthly Period and the denominator of which is the Trust
Adjusted Invested Amount.
"Series Required Transferor Amount" for any date of determination means 7%
of the Invested Amount.
"Servicing Base Amount" means, for any Distribution Date, (i) the Adjusted
Invested Amount as of the last day of the Monthly Period preceding such
Distribution Date, minus (ii) the product of the amount, if any, on deposit in
the Special Funding Account as of the last day of the Monthly Period preceding
such Distribution Date and the Series Allocation Percentage with respect to
such Monthly Period.
"Servicing Fee Rate" means 2.0% per year.
"Telerate Page 3750" means the display page currently so designated on the
Moneyline Telerate Service (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 designated for the trust based on the eligibility criteria specified in
the pooling and servicing agreement.
S-57
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Annex I
Other Series
The table below sets forth the principal characteristics of all other Series
issued by the trust and currently outstanding.
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 year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . $73,600,000
Class B Certificate Rate. . . . . . . . . . . . . . . . One-Month LIBOR plus 0.40% per year
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 year
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 year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . $75,200,000
Class B Certificate Rate. . . . . . . . . . . . . . . . One-Month LIBOR plus 0.39% per year
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 year
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 year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . $73,600,000
Class B Certificate Rate. . . . . . . . . . . . . . . . One-Month LIBOR plus 0.38% per year
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 year
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 year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . $40,000,000
Class B Certificate Rate. . . . . . . . . . . . . . . . One-Month LIBOR plus 0.31% per year
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 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 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 year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . $48,000,000
Class B Certificate Rate. . . . . . . . . . . . . . . . One-Month LIBOR plus 0.45% per year
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 year
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 year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . $57,600,000
Class B Certificate Rate. . . . . . . . . . . . . . . . One-Month LIBOR plus 0.45% per year
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 year
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 year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . $73,600,000
Class B Certificate Rate. . . . . . . . . . . . . . . . One-Month LIBOR plus 0.40% per year
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 year
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 year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . $88,000,000
Class B Certificate Rate. . . . . . . . . . . . . . . . One-Month LIBOR plus 0.37% per year
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 year
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 year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . $60,000,000
Class B Certificate Rate. . . . . . . . . . . . . . . . One-Month LIBOR plus 0.35% per year
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 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 . . . . . . . . . . . . . . . . . .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 year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . $40,800,000
Class B Certificate Rate. . . . . . . . . . . . . . . . . . . . . . . . . . .1.90% per year
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 year
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
Series 2004-1
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . .$800,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . . . .$668,000,000
Class A Certificate Rate. . . . . . . . . . . . . . . . One-Month LIBOR plus 0.08% per year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . . . .$ 60,000,000
Class B Certificate Rate. . . . . . . . . . . . . . . . One-Month LIBOR plus 0.25% per year
Controlled Accumulation Amount (subject to adjustment). . . . . . . . . . . .$60,666,666.67
Approximate Commencement of Controlled Accumulation
Period (subject to adjustment). . . . . . . . . . . . . . . . . . . . . . .February 1, 2008
Annual Servicing Fee Percentage . . . . . . . . . . . . . . . . . . . . . . .2.00% per year
Collateral Initial Invested Amount. . . . . . . . . . . . . . . . . . . . . . . $72,000,000
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 . . . . . . . . . . . . . . . . . . . . . . . February 17, 2009
Series Issuance Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 1, 2004
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Group II
A-14
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SUBJECT TO COMPLETION, DATED MARCH [__], 2004
[AMERICAN Prospectus
EXPRESS
Logo] American Express Credit Account Master Trust
Issuer
American Express Receivables Financing Corporation II
American Express Receivables Financing Corporation III LLC
American Express Receivables Financing Corporation IV LLC
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.
March [__], 2004
Consider carefully the risk factors beginning on page 10 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.
The information in this prospectus and the accompanying prospectus supplement
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 and accompanying prospectus supplement. This prospectus and the
accompanying prospectus supplement are not an offer to sell nor are they
seeking an offer to buy these securities in any jurisdiction 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 94 in this prospectus.
2
TABLE OF CONTENTS
Page
----
Prospectus Summary ..................................................... 5
The Trust and the Trustee ............................................. 5
Centurion ............................................................. 5
FSB ................................................................... 5
The Transferors ....................................................... 5
Trust Assets .......................................................... 6
The Certificates ...................................................... 6
The Transferor Certificates ........................................... 7
Collections by the Servicer ........................................... 7
Allocation of Trust Assets ............................................ 7
Interest Payments on the
Certificates ........................................................ 7
Principal Payments on the
Certificates ........................................................ 7
Revolving Period .................................................... 7
Principal Accumulation and
Amortization Periods ............................................... 8
Early Accumulation and
Amortization Periods ............................................... 8
Reallocated Investor Finance
Charge Collections .................................................. 8
Shared Excess Finance Charge
Collections ......................................................... 9
Shared Principal Collections .......................................... 9
Credit Enhancement .................................................... 9
Tax Status ............................................................ 9
Certificate Ratings ................................................... 9
Risk Factors ........................................................... 10
Use of Proceeds ........................................................ 23
The Trust .............................................................. 23
Centurion's and FSB's Revolving Credit Businesses ...................... 25
General ............................................................... 25
Underwriting and Authorization
Procedures .......................................................... 26
Billing and Payments .................................................. 27
Collection Efforts .................................................... 29
Issuer Rate Fees ....................................................... 29
RFC II, RFC III, RFC IV, Credco,
Centurion, FSB and TRS ................................................ 30
RFC II ................................................................ 30
RFC III ............................................................... 30
RFC IV ................................................................ 30
Credco ................................................................ 31
Centurion ............................................................. 31
FSB ................................................................... 31
Page
----
TRS ................................................................... 31
Merger or Consolidation of a
Transferor or the Servicer ............................................ 32
Assumption of a Transferor's
Obligations ........................................................... 33
The Accounts ........................................................... 34
Description of the Certificates ........................................ 35
General ............................................................... 35
Book-Entry Registration ............................................... 35
Definitive Certificates ............................................... 40
Interest .............................................................. 40
Principal ............................................................. 41
Pay-Out Events and Reinvestment
Events .............................................................. 43
Servicing Compensation and
Payment of Expenses ................................................. 45
The Pooling and Servicing Agreement
Generally ............................................................. 45
Conveyance of Receivables ............................................. 45
Representations and Warranties ........................................ 45
The Transferor Certificates;
Additional Transferors .............................................. 48
Additions of Accounts or
Participation Interests ............................................. 49
Removal of Accounts ................................................... 50
Discount Option ....................................................... 50
Premium Option ........................................................ 52
Indemnification ....................................................... 53
Collection and Other Servicing
Procedures .......................................................... 53
New Issuances ......................................................... 54
Collection Account .................................................... 55
Deposits in Collection Account ........................................ 55
Allocations ........................................................... 57
Groups of Series ...................................................... 57
Reallocations Among Different
Series Within a Reallocation
Group ............................................................... 57
Sharing of Excess Finance Charge
Collections Among Excess
Allocation Series ................................................... 60
Sharing of Principal Collections
Among Principal Sharing Series ...................................... 60
Paired Series ......................................................... 61
Special Funding Account ............................................... 61
Funding Period ........................................................ 62
3
Page
----
Defaulted Receivables; Rebates
and Fraudulent Charges .............................................. 63
Credit Enhancement .................................................... 63
Servicer Covenants .................................................... 66
Certain Matters Regarding the
Servicer ............................................................ 67
Servicer Default ...................................................... 67
Evidence as to Compliance ............................................. 68
Amendments ............................................................ 68
Defeasance ............................................................ 70
List of Certificateholders ............................................ 71
The Trustee ........................................................... 71
Description of the Purchase
Agreements ............................................................ 72
Sale of Receivables ................................................... 72
Representations and Warranties ........................................ 73
Repurchase Obligations ................................................ 73
Reassignment of Other Receivables ..................................... 74
Amendments ............................................................ 74
Termination ........................................................... 74
Certain Legal Aspects of the
Receivables ........................................................... 75
Transfer of Receivables ............................................... 75
Page
----
Regulatory Action, Conservatorship and Receivership and Bankruptcy .... 76
Certain Regulatory Matters ............................................ 78
Consumer Protection Laws .............................................. 79
Tax Matters ............................................................ 80
Federal Income Tax
Consequences--General ............................................... 80
Treatment of the Certificates as Debt ................................. 80
Treatment of the Trust ................................................ 81
Taxation of Interest Income of U.S.
