AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 2006
REGISTRATION NOS. 333-130508,
333-130508-01, 333-130508-02 AND
333-130508-03
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
AMERICAN EXPRESS CREDIT ACCOUNT MASTER TRUST
(Issuing Entity in respect of the Certificates)
AMERICAN EXPRESS AMERICAN EXPRESS AMERICAN EXPRESS
RECEIVABLES FINANCING RECEIVABLES FINANCING RECEIVABLES FINANCING
CORPORATION II CORPORATION III LLC CORPORATION IV LLC
(DEPOSITORS)
(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 20-0942395 20-0942445
(I.R.S. Employer Identification (I.R.S. Employer Identification (I.R.S. Employer Identification
Number) Number) Number)
200 VESEY STREET, ROOM 138 4315 SOUTH 2700 WEST, ROOM 1300 4315 SOUTH 2700 WEST, ROOM 1300
MAIL STOP 01-31-12 MAIL STOP 02-01-04 MAIL STOP 02-01-58
NEW YORK, NEW YORK 10285 SALT LAKE CITY, UTAH 84184 SALT LAKE CITY, UTAH 84184
(212) 640-2000 (801) 945-2030 (801) 945-2068
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.
GROUP COUNSEL ALAN M. KNOLL, ESQ.
AMERICAN EXPRESS COMPANY ORRICK, HERRINGTON & SUTCLIFFE LLP
200 VESEY STREET 666 FIFTH AVENUE
NEW YORK, NEW YORK 10285 NEW YORK, NEW YORK 10103
(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 this Form is a registration statement filed pursuant to General
Instruction I.D. or a post-effective amendment thereto that shall become
effective upon filing with the Commission pursuant to Rule 462(e) under the
Securities Act, check the following box. |_|
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction I.D. filed to register additional securities
or additional classes of securities pursuant to Rule 413(b) under the
Securities Act, check the following box. |_|
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------------
TITLE OF SECURITIES PROPOSED MAXIMUM PROPOSED MAXIMUM
TO BE REGISTERED AMOUNT TO BE AGGREGATE PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED(A)(B) CERTIFICATE(C) PRICE(C) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------------
Certificates.................................. $1,000,000 100% $1,000,000 $107
- ----------------------------------------------------------------------------------------------------------------------------------
(a) With respect to any securities 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 securities 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 security 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 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; and
o a form of base prospectus relating to asset-backed certificates of
American Express Credit Account Master Trust.
FORM OF PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED [______], 200[_]
[AMERICAN
EXPRESS LOGO]
AMERICAN EXPRESS CREDIT ACCOUNT MASTER TRUST
ISSUING ENTITY
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION II
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION III LLC
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION IV LLC
DEPOSITORS AND TRANSFERORS
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
SERVICER
AMERICAN EXPRESS CENTURION BANK
AMERICAN EXPRESS BANK, FSB
SPONSORS
SERIES 200[_]-[_]
$[_________] CLASS A FLOATING RATE ASSET BACKED CERTIFICATES
$[_________] CLASS B FLOATING RATE ASSET BACKED CERTIFICATES
THE ISSUING ENTITY 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 [____________] (______)% [____________] (______)%
Underwriting discount [____________] (______)% [____________] (______)%
Proceeds to transferors [____________] (______)% [____________] (______)%
The primary assets of the issuing entity are receivables generated in a
portfolio of designated consumer revolving credit accounts or features and, in
the future, may include other charge or credit accounts or features or
products.
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 issuing entity 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
[A CO.] [B CO.] [C CO.]
[__________], 200[_]
- --------------------------------------------------------------------------------
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE [_] IN THE PROSPECTUS.
A CERTIFICATE IS NOT A DEPOSIT AND NEITHER THE CERTIFICATES NOR THE
UNDERLYING ACCOUNTS OR RECEIVABLES ARE INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE ISSUING ENTITY 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.
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-[__] in this prospectus
supplement and on page [__] in the accompanying prospectus.
i
TRANSACTION SUMMARY
Issuing Entity: American Express Credit
Account Master Trust
Depositors and Transferors: American Express Receivables
Financing Corporation II,
American Express Receivables
Financing Corporation III LLC
and American Express
Receivables Financing
Corporation IV LLC
Sponsors and Originators: American Express Centurion
Bank and American Express
Bank, FSB
Servicer: American Express Travel
Related Services Company,
Inc.
Trustee: The Bank of New York
Series Issuance Date: [__________], 200[_]
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 card 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: [_________________] [_________________]
Approximate end of Revolving
Period and 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) and Sign & Travel(R) are federally registered
servicemarks of American Express Company and its affiliates.
** The percentage of Series 200[_]-[_] comprised by the collateral interest
is [___]%.
*** It is a condition to issuance of the Series 200[_]-[_] certificates that
at least one of these ratings be obtained.
ii
TABLE OF CONTENTS
PAGE
----
Summary of Series Terms ............................................ S-1
Introduction........................................................ S-14
Maturity Considerations............................................. S-14
The Trust Portfolio................................................. S-17
General........................................................... S-17
Loss and Delinquency Experience................................... S-18
Revenue Experience................................................ S-19
Payment Rates..................................................... S-20
The Receivables..................................................... S-21
Series Provisions................................................... S-24
Interest Payments................................................. S-24
Principal Payments................................................ S-26
Subordination of the Class B Certificates
and the Collateral Interest...................................... S-28
Allocation Percentages............................................ S-28
Principal Funding Account......................................... S-29
Reserve Account................................................... S-30
Reallocation of Cash Flows........................................ S-31
PAGE
----
Application of Collections........................................ S-33
Defaulted Receivables; Investor Charge-Offs....................... S-36
Paired Series..................................................... S-38
Pay-Out Events.................................................... S-39
Servicing Compensation and Payment of Expenses.................... S-41
Optional Repurchase............................................... S-41
Series Termination................................................ S-42
Reports........................................................... S-42
ERISA Considerations................................................ S-43
Class A Certificates.............................................. S-43
Class B Certificates.............................................. S-43
The Department of Labor Authorization ............................ S-44
Consultation with Counsel ........................................ S-44
Underwriting........................................................ S-45
Annex I............................................................. A-I-1
Annex II............................................................ A-II-1
iii
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.
RISK FACTORS
Investment in the Series 200[_]-[_] certificates involves certain risks. You
should consider carefully the risk factors beginning on page [__] of the
accompanying prospectus.
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 200[_]-[_] certificates include only
the Class A certificates and Class B certificates and references to Series
200[_]-[_] include the Series 200[_]-[_] certificates and the 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 200[_]-[_] certificates may be purchased in
minimum denominations of $[1,000] and integral multiples of $1,000.
The Series 200[_]-[_] certificates are expected to be issued on [________],
200[_].
DISTRIBUTION DATES
Distribution dates for the Series 200[_]-[_] certificates will commence
[________], 200[_] 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 200[_]-[_] 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.
LIBOR for each interest period will be determined on the second business day
before the beginning of that interest period. LIBOR for the initial interest
period, however, will be determined two business days before the issuance date
of the Series 200[_]-[_] certificates. For calculating LIBOR only, a business
day is any day that U.S. dollar deposits are transacted in the London
interbank market.
LIBOR will be the rate appearing on Telerate Page 3750 as of 11:00 a.m.,
London time, on that date for deposits in U.S. dollars for a one-month period.
If that rate does not appear on Telerate Page 3750, the servicer will request
four prime banks (selected by the servicer) in the London interbank market to
provide quotations of their rates for U.S. dollar deposits for a one-month
period, at approximately 11:00 a.m., London time, on that day. LIBOR will then
be the average of those rates. However, if less than two rates are provided,
LIBOR will be the average of the rates for loans in U.S.
S-1
dollars to leading European banks for a one-month period offered by four major
banks (selected by the servicer) in New York City, at approximately 11:00
a.m., New York City time, on that day.
Interest on the Class A certificates and the Class B certificates for any
distribution date will be calculated as follows:
Number of
days in Rate for
Principal amount interest period interest
at end 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.
No payment of interest will be made on the Class B certificates until the
required payment of interest has been made on the Class A certificates. See
"--Credit Enhancement" and "Series Provisions--Subordination of the Class B
Certificates and the Collateral Interest" in this prospectus supplement.
PRINCIPAL
Principal of the Series 200[_]-[_] certificates is expected to be paid in full
on the [______] distribution date, which is the expected final payment date.
On approximately [________], 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 200[_]-[_] 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 200[_]-[_]
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 200[_]-[_] 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 200[_]-[_]
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.
S-2
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 invested amount will suffer any loss of
principal.
Credit enhancement for the Series 200[_]-[_] certificates is for the benefit
of Series 200[_]-[_] 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.
[LETTER OF CREDIT], [CASH COLLATERAL GUARANTY OR ACCOUNT], [SURETY BOND OR
INSURANCE POLICY], [DERIVATIVE AGREEMENT], [SUPPLEMENTAL CREDIT ENHANCEMENT
AGREEMENT], [SUPPLEMENTAL LIQUIDITY AGREEMENT]
[The trust may obtain a letter of credit to serve as an additional source of
funds to pay [principal of or interest] on the [Class [_]]/[Series 200[_]-[_]]
certificates.]
[The trust may obtain a cash collateral guaranty or account to serve as an
additional source of funds to pay [principal of or interest] on the[Class
[_]]/[Series 200[_]-[_]] certificates.]
[The trust may obtain a surety bond or insurance policy to serve as an
additional source of funds to pay [principal of or interest] on the [Class
[_]]/[Series 200[_]-[_]] certificates.]
[The trust will enter into a derivative agreement to serve as an additional
source of funds to pay [principal of or interest] on the [Class [_]]/[Series
200[_]-[_]] certificates.]
[The trust will enter into a supplemental [credit enhancement] [liquidity]
agreement as an additional source of funds to pay [principal of or interest
on] the [Class [_]]/[Series 200[_]-[_]] certificates.]
[DERIVATIVE COUNTERPARTY]
[The derivative counterparty under the derivative agreement is [_]. The
derivative counterparty is a [state/country of incorporation] corporation and
was incorporated in [_].
The derivative counterparty provides a wide range of business and banking
S-3
services, including [description of services and general character].
The long-term credit rating assigned to the derivative counterparty by Moody's
is currently "[_]" and by Standard & Poor's is currently "[_]." The short-term
credit rating assigned to the derivative counterparty by Moody's is currently
"[_]" and by Standard & Poor's is currently "[_]."
[Describe the operation and material terms of any derivative agreement,
including limits on amount and timing of payments. Describe material
provisions regarding the substitution of the derivative counterparty.]
Based on a reasonable good faith estimate of maximum probable exposure, the
significance percentage of the derivative agreement is [less than 10%].]
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 notice to, or review or consent by, you or any other certificateholder.
THE TRANSFEROR INTEREST
The interest in the trust not represented by your series or by any other
series is the transferors' interest. 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 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 Total receivables in the trust:
$[___________]
o Principal receivables in the trust: $[______]
o Finance charge receivables in the trust: $[______]
o Accounts designated to the trust:
[________]
o Account billing addresses: generally all 50 states plus the District of
Columbia and Puerto Rico
See "The Trust Portfolio" in this prospectus supplement, and "Centurion's and
FSB's Revolving Credit Businesses" and "The Accounts" in the accompanying
prospectus.