Certificate Owners .................................................... 83
Sale or Exchange of Certificates ...................................... 84
Foreign Certificate Owners ............................................ 85
Backup Withholding and
Information Reporting ............................................... 86
State and Local Taxation .............................................. 86
ERISA Considerations ................................................... 87
Plan of Distribution ................................................... 91
Legal Matters .......................................................... 92
Reports to Certificateholders .......................................... 92
Where You Can Find More
Information ........................................................... 92
Glossary of Defined Terms .............................................. 94
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 in 1996 pursuant to a
pooling and servicing agreement. This agreement, as it has been amended and
restated as of April 17, 2004, is among American Express Travel Related
Services Company, Inc., as servicer, American Express Receivables Financing
Corporation II, American Express Receivables Financing Corporation III LLC and
American Express Receivables Finance Corporation IV LLC, 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.
Centurion
American Express Centurion Bank, a Utah industrial loan company, owns credit
card and other credit or charge accounts from which receivables are
transferred to American Express Receivables Financing Corporation III LLC,
which receivables American Express Receivables Financing Corporation III LLC
may then, subject to certain conditions, add to the trust. See "The Pooling
and Servicing Agreement Generally--Additions of Accounts or Participation
Interests."
We refer to American Express Centurion Bank as "Centurion."
FSB
American Express Bank, FSB, a federal savings bank, owns credit card and other
credit or charge accounts from which receivables are transferred to American
Express Receivables Financing Corporation IV LLC, which receivables American
Express Receivables Financing Corporation IV LLC may then, subject to certain
conditions, add to the trust. See "The Pooling and Servicing Agreement
Generally--Additions of Accounts or Participation Interests."
We refer to American Express Bank, FSB as "FSB" and, together with Centurion,
the "account owners."
The Transferors
American Express Receivables Financing Corporation III LLC is a limited
liability company formed under the laws of the State of Delaware on March 11,
2004. It is a wholly-owned subsidiary of Centurion. RFC III purchases from
Centurion receivables arising in credit card and other credit or charge
accounts owned by Centurion. RFC III may then, subject to certain conditions,
add those receivables to the trust.
American Express Receivables Financing Corporation IV LLC is a limited
liability company formed under the laws of the
5
State of Delaware on March 11, 2004. It is a wholly-owned subsidiary of FSB.
RFC IV purchases from FSB receivables arising in credit card and other credit
or charge accounts owned by FSB. RFC IV may then, subject to certain
conditions, add those receivables to the trust.
American Express Receivables Financing Corporation II, or RFC II, is a
Delaware corporation incorporated under the laws of the State of Delaware on
August 7, 1995 and is a wholly-owned subsidiary of American Express Travel
Related Services Company, Inc. Currently, RFC II does not transfer any
receivables to the trust and we do not expect that RFC II will do so in the
future.
We refer to American Express Receivables Financing Corporation II as "RFC II"
or a "transferor." We refer to American Express Receivables Financing
Corporation III LLC as "RFC III" or a "transferor." We refer to American
Express Receivables Financing Corporation IV LLC as "RFC IV" or a
"transferor." RFC II, RFC III and RFC IV are referred to as the "transferors."
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.
- ---------------
* American Express(R), Optima(R), and Sign & Travel(R) are federally
registered servicemarks of American Express Company and its affiliates.
Each transferor selects the accounts to be designated to the trust 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 the right to receive certain issuer rate fees attributed to the receivables;
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.
6
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.
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
o collections of finance charge receivables and principal receivables and
o principal 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
7
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 each month based on the amount
of principal receivables collected 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.
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.
8
For a more detailed discussion, 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 this prospectus.
Shared Excess Finance Charge Collections
Any series may be included in a group called an excess allocation group. 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 excess allocation 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 principal sharing 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 surety bond
o spread account
o reserve account
o swap arrangement
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.
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.
9
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 delayed or
reduced payments to you.
Prior to the substitution date, Centurion represented and
warranted that its transfer of receivables to the trustee was
either (i) an absolute sale of those receivables or (ii) the
grant of a security interest in those receivables. After the
substitution date, each of Centurion and FSB represents and
warrants that its transfer of receivables to RFC III and RFC
IV, respectively, is an absolute sale of those receivables.
Each of RFC III and RFC IV, in turn, 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.
Prior to the substitution date, Centurion took steps under
the Uniform Commercial Code to perfect the trustee's interest
in the receivables. After the substitution date, each of
Centurion and FSB takes steps under the UCC to perfect the
interests of RFC III and RFC IV, respectively, in the
receivables. Each of RFC III and RFC IV, in turn, takes steps
under the UCC to perfect the trustee's interest in the
receivables. Nevertheless, if the UCC does not govern these
transfers or if some other action is required under
10
applicable law and has not been taken, payments to you could
be delayed or reduced.
Prior to the substitution date, Centurion represented,
warranted, and covenanted that its transfer of receivables to
the trustee was perfected and free and clear of the lien or
interest of any other entity, except for certain permitted
liens. After the substitution date, each of Centurion, FSB,
RFC III, and RFC IV 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, FSB, RFC III, or RFC
IV could have priority over the interest of the trustee in
the receivables;
o the administrative expenses of a conservator, receiver, or
bankruptcy trustee for Centurion, FSB, 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.
Prior to the substitution date, Centurion transferred
receivables to Credco, which in turn transferred receivables
to RFC II, which then transferred receivables to the trustee.
Although the agreements that effected these transfers remain
in place and although RFC II is still a transferor under the
pooling and servicing agreement, the parties do not expect
that future transfers of receivables will be made in this
manner. No assurance can be given, however, that this
expectation will not change or that the parties will not
resume such transfers of receivables. If this were to occur,
risks similar to those described above would exist with
respect to these parties and these transfers, and payments to
you could be delayed or reduced for similar reasons.
Regulatory action or the conservatorship, receivership, or
bankruptcy of Centurion, FSB, TRS, or their affiliates 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
11
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. FSB is a
federal savings bank and is regulated and supervised by the
Office of Thrift Supervision, which is authorized to appoint
the FDIC as conservator or receiver for FSB if certain events
occur relating to FSB's financial condition or the propriety
of its actions. In addition, the FDIC could appoint itself as
conservator or receiver for Centurion or FSB.
Prior to the substitution date, Centurion treated its
transfer of receivables to the trustee as a sale for
accounting purposes. After the substitution date, each of
Centurion and FSB treats its transfer of receivables as a
sale. Arguments may be made, however, that any of these
transfers constitutes 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. The transfers of receivables by Centurion and FSB,
and the related receivables purchase agreements, 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 the transfer of
receivables by Centurion or FSB. 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 or
FSB. The FDIC, moreover, could delay its decision whether to
seek to reclaim, recover, or recharacterize the transfer of
receivables by Centurion or FSB for a reasonable period
following its appointment as conservator or receiver.
Therefore, if the FDIC were to reclaim, recover, or
recharacterize the transfer of receivables by Centurion or
FSB, 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 the transfer of
12
receivables by Centurion or FSB, you could suffer a loss on
your investment if (i) the related receivables purchase
agreement, the pooling and servicing agreement, or the
transfer of receivables by Centurion or FSB 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 related receivables
purchase agreement, the pooling and servicing agreement, or
the certificates, or (iv) the FDIC were to repudiate other
parts of the related receivables purchase agreement, the
pooling and servicing agreement, or other transaction
documents.
RFC III is a wholly-owned subsidiary of Centurion, and RFC IV
is a wholly-owned subsidiary of FSB. Certain provisions of
the FDIA and regulations issued by banking authorities may
apply not only to Centurion and FSB but to their subsidiaries
as well. If RFC III or RFC IV were found to have violated any
of these provisions or regulations, payments to you could be
delayed or reduced. Arguments also may be made that the
FDIC's rights and powers under the FDIA extend to RFC III and
RFC IV and that, as a consequence, the FDIC could repudiate
or otherwise directly affect the rights of certificateholders
under the pooling and servicing agreement. If the FDIC were
to take this position, payments to you could be delayed or
reduced.
In addition, if Centurion or FSB entered conservatorship or
receivership, the FDIC could exercise control over the
receivables or the other assets of RFC III or RFC IV on an
interim or a permanent basis. Although steps have been taken
to minimize this risk, the FDIC could argue that --
o the assets of RFC III or RFC IV (including the receivables)
constitute assets of Centurion or FSB available for liquidation and
distribution by its conservator or receiver;
o RFC III or RFC IV and its assets (including the receivables) should
be substantively consolidated with Centurion or FSB and its assets;
or
o the FDIC's control over the receivables is necessary for Centurion or
FSB to reorganize or to protect the public interest.
If these or similar arguments were made, whether successfully
or not, payments to you could be delayed or reduced.
If TRS or any of its 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, TRS or any of
its affiliates
13
as debtor-in-possession or another interested party could
argue that--
o RFC III or RFC IV and its assets (including the receivables) should
be substantively consolidated with the bankruptcy estate of TRS or
any of its affiliates; or
o the receivables are necessary for TRS or any of its affiliates to
reorganize.
If these or similar arguments were made, whether successfully
or not, payments to you could be delayed or reduced. If TRS
or any of its affiliates were to enter bankruptcy, moreover,
the trustee and the certificateholders could be prohibited
from taking any action to enforce the pooling and servicing
agreement or any other transaction document against TRS or
those affiliates without the permission of the bankruptcy
court.
Regardless of any decision made by the FDIC or ruling made by
a court, the fact that Centurion or FSB has entered
conservatorship or receivership or that a bankruptcy case has
been commenced by or against TRS or its 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 FSB or a court overseeing the bankruptcy
case of TRS or any of its affiliates may have the power (i)
to prevent or require the commencement of an early
amortization period or a rapid accumulation 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 III or RFC IV. If
any of these events were to occur, payments to you could be
delayed or reduced.
Furthermore, at any time, if the appropriate banking
regulatory authorities were to conclude that any obligation
under a receivables purchase agreement, 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, FSB, or their affiliates, such regulatory
authority has the power to order Centurion, FSB, or the
related
14
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 the regulatory authority determines to be
appropriate. If such an order were issued, payments to you
could be delayed or reduced. In addition, Centurion, FSB, or
the related 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.
Prior to the substitution date, Centurion transferred
receivables to Credco, which in turn transferred receivables
to RFC II, which then transferred receivables to the trustee.
Although the agreements that effected these transfers remain
in place and although RFC II is still a transferor under the
pooling and servicing agreement, the parties do not expect
that future transfers of receivables will be made in this
manner. No assurance can be given, however, that this
expectation will not change or that the parties will not
resume such transfers of receivables. If this were to occur,
risks similar to those described above would exist with
respect to these parties and these transfers, and payments to
you could be delayed or reduced for similar reasons.
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 or FSB's ability to maintain
previous levels of finance charges or fees.
Each of the transferors, Centurion and FSB makes
representations and warranties about its compliance with
legal requirements. Each of the transferors 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.
15
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 an
account owner, a 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 and
FSB'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 account owners may not be able to generate new
receivables, or the transferors may not be able to 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 or FSB, as applicable. We do not guarantee that
new
16
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.
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, the Servicemembers Civil Relief Act allows
individuals on active duty in the military to cap the
interest rate and fees incurred before
17
the call to active duty at 6%. In addition, subject to
judicial discretion, any action or court proceeding in which
an individual in military service is involved may be stayed
if the individual's rights would be prejudiced by denial of
such a stay. Currently, some accountholders with outstanding
balances have been placed on active duty in the military, and
more may be placed on active duty in the future. 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 Servicemembers 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.
Competition in the credit card industry may result in a
decline in Centurion's or FSB'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.
- ---------------
* VISA(R) and MasterCard(R) are federally registered trademarks of VISA
U.S.A., Inc. and MasterCard International Incorporated, respectively.
18
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;
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 and FSB'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 and FSB 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.
19
As owners of the accounts, Centurion and FSB retain 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 or FSB, as applicable, 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.
Neither Centurion nor FSB will reduce the interest rate it
charges on the receivables or other fees if that action would
result in a pay-out event, unless it 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.
Neither Centurion nor FSB has 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 or FSB, as
applicable, 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.
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 the likelihood of early payment
20
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.
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
21
Generally--Additions of Accounts or Participation Interests"
in this prospectus.
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.
22
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 III will use these proceeds to purchase additional receivables from
Centurion or for its general company purposes, including repayment of loans
made from time to time by Centurion to RFC III and RFC IV will use these
proceeds to purchase additional receivables from FSB or for its general
company purposes, including repayment of loans made from time to time by FSB
to RFC IV. Each of Centurion and FSB will use such amounts received from RFC
III or RFC IV, respectively, for general corporate purposes.
The Trust
American Express Credit Account Master Trust was formed in 1996 pursuant to
a pooling and servicing agreement. This pooling and servicing agreement, as
amended and restated as of April 17, 2004, is among American Express Travel
Related Services Company, Inc., or TRS, as servicer, RFC II, RFC III and RFC
IV, as transferors, and The Bank of New York, as trustee.
As permitted by the pooling and servicing agreement, the pooling and
servicing agreement was amended and restated as of April 17, 2004 (the
"substitution date") to substitute RFC III as transferor in place of
Centurion. In addition, the pooling and servicing agreement was amended to
designate FSB as an account owner and RFC IV as a transferor. Pursuant to the
pooling and servicing agreement, RFC III and RFC IV have assumed the
obligations of a transferor of the trust. RFC II remains as a transferor and
TRS remains as the servicer.
At the time of such substitution and amendment, Centurion entered into a
receivables purchase agreement with RFC III and FSB entered into a receivables
purchase agreement with RFC IV. Under the receivables purchase agreements,
each of Centurion and FSB sold its existing right, title and interest in, and
on an ongoing basis will sell, the receivables in the designated accounts to
RFC III and RFC IV, respectively. RFC III and RFC IV, as transferors under the
pooling and servicing agreement, in turn transfer the receivables to the
trust.
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.
23
Each transferor, being Centurion and RFC II prior to the substitution date
and being RFC II, RFC III and RFC IV and any additional transferor on and
after the substituton date, has conveyed and will convey 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, Issuer Rate 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, participation interests and related property conveyed to the
trustee pursuant to an assignment, the right to receive Issuer Rate Fees
attributed to the receivables, all monies on deposit in the Collection
Account, the Special Funding Account and in certain accounts maintained for
the benefit of the certificateholders, any series enhancements, and all of
each transferor's legal rights and remedies under the receivables purchase
agreements.
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.
Throughout the term of the trust, the accounts from which the receivables
arise will be the accounts designated 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 related selection dates, 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.
24
Centurion's and FSB's Revolving Credit Businesses
General
The receivables transferred to the trust are certain receivables generated
from transactions made by persons who are holders of consumer American Express
revolving credit card accounts issued by Centurion or FSB, whether branded
"Optima" Card accounts, "Blue" from American Express or otherwise, Optima Line
of Credit accounts and Sign & Travel/Extended Payment Option revolving credit
accounts or features. Cards issued by Centurion and FSB 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
or FSB.
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." American Express credit card accounts originated by Centurion and FSB
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 and FSB offer American Express credit card accounts that
are originated under affinity or co-branded programs between one of the
issuing American Express banks and certain unaffiliated entities. Centurion
and FSB also distribute 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 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
25
predecessor to the Optima Line of Credit account was established in 1985. The
Optima Line of Credit accounts were principally generated through (i)
applications mailed directly to existing cardmembers, (ii) direct mail
solicitations to existing or prospective cardmembers for accounts on a pre-
approved credit basis and (iii) with respect to certain Optima Line of Credit
accounts, purchases of accounts from other financial institutions providing
lines of credit to cardmembers.
Sign & Travel/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.
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 and FSB use 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. The applicable issuing
bank 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 and FSB with the credit attributes, scores, and encrypted names and
addresses of persons passing the minimum criteria. Centurion and FSB then
screen out persons with prior American Express delinquencies and incidents of
fraud, and use 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,
26
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 American Express 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 and FSB have 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.
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 or FSB, as
appropriate, 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 and FSB 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 or FSB, as applicable, 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
27
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 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
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.
28
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 the appropriate issuing bank, TRS and collection agencies and
attorneys retained by such issuing bank. Under current practice, Centurion and
FSB include 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 that are
considered 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
it is determined that the account holder is unable to pay the outstanding
balance, the account is "pre-empted"--i.e., the card is cancelled, credit
privileges are revoked, and more intensive collection action is initiated. For
all other account holders, credit privileges are generally cancelled no later
than 90 days from initial billing. For both the pre-empted accounts and those
reaching the 90-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 and FSB, respectively, may enter into arrangements with account
holders to extend or otherwise change payment schedules to maximize
collections. In the future, each of the Centurion and FSB may sell its rights
to certain collections to its affiliates or collection agencies.