S-4
KEY PARTIES AND OPERATING DOCUMENTS
- ----------------------- -----------------------
American Express American Express
Centurion Bank Bank FSB
(Sponsor) (Sponsor)
- ----------------------- -----------------------
| |
| |
| | Receivables
Receivables Receivables <---- Purchase
| | Agreements
| |
| |
- ----------------------- ----------------------- -----------------------
American Express American Express American Express
Receivables Financing Receivables Financing Receivables Financing
Corporation III Corporation IV Corporation II*
(Transferor and (Transferor and (Transferor and
Depositor) Depositor) Depositor)
- ----------------------- ----------------------- -----------------------
| | | |
| | | |
| | | | Pooling and
Receivables Transferor Receivables Transferor <---- Servicing
Interest Interest Agreement
| | | |
| | | |
| | | |
----------------------------------------------
American Express Credit Pooling and
Account Master Trust <---- Servicing
(Issuing Entity) Agreement
----------------------------------------------
|
- ----------------- |
American |
Express Travel -------------------
Related Services Series
Company, Inc. 200[_]-[_]
(Servicer) -------------------
- ----------------- | | |
The Bank of | | | <---- Series 200[_]-[_]
New York | | | Supplement
(Trustee) Class A Class B Collateral
- ----------------- certificates certificates Interest
| |
| |
| |
------------------
Certificateholders
------------------
* American Express Receivables Financing Corporation II does not currently
transfer any receivables to the issuing entity and it is not expected to do
so in the future.
S-5
COLLECTIONS BY THE SERVICER
The servicer will collect payments on the receivables, will deposit (or cause
to be deposited) those collections in the collection 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 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:
- ---------------
* American Express(R) and Sign & Travel(R) are federally registered
servicemarks of American Express Company and its affiliates.
S-6
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 200[_]-[_] 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.
Series 200[_]-[_] 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.
APPLICATION OF COLLECTIONS
FINANCE CHARGE COLLECTIONS AND EXCESS SPREAD
Each month, collections of finance charge receivables allocated to the Class A
certificates, the Class B certificates and the collateral interest, and the
excess spread that may remain, will generally be applied as follows:
S-7
- ----------------------------- ----------------------------- -----------------------------
Finance charge collections Finance charge collections Finance charge collections
and other amounts allocated and other amounts allocated and other amounts allocated
to the Class A certificates to the Class B certificates to the collateral interest
- ----------------------------- ----------------------------- -----------------------------
| | |
| | |
| | |
- ----------------------------- ----------------------------- -----------------------------
Interest due on the Class Interest due on the Class Collateral interest's
A certificates B certificates portion of the servicing
- ----------------------------- ----------------------------- fee
Class A's portion of the Class B's portion of the (if TRS is not the servicer)
servicing fee servicing fee -----------------------------
(if TRS is not the servicer) (if TRS is not the servicer) |
- ----------------------------- ----------------------------- |
Class A's portion of the | |
defaulted amount | |
- ----------------------------- | |
| | |
| | |
| | |
- --------------------------------------------------------------------------------------------
Excess Spread and Excess Finance Charge Collections From Other Series
- --------------------------------------------------------------------------------------------
------------------------------------------------------------------------
First: ---> Deficiencies to the Class A certificates
| ------------------------------------------------------------------------
|
| ------------------------------------------------------------------------
Second: ---> Deficiencies to the Class B certificates
| ------------------------------------------------------------------------
|
| ------------------------------------------------------------------------
Third: ---> Interest due on the collateral interest
| ------------------------------------------------------------------------
|
| ------------------------------------------------------------------------
Fourth: ---> Deficiencies to the servicer
| ------------------------------------------------------------------------
|
| ------------------------------------------------------------------------
Fifth: ---> Reductions of the collateral invested amount
| ------------------------------------------------------------------------
|
| ------------------------------------------------------------------------
Sixth: ---> Reserve account
| ------------------------------------------------------------------------
|
| ------------------------------------------------------------------------
Seventh: ---> 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-8
PRINCIPAL COLLECTIONS
Each month, your series' share of principal collections will generally be
applied as follows:
Available Principal Collections
- --------------------------- ---------------------------- --------------------
During the revolving period: During the controlled During the early
accumulation period: amortization period:
- --------------------------- ---------------------------- --------------------
| | |
| | |
| | |
| --------------------------- First, Class A
| Principal funding account invested amount
| --------------------------- |
| | |
| | |
| | Second, Class B
| First, Class A invested amount
| invested amount |
| | |
| | |
| | Third, collateral
| Second, Class B invested amount
| invested amount |
| | |
| | |
| | |
| Third, collateral |
| invested amount |
| | |
| | |
| ---------------------------- |
|--------------- Shared principal collections-----------
----------------------------
|
|
|
Principal shortfalls of other principal
sharing series
| |
| or |
| |
Holders of the Special funding
transferors' interest account
S-9
See "Maturity Considerations," "Series Provisions--Principal Payments" and
"--Application of Collections" in this prospectus supplement.
FEES AND EXPENSES PAYABLE FROM COLLECTIONS
o Fees and expenses payable from collections of finance charge receivables
-- 2.0% of invested amount paid to the servicer as described below.
SERVICING FEE
The servicer is entitled to receive a monthly servicing fee as compensation
for its servicing activities and as reimbursement for any expenses incurred by
it as servicer. For each month, the servicing fee will equal one-twelfth of
the product of:
o 2.00% per year; and
o the invested amount for the related monthly period.
The servicing fee will be allocated among the transferor interest and the
certificateholders.
REVOLVING PERIOD
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 200[_]-[_] 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.
[PREFUNDING PERIOD
Provide the prefunding amount in the prefunding account, the date by which the
invested amount is expected to equal the aggregate principal amount of the
certificates and any other information required by Item 1103(a)(5) of
Regulation AB.]
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 any 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 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.
S-10
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 200[_]-[_]
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.
SERIES TERMINATION
If on the distribution date which is two months prior to the Series 200[_]-[_]
termination date, the invested amount 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 200[_]-[_] termination date. The
servicer will sell such receivables on the Series 200[_]-[_] 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 to Series
200[_]-[_]. See "Series Provisions--Series Termination" in this prospectus
supplement.
REGISTRATION
The Series 200[_]-[_] certificates will be in book-entry form and will be
registered in
S-11
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 200[_]-[_] certificates through DTC, in the
United States, or Clearstream, Luxembourg or the Euroclear System in Europe.
See "Description of the Certificates--Book-Entry Registration" in the
accompanying prospectus.
TAX STATUS
Subject to important considerations described under "Tax Matters" in the
accompanying prospectus, Orrick, Herrington & Sutcliffe LLP, as special tax
counsel to the transferors, is of the opinion that under existing law your
certificates will be characterized as debt for federal income tax purposes. By
your acceptance of a certificate, you will agree to treat your certificates as
debt for federal, state and local income and franchise tax purposes. See "Tax
Matters" in the accompanying prospectus for additional information concerning
the application of federal income tax laws.
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 must be rated by at least one of the
following nationally recognized rating agencies:
Moody's: Aaa
Standard & Poor's: AAA
At issuance, the Class B certificates must be rated by at least one of the
following nationally recognized rating agencies:
Moody's: A1
Standard & Poor's: A
A rating addresses the likelihood of the payment of interest on a certificate
when due and the ultimate payment of principal of that certificate by its
legal maturity date. A rating does not address the likelihood of payment of
principal of a certificate on its expected final payment date. In addition, a
rating does not address the possibility of an early payment or acceleration of
a certificate, which could be caused by an early amortization event or an
event of default. A rating is not a recommendation to buy, sell or hold
certificates and may be subject to revision or withdrawal at any time by the
assigning rating agency. A rating is based on each rating agency's independent
evaluation of the receivables and the availability of any credit enhancement
for the certificates. A rating, or a change or withdrawal of a rating, by one
rating agency will not necessarily correspond to a rating, or a change or
withdrawal of a rating, from any other rating agency. You will not be notified
if
S-12
any of the ratings of these Series 200[__]-[__] certificates changes.
See "Risk Factors--If the ratings of the certificates are lowered or
withdrawn, their market value could decrease" in the accompanying prospectus.
EXCHANGE LISTING
[An application will be made to list the Series 200[_]-[_] certificates on the
EuroMTF of 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 200[_]-[_]
certificates, Boulevard Konrad Adenauer 2, Luxembourg, phone number 352-4212-
2643 to determine whether or not the Series 200[_]-[_] certificates are listed
on the Luxembourg Stock Exchange.]
S-13
INTRODUCTION
The following provisions of this prospectus supplement contain more detailed
information concerning the certificates offered hereby. The certificates will
be issued by the trust pursuant to the terms of a pooling and servicing
agreement dated as of May 16, 1996, as amended and restated as of April 16,
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 [__________________], the trust will issue $[_________] of Class
A Series 200[_]-[_] Floating Rate Asset Backed Certificates and $[________] of
Class B Series 200[_]-[_] 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 200[_]-[_] 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 200[_]-[_] 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 200[_]-[_] 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 200[_]-[_] 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 200[_]-[_], cause the trust
S-14
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 200[_]-[_] 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 200[_]-[_].
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 200[_]-[_]), 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 200[_]-
[_] 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 200[_]-[_] 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 200[_]-[_] certificates and the
Collateral Interest, the final payment of principal to the Series 200[_]-[_]
certificateholders and the holder of the Collateral Interest may be delayed.
Should a Pay-Out Event occur with respect to the Series 200[_]-[_]
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 200[_]-[_]
certificateholders on the first Special Payment Date, and the Series 200[_]-
[_] 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 200[_]-[_] 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 200[_]-[_], 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 200[_]-[_] 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 Trust Portfolio" under "The Trust
Portfolio--Payment Rates" in this prospectus supplement. The transferors
cannot
S-15
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 200[_]-[_] 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 200[_]-[_] certificateholders and the holder of the Collateral
Interest could expect to receive payments of principal on the Series 200[_]-
[_] 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 Trust Portfolio" under "The Trust 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 200[_]-[_] 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-16
THE TRUST PORTFOLIO
GENERAL
The primary assets of the trust are receivables generated from time to time
in a portfolio of designated American Express credit cards 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 in the Trust Portfolio were selected from the Total Portfolio
based upon the eligibility criteria specified in the purchase agreements and 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. Subject only to these criteria and any applicable
regulatory guidelines, the account owners have the discretion to select the
accounts in the Total Portfolio for addition to the Trust Portfolio. The account
owners have in the past considered, and may in the future consider, factors such
as product type, tenure of an account and interest rate applicable to an account
in determining the accounts to be added to the Trust Portfolio. Set forth below
is certain information with respect to the Trust Portfolio. See "Centurion's and
FSB's Revolving Credit Businesses" and "The Accounts" in the accompanying
prospectus.
The Trust 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 Trust
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 Trust Portfolio set forth below.
LOSS AND DELINQUENCY EXPERIENCE
The following tables set forth the loss and delinquency experience for the
Trust Portfolio for each of the periods shown. The loss and delinquency rates
at any time reflect, among other factors, the quality of the Trust Portfolio,
the average seasoning of the accounts, the success of the account owners'
collection efforts, the product mix of the Trust Portfolio and general
economic conditions.
S-17
The following table sets forth the loss experience for the Trust Portfolio
for each indicated period. Total gross charge-offs include charge-offs of
principal receivables only, and do not include any charge-offs of finance charge
and fee receivables or the amount of any reductions in principal receivables due
to a rebate, refund, error, fraudulent charge or other miscellaneous adjustment
described under "The Pooling and Servicing Agreement Generally--Defaulted
Receivables; Rebates and Fraudulent Charges." If finance charge and fee
receivables that have been charged-off were included in total gross charge-offs,
total gross charge-offs would be higher as an absolute number and as a
percentage of the average principal receivables outstanding during the periods
indicated. Recoveries are collections received in respect of charged-off
accounts in the Trust Portfolio during the period indicated in the following
table. Total recoveries for each indicated period include recoveries of
principal, finance charges and certain fees for that period. Under the pooling
and servicing agreement, recoveries are treated as collections of finance charge
receivables. Total net charge-offs are an amount equal to total gross
charge-offs minus total recoveries, each for the applicable period. Average
principal receivables outstanding for each indicated period is the average of
the month-end principal receivables balance for that period. We cannot provide
any assurance that the loss experience for the receivables in the Trust
Portfolio in the future will be similar to the historical experience set forth
below.