Generally, it is Centurion's and FSB's practices 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 and FSB may change
over time in accordance with its business judgment and applicable law.
Issuer Rate Fees
Centurion and FSB receive certain fees (referred to in this prospectus and
the accompanying prospectus supplement as "Issuer Rate Fees") as partial
compensation for taking credit risk, absorbing fraud losses, funding
receivables and servicing account holders. Issuer Rate Fees earned by issuing
banks in connection with account holder charges for merchandise and services
is collected by the American Express system. These Issuer Rate Fees are
similar in concept to interchange fees that are received by issuing banks in
transactions on bank-card networks. TRS may from time to time change the
amount of Issuer Rate Fees. Issuer Rate Fees payable to Centurion and FSB will
be allocated and sold to RFC III and RFC IV, respectively, for each month in
an amount equal to the product of:
o a fraction, the numerator of which is the Issuer Rate Fees payable to
Centurion or FSB, as applicable, during the second preceding Monthly
Period and the denominator of which is the aggregate amount of cardholder
charges in all accounts owned by Centurion or FSB, as applicable,
excluding balance transfer transactions, purchases
29
made by convenience checks, cash advances and certain ineligible products
and services offered by TRS or any affiliate or subsidiary thereof, in
each case with respect to such Monthly Period, and
o new principal receivables in the accounts with respect to such Monthly
Period.
This calculation represents an estimate of the actual Issuer Rate Fees payable
to Centurion and FSB from time to time in respect of the receivables and may
be greater or less than the actual amount of Issuer Rate Fees so payable. Each
of Centurion and FSB will be required, pursuant to the terms of the related
purchase agreement, to transfer to RFC III and RFC IV, respectively, and RFC
III and RFC IV will in turn be required, pursuant to the terms of the pooling
and servicing agreement, to transfer to the trust for the benefit of the
certificateholders, these Issuer Rate Fees. Issuer Rate Fees, if any, will be
included in collections of finance charge receivables pursuant to the pooling
and servicing agreement for purposes of determining the amount of finance
charge collections and allocating such collections and payments to the
certificates. Issuer Rate Fees, if any, will also be included in finance
charge receivables for purposes of calculating the average yield on the
portfolio of accounts included in the trust applicable to any series of
certificates.
RFC II, RFC III, RFC IV, Credco, Centurion, FSB 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.
RFC III
RFC III, a transferor, was formed under the laws of the State of Delaware on
March 11, 2004. Its sole member is Centurion. RFC III was formed 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
Centurion, as sole member of RFC III, nor RFC III's board of directors,
intends to change the business purpose of RFC III. RFC III's executive offices
are located at 4315 South 2700 West, Salt Lake City, Utah 84184.
RFC IV
RFC IV, a transferor, was formed under the laws of the State of Delaware on
March 11, 2004. Its sole member is FSB. RFC IV was formed for the limited
purpose of issuing securities of the type offered hereby, purchasing, holding,
owning and selling receivables and any
30
activities incidental to and necessary or convenient for the accomplishment of
such purposes. Neither FSB, as sole member of RFC IV, nor RFC IV's board of
directors, intends to change the business purpose of RFC IV. RFC IV's
executive offices are located at 4315 South 2700 West, Salt Lake City, Utah
84184.
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, Centurion and FSB 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.
Centurion
Centurion, an account owner, 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.
FSB
FSB, an account owner, was chartered by the Office of Thrift Supervision under
the laws of the United States of America as a federal savings bank in 2000 and
received FDIC insurance in 2000. Its principal office is located at 4315 South
2700 West, Salt Lake City, Utah 84184. FSB is a wholly owned subsidiary of
TRS.
In December 2003, FSB and certain of its affiliates received OTS approval
to, among other things, transfer ownership of FSB from American Express
Financial Corporation to TRS, relocate its headquarters from Minneapolis,
Minnesota to Salt Lake City, Utah, and amend its business plan to permit FSB
to offer certain credit, charge and consumer lending products, small business
loans, mortgages and mortgage-related products and a transactional Internet
site. The implementation of the changes to FSB's business plan began in the
first quarter of 2004 with the transfer of certain credit card and charge
accounts from Centurion to FSB.
TRS
TRS, a company incorporated under the laws ofthe State of New York on May 3,
1982, is a wholly owned subsidiary of American Express Company and the direct
parent company of Centurion, FSB, 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 World Financial Center, 200 Vesey Street, New York, New York 10285-
4405.
31
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.
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:
(vii) the surviving entity is an eligible servicer under the pooling and
servicing agreement;
(viii) 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
(ix) in a supplement to the pooling and servicing agreement, the
surviving entity expressly assumes the servicer's obligations
under such agreement.
32
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
(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.
33
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, the receivables of which will ultimately be conveyed to the
trust. Neither RFC III nor RFC IV owns accounts. If either RFC III or RFC IV
is required to designate accounts to the trust, it may give notice of the
required addition to Centurion or FSB, as applicable. Under the applicable
purchase agreement, Centurion or FSB will be obligated to designate accounts
as requested. In addition, Centurion or FSB, as applicable, may, at the
request of RFC III or RFC IV, as applicable, designate accounts to be included
as Additional Accounts and sell the receivables in those accounts to RFC III
or RFC IV, as applicable. See "The Purchase Agreements" in this prospectus.
Such accounts designated for the trust 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 any transferor transfers any
receivables arising in Additional Accounts 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 selection date related to their
dates of designation for inclusion in the trust 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. 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
34
generated under Additional Accounts, but will not include the receivables
generated under removed accounts or removed participation interests.
Centurion and FSB transfer to RFC III and RFC IV, respectively, and RFC III
and RFC IV in turn transfer to the trust, the Issuer Rate Fees. The Issuer
Rate Fees are similar in concept to interchange fees that are received by
issuing banks in transactions on bank-card networks. Pursuant to the pooling
and servicing agreement, these Issuer Rate Fees are treated as collections of
finance charge receivables. See "Centurion's and FSB's Revolving Credit
Businesses--Issuer Rate Fees" above.
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
35
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.
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
36
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.
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
37
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.
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.
38
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
39
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.
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 year 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
40
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.
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
41
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.
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
42
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 the transferors 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.
43
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.
44
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
(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.
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 accounts existing
at the applicable 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
accounts existing at the applicable cut-off date, all receivables
thereafter created from time to time under the accounts, all Recoveries
allocable to the trust and the proceeds of all of the foregoing.
From time to time, RFC III and RFC IV 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 RFC II, RFC III and RFC IV may assign to
the trust its interest in participations, all insurance proceeds, all
Recoveries allocable to the trust, and the proceeds of all of the foregoing.
Representations and Warranties
Under the pooling and servicing agreement, RFC II, RFC III and RFC IV 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;
45
(ii) as of each applicable selection date, each of the receivables then
existing in the
accounts 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 such transferor and receipt
of written notice of the breach by such 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 such
transferor 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.
An Ineligible Receivable will be reassigned to the related transferor on or
before the Monthly Period in which such reassignment obligation arises by the
servicer deducting 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, such transferor 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 related transferor, and
the obligation of such transferor 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.
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 corporation or a limited liability company, 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.
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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 related transferor 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. Such transferor 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.
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 related transferor 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
delivered 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 cut-off date:
(i) its account number and
(ii) except in the case of new accounts and the list delivered on the
substitution date, the aggregate amount of receivables in such account.
The transferors, Centurion, FSB and Credco will retain and will not deliver
to the trustee any other records or agreements relating to the accounts or the
receivables, as applicable. 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
47
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, Centurion, FSB 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,
(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
48
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. The conveyance by any transferor 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,
(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.
Any Additional Accounts designated to the trust will be selected from
accounts owned by Centurion or FSB. Therefore, if Additional Accounts are to
be designated, a transferor shall, under the applicable receivables purchase
agreement, request that Centurion or FSB, as applicable, designate accounts
which qualify as Eligible Accounts to such transferor. Such transferor will
then designate such accounts to the trust.
Each Additional Account must be an Eligible Account at the time of its
designation to the trust. 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
49
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. 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.
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
50
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.
On the first series closing date, the transferors designated an initial
discount percentage equal to 2.0%. As of April 17, 2004, the transferors
reduced the discount percentage to 0.0%. Any increase, reduction or withdrawal
of such discount percentage will be made in accordance with the conditions
described in the preceding paragraphs.
51
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.