LOSS EXPERIENCE OF THE TRUST PORTFOLIO
(DOLLARS IN THOUSANDS)
[___] MONTHS YEAR ENDED DECEMBER 31,
ENDED ----------------------------------
[___] 2006 2005 2004 2003 2002 2001
------------ ---- ---- ---- ---- ----
Average Principal Receivables Outstanding .................................... $ $ $ $ $ $
Total Gross Charge-Offs ...................................................... $ $ $ $ $ $
Total Recoveries ............................................................. $ $ $ $ $ $
-- -- -- -- -- --
Total Net Charge-Offs ........................................................ $ $ $ $ $ $
== == == == == ==
Total Gross Charge-Offs as a Percentage of Average Principal Receivables
Outstanding................................................................. %(1)
Total Recoveries as a Percentage of Average Principal Receivables Outstanding %(1) % % % % %
-- -- -- -- -- --
Total Net Charge-Offs as a Percentage of Average Principal Receivables
Outstanding................................................................. %(1) % % % % %
== == == == == ==
Number of Accounts Experiencing a Loss(2) .................................... N/A N/A
Number of Accounts Experiencing a Recovery(2) ................................ N/A N/A
Average Net Loss per Account Experiencing a Loss(2)(3) ....................... N/A N/A
(1) This percentage is an annualized figure.
(2) Information for periods prior to January 1, 2003 is not available.
(3) Calculated as Net Charge-Offs divided by Number of Accounts Experiencing a
Loss.
S-18
The following tables set forth the delinquency experience for the Trust
Portfolio for each indicated period. With respect to the "Average Receivables
Delinquent as a Percentage of the Trust Portfolio" table below, the average
receivables delinquent is the average of the month-end delinquent amounts, while
the average receivables outstanding is the average of month-end receivables
balances, each for the applicable period. With respect to the "Average Number of
Delinquent Accounts as a Percentage of the Trust Portfolio" table below, the
average number of delinquent accounts is the average of the month-end delinquent
accounts, while the average number of outstanding accounts is the average of
total month-end accounts, each for the applicable period. We cannot provide any
assurance that the delinquency experience for the receivables in the Trust
Portfolio in the future will be similar to the historical experience set forth
below.
AVERAGE RECEIVABLES DELINQUENT AS A PERCENTAGE OF THE TRUST PORTFOLIO
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
[___] MONTHS ENDED --------------------------------------------------------------------------
[____] 2006 2005 2004 2003
---------------------- ---------------------- ---------------------- ----------------------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
AVERAGE AVERAGE AVERAGE AVERAGE
DOLLAR RECEIVABLES DOLLAR RECEIVABLES DOLLAR RECEIVABLES DOLLAR RECEIVABLES
AMOUNT OUTSTANDING AMOUNT OUTSTANDING AMOUNT OUTSTANDING AMOUNT OUTSTANDING
------ ------------- ------ ------------- ------ ------------- ------ -------------
Average Receivables
Outstanding ............ $ % $ % $ % $ %
Average Receivables
Delinquent:
31 to 60 Days .......... $ % $ % $ % $ %
61 to 90 Days .......... $ % $ % $ % $ %
91 to 120 Days ......... $ % $ % $ % $ %
121 to 150 Days ........ $ % $ % $ % $ %
151 Days or More ....... $ % $ % $ % $ %
---- ---- ----- ---- ------ ---- ------- ----
Total.................... $ % $ % $ % $ %
==== ==== ===== ==== ====== ==== ======= ====
YEAR ENDED DECEMBER 31,
------------------------------------------------
2002 2001
---------------------- ----------------------
PERCENTAGE OF PERCENTAGE OF
AVERAGE AVERAGE
DOLLAR RECEIVABLES DOLLAR RECEIVABLES
AMOUNT OUTSTANDING AMOUNT OUTSTANDING
------ ------------- ------ -------------
Average Receivables
Outstanding ............ $ % $ %
Average Receivables
Delinquent:
31 to 60 Days .......... $ % $ %
61 to 90 Days .......... $ % $ %
91 to 120 Days ......... $ % $ %
121 to 150 Days ........ $ % $ %
151 Days or More ....... $ % $ %
---- ----- ----- -----
Total.................... $ % $ %
==== ===== ====== ======
AVERAGE NUMBER OF DELINQUENT ACCOUNTS AS A PERCENTAGE OF THE TRUST PORTFOLIO
YEAR ENDED DECEMBER 31,
[___] MONTHS ENDED ------------------------------------------------------
[____] 2006 2005 2004
------------------------- ------------------------- -------------------------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
NUMBER OF TOTAL NUMBER NUMBER OF TOTAL NUMBER NUMBER OF TOTAL NUMBER
ACCOUNTS OF ACCOUNTS ACCOUNTS OF ACCOUNTS ACCOUNTS OF ACCOUNTS
--------- ------------- --------- ------------- --------- -------------
Average Number of
Accounts Outstanding ... % % %
Average Number of
Accounts Delinquent:
31 to 60 Days .......... % % %
61 to 90 Days .......... % % %
91 to 120 Days ......... % % %
121 to 150 Days ........ % % %
151 Days or More ....... % % %
---- ---- ----- ----- ----- -----
Total.................... % % %
==== ==== ===== ===== ===== =====
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------
2003 2002 2001
-------------------------- -------------------------- --------------------------
PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
NUMBER OF TOTAL NUMBER NUMBER OF TOTAL NUMBER NUMBER OF TOTAL NUMBER
ACCOUNTS OF ACCOUNTS ACCOUNTS OF ACCOUNTS ACCOUNTS OF ACCOUNTS
--------- ------------- --------- ------------- --------- -------------
Average Number of
Accounts Outstanding ... % % %
Average Number of
Accounts Delinquent:
31 to 60 Days .......... % % %
61 to 90 Days .......... % % %
91 to 120 Days ......... % % %
121 to 150 Days ........ % % %
151 Days or More ....... % % %
------ --- ---- ---- ----- ----
Total.................... % % %
====== === ==== ==== ===== ====
REVENUE EXPERIENCE
The following table sets forth the revenue experience for the Trust Portfolio
from total finance charge and fee collections for each indicated period. Total
finance charge and fee collections set forth in the table below include periodic
finance charges, cash advance fees, annual membership fees, other fees, discount
option yield (for periods prior to March 26, 2004), Issuer Rate Fees (for
periods on and after March 26, 2004) and recoveries on charged-off accounts.
S-19
Under the pooling and servicing agreement, recoveries on charged-off accounts
are treated as collections of finance charge receivables. Until March 26, 2004,
the transferors transferred receivables to the trust at a discount of 2.0%. As
of the close of business on March 26, 2004, the transferors reduced the discount
percentage to 0.0% and, since that time, the transferors have transferred to the
trust all Issuer Rate Fees allocable to the receivables arising in accounts
comprising the Trust Portfolio. See "The Pooling and Servicing Agreement
Generally--Discount Option" and "Centurion's and FSB's Revolving Credit
Businesses--Issuer Rate Fees" in the accompanying prospectus. There can be no
assurance that the revenues for the Trust Portfolio in the future will be
similar to the historical experience of the Trust Portfolio set forth below.
Revenue experience from total finance charge and fee collections results
from dividing total finance charges and fee collections by the average
principal receivables outstanding. The average principal receivables
outstanding for each indicated period is the average of the month-end
principal receivables balances for that period.
REVENUE EXPERIENCE OF THE TRUST PORTFOLIO
(DOLLARS IN THOUSANDS)
[__] MONTHS YEAR ENDED DECEMBER 31,
ENDED ----------------------------------
[___] 2006 2005 2004 2003 2002 2001
----------- ---- ---- ---- ---- ----
Average Principal Receivables Outstanding ..................................... $ $ $ $ $ $
Total Finance Charge and Fee Collections ...................................... $ $ $ $ $ $
Total Finance Charge and Fee Collections as a Percentage of Average Principal
Receivables Outstanding...................................................... %(1) % % % % %
- ---------------
(1) This percentage is an annualized figure.
The historical revenue figures for the Trust Portfolio shown in the table
above include interest on purchases and cash advances and fees collected from
holders of the accounts during the applicable month. Revenues from finance
charges and fees collected 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 change in
the level of delinquencies on the receivables. 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 Trust 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. None of
the servicer, any account owner or 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 Trust
Portfolio.
S-20
PRINCIPAL PAYMENT RATES
The following table sets forth the highest and lowest account holder monthly
principal payment rates for the Trust Portfolio during any month in the period
shown and the average account holder monthly principal payment rates for all
months during each period shown, calculated as the percentage equivalent of a
fraction. The monthly principal payment rates are calculated as the amount of
principal payments from account holders (excluding recoveries on charged-off
receivables) as posted to the accounts during the applicable month divided by
the aggregate amount of principal receivables outstanding as of the beginning
of the applicable month. In addition, as of the month ended [______], 20[__],
and with regard to the prior month's statements only, [__]% of the accounts in
the Trust Portfolio made the minimum payment under the terms of the related
account agreement, and [__]% of the accounts in the Trust Portfolio had
account holders that paid their full balance under the terms of the related
account agreement. See "Centurion's and FSB's Revolving Credit
Businesses--Billing and Payments" in the accompanying prospectus for a
description of how minimum payments are calculated.
ACCOUNT HOLDER MONTHLY PRINCIPAL PAYMENT RATES OF THE TRUST PORTFOLIO
[__] MONTHS YEAR ENDED DECEMBER 31,
ENDED ----------------------------------
[___] 2006 2005 2004 2003 2002 2001
----------- ---- ---- ---- ---- ----
Lowest Month .................................................................. % % % % % %
Highest Month ................................................................. % % % % % %
Monthly Average ............................................................... % % % % % %
THE RECEIVABLES
As of [________], 200[_], the receivables in the accounts included in the
Trust Portfolio totaled $[_______], comprised of $[_____] of principal
receivables and $[_____] of finance charge receivables.
The following tables, together with the paragraph under "--Composition by
Geographic Distribution," summarize the Trust Portfolio by various criteria as
of [______], 200[_]. 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 [______], 200[_].
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
ACCOUNT BALANCE RANGE NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
--------------------- 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-21
The average account balance as of [___], [___] was $[___] for all accounts
and $[___] for all accounts other than accounts with a zero balance as of that
date.
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
CREDIT LIMIT RANGE NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
------------------ 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(1) .........................................................
Total (Credit Card) ....................................................
No Pre-Set Spending Limit (Sign & Travel Accounts) .........................
Total ..................................................................
Grand Total ...........................................................
- ---------------
(1) The maximum credit limit is $100,000.
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
PERCENTAGE PERCENTAGE
PERIOD OF DELINQUENCY OF TOTAL OF TOTAL
(DAYS CONTRACTUALLY DELINQUENT) NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
-------------------------------- ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
---------- ---------- --------------- -----------
Current to 30 days ...................................................
31 to 60 Days .........................................................
61 to 90 Days .........................................................
91 Days to 120 Days ...................................................
121 Days to 150 Days ..................................................
151 Days or More ......................................................
Total .............................................................
S-22
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
ACCOUNT AGE NUMBER OF NUMBER OF RECEIVABLES RECEIVABLES
----------- ACCOUNTS ACCOUNTS OUTSTANDING OUTSTANDING
--------- ---------- ----------- -----------
Not More than 11 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 ..................................................................
COMPOSITION BY GEOGRAPHIC DISTRIBUTION
TRUST PORTFOLIO
As of [______], 200[_], 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 [_]% of the receivables related to account holders having billing
addresses in any other single state.
COMPOSITION BY STANDARDIZED CREDIT SCORE
TRUST PORTFOLIO
The following table sets forth the composition of the Trust Portfolio as of
[___], [___] by FICO(R)* score ranges. To the extent available, FICO scores
are obtained at origination and monthly thereafter. A FICO score is a
measurement determined by Fair Isaac Corporation using information collected
by the major credit bureaus to assess consumer credit risk. FICO risk scores
rank-order consumers according to the likelihood that their credit obligations
will be paid in accordance with the terms of their accounts. Although Fair
Isaac Corporation discloses only limited information about the variables it
uses to assess credit risk, those variables likely include, but are not
limited to, debt level, credit history, payment patterns (including
delinquency experience), and level of utilization of available credit. FICO
scores of an individual may change over time, depending on the conduct of the
individual, including the individual's usage of his or her available credit
and changes in credit score technology used by Fair Isaac Corporation.
FICO scores are based on independent, third-party information, the accuracy
of which we cannot verify. The account owners do not use standardized credit
scores, such as a FICO score, alone to determine the amount of charges that
should be approved on a credit card account. Rather, a FICO score is only one
of many factors used by Centurion and FSB, as account owners, to assess an
individual's credit and default risk. In connection with their underwriting
and authorization decisions, the account owners use proprietary scoring
models, which they generally have found to be more accurate predictors of
credit and default risk than any single
S-23
- ---------------
* FICO(R) is a federally registered servicemark of Fair, Isaac & Company.
standardized credit score such as FICO. The use of proprietary models also
enables an account owner to extend credit to an account holder with a lower
FICO score without changing the account owner's risk tolerance than would be
the case if the account owner relied solely on FICO. See "Centurion's and
FSB's Revolving Credit Business--Underwriting and Authorization Procedures" in
the accompanying prospectus. The FICO scores presented below should not be
used alone as a method of forecasting whether account holders will make
payments in accordance with the terms of their accounts. References to
"Receivables Outstanding" in the following table include both finance charge
receivables and principal receivables. Because the future composition of the
Trust Portfolio may change over time, this table is not necessarily indicative
of the composition of the Trust Portfolio at any specific time in the future.
COMPOSITION BY STANDARDIZED CREDIT SCORE(1)
TRUST PORTFOLIO
PERCENTAGE OF
TOTAL
FICO SCORE RANGE RECEIVABLES RECEIVABLES
---------------- OUTSTANDING OUTSTANDING
----------- -------------
Less than 560 ................................... $ %
560 - 659 ....................................... $ %
660 - 699 ....................................... $ %
700 - 759 ....................................... $ %
760 and above ................................... $ %
Refreshed FICO Unavailable ...................... $ %
Total ........................................... $ %
- ---------------
(1) Standardized Credit Score defined as the FICO score in the most recent
Monthly Period.
STATIC POOL INFORMATION
Static pool information regarding the performance of the receivables in the
Total Portfolio is provided in Annex II to this prospectus supplement, which
forms an integral part of this prospectus supplement. All static pool
information regarding the performance of those receivables in Annex II for
periods prior to January 1, 2006 will not form a part of this prospectus
supplement, the accompanying prospectus or the registration statement relating
to the certificates.
SERIES PROVISIONS
The Series 200[_]-[_] certificates and the Collateral Interest will be
issued pursuant to the pooling and servicing agreement and the Series 200[_]-
[_] 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 200[_]-[_]
certificates and the Collateral Interest. Reference should be made to the
prospectus for additional information concerning the Series 200[_]-[_]
certificates, the Collateral Interest and the pooling and servicing agreement.
See "The Pooling and Servicing Agreement Generally" in the accompanying
prospectus.
S-24
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 [__________], 200[_], to the Series
200[_]-[_] certificateholders in whose names the Series 200[_]-[_]
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.
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 [__________], 200[_], 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 200[_]-[_] 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,
S-25
(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 [_________], 200[_], 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 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 200[_]-[_] 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 [___________], 200[_], 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 200[_]-[_] supplement.
S-26
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 200[_]-[_] 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 Expected Final Payment 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:
(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
S-27
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 200[_]-[_].
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 200[_]-[_] 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 200[_]-
[_] Termination Date occurs, the holders of the Class A certificates will be
entitled to receive Available Principal Collections in an amount up to the
Class A Invested Amount. After payment in full of the Class A Invested Amount,
the holders of the Class B certificates will be entitled to receive, on each
Distribution Date, Available Principal Collections until the earlier of the
date the Class B Invested Amount is paid in full and the Series 200[_]-[_]
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 200[_]-[_]
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
S-28
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 200[_]-[_] 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 200[_]-[_] specifically, as described below.
Pursuant to the pooling and servicing agreement, during each Monthly Period,
the servicer will allocate to Series 200[_]-[_] 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 200[_]-[_] with respect to any Monthly Period will
be allocated to the Series 200[_]-[_] certificates and the Collateral Interest
based on the Floating Allocation Percentage and the remainder of such Series
Allocable Finance Charge Collections and Series Allocable Defaulted Amount
will be allocated to the interest of the holders of the transferor
certificates.
Investor Finance Charge Collections (which for any Monthly Period is equal
to the product of the Floating Allocation Percentage and the Series Allocable
Finance Charge Collections) will be reallocated among all series, including
Series 200[_]-[_], 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 200[_]-[_]
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 200[_]-[_] will be
allocated to the Series 200[_]-[_] 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
200[_]-[_] 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.
S-29
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 200[_]-[_] certificateholders.
During the Controlled Accumulation Period, the servicer will transfer
collections in respect of principal receivables allocated to Series 200[_]-
[_], Shared Principal Collections allocated to Series 200[_]-[_] 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 200[_]-[_], 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 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 200[_]-[_] (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.
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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
200[_]-[_].
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.
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 200[_]-[_] 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:
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o Excess Spread and Excess Finance Charge Collections allocated to Series
200[_]-[_] 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 200[_]-[_], are insufficient to fund the Class A
Required Amount for such related Monthly Period, then the Collateral
Invested Amount will be reduced by the amount of such excess (but not by
more than the Class A Investor Default Amount for such related
Distribution Date).
In the event that such reduction would cause the Collateral Invested Amount
to be a negative number, the Collateral Invested Amount will be reduced to
zero, and the Class B Invested Amount will be reduced by the amount by which
the Collateral Invested Amount would have been reduced below zero (but not by
more than the excess of the Class A Investor Default Amount, if any, for such
Distribution Date over the amount of such reduction, if any, of the Collateral
Invested Amount for such Distribution Date).
In the event that such reduction would cause the Class B Invested Amount to
be a negative number, the Class B Invested Amount will be reduced to zero and
the Class A Invested Amount will be reduced by the amount by which the Class B
Invested Amount would have been reduced below zero (but not by more than the
excess, if any, of the Class A Investor Default Amount for such Distribution
Date over the amount of the reductions, if any, of the Collateral Invested
Amount and the Class B Invested Amount with respect to such Distribution Date
as described above). Any such reduction in the Class A Invested Amount may
have the effect of slowing or reducing the return of principal and interest to
the Class A certificateholders. In such case, the Class A certificateholders
will bear directly the credit and other risks associated with their undivided
interest in the trust. See "--Defaulted Receivables; Investor Charge-Offs"
below.
Reductions of the Class A Invested Amount 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 200[_]-[_]
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:
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o Excess Spread and Excess Finance Charge Collections allocated to Series
200[_]-[_] 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.
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
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(iv) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as described under "--Excess Spread; Excess Finance
Charge Collections" below.
(B) an amount equal to the Class B Available Funds will be distributed in
the following priority:
(i) an amount equal to Class B Monthly Interest for such Distribution Date,
plus the amount of any Class B Outstanding Monthly Interest, plus the amount
of any Class B Additional Interest for such Distribution Date and any Class B
Additional Interest previously due but not distributed to the Class B
certificateholders on a prior Distribution Date, will be distributed to the
Class B certificateholders;
(ii) if TRS or an affiliate of TRS is no longer the servicer, an amount equal
to the Class B Servicing Fee for such Distribution Date, plus the amount of
any Class B Servicing Fee previously due but not distributed to the servicer
on a prior Distribution Date, will be distributed to the servicer; and
(iii) the balance, if any, shall constitute Excess Spread and shall be
allocated and distributed as described under "--Excess Spread; Excess Finance
Charge Collections" below.
(C) an amount equal to the Collateral Available Funds will be distributed
in the following priority:
(i) if TRS or an affiliate of TRS is no longer the servicer, an amount equal
to the Collateral Interest Servicing Fee for such Distribution Date, plus the
amount of any Collateral Interest Servicing Fee previously due but not
distributed to the servicer on a prior Distribution Date, will be paid to the
servicer; and
(ii) the balance, if any, will constitute a portion of Excess Spread and will
be allocated and distributed as described under "--Excess Spread; Excess
Finance Charge Collections" below.
EXCESS SPREAD; EXCESS FINANCE CHARGE COLLECTIONS.
On each Distribution Date, the trustee, acting pursuant to the servicer's
instructions, will apply Excess Spread and Excess Finance Charge Collections
allocated to Series 200[_]-[_] 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
200[_]-[_], 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
S-34
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 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 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
S-35
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 with respect to 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
(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.
S-36
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 200[_]-[_] 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
200[_]-[_] 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 200[_]-[_] 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 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 200[_]-[_] 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
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Series 200[_]-[_] 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 200[_]-[_] available for such purpose as described above under
"--Application of Collections--Excess Spread; Excess Finance Charge
Collections."
On each Distribution Date, if the Collateral Default Amount for such
Distribution Date exceeds the amount of Excess Spread and Excess Finance
Charge Collections allocated to Series 200[_]-[_] 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 200[_]-[_] allocated and available for that
purpose as described above under "--Application of Collections--Excess Spread;
Excess Finance Charge Collections."
PAIRED SERIES
Series 200[_]-[_] 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
S-38
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
200[_]-[_] 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 200[_]-[_] certificateholders after the Series 200[_]-
[_] 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 200[_]-[_]
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 200[_]-[_] 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;
(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 200[_]-[_] 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 200[_]-[_]
supplement, which failure has a material adverse effect on the Series 200[_]-
[_] 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 200[_]-[_] 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
200[_]-[_] 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
S-39
required to convey such receivables or participation interests pursuant to the
pooling and servicing agreement or the Series 200[_]-[_] 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;
(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
200[_]-[_] supplement; and
(j) the occurrence of an insolvency event as defined in the related
purchase agreement relating to any account owner; or
(k) any account owner is unable for any reason to transfer receivables to
the related transferor in accordance with the related purchase agreement;
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 200[_]-[_] certificates and the
Collateral Interest evidencing more than 50% of the aggregate unpaid principal
amount of Series 200[_]-[_] 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 200[_]-[_] certificateholders and the holder of the
Collateral Interest) may declare that a Pay-Out Event has occurred with
respect to Series 200[_]-[_] as of the date of such notice, and, in the case
of any event described in subparagraph (b), (e), (g) or (h), a Pay-Out Event
shall occur with respect to Series 200[_]-[_] without any notice or other
action on the part of the trustee immediately upon the occurrence of such
event.
In the case of any event described in subparagraph (a), (i), (j) or (k), a
Pay-Out Event shall occur with respect to Series 200[_]-[_] without any notice
or other action on the part of the trustee, the Series 200[_]-[_]
certificateholders or the holder of the Collateral Interest immediately upon
the occurrence of such event (or, in the case of clause (y) below, immediately
following the expiration of the 60-day grace period), but only to the extent
that:
(x) as of the date of such event, the average of the Monthly Receivables
Percentage for the immediately preceding three Monthly Periods is equal to or
greater than 10%, or
(y) as of the date of such event, the average of the Monthly Receivables
Percentage for the immediately preceding three Monthly Periods is less than
10%, and within 60 days following the occurrence of the related insolvency
event or inability to transfer receivables, the aggregate amount of principal
receivables outstanding in the trust does not at least equal the Required
Minimum Principal Balance (without giving effect to principal receivables
attributable to the transferor or the account owner with respect to which the
insolvency event or the inability to transfer receivables has occurred).
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
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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 200[_]-[_] 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 200[_]-[_] 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.