52
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, each transferor has 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 each transferor 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 any such
person in the performance of duties or by reason of reckless disregard of its
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
53
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.
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;
54
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.
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, 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
55
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.
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.
56
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.
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
57
(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.
58
-------------------------------
American Express Credit Account
Master Trust
Finance Charge
Collections
-------------------------------
|
|
-----------------------------------------------------------------------------
| | |
| | |
-------------------------- -------------------------- --------------------------
Series 1 Series 2 Series 3
Step Series Allocable Finance Series Allocable Finance Series Allocable Finance
1 Charge Collections (based Charge Collections (based Charge Collections (based
upon the Series Allocation upon the Series Allocation upon the Series Allocation
Percentage Percentage Percentage
-------------------------- -------------------------- --------------------------
| | |
| | |
------------------ ------------------ ------------------
| | | | | |
-------------- ------------------- ------------- ------------------- -------------- -------------------
Investor Finance Investor Finance Investor Finance
Transferors' Charge Collections Transferors' Charge Collections Transferors' Charge Collections
Step Finance Charge (based upon the Finance Charge (based upon the Finance Charge (based upon the
2 Collections Floating Allocation Collections Floating Allocation Collections Floating Allocation
Percentage) Percentage) Percentage)
-------------- ------------------- ------------- ------------------- -------------- -------------------
| | |
| | |
------------------------------------------------------------------------------------
|
|
Step ------------------------------------------------------------------------------------
3 _ Group
| Investor Finance Charge Collections
| ------------------------------------------------------------------------------------
|
|----------------------------------------
| |
| ------------------------------|---------------------------------
| | | |
| ------------------------------------------------------------------------------------
Step | Series 1 Series 2 Series 3
4 | Investor Monthly Interest Investor Monthly Interest Investor Monthly Interest
| ------------------------------------------------------------------------------------
|
|----------------------------------------
| |
| ------------------------------|---------------------------------
| | | |
| ---------------------------------------------------------------------------------------
| Series 1 Series 2 Series 3
| Investor Default Amount Investor Default Amount Investor Default Amount
| ---------------------------------------------------------------------------------------
|
|----------------------------------------
| |
| ------------------------------|---------------------------------
| | | |
| ---------------------------------------------------------------------------------------
| Series 1 Series 2 Series 3
| Investor Monthly Fees Investor Monthly Fees Investor Monthly Fees
| ---------------------------------------------------------------------------------------
|
|----------------------------------------
| |
| ------------------------------|---------------------------------
| | | |
| ---------------------------------------------------------------------------------------
| Series 1 Series 2 Series 3
| Investor Additional Amounts Investor Additional Amounts Investor Additional Amounts
| ---------------------------------------------------------------------------------------
|
|----------------------------------------
| |
| ------------------------------|---------------------------------
| | | |
| ---------------------------------------------------------------------------------------
| Series 1 Series 2 Series 3
| Balance based upon Balance based upon Balance based upon
| Investor Amount Investor Amount Investor Amount
| ---------------------------------------------------------------------------------------
59
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 them, 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
60
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
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
61
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.
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
62
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.
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
63
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
64
to the holders of subordinated certificates are paid to the holders of the
certificates that are senior to such subordinated certificates.
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
65
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.
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.
66
Such assignment and transfer will be made when the servicer deposits an
amount equal to the amount of such receivables in the Collection Account on
the Business Day preceding the Distribution Date following the Monthly Period
during which such obligation arises. This transfer and assignment to the
servicer constitutes the sole remedy available to the certificateholders if
such covenant or warranty of the servicer is not satisfied and the trust's
interest in any such assigned receivables will be automatically assigned to
the servicer.
Certain Matters Regarding the Servicer
The servicer may not resign from its obligations and duties under the
pooling and servicing agreement except:
(i) upon determination that the performance of such obligations and duties
is no longer permissible under applicable law or
(ii) if such obligations and duties are assumed by an entity that has
satisfied the Rating Agency Condition.
No such resignation will become effective until the trustee or a successor
to the servicer has assumed the servicer's obligations and duties under the
pooling and servicing agreement. Notwithstanding the foregoing, the servicer
may assign part or all of its obligations and duties as servicer under the
pooling and servicing agreement if such assignment satisfies the Rating Agency
Condition. TRS may assign or delegate all or part of its rights, duties and
obligations as servicer to Centurion within the next two years.
Any person into which, in accordance with the pooling and servicing
agreement, the servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which the servicer is a party, or any
person succeeding to the business of the servicer, will be the successor to
the servicer under the pooling and servicing agreement.
Servicer Default
In the event of any Servicer Default, 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
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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.
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.
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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,
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
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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, the
transferors have the right to use collections on receivables to purchase
Eligible Investments rather than additional receivables.
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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.
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, Floor 8 West, New York, New York 10286. The
transferors, the servicer and their respective affiliates may from time to
time enter into normal banking and trustee relationships with the trustee and
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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 summarizes the material terms of the RFC III purchase
agreement, which is the receivables purchase agreement between Centurion and
RFC III, and the RFC IV purchase agreement, which is the receivables purchase
agreement between FSB and RFC IV. We refer to the RFC III purchase agreement
and the RFC IV purchase agreement collectively as the "purchase agreements"
and we refer to RFC III and RFC IV individually as the "purchaser" and
collectively as the "purchasers." Forms of the purchase agreements are filed
as exhibits to this registration statement, of which this prospectus is a
part.
Sale of Receivables
Centurion and FSB are the owners of the accounts which contain the
receivables that are purchased by RFC III and RFC IV, respectively, pursuant
to the respective purchase agreement and then transferred by RFC III and RFC
IV to the trust. In connection with the sale of receivables to RFC III and RFC
IV, respectively, each of Centurion and FSB has:
o filed appropriate UCC financing statements to evidence the sale to the
respective purchaser and to perfect the right, title and interest of such
purchaser in those receivables; and
o indicated in its books and records (including any related computer files)
that the receivables have been sold by it to the respective purchaser.
Pursuant to the applicable purchase agreement, Centurion and FSB,
respectively:
o sold all of its right, title and interest, if any, in the receivables
existing in the initial accounts at the close of business on the
substitution date and in the receivables thereafter arising in those
accounts, in each case including all Issuer Rate Fees, insurance proceeds
and Recoveries allocable to such receivables, all monies due or to become
due, all amounts received or receivable, all collections and all
proceeds, each as it relates to such receivables; and
o will, from time to time, at the request of the respective purchaser,
designate Additional Accounts and sell to the respective purchaser all of
its right, title and interest in the receivables existing in the
additional accounts on the applicable addition cut-off date and in the
receivables arising thereafter in those accounts, in each case including
all Issuer Rate Fees, insurance proceeds, Recoveries, all monies due or
to become due, all amounts received or receivable, all collections and
all proceeds, each as it relates to such receivables.
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Under each purchase agreement, the allocated Issuer Rate Fees for each
calendar month is to be paid by Centurion or FSB, as applicable, to the
respective purchaser in the second following calendar month. For each calendar
month, the allocated Issuer Rate Fees will be an amount equal to the product
of (a) a fraction, the numerator of which is the Issuer Rate Fees payable to
Centurion or FSB, as applicable, during the second preceding Monthly Period
and the denominator of which is the aggregate amount of cardholder charges in
all accounts owned by Centurion or FSB, as applicable, excluding balance
transfer transactions, purchases made by convenience checks, cash advances and
certain ineligible products and services offered by TRS or any affiliate or
subsidiary thereof, in each case with respect to such Monthly Period, and (b)
new principal receivables in the accounts with respect to such Monthly Period.
Pursuant to the pooling and servicing agreement, each of RFC III and RFC IV
has assigned all of its right, title and interest in the respective purchase
agreement, including its right to enforce the agreement against Centurion or
FSB, as applicable, to the trustee.
Representations and Warranties
In each purchase agreement, Centurion or FSB, respectively, represents and
warrants to the respective purchaser that, among other things:
o it is validly existing in good standing under the applicable laws of the
applicable jurisdiction and has full power and authority to own its
properties and conduct its business;
o its execution and delivery of the purchase agreement and its performance
of the transactions contemplated by that agreement will not conflict with
or result in any breach of any of the terms of any material agreement to
which it is a party or by which its properties are bound and will not
conflict with or violate any requirements of law applicable to it; and
o all governmental authorizations, consents, orders, approvals,
registrations or declarations required to be obtained by it in connection
with its execution and delivery of, and its performance of the applicable
purchase agreement, have been obtained.