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
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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 200[_]-
[_] 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 200[_]-[_] Termination Date (after giving effect to all
distributions required to be made on the Series 200[_]-[_] Termination Date
other than from the proceeds of the sale). No transferor, any affiliate
thereof, any agent thereof or any other party consolidated with such
transferor for purposes of United States generally accepted accounting
principles will be entitled to participate in such bidding process or to
purchase the receivables; provided, however, that, to the extent the holder of
the Collateral Interest is not a transferor, an affiliate thereof, an agent
thereof or any other party consolidated with a transferor for purposes of
United States generally accepted accounting principles, the holder of the
Collateral Interest may participate in 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 200[_]-[_] Termination Date
for distribution to the Series 200[_]-[_] certificateholders and the holder of
the Collateral Interest. The servicer will sell such receivables on the Series
200[_]-[_] 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 200[_]-[_] Termination Date
for distribution to the Series 200[_]-[_] certificateholders and the holder of
the Collateral Interest) to Series 200[_]-[_].
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REPORTS
No later than the second Business Day prior to each Distribution Date, the
servicer will forward to the trustee, the paying agent, the transferors, 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 200[_]-[_]
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 (iii), (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.
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
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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 satisfied.
The transferors believe that the authorization will apply to the acquisition
and holding of the Class A certificates by Plans and that all conditions of
the authorization, other than those that are within the control of the
investors, will be met.
CONSULTATION WITH COUNSEL
In light of the foregoing fiduciaries or other persons contemplating
purchasing the Class A certificates on behalf of or with "plan assets" of any
Plan should consult their own counsel regarding whether the trust's assets
represented by the Class A certificates would be considered "plan assets," the
consequences that would apply if the trust's assets were considered "plan
assets," and the availability of exemptive relief from the prohibited
transaction rules.
Finally, Plan fiduciaries and other Plan investors should consider the
fiduciary standards under ERISA or other applicable law in the context of the
Plan's particular circumstances before authorizing an investment of a portion
of the Plan's assets in the Class A certificates. Accordingly, among other
factors, Plan fiduciaries and other Plan investors should consider whether the
investment (i) satisfies the diversification requirement of ERISA or other
applicable law, (ii) is in accordance with the Plan's governing instruments,
and (iii) is prudent in light of the "Risk Factors" and other factors
discussed in the accompanying prospectus.
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UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
among the transferors, American Express Centurion Bank, American Express Bank,
FSB, 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
UNDERWRITERS OF THE CLASS B CERTIFICATES OF CLASS B CERTIFICATES
---------------------------------------- --------------------------
[A Co.]........................................... $
[B Co.]...........................................
[C Co.]...........................................
-----------
Total............................................ $
===========
The underwriting agreement provides that the obligation of the Class A
underwriters to pay for and accept delivery of the Class A certificates and
the obligation of the Class B underwriters to pay for and accept delivery of
the Class B certificates are subject to the approval of certain legal matters
by their counsel and to certain other conditions. All of the Series 200[_]-[_]
certificates offered hereby will be issued if any are issued. Offering
expenses are estimated to be $[______].
The Class A underwriters propose initially to offer the Class A certificates
to the public at the price set forth on the cover page hereof and to certain
dealers at such price less concessions not in excess of [___]% of the
principal amount of the Class A certificates. The Class A underwriters may
allow, and such dealers may reallow, concessions not in excess of [___]% of
the principal amount of the Class A certificates to certain brokers and
dealers. After the initial public offering, the public offering price and
other selling terms may be changed by the Class A underwriters.
The Class B underwriters propose initially to offer the Class B certificates
to the public at the price set forth on the cover page hereof and to certain
dealers at such price less concessions not in excess of [___]% of the
principal amount of the Class B certificates. The Class B underwriters may
allow, and such dealers may reallow, concessions not in excess of [___]% of
the principal amount of the Class B certificates to certain brokers and
dealers. After the initial public offering, the public offering price and
other selling terms may be changed by the Class B underwriters.
Each underwriter of these Series 200[_]-[_] certificates has agreed that:
o it has complied and will comply with all applicable provisions of the
Financial Services and Markets Act 2000, or the FSMA, with respect to
anything done by it in relation to
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the Series 200[_]-[_] certificates in, from or otherwise involving the
United Kingdom; and
o it has only and will only communicate or cause to be communicated an
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 200[_]-[_] 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 200[_]-[_] 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 200[_]-[_] certificates so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
Series 200[_]-[_] 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 200[_]-[_] 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 200[_]-[_]
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.
In the ordinary course of their respective businesses, the underwriters and
their respective affiliates have engaged and may in the future engage in
investment banking or commercial banking transactions with the transferors,
TRS, Centurion, FSB or any of their affiliates.
Centurion, on behalf of itself and RFC III, and FSB, on behalf of itself and
RFC IV, will indemnify the underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, or contribute to
payments the underwriters may be required to make in respect thereof.
S-46
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 200[_]-[_], and
(iii) certain other amounts which pursuant to the Series 200[_]-[_]
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
200[_]-[_] 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 are 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 200[_]-[_] 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 200[_]-[_] in
accordance with the pooling and servicing agreement and the Series 200[_]-
[_] 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 200[_]-[_]
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.
S-48
"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
S-49
(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 200[_]-[_] 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 200[_]-[_] in
accordance with the pooling and servicing agreement and the Series 200[_]-
[_] 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
S-50
(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 200[_]-[_] 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-51
(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 200[_]-[_] in accordance with the pooling and servicing agreement and
the Series 200[_]-[_] 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:
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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
200[_]-[_] 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 200[_]-[_] 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 200[_]-[_] 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
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(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-55
"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 servicer 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 RECEIVABLES PERCENTAGE" means, for any day, the percentage
equivalent of a fraction:
o the numerator of which is an amount equal to the sum of the aggregate
amount of principal receivables outstanding in the trust attributable
to the transferor or the account owner with respect to which an
insolvency event has occurred or to the transferor that is unable to
transfer receivables to the trust, and
o the denominator of which is an amount equal to the sum of the aggregate
amount of principal receivables outstanding in the trust,
S-56
in each case as of the last day of the immediately preceding Monthly Period.
"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 200[_]-[_] as of the last day of the immediately preceding Monthly
Period (or, with respect to the first Monthly Period, the Initial Invested
Amount), and
(ii) during the Controlled Accumulation Period or the Early Amortization
Period, the Series Adjusted Invested Amount for Series 200[_]-[_] 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 200[_]-[_] 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 200[_]-[_] 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 200[_]-[_], 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 200[_]-[_].
"PRINCIPAL FUNDING ACCOUNT" means the account established as described under
"Series Provisions--Principal Funding Account" in this prospectus supplement.
S-57
"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 200[_]-[_] 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:
(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 200[_]-[_]" 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 200[_]-[_] TERMINATION DATE" means the [_________] Distribution
Date.
"SERIES ADJUSTED INVESTED AMOUNT" means, with respect to Series 200[_]-[_],
for any Monthly Period, the Initial Invested Amount for Series 200[_]-[_],
less the excess, if any, of all reductions in the Invested Amount (other than
any reductions occasioned by payments of principal to the Series 200[_]-[_]
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 200[_]-[_]
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
200[_]-[_], 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
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(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 200[_]-[_], for any Monthly Period, the product of (i) the Series
Allocation Percentage for Series 200[_]-[_] and (ii) the amount of collections
of finance charge receivables deposited in the Collection Account, the amount
of collections of principal receivables deposited in the Collection Account
and the amount of all Defaulted Amounts with respect to such Monthly Period,
respectively.
"SERIES ALLOCATION PERCENTAGE" means, with respect to Series 200[_]-[_], for
any Monthly Period, the percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is the Series Adjusted
Invested Amount for Series 200[_]-[_] 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 [_]%
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 purchase agreements and the pooling and servicing agreement.
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ANNEX I
OTHER SERIES
The information provided in this Annex I is an integral part of the prospectus
supplement.
The table below sets forth the principal characteristics of all other series
issued by the trust and currently outstanding. [The total Invested Amount for
all outstanding series is $[__________].]
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
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-I-1
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-I-2
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-I-3
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-I-4
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 2002-5
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . .$600,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . .$495,000,000
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
A-I-5
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
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
A-I-6
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
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
A-I-7
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
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 . . . . . . . . . . . . . . . . . 2.0% 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 2009 Distribution Date
Series Issuance Date. . . . . . . . . . . . . . . . . . . . . . . March 1, 2004
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Group II
A-I-8
SERIES 2004-2
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . .$400,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . .$334,000,000
Class A Certificate Rate. . . . . . . . . . One-month LIBOR plus 0.17% per year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . $30,000,000
Class B Certificate Rate. . . . . . . . . . One-Month LIBOR plus 0.37% per year
Controlled Accumulation Amount (subject to adjustment). . . . . .$30,333,333.34
Approximate Commencement of Controlled Accumulation
Period (subject to adjustment). . . . . . . . . . . . . . . . . . . May 1, 2013
Annual Servicing Fee Percentage . . . . . . . . . . . . . . . . . 2.0% per year
Collateral Initial Invested Amount. . . . . . . . . . . . . . . . . $36,000,000
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 2014 Distribution Date
Series Issuance Date. . . . . . . . . . . . . . . . . . . . . . . .June 2, 2004
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Group II
SERIES 2004-3
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . .$600,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . .$522,000,000
Class A Certificate Rate. . . . . . . . . . . . . . . . . . . . .4.35% per year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . $30,000,000
Class B Certificate Rate. . . . . . . . . . . . . . . . . . . . .4.55% per year
Controlled Accumulation Amount (subject to adjustment). . . . . . . $46,000,000
Approximate Commencement of Controlled Accumulation
Period (subject to adjustment). . . . . . . . . . . . . . . . . . . May 1, 2008
Annual Servicing Fee Percentage . . . . . . . . . . . . . . . . . 2.0% per year
Collateral Initial Invested Amount. . . . . . . . . . . . . . . . . $48,000,000
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 2009 Distribution Date
Series Issuance Date. . . . . . . . . . . . . . . . . . . . . . . .June 2, 2004
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Group I
A-I-9
SERIES 2004-4
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . .$1,100,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . .$918,500,000
Class A Certificate Rate. . . . . . . . . . One-month LIBOR plus 0.09% per year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . $82,500,000
Class B Certificate Rate. . . . . . . . . . One-month LIBOR plus 0.28% per year
Controlled Accumulation Amount (subject to adjustment). . . . . .$83,416,666.67
Approximate Commencement of Controlled Accumulation
Period (subject to adjustment). . . . . . . . . . . . . . . . . .August 1, 2008
Annual Servicing Fee Percentage . . . . . . . . . . . . . . . . . 2.0% per year
Collateral Initial Invested Amount. . . . . . . . . . . . . . . . . $99,000,000
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 . . . . . . . . . . . August 2009 Distribution Date
Series Issuance Date. . . . . . . . . . . . . . . . . . . . . . August 17, 2004
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Group II
SERIES 2004-5
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . .$1,000,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . .$835,000,000
Class A Certificate Rate. . . . . . . . . . One-month LIBOR plus 0.09% per year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . $75,000,000
Class B Certificate Rate. . . . . . . . . . One-month LIBOR plus 0.25% per year
Controlled Accumulation Amount (subject to adjustment). . . . . .$75,833,333.34
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment) . . . . . . . . . . . . . . . . . . . September 1, 2008
Annual Servicing Fee Percentage . . . . . . . . . . . . . . . . . 2.0% per year
Collateral Initial Invested Amount. . . . . . . . . . . . . . . . . $90,000,000
Enhancement for the Class A and Class B Certificates.Collateral Invested Amount
Other enhancement for the Class A Certificates. . .Subordination of the Class B
Certificates
Expected Final Payment Date . . . . . . . . . .September 2009 Distribution Date
Series Issuance Date. . . . . . . . . . . . . . . . . . . . .September 23, 2004
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Group II
A-I-10
SERIES 2005-1
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . .$600,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . .$501,000,000
Class A Certificate Rate. . . . . . . . . . One-month LIBOR plus 0.03% per year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . $45,000,000
Class B Certificate Rate. . . . . . . . . . One-month LIBOR plus 0.12% per year
Controlled Accumulation Amount (subject to adjustment). . . . . . . $45,500,000
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment) . . . . . . . . . . . . . . . . . . . . . March 1, 2009
Annual Servicing Fee Percentage . . . . . . . . . . . . . . . . . 2.0% per year
Collateral Initial Invested Amount. . . . . . . . . . . . . . . . . $54,000,000
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 . . . . . . . . . . . .March 2010 Distribution Date
Series Issuance Date. . . . . . . . . . . . . . . . . . . . . . .March 24, 2005
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Group II
SERIES 2005-2
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . .$600,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . .$501,000,000
Class A Certificate Rate. . . . . . . . . . One-month LIBOR plus 0.10% per year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . $45,000,000
Class B Certificate Rate. . . . . . . . . . One-month LIBOR plus 0.28% per year
Controlled Accumulation Amount (subject to adjustment). . . . . . . $45,500,000
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment) . . . . . . . . . . . . . . . . . . . . . March 1, 2014
Annual Servicing Fee Percentage . . . . . . . . . . . . . . . . . 2.0% per year
Collateral Initial Invested Amount. . . . . . . . . . . . . . . . . $54,000,000
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 . . . . . . . . . . . .March 2015 Distribution Date
Series Issuance Date. . . . . . . . . . . . . . . . . . . . . . .March 24, 2005
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Group II
A-I-11
SERIES 2005-3
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . .$700,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . .$584,500,000
Class A Certificate Rate. . . . . . . . . . One-Month LIBOR plus 0.00% per year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . $52,500,000
Class B Certificate Rate. . . . . . . . . . One-Month LIBOR plus 0.14% per year
Controlled Accumulation Amount (subject to adjustment). . . . . .$53,083,333.34
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment) . . . . . . . . . . . . . . . . . . . . . .June 1, 2007
Annual Servicing Fee Percentage . . . . . . . . . . . . . . . . . 2.0% per year
Collateral Initial Invested Amount. . . . . . . . . . . . . . . . . $63,000,000
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 2008 Distribution Date
Series Issuance Date. . . . . . . . . . . . . . . . . . . . . . . June 17, 2005
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Group II
SERIES 2005-4
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . .$500,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . .$417,500,000
Class A Certificate Rate. . . . . . . . . . One-Month LIBOR plus 0.07% per year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . $37,500,000
Class B Certificate Rate. . . . . . . . . . One-Month LIBOR plus 0.25% per year
Controlled Accumulation Amount (subject to adjustment). . . . . .$37,916,666.67
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment) . . . . . . . . . . . . . . . . . . . . . .June 1, 2011
Annual Servicing Fee Percentage . . . . . . . . . . . . . . . . . 2.0% per year
Collateral Initial Invested Amount. . . . . . . . . . . . . . . . . $45,000,000
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 2012 Distribution Date
Series Issuance Date. . . . . . . . . . . . . . . . . . . . . . . June 17, 2005
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Group II
A-I-12
SERIES 2005-5
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . .$1,100,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . .$918,500,000
Class A Certificate Rate. . . . . . . . . . One-Month LIBOR plus 0.04% per year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . $82,500,000
Class B Certificate Rate. . . . . . . . . . One-Month LIBOR plus 0.18% per year
Controlled Accumulation Amount (subject to adjustment). . . . . .$83,416,666.67
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment) . . . . . . . . . . . . . . . . . . . . . .July 1, 2009
Annual Servicing Fee Percentage . . . . . . . . . . . . . . . . . 2.0% per year
Collateral Initial Invested Amount. . . . . . . . . . . . . . . . . $99,000,000
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 2010 Distribution Date
Series Issuance Date. . . . . . . . . . . . . . . . . . . . . . . July 21, 2005
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Group II
SERIES 2005-6
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . .$700,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . .$584,500,000
Class A Certificate Rate. . . . . . . . . . One-Month LIBOR plus 0.00% per year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . $52,500,000
Class B Certificate Rate. . . . . . . . . . One-Month LIBOR plus 0.14% per year
Controlled Accumulation Amount (subject to adjustment). . . . . .$53,083,333.34
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment) . . . . . . . . . . . . . . . . . . . . .August 1, 2007
Annual Servicing Fee Percentage . . . . . . . . . . . . . . . . . 2.0% per year
Collateral Initial Invested Amount. . . . . . . . . . . . . . . . . $63,000,000
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 . . . . . . . . . . . August 2008 Distribution Date
Series Issuance Date. . . . . . . . . . . . . . . . . . . . . . August 18, 2005
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Group II
A-I-13
SERIES 2005-7
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . .$700,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . .$584,500,000
Class A Certificate Rate. . . . . . . . . . One-Month LIBOR plus 0.07% per year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . $52,500,000
Class B Certificate Rate. . . . . . . . . . One-Month LIBOR plus 0.27% per year
Controlled Accumulation Amount (subject to adjustment). . . . . .$53,083,333.34
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment) . . . . . . . . . . . . . . . . . . . . .August 1, 2011
Annual Servicing Fee Percentage . . . . . . . . . . . . . . . . . 2.0% per year
Collateral Initial Invested Amount. . . . . . . . . . . . . . . . . $63,000,000
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 . . . . . . . . . . . August 2012 Distribution Date
Series Issuance Date. . . . . . . . . . . . . . . . . . . . . . August 18, 2005
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Group II
SERIES 2005-8
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . .$500,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . .$417,500,000
Class A Certificate Rate. . . . . . . . . . One-Month LIBOR plus 0.03% per year
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . $37,500,000
Class B Certificate Rate. . . . . . . . . . One-Month LIBOR plus 0.17% per year
Controlled Accumulation Amount (subject to adjustment). . . . . .$37,916,666.67
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment) . . . . . . . . . . . . . . . . . . . .November 1, 2009
Annual Servicing Fee Percentage . . . . . . . . . . . . . . . . . 2.0% per year
Collateral Initial Invested Amount. . . . . . . . . . . . . . . . . $45,000,000
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 . . . . . . . . . . November 2010 Distribution Date
Series Issuance Date. . . . . . . . . . . . . . . . . . . . . November 22, 2005
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Group II
A-I-14
SERIES 2006-A
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . .$700,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . .$584,500,000
Class A Certificate Rate. . . . . . . . . . . . . . . . . . . . . Floating Rate
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . $52,500,000
Class B Certificate Rate. . . . . . . . . . . . . . . . . . . . . Floating Rate
Controlled Accumulation Amount (subject to adjustment). . . . . .$53,083,333.34
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment) . . . . . . . . . . . . . . . . . . . . January 1, 2008
Annual Servicing Fee Percentage . . . . . . . . . . . . . . . . . 2.0% per year
Collateral Initial Invested Amount. . . . . . . . . . . . . . . . . $63,000,000
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 . . . . . . . . . . .January 2009 Distribution Date
Series Issuance Date. . . . . . . . . . . . . . . . . . . . . February 15, 2006
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Group II
SERIES 2006-B
Initial Invested Amount . . . . . . . . . . . . . . . . . . . . . .$700,000,000
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . .$584,500,000
Class A Certificate Rate. . . . . . . . . . . . . . . . . . . . . Floating Rate
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . $52,500,000
Class B Certificate Rate. . . . . . . . . . . . . . . . . . . . . Floating Rate
Controlled Accumulation Amount (subject to adjustment). . . . . .$53,083,333.34
Approximate Commencement of Controlled Accumulation Period
(subject to adjustment) . . . . . . . . . . . . . . . . . . . . January 1, 2010
Annual Servicing Fee Percentage . . . . . . . . . . . . . . . . . 2.0% per year
Collateral Initial Invested Amount. . . . . . . . . . . . . . . . . $63,000,000
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 . . . . . . . . . . .January 2011 Distribution Date
Series Issuance Date. . . . . . . . . . . . . . . . . . . . . February 15, 2006
Principal Sharing Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Excess Allocation Series. . . . . . . . . . . . . . . . . . . . . . . . . . Yes
Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Group II
A-I-15
ANNEX II
STATIC POOL INFORMATION
The information in this Annex II forms an integral part of the prospectus
supplement.
The following tables present charge-off, delinquency, payment rate and
revenue experience of the Total Portfolio. The Total Portfolio is comprised of
American Express credit cards and Sign & Travel/Extended Payment Option consumer
revolving credit accounts or features owned by Centurion and FSB. Data is
presented in separate increments based on the year of origination of the
accounts, each an "Origination Segment." Data is presented for accounts that
were originated in 2001 or thereafter. Data for origination years prior to 2001
is not presented, since such data is not available and could not be obtained
without unreasonable effort or expense. As of [_____], [___], the accounts
reflected in the following tables had receivables outstanding that were
approximately [__]% of the total receivables outstanding in the Total Portfolio
at such date.
As used in the tables, the date of origination is generally either the date
the account became effective or was first used. The account aging shows
activity through the indicated age of the account (e.g., 0-12 months, 13-24
months), which is referred to in this Annex II as the "performance period." In
the following tables, highlighted data is based on a full 12 months of
activity for all accounts in the applicable Origination Segment and,
therefore, will not change in future disclosures. The data that is not
highlighted will change in future disclosures and, in some cases, will reflect
activity in an account for less than 12 full months, depending on when the
account is originated and when the data for that disclosure is generated.
For periods prior to January 1, 2006, activity in a particular account for a
particular month reflects activity that occurred within such account's monthly
billing cycle, resulting in different end dates during a month for which
activity is presented, since there are ten different monthly billing cycles.
For periods after January 1, 2006, activity in all accounts reflects activity
in the relevant Monthly Period. As a result of this change, for accounts whose
monthly billing cycle end date was prior to December 25, 2005, data will not
be presented for those days subsequent to such account's monthly billing cycle
end date and December 25, 2005, the first date in the January 2006 Monthly
Period.
Because the Trust Portfolio is only a portion of the Total Portfolio, the
actual performance of the receivables in the Trust Portfolio may be different
from the performance reflected in the tables below. There can be no assurance
that the performance of receivables in the future will be similar to the
historical experience set forth below.
GROSS CHARGE-OFF RATE OF THE TOTAL PORTFOLIO
AS OF DATE: ________________
0-12 13-24 25-36 37-48 49-60 >=61
ORIGINATION YEAR MONTHS MONTHS MONTHS MONTHS MONTHS MONTHS
------ ------ ------ ------ ------ ------
2006 ORIGINATION ......................................................... %
2005 ORIGINATION ......................................................... % %
2004 ORIGINATION ......................................................... % % %
2003 ORIGINATION ......................................................... % % % %
2002 ORIGINATION ......................................................... % % % % %
2001 ORIGINATION ......................................................... % % % % % %
A-II-1
[The data will also be presented in graphical format.]
Total gross charge-offs for any Origination Segment include charge-offs of
principal, finance charges and certain fees, but do not include the amount of
any reductions in principal receivables due to a rebate, refund, error,
fraudulent charge or other miscellaneous adjustment described under "The
Pooling and Servicing Agreement Generally--Defaulted Receivables; Rebates and
Fraudulent Charges" in the accompanying base prospectus. The gross charge-off
rate, which is an annualized percentage, results from dividing total gross
charge-offs by the average month-end receivables for each month in the
applicable performance period, which is referred to in this Annex II as the
"average receivables outstanding."
Historical data for total gross charge-offs as reported with respect to the
Trust Portfolio (i) unlike the calculation of total gross charge-offs above,
does not include charge-offs of finance charges or fee receivables and (ii) is
calculated using the average principal receivables outstanding instead of the
average receivables outstanding. As a result, there are limitations to any
comparison of the historical data presented in this prospectus supplement and
the static pool data presented in the table above.