Repurchase Obligations
In each purchase agreement, each of Centurion and FSB, respectively, makes
the following representations and warranties, among others:
o as of the applicable cut-off date with respect to the accounts, the list
of accounts and information concerning the accounts provided by it is
accurate and complete in all material respects, with certain permitted
exceptions;
o each receivable conveyed by it to the respective purchaser has been
conveyed free and clear of any lien or encumbrance, except liens
permitted by the applicable purchase agreement;
o all governmental authorizations, consents, orders, approvals,
registrations or declarations required to be obtained, effected or given
by it in connection with the conveyance of receivables to the respective
purchaser have been duly obtained, effected or given and are in full
force and effect;
o as of each applicable selection date, each account was an Eligible
Account;
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o as of each applicable selection date, each of the receivables then
existing in the
accounts was an Eligible Receivable;
o as of the date of creation of any new receivable, such receivable is an
Eligible Receivable; and
o no selection procedures reasonably believed by it to be materially
adverse to the interests of the respective purchaser have been used in
selecting the accounts.
The purchase agreements provide that if Centurion or FSB, as applicable,
breaches any of the representations and warranties described above and, as a
result, the respective purchaser is required under the pooling and servicing
agreement to accept a reassignment of the related Ineligible Receivables
transferred to the trust by such purchaser, then Centurion or FSB, as
applicable, will accept reassignment of such Ineligible Receivables and pay to
the respective purchaser an amount equal to the unpaid balance of such
Ineligible Receivables. See "- Representations and Warranties" in this
prospectus.
Reassignment of Other Receivables
Each of Centurion and FSB, as applicable, also represents and warrants in
the respective purchase agreement that (a) such purchase agreement and any
supplemental conveyance each constitutes a legal, valid and binding obligation
of Centurion or FSB, as applicable, and (b) such purchase agreement and any
supplemental conveyance constitute a valid sale to the respective purchaser of
all right, title and interest of Centurion or FSB, as applicable, of the
receivables, including all Issuer Rate Fees, insurance proceeds, Recoveries,
all monies due or to become due, all amounts received or receivable, all
collections and all proceeds, each as it relates to such receivables, and that
the sale is perfected under the applicable UCC. If a representation described
in (a) or (b) of the preceding sentence is not true and correct in any
material respect and as a result of the breach the respective purchaser is
required under the pooling and servicing agreement to accept a reassignment of
all of the receivables previously sold by Centurion or FSB, as applicable,
pursuant to such purchase agreement, Centurion or FSB, as applicable, will
accept a reassignment of those receivables. See "--Representations and
Warranties" in this prospectus. If Centurion or FSB, as applicable, is
required to accept such reassignment, Centurion or FSB, as applicable, will
pay to the respective purchaser an amount equal to the unpaid balance of the
reassigned receivables.
Amendments
The purchase agreements may be amended by Centurion or FSB, as applicable,
and the respective purchaser without consent of any investor
certificateholders. No amendment, however, may be effective unless:
o written confirmation has been received by such purchaser from each rating
agency that the amendment will not result in the reduction, qualification
or withdrawal of the respective ratings of each rating agency for any
certificates issued by the trust; and
o Centurion or FSB, as applicable, will certify to the respective purchaser
that it reasonably believes that the amendment will not cause a Pay-Out
Event.
Termination
The purchase agreements will not terminate at least until the earlier of (a)
the termination of the trust pursuant to the pooling and servicing agreement
and (b) an amendment to the pooling and servicing agreement to replace RFC III
with an affiliate of RFC III as a transferor
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under the pooling and servicing agreement or to replace RFC IV with an
affiliate of RFC IV as a transferor under the pooling and servicing agreement,
as applicable. Nevertheless, if a receiver or conservator is appointed for
either of Centurion or FSB or certain other liquidation, bankruptcy,
insolvency or other similar events occur, Centurion or FSB, as the case may
be, will cease to transfer receivables to the respective purchaser and
promptly give notice of that event to such purchaser and the trustee, unless
the receiver, conservator or bankruptcy court instructs otherwise.
Certain Legal Aspects of the Receivables
Transfer of Receivables
Prior to the substitution date, Centurion represented and warranted that its
transfer of receivables to the trustee was either (i) an absolute sale of
those receivables or (ii) the grant of a security interest in those
receivables. After the substitution date, each of Centurion and FSB represents
and warrants that its transfer of receivables to RFC III and RFC IV,
respectively, is an absolute sale of those receivables. Each of RFC III and
RFC IV, in turn, 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.
Prior to the substitution date, Centurion took steps under the UCC to
perfect the trustee's interest in the receivables. After the substitution
date, each of Centurion and FSB takes steps under the UCC to perfect the
interests of RFC III and RFC IV, respectively, in the receivables. Each of RFC
III and RFC IV, in turn, takes steps under the UCC to perfect the trustee's
interest in the receivables. Nevertheless, if the UCC does not govern these
transfers or if some other action is required under applicable law and has not
been taken, payments to you could be delayed or reduced.
Prior to the substitution date, Centurion represented, warranted, and
covenanted that its transfer of receivables to the trustee was perfected and
free and clear of the lien or interest of any other entity, except for certain
permitted liens. After the substitution date, each of Centurion, FSB, RFC III,
and RFC IV 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, FSB, RFC III, or RFC IV could have priority over
the interest of the trustee in the receivables;
o the administrative expenses of a conservator, receiver, or bankruptcy
trustee for Centurion, FSB, 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.
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Prior to the substitution date, Centurion transferred receivables to Credco,
which in turn transferred receivables to RFC II, which then transferred
receivables to the trustee. Although the agreements that effected these
transfers remain in place and although RFC II is still a transferor under the
pooling and servicing agreement, the parties do not expect that future
transfers of receivables will be made in this manner. No assurance can be
given, however, that this expectation will not change or that the parties will
not resume such transfers of receivables. If this were to occur, risks similar
to those described above would exist with respect to these parties and these
transfers, and payments to you could be delayed or reduced for similar
reasons.
Certain Matters Relating to Regulatory Action, Conservatorship, Receivership,
and Bankruptcy
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 FDIC as conservator or receiver for
Centurion if certain events occur relating to Centurion's financial condition
or the propriety of its actions. FSB is a federal savings bank and is
regulated and supervised by the Office of Thrift Supervision, which is
authorized to appoint the FDIC as conservator or receiver for FSB if certain
events occur relating to FSB's financial condition or the propriety of its
actions. In addition, the FDIC could appoint itself as conservator or receiver
for Centurion or FSB.
Prior to the substitution date, Centurion treated its transfer of
receivables to the trustee as a sale for accounting purposes. After the
substitution date, each of Centurion and FSB treats its transfer of
receivables as a sale. Arguments may be made, however, that any of these
transfers constitutes the grant of a security interest under general
applicable law. Nevertheless, the FDIC has issued regulations surrendering
certain rights under the FDIA 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. The transfers of receivables by Centurion and FSB, and the related
receivables purchase agreements, 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
the transfer of receivables by Centurion or FSB. 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 or FSB. The FDIC, moreover, could delay its decision
whether to seek to reclaim, recover, or recharacterize the transfer of
receivables by Centurion or FSB for a reasonable period following its
appointment as conservator or receiver. Therefore, if the FDIC were to
reclaim, recover, or recharacterize the transfer of receivables by Centurion
or FSB, 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 the transfer of receivables
by Centurion or FSB, you could suffer a loss on your investment if (i) the
related receivables purchase agreement, the pooling
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and servicing agreement, or the transfer of receivables by Centurion or FSB
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 related receivables
purchase agreement, the pooling and servicing agreement, or the certificates,
or (iv) the FDIC were to repudiate other parts of the related receivables
purchase agreement, the pooling and servicing agreement, or other transaction
documents.
RFC III is a wholly-owned subsidiary of Centurion, and RFC IV is a wholly-
owned subsidiary of FSB. Certain provisions of the FDIA and regulations issued
by banking authorities may apply not only to Centurion and FSB but to their
subsidiaries as well. If RFC III or RFC IV were found to have violated any of
these provisions or regulations, payments to you could be delayed or reduced.
Arguments also may be made that the FDIC's rights and powers under the FDIA
extend to RFC III and RFC IV and that, as a consequence, the FDIC could
repudiate or otherwise directly affect the rights of certificateholders under
the pooling and servicing agreement. If the FDIC were to take this position,
payments to you could be delayed or reduced.