NET CHARGE-OFF RATE OF THE TOTAL PORTFOLIO
AS OF DATE: ________________
0-12 13-24 25-36 37-48 49-60 >=61
ORIGINATION YEAR MONTHS MONTHS MONTHS MONTHS MONTHS MONTHS
------ ------ ------ ------ ------ ------
2006 ORIGINATION ......................................................... %
2005 ORIGINATION ......................................................... % %
2004 ORIGINATION ......................................................... % % %
2003 ORIGINATION ......................................................... % % % %
2002 ORIGINATION ......................................................... % % % % %
2001 ORIGINATION ......................................................... % % % % % %
[The data will also be presented in graphical format.]
Total net charge-offs for any Origination Segment are an amount equal to
total gross charge-offs minus total recoveries. The net charge-off rate, which
is an annualized percentage, results from dividing total net charge-offs by
the average receivables outstanding.
Historical data for total net charge-offs as reported with respect to the
Trust Portfolio in this prospectus supplement is calculated using the average
principal receivables outstanding instead of the average receivables
outstanding. As a result, there are limitations to any comparison of the
historical data presented in this prospectus supplement and the static pool
data presented in the tables above.
A-II-2
30 DAYS+ DELINQUENCY RATE OF THE TOTAL PORTFOLIO
AS OF DATE: ________________
0-12 13-24 25-36 37-48 49-60 >=61
ORIGINATION YEAR MONTHS MONTHS MONTHS MONTHS MONTHS MONTHS
------ ------ ------ ------ ------ ------
2006 ORIGINATION ......................................................... %
2005 ORIGINATION ......................................................... % %
2004 ORIGINATION ......................................................... % % %
2003 ORIGINATION ......................................................... % % % %
2002 ORIGINATION ......................................................... % % % % %
2001 ORIGINATION ......................................................... % % % % % %
[The data will also be presented in graphical format.]
The 30 Days+ Delinquency Rate (i.e., accounts 31 days or more delinquent) is
the result of dividing the average of the month-end delinquent amounts for
each month in the applicable performance period by the average receivables
outstanding.
ACCOUNT HOLDER MONTHLY PAYMENT RATE OF THE TOTAL PORTFOLIO
AS OF DATE: ________________
0-12 13-24 25-36 37-48 49-60 >=61
ORIGINATION YEAR MONTHS MONTHS MONTHS MONTHS MONTHS MONTHS
------ ------ ------ ------ ------ ------
2006 ORIGINATION ......................................................... %
2005 ORIGINATION ......................................................... % %
2004 ORIGINATION ......................................................... % % %
2003 ORIGINATION ......................................................... % % % %
2002 ORIGINATION ......................................................... % % % % %
2001 ORIGINATION ......................................................... % % % % % %
[The data will also be presented in graphical format.]
The monthly payment rate results from dividing total collections received
(excluding recoveries on charged-off receivables) during each month by that
month's opening total receivables balance.
Historical data for the monthly principal payment rate as reported with
respect to the Trust Portfolio (i) unlike the calculation of monthly payment
rate above includes collections of principal receivables only and (ii) is
calculated using that month's opening principal receivables balance. As a
result, there are limitations to any comparison of the historical data presented
in this prospectus supplement and the static pool data presented in the table
above.
A-II-3
REVENUE EXPERIENCE OF THE TOTAL PORTFOLIO
AS OF DATE: ________________
0-12 13-24 25-36 37-48 49-60 >=61
ORIGINATION YEAR MONTHS MONTHS MONTHS MONTHS MONTHS MONTHS
------ ------ ------ ------ ------ ------
2006 ORIGINATION ......................................................... %
2005 ORIGINATION ......................................................... % %
2004 ORIGINATION ......................................................... % % %
2003 ORIGINATION ......................................................... % % % %
2002 ORIGINATION ......................................................... % % % % %
2001 ORIGINATION ......................................................... % % % % % %
[The data will also be presented in graphical format.]
The percentages set forth above, which are annualized percentages, result
from dividing total finance charges and fees billed by the average receivables
outstanding. Total finance charges and fees billed include periodic finance
charges, cash advance fees, annual membership fees, other fees and Issuer Rate
Fees.
Historical data for revenue experience as reported with respect to the Trust
Portfolio (i) unlike the calculation of total finance charges and fees billed
above which is based on the related amounts posted to accounts, is calculated
based on the related amounts collected on the accounts including recoveries,
(ii) is calculated using discount option yield for periods prior to March 26,
2004 and using Issuer Rate Fees for periods after the close of business on March
26, 2004 and (iii) is calculated using the average principal receivables
outstanding instead of the average receivables outstanding. As a result, there
are limitations to any comparison of the historical data presented in this
prospectus supplement and the static pool data presented in the table above.
A-II-4
SUBJECT TO COMPLETION, DATED [_____], [_____]
Prospectus
AMERICAN EXPRESS CREDIT ACCOUNT MASTER TRUST
ISSUING ENTITY
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION II
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION III LLC
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION IV LLC
DEPOSITORS AND TRANSFERORS
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
SERVICER
AMERICAN EXPRESS CENTURION BANK
AMERICAN EXPRESS BANK, FSB
SPONSORS
ASSET BACKED CERTIFICATES
THE ISSUING ENTITY--
o may periodically issue asset backed certificates in one or more series
with one or more classes; and
o will own--
-receivables in a portfolio of consumer charge or revolving credit
accounts;
-payments due on those receivables; and
-other property described in this prospectus and in the accompanying
prospectus supplement.
THE CERTIFICATES--
o will represent interests in the issuing entity 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.
[________], 200[_]
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE [__] IN THIS
PROSPECTUS.
A certificate is not a deposit and neither the certificates nor the
underlying accounts or receivables are insured or guaranteed by the
Federal Deposit Insurance Corporation or any other governmental agency.
The certificates will represent interests in the issuing entity 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 is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. The prospectus is not an
offer to sell these securities and is not seeking an offer to buy these
securities in any jurisdiction where the offer and sale is not permitted.
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.
You should rely only on the information provided in this prospectus and the
accompanying prospectus supplement, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the certificates in any state where the offer
is not permitted. We do not claim the accuracy of the information in this
prospectus or the accompanying prospectus supplement as of any date other than
the dates stated on their respective covers.
We include cross-references in this prospectus and in the accompanying
prospectus supplement to captions in these materials where you can find
additional, related discussions. The following table of contents and the table
of contents included in the accompanying prospectus supplement provide the
pages on which these captions are located.
Parts of this prospectus contain defined terms. You can find a listing of
the pages where defined terms in this prospectus are defined under the caption
"Glossary of Defined Terms" beginning on page [_] in this prospectus.
-------------------
i
TABLE OF CONTENTS
PAGE
----
Prospectus Summary ..................................................... 1
Risk Factors ........................................................... 8
Use of Proceeds ........................................................ 21
The Issuing Entity ..................................................... 21
Centurion's and FSB's Revolving Credit Businesses ...................... 23
General ............................................................... 23
Underwriting and Authorization
Procedures .......................................................... 24
Billing and Payments .................................................. 25
Collection Efforts .................................................... 26
Issuer Rate Fees ...................................................... 27
RFC II, RFC III, RFC IV, Credco,
Centurion, FSB and TRS ................................................ 29
RFC II ................................................................ 29
RFC III ............................................................... 29
RFC IV ................................................................ 30
Centurion ............................................................. 30
FSB ................................................................... 31
TRS ................................................................... 31
Merger or Consolidation of a
Transferor or the Servicer ............................................ 32
Assumption of a Transferor's
Obligations ........................................................... 32
The Accounts ........................................................... 33
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
PAGE
----
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
Outsourcing of Servicing .............................................. 54
New Issuances ......................................................... 56
Collection Account .................................................... 57
Deposits in Collection Account ........................................ 57
Allocations ........................................................... 59
Groups of Series ...................................................... 59
Reallocations Among Different
Series Within a Reallocation
Group ............................................................... 59
Sharing of Excess Finance Charge
Collections Among Excess
Allocation Series ................................................... 62
Sharing of Principal Collections
Among Principal Sharing Series ...................................... 62
Paired Series ......................................................... 63
Special Funding Account ............................................... 63
Funding Period ........................................................ 64
ii
PAGE
----
Defaulted Receivables; Rebates
and Fraudulent Charges .............................................. 65
Credit Enhancement .................................................... 65
Servicer Covenants .................................................... 69
Certain Matters Regarding the
Servicer ............................................................ 70
Servicer Default ...................................................... 70
Evidence as to Compliance ............................................. 71
Amendments ............................................................ 72
Defeasance ............................................................ 74
List of Certificateholders ............................................ 75
The Trustee ........................................................... 75
Description of the Purchase
Agreements ............................................................ 77
Sale of Receivables ................................................... 77
Representations and Warranties ........................................ 78
Repurchase Obligations ................................................ 78
Reassignment of Other
Receivables ......................................................... 79
Amendments ............................................................ 80
Termination ........................................................... 80
Certain Legal Aspects of the
Receivables ........................................................... 80
PAGE
----
Certain Regulatory Matters ............................................ 80
Consumer Protection Laws .............................................. 81
Recent Litigation ..................................................... 82
Tax Matters ............................................................ 82
Federal Income Tax
Consequences--General ............................................... 82
Treatment of theCertificates as Debt .................................. 82
Description of Opinions ............................................... 83
Treatment of the Trust ................................................ 84
Taxation of Interest Income of U.S.
Certificate Owners .................................................... 86
Sale or Exchange of Certificates ...................................... 87
Foreign Certificate Owners ............................................ 87
Backup Withholding and
Information Reporting ............................................... 88
State and Local Taxation .............................................. 89
ERISA Considerations ................................................... 89
Plan of Distribution ................................................... 93
Legal Matters .......................................................... 94
Reports to Certificateholders .......................................... 94
Where You Can Find More
Information ........................................................... 94
Glossary of Defined Terms .............................................. 96
iii
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.
RISK FACTORS
Investment in the certificates involves risks. You should consider carefully
the risk factors beginning on page [__] in this prospectus.
THE ISSUING ENTITY
American Express Credit Account Master Trust is the issuing entity of the
certificates. It was formed in 1996 pursuant to a pooling and servicing
agreement. This agreement, as it has been amended and restated as of April 16,
2004 and as further amended from time to time, 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 Financing Corporation IV
LLC, as transferors, and The Bank of New York, as trustee.
We refer to the American Express Credit Account Master Trust as the "trust" or
the "issuing entity."
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.
ACCOUNT OWNERS AND SPONSORS
The receivables owned by the trust will arise in designated credit or charge
accounts owned by American Express Centurion Bank, American Express Bank, FSB
or any of their affiliates.
CENTURION
American Express Centurion Bank, a Utah industrial bank, owns credit card and
other credit or charge accounts from which receivables are transferred to
American Express Receivables Financing Corporation III LLC. American Express
Receivables Financing Corporation III LLC may then, subject to certain
conditions, add those receivables to the trust. See "The Pooling and Servicing
Agreement Generally--Additions of Accounts or Participation Interests" and
"Description of the Purchase Agreements."
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. American Express Receivables
Financing Corporation IV LLC may then, subject to certain conditions, add
those receivables to the trust. See "The Pooling and Servicing Agreement
Generally--Additions of Accounts or Participation Interests" and "Description
of the Purchase Agreements."
1
We refer to American Express Bank, FSB as "FSB" and, together with Centurion,
the "account owners."
DEPOSITORS AND 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. See "Description of the Purchase
Agreements" in this prospectus. American Express Receivables Financing
Corporation III LLC structures the issuing entity's transactions. Its address
is 4315 South 2700 West, Room 1300, 02-01-04, Salt Lake City, Utah 84184 and
its phone number is (801) 945-2030.
American Express Receivables Financing Corporation IV 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 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. See "Description of the Purchase Agreements" in this prospectus.
American Express Receivables Financing Corporation IV LLC structures the
issuing entity's transactions. Its address is 4315 South 2700 West, Room 1300,
02-01-58, Salt Lake City, Utah 84184 and its phone number is (801) 945-2068.