In addition, if Centurion or FSB entered conservatorship or receivership,
the FDIC could exercise control over the receivables or the other assets of
RFC III or RFC IV on an interim or a permanent basis. Although steps have been
taken to minimize this risk, the FDIC could argue that -
o the assets of RFC III or RFC IV (including the receivables) constitute
assets of Centurion or FSB available for liquidation and distribution by
its conservator or receiver;
o RFC III or RFC IV and its assets (including the receivables) should be
substantively consolidated with Centurion or FSB and its assets; or
o the FDIC's control over the receivables is necessary for Centurion or FSB
to reorganize or to protect the public interest.
If these or similar arguments were made, whether successfully or not,
payments to you could be delayed or reduced.
If TRS or any of its 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, TRS or
any of its affiliates as debtor-in-possession or another interested party
could argue that -
o RFC III or RFC IV and its assets (including the receivables) should be
substantively consolidated with the bankruptcy estate of TRS or any of
its affiliates; or
o the receivables are necessary for TRS or any of its affiliates to
reorganize.
If these or similar arguments were made, whether successfully or not,
payments to you could be delayed or reduced. If TRS or any of its affiliates
were to enter bankruptcy, moreover, the trustee and the certificateholders
could be prohibited from taking any action to enforce the pooling and
servicing agreement or any other transaction document against TRS or those
affiliates without the permission of the bankruptcy court.
Regardless of any decision made by the FDIC or ruling made by a court, the
fact that Centurion or FSB has entered conservatorship or receivership or that
a bankruptcy case has
77
been commenced by or against TRS or its 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 FSB or a court overseeing the bankruptcy case of TRS
or any of its affiliates may have the power (i) to prevent or require the
commencement of an early amortization period or a rapid accumulation 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 III or RFC IV. If any of these
events were to occur, payments to you could be delayed or reduced.
Furthermore, at any time, if the appropriate banking regulatory authorities
were to conclude that any obligation under a receivables purchase agreement,
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, FSB, or their affiliates, such
regulatory authority has the power to order Centurion, FSB, 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 the regulatory authority determines
to be appropriate. If such an order were issued, payments to you could be
delayed or reduced. In addition, Centurion, FSB, or the related 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.
Prior to the substitution date, Centurion transferred receivables to Credco,
which in turn transferred receivables to RFC II, which then transferred
receivables to the trustee. Although the agreements that effected these
transfers remain in place and although RFC II is still a transferor under the
pooling and servicing agreement, the parties do not expect that future
transfers of receivables will be made in this manner. No assurance can be
given, however, that this expectation will not change or that the parties will
not resume such transfers of receivables. If this were to occur, risks similar
to those described above would exist with respect to these parties and these
transfers, and payments to you could be delayed or reduced for similar
reasons.
Certain Regulatory Matters
The operations and financial condition of Centurion and FSB are subject to
extensive regulation and supervision under federal and state law. The
appropriate banking regulatory authorities, including the FDIC, have broad
enforcement powers over Centurion and FSB. 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 or
affiliate,
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such federal bank regulatory authorities have the power under the FDIA 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 related bank or
affiliate may not be liable to you for contractual damages for complying with
such an order and no recourse may be available against the relevant regulatory
authority.
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 required that
bank, among other things, to immediately resign as servicer and to cease
performing its duties as servicer within approximately 120 days, 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, FSB and their affiliates have no reason to believe that any
obligation of Centurion, FSB 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, FSB
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 and FSB, 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 caused by its
servicing activities. 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.
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Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the certificateholders if such laws result in any
receivables being charged off as uncollectible. See "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.
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
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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.
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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).
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
83
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.
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.
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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:
(i) is signed by the foreign person under penalties of perjury,
(ii) certifies that the foreign person is not a U.S. person, and
(iii) 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:
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(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.
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.
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.
86
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,
(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 (as the
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transferors to the trust at the time) 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 the 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;
(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;
88
(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;
(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
89
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;
(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 this 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
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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.
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
91
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, FSB 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, RFC III, RFC IV and the trust by Carol V. Schwartz, Group Counsel of
American Express. Mr. Cooper and Ms. Schwartz each own or have the right to
acquire a number of shares of common stock of American Express which in the
aggregate is equal to less than .05% of the outstanding common stock of
American Express. Certain other legal matters will be passed upon for the
transferors and the trust by Orrick, Herrington & Sutcliffe LLP. Certain legal
matters will be passed upon for the underwriters by Orrick, Herrington &
Sutcliffe LLP. Certain legal matters relating to the federal tax consequences
of the issuance of the certificates and certain other matters relating thereto
will be passed upon for the transferors by Orrick, Herrington & Sutcliffe LLP.
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
92
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).
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 10285-4405,
Attention: Secretary; (212) 640-5583.
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Glossary of Defined Terms
"Additional Accounts" are any accounts in the Total Portfolio that are
designated to the trust pursuant to an addition.
"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.
"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,
FSB, any other account owner 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 "The
Pooling and Servicing Agreement Generally--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.
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"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 invested amount of that series, 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,
95
(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,
(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 (other than any
account owner), or
(b) a segregated trust account with the corporate trust department of a
depository institution (other than any account owner) 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.
96
"Eligible Investment" means:
(i) obligations fully guaranteed by the United States of America,
(ii) demand deposits, time deposits or certificates of deposit of
depository institutions or trust companies incorporated under the laws of
the United States of America or any state thereof and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided that, at the time of the trust's
investment therein, the short-term debt of such depository institution or
trust company shall be rated at least "A-1+" (or any other rating subject
to receipt by the transferors, the servicer and the trustee of written
notification from S&P that investments of such type at such other minimum
rating will not result in S&P reducing or withdrawing its then existing
rating of the certificates of any outstanding series or class with
respect to which it is a Rating Agency) by S&P and shall be satisfactory
to each other Rating Agency,
(iii) commercial paper that, at the time of the trust's investment or
a contractual commitment to invest therein, shall be rated at least "A-
1+" (or any other rating subject to receipt by the transferors, the
servicer and the trustee of written notification from S&P that
investments of such type at such other minimum rating will not result in
S&P reducing or withdrawing its then existing rating of the certificates
of any outstanding series or class with respect to which it is a Rating
Agency) by S&P and shall be satisfactory to 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;
97
provided, however, that Eligible Investments shall not include securities
issued by, or other obligations of, any account owner.
"Eligible Receivable" means each receivable:
(a) that has arisen in an Eligible Account;
(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 is 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;
98
(j) as to which, at the time of transfer to the trust, none of the
transferors, Centurion, FSB, 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.
99
"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.
"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 16, 2004.
"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 second day following the last day of the seventh billing cycle of the
second preceding calendar month and ending at the close of business on the day
following 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.
100
"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.
"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
101
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:
(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
102
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 "Description of the
Certificates--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.
"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 FSB and in the future may include
other charge or credit accounts or products owned by Centurion, FSB 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.
103
American Express Credit Account Master Trust
Issuer
SERIES 2004-[_]
$[________]
Class A Floating Rate Asset Backed Certificates
$[________]
Class B Floating Rate Asset Backed Certificates
American Express Receivables Financing Corporation II
American Express Receivables Financing Corporation III LLC
American Express Receivables Financing Corporation IV LLC
Transferors
American Express Travel Related Services Company, Inc.
Servicer
[LOGO]
------------------------
PROSPECTUS SUPPLEMENT
------------------------
Underwriters of the Class A certificates
[A Co.]
[B Co.]
[C Co.]
Underwriter of the Class B certificates
[A 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 ................................................... $126.70**
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 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,
II-1
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
II-2
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
American Express Receivables Financing Corporation III LLC and
American Express Receivables Financing Corporation IV LLC
The Delaware Limited Liability Company Act gives Delaware limited liability
companies broad powers to indemnify and hold harmless any member or manager or
other person from and against any and all claims and demands whatsoever.
No member, director or officer shall be liable to American Express
Receivables Financing Corporation III LLC or any person or entity bound by the
Limited Liability Company Agreement for any loss, damage or claim incurred by
reason of any act or omission performed or omitted by such member, director or
officer in good faith on behalf of American Express Receivables Financing
Corporation III LLC and in a manner reasonably believed to be within the scope
of the authority conferred on such member, director or officer by the Limited
Liability Company Agreement, except that a member, director or officer shall
be liable for any such loss, damage or claim incurred by reason of such
member's, director's or officer's willful misconduct. To the full extent
permitted by applicable law, a member, director or officer shall be entitled
to indemnification from American Express Receivables Financing Corporation III
LLC for any loss, damage or claim incurred by such member, director of officer
by reason of any act or omission performed or omitted by such member or
officer in good faith on behalf of American Express Receivables Financing
Corporation III LLC and in a manner reasonably believed to be within the scope
of the authority conferred on such member, director or officer by the Limited
Liability Company Agreement except that no member, director or officer shall
be entitled to be indemnified in respect of any loss, damage or claim incurred
by such member, director or officer by reason of willful misconduct with
respect to such acts or omissions; provided, however, that any indemnity under
the Limited Liability Company Agreement shall be provided out of and to the
extent of American Express Receivables Financing Corporation III LLC assets
only, and the member shall not have personal liability on account thereof.
No member, director or officer shall be liable to American Express
Receivables Financing Corporation IV LLC or any person or entity bound by the
Limited Liability Company Agreement for any loss, damage or claim incurred by
reason of any act or omission performed or omitted by such member, director or
officer in good faith on behalf of American Express Receivables Financing
Corporation IV LLC and in a manner reasonably believed to be within the scope
of the authority conferred on such member, director or officer by the Limited
Liability Company Agreement, except that a member, director or officer shall
be liable for any such loss, damage or claim incurred by reason of such
member's, director's or officer's willful misconduct. To the full extent
permitted by applicable law, a member, director or officer shall be entitled
to indemnification from American Express Receivables Financing Corporation IV
LLC for any loss, damage or claim incurred by such member, director of officer
by reason of any act or omission performed or omitted by such member or
officer in good faith on behalf of American Express Receivables Financing
Corporation IV LLC and in a manner reasonably believed to be within the scope
of the authority conferred on such member, director or officer by the
II-3
Limited Liability Company Agreement except that no member, director or officer
shall be entitled to be indemnified in respect of any loss, damage or claim
incurred by such member, director or officer by reason of willful misconduct
with respect to such acts or omissions; provided, however, that any indemnity
under the Limited Liability Company Agreement shall be provided out of and to
the extent of American Express Receivables Financing Corporation IV LLC assets
only, and the member shall not have personal liability on account thereof.
Each underwriting agreement will generally provide that the underwriters
will indemnify American Express Receivables Financing Corporation III LLC and
American Express Receivables Financing Corporation IV LLC and their respective
directors, officers and controlling parties against specified liabilities,
including liabilities under the Securities Act of 1933, as amended, relating
to certain information provided or actions taken by the underwriter. American
Express Receivables Financing Corporation III LLC and American Express
Receivables Financing Corporation IV LLC have been advised that in the opinion
of the Securities and Exchange Commission, this indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
Item 16. Exhibits.
Exhibit
Number Description
------ -----------
1.1 Form of Underwriting Agreement.*
3.1 Limited Liability Company Agreement of American Express Receivables Financing Corporation III LLC.*
3.2 Limited Liability Company Agreement of American Express Receivables Financing Corporation IV LLC.*
4.1 Form of Pooling and Servicing Agreement.*
4.2 Form of Series Supplement, including form of Asset Backed Certificate.*
4.3 Receivable Purchase Agreement (incorporated by reference to Exhibit 10.1 to Registration Statement No. 333-67567).
4.4 Form of Receivables Purchase Agreement between American Express Centurion Bank and American Express Receivables
Financing Corporation III LLC.*
4.5 Form of Receivables Purchase Agreement between American Express Bank, FSB and American Express Receivables Financing
Corporation IV LLC.*
5.1 Opinion of American Express Receivables Financing Corporation II with respect to legality.*
5.2 Opinion of American Express Receivables Financing Corporation III LLC with respect to legality.*
5.3 Opinion of American Express Receivables Financing Corporation IV LLC with respect to legality.*
8.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax matters.*
23.1 Consent of American Express Receivables Financing Corporation II (included in its opinion filed as Exhibit 5.1).*
II-4
Exhibit
Number Description
------ -----------
23.2 Consent of American Express Receivables Financing Corporation III LLC (included in its opinion filed as Exhibit
5.2).*
23.3 Consent of American Express Receivables Financing Corporation IV LLC (included in its opinion filed as Exhibit 5.3).*
23.4 Consent of Orrick, Herrington & Sutcliffe LLP (included in its opinion filed as Exhibit 8.1).*
24.1 Powers of Attorney of American Express Receivables Financing Corporation II (included on page II-5).
24.2 Powers of Attorney of American Express Receivables Financing Corporation III LLC (included on page II-7).
24.3 Powers of Attorney of American Express Receivables Financing Corporation IV LLC (included on page II-8).
- ---------------
* 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.
(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.
II-5
(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-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 March 12,
2004.
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 March 12, 2004 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
John D. Koslow (Principal Financial Officer and
Principal Accounting Officer)
II-7
Signature Title
--------- -----
/s/Donald J. Puglisi Director
---------------------------------------------------------
Donald J. Puglisi
/s/ David L. Yowan Director
---------------------------------------------------------
David L. Yowan
II-8
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 March 12,
2004.
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION
III LLC,
as originator of the Trust and Co-Registrant and
as Transferor on behalf of the Trust as Co-
Registrant
By: /s/ Lisa Lambert
Name: Lisa Lambert
Title: Vice President and Treasurer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Leslie R. Scharfstein and Carol V. Schwartz,
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 March 12, 2004 by the following
persons in the capacities indicated.
Signature Title
--------- -----
/s/Leslie R. Scharfstein President and Director
--------------------------------------------------------- (Principal Executive Officer)
Leslie R. Scharfstein
/s/ Lisa Lambert Vice President and Treasurer
--------------------------------------------------------- and Director
Lisa Lambert (Principal Financial Officer and
Principal Accounting Officer)
/s/Ruth K. Lavelle Director
---------------------------------------------------------
Ruth K. Lavelle
II-9
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 March 12,
2004.
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION
IV LLC,
as originator of the Trust and Co-Registrant and
as Transferor on behalf of the Trust as Co-
Registrant
By: /s/ Lisa Lambert
Name: Lisa Lambert
Title: Vice President and Treasurer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Leslie R. Scharfstein and Carol V. Schwartz,
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 March 12, 2004 by the following
persons in the capacities indicated.
Signature Title
--------- -----
/s/Leslie R. Scharfstein President and Director
--------------------------------------------------------- (Principal Executive Officer)
Leslie R. Scharfstein
/s/ Lisa Lambert Vice President and Treasurer
--------------------------------------------------------- and Director
Lisa Lambert (Principal Financial Officer and
Principal Accounting Officer)
/s/Ruth K. Lavelle Director
---------------------------------------------------------
Ruth K. Lavelle
II-10
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
1.1 Form of Underwriting Agreement.*
3.1 Limited Liability Company Agreement of American Express Receivables Financing Corporation III LLC.*
3.2 Limited Liability Company Agreement of American Express Receivables Financing Corporation IV LLC.*
4.1 Form of Pooling and Servicing Agreement.*
4.2 Form of Series Supplement, including form of Asset Backed Certificate.*
4.3 Receivable Purchase Agreement (incorporated by reference to Exhibit 10.1 to Registration Statement No. 333-67567).
4.4 Form of Receivables Purchase Agreement between American Express Centurion Bank and American Express Receivables
Financing Corporation III LLC.*
4.5 Form of Receivables Purchase Agreement between American Express Bank, FSB and American Express Receivables Financing
Corporation IV LLC.*
5.1 Opinion of American Express Receivables Financing Corporation II with respect to legality.*
5.2 Opinion of American Express Receivables Financing Corporation III LLC with respect to legality.*
5.3 Opinion of American Express Receivables Financing Corporation IV LLC with respect to legality.*
8.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect to tax matters.*
23.1 Consent of American Express Receivables Financing Corporation II (included in its opinion filed as Exhibit 5.1).*
23.2 Consent of American Express Receivables Financing Corporation III LLC (included in its opinion filed as Exhibit
5.2).*
23.3 Consent of American Express Receivables Financing Corporation IV LLC (included in its opinion filed as Exhibit 5.3).*
23.4 Consent of Orrick, Herrington & Sutcliffe LLP (included in its opinion filed as Exhibit 8.1).*
24.1 Powers of Attorney of American Express Receivables Financing Corporation II (included on page II-5).
24.2 Powers of Attorney of American Express Receivables Financing Corporation III LLC (included on page II-7).
24.3 Powers of Attorney of American Express Receivables Financing Corporation IV LLC (included on page II-8).
- -------------------------
* To be filed by amendment
II-11