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,"
a "depositor" or a "transferor." We refer to American Express Receivables
Financing Corporation III LLC as "RFC III," a "depositor" or a "transferor."
We refer to American Express Receivables Financing Corporation IV LLC as "RFC
IV," a "depositor" or a "transferor." RFC II, RFC III and RFC IV collectively
are referred to as the "transferors."
SERVICER
American Express Travel Related Services Company, Inc. is the servicer of the
trust. As servicer, it is responsible for servicing, managing and making
collections on the receivables in the trust. See "Transaction
Parties--Servicer" and "The Pooling and Servicing Agreement
Generally--Collection and Other Servicing Procedures" in this prospectus.
American Express Travel Related Services Company, Inc. has outsourced certain
functions to affiliated and unaffiliated third parties, but it remains
responsible for the overall servicing process. For information about certain
affiliated and unaffiliated third party vendors that provide these services,
including Amex Card Services Company, Centurion and FSB, see "The Pooling and
Servicing Agreement Generally--Collection and Other Servicing Procedures" in
this prospectus.
In limited cases, the servicer may resign or be removed, and either the
trustee or a third party may be appointed as the new servicer. See "The
Pooling and Servicing
2
Agreement Generally--Servicer Default" in this prospectus.
The servicer receives a servicing fee from the trust, and each series is
obligated to pay a portion of that fee. See the related prospectus supplement
for a description of the monthly servicing fee allocated to each series of
certificates.
We refer to American Express Travel Related Services Company, Inc. as "TRS" or
the "servicer."
TRUSTEE
The Bank of New York, a New York banking corporation, is the trustee of the
trust and each series of certificates issued by the trust. Its address is 101
Barclay Street, Floor 8 West, New York, New York 10286, Attention: Asset-
Backed Securities Unit. Its telephone number is (212) 815-6258.
Under the terms of the pooling and servicing agreement, the role of the
trustee is limited. See "The Pooling and Servicing Agreement Generally--The
Trustee" in this prospectus.
TRUST ASSETS
The transferors have designated to the trust selected consumer American
Express(R)* credit card 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.
Certificateholders will not be notified of any changes to the composition of
the assets in the trust due to additions or removals of receivables. However,
monthly reports containing certain information relating to the certificates
and the collateral securing the certificates will be filed with the Securities
and Exchange Commission. These reports will not be sent to certificateholders.
See "Where You Can Find More Information" in this prospectus for information
as to how these reports may be accessed.
Subject only to the eligibility criteria established in the purchase
agreements and the pooling and servicing agreement, the account owners have
the discretion to select the accounts to be designated to the trust. 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.
Additional assets may be transferred to the trust as described under "The
Pooling and Servicing Agreement Generally--Additions of Accounts or
Participation Interests" in this prospectus. The transferors may add
additional receivables or participation
- ---------------
* American Express(R) and Sign & Travel(R) are federally registered
servicemarks of American Express Company and its affiliates.
3
interests to the trust at any time without limitation, provided that the
receivables are eligible receivables, the transferors reasonably believe that
the addition will not result in an adverse effect, and the rating agencies
confirm the ratings on the outstanding certificates. Under certain limited
circumstances, the transferors may be obligated to add additional receivables
or participation interests to the trust if required to maintain the required
minimum principal balance.
The transferors may also remove receivables that previously were transferred
to the trust as described in "The Pooling and Servicing Agreement
Generally--Removal of Accounts" in this prospectus, provided that
o the transferors reasonably believe that the removal will not result in an
adverse effect,
o the rating agencies confirm the ratings on the outstanding certificates,
o the receivables subject to removal are selected randomly, and
o only one removal occurs each month.
If a transferor breaches certain representations and warranties relating to
the eligibility of receivables included in the trust, however, that transferor
may be required to remove immediately those receivables from the trust.
Finally, on the date when any receivable in an account is charged off as
uncollectible, the trust automatically transfers those receivables back to the
applicable transferor.
THE CERTIFICATES
The trust has issued, and in the future expects to issue, asset backed
certificates, each evidencing an undivided interest in the trust. The
certificates are issued in series. A series may contain one or more classes.
The terms of any future series or class will not be subject to your prior
review or consent. We cannot assure you that the terms of any future series
might not have an impact on the timing or amount of payments received by a
certificateholder.
THE TRANSFEROR INTEREST
The interest in the trust not represented by your series or by any other
series is the transferors' interest, which is held by the transferors. The
transferors' interest may be held either in certificated form represented by
the transferor certificates or in uncertificated form. Any reference in this
prospectus to the transferor certificates means the transferors' interest as
held in either certificated or uncertificated form. The transferors' interest
does not provide credit enhancement for your series or any other series.
COLLECTIONS BY THE SERVICER
The servicer receives collections on the receivables, deposits (or causes to
be deposited) those collections in the collection 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.
4
The accompanying prospectus supplement describes the allocation percentages
applicable to your series.
Certificateholders are only entitled to amounts allocated to their series
equal to the interest and principal payments on their certificates.
See "The Pooling and Servicing Agreement Generally--Allocations" in this
prospectus.
INTEREST PAYMENTS ON THE CERTIFICATES
Each certificate entitles the holder to receive payments of interest as
described in the accompanying prospectus supplement. If a series of
certificates consists of more than one class, each class may differ in, among
other things, priority of payments, payment dates, interest rates, method for
computing interest and rights to series enhancement.
Each class of certificates may have fixed, floating or any other type of
interest rate. Generally, interest will be paid monthly, quarterly, semi-
annually or on other scheduled dates over the life of the certificates.
See "Description of the Certificates--Interest" in this prospectus.
PRINCIPAL PAYMENTS ON THE CERTIFICATES
Each certificate entitles the holder to receive payments of principal as
described in the accompanying prospectus supplement. If a series of
certificates consists of more than one class, each class may differ in, among
other things, the amounts allocated for principal payments, priority of
payments, payment dates, maturity, and rights to series enhancement.
See "Description of the Certificates--Principal" in this prospectus.
REVOLVING PERIOD
Each series of certificates will begin with a period, known as the revolving
period, during which the trust will not pay or accumulate principal for
payment to the certificateholders. During the revolving period, the trust
will pay available principal to the holders of the transferor certificates or
to certificateholders of other series.
The revolving period for a series begins on the series cut-off date described
in the accompanying prospectus supplement, and ends at the start of either an
amortization period or an accumulation period.
Following the revolving period, each class of certificates will have one or a
combination of the following periods in which:
o principal is accumulated in specified amounts per month and paid on a
scheduled date;
o principal is paid in fixed amounts at scheduled intervals;
o principal is accumulated in varying amounts 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
5
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.
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:
6
o subordination
o insurance policy
o letter of credit
o spread account
o derivative
agreement
arrangement
o collateral interest
o cash collateral guaranty or account
o surety bond
o maturity liquidity agreement
o supplemental credit
enhancement or
liquidity agreement
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.
7
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.
Representations and warranties are made that the trustee has
a perfected interest in the receivables. If any of these
representations and warranties were found not to be true,
however, payments to you could be delayed or reduced.
In addition, the transaction documents permit certain tax
liens to have priority over the trustee's perfected interest
in the receivables. If any of these tax liens were to arise,
you could suffer a loss on your investment.
Furthermore, if a conservator or receiver for either bank or
a bankruptcy trustee for TRS were to argue that any of its
administrative expenses relate to the receivables or the
transaction documents, those expenses could be paid from
collections on the receivables before the trustee receives
any payments, which could result in losses on your
investment.
THE TRUSTEE MAY NOT HAVE A PERFECTED INTEREST IN COLLECTIONS
COMMINGLED BY THE SERVICER OR ANY SUBSERVICER WITH ITS OWN
FUNDS, WHICH COULD CAUSE DELAYED OR REDUCED PAYMENTS TO YOU.
The servicer is obligated to deposit collections into the
collection account no later than the second business day
after the date of processing for those collections. In the
event that certain conditions are met, however, the servicer
is permitted to hold all collections received during a
monthly period and to make only a single deposit
8
of those collections on the following distribution date. See
"The Pooling and Servicing Agreement Generally--Deposits in
Collection Account."
All collections that the servicer is permitted to hold are
commingled with its other funds or the funds of a subservicer
and used for its own benefit. The trustee may not have a
perfected interest in these amounts, and thus payments to you
could be delayed or reduced if the servicer or any
subservicer were to become bankrupt.
THE CONSERVATORSHIP, RECEIVERSHIP, BANKRUPTCY, OR INSOLVENCY
OF CENTURION, FSB, TRS, A TRANSFEROR, THE TRUST, OR ANY OF
THEIR AFFILIATES COULD RESULT IN ACCELERATED, DELAYED, OR
REDUCED PAYMENTS TO YOU.
Centurion is a Utah industrial bank and FSB is a federal
savings bank, and the deposits of each bank are insured by
the Federal Deposit Insurance Corporation (FDIC). If certain
events occur relating to either bank's financial condition or
the propriety of its actions, the FDIC may be appointed as
conservator or receiver for that bank.
Prior to April 16, 2004, Centurion treated its transfer of
the receivables to the trustee as a sale for accounting
purposes. From and after April 16, 2004, Centurion treats its
transfer of the receivables to RFC III as a sale and FSB
treats its transfer of receivables to RFC IV as a sale.
Arguments may be made, however, that any of these transfers
constitutes only the grant of a security interest under
applicable law.
Nevertheless, the FDIC has issued a regulation surrendering
certain rights to reclaim, recover, or recharacterize a
financial institution's transfer of financial assets such as
the receivables if
o the transfer involved a securitization of the financial assets and
meets specified conditions for treatment as a sale under relevant
accounting principles;
o the financial institution received adequate consideration for the
transfer;
o the parties intended that the transfer constitute a sale for
accounting purposes; and
o 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.
Each bank's transfer of the receivables is intended to
satisfy all of these conditions.
9
If a condition required under the FDIC's regulation were
found not to have been met, however, the FDIC could seek to
reclaim, recover, or recharacterize the transfer of the
receivables by Centurion or FSB. The FDIC may not be subject
to an express time limit in deciding whether to take these
actions, and a delay by the FDIC in making a decision could
result in losses on your investment. If the FDIC were
successful in any of these actions, moreover, you may not be
entitled under applicable law to the full amount of your
damages.
Even if the conditions set forth in the regulation were
satisfied and the FDIC did not reclaim, recover, or
recharacterize the transfer of the receivables by Centurion
or FSB, payments to you could be delayed or reduced if either
bank entered conservatorship or receivership.
For instance, the FDIC may request a stay of any action to
enforce the transaction documents or the certificates. The
FDIC also may require that its claims process be followed
before payments on the receivables are released. The delay
caused by any of these actions could result in losses to you.
The FDIC, moreover, may have the power to choose whether or
not the terms of the transaction documents will continue to
apply. Thus, regardless of what the transaction documents
provide, the FDIC could
o prevent or limit the commencement of an early amortization period or
a rapid accumulation period, or instead do the opposite and require
those to commence;
o prevent or limit the early liquidation of the receivables and the
termination of the trust, or instead do the opposite and require
those to occur; or
o prevent or limit the continued transfer of receivables, or instead do
the opposite and require those to continue.
If any of these events were to occur, payments to you could
be delayed or reduced. You also may suffer a loss if the FDIC
were to argue that any term of the transaction documents
violates applicable regulatory requirements.
RFC III is a wholly-owned subsidiary of Centurion. RFC IV is
a wholly-owned subsidiary of FSB. Certain banking laws and
regulations 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 laws or regulations, you could
suffer a loss on your investment.
Arguments also may be made that the FDIC's rights and powers
extend to RFC III, RFC IV, and the trust and that, as a
10
consequence, the FDIC could repudiate or otherwise directly
affect the rights of certificateholders under the transaction
documents. If the FDIC were to take this position, losses to
you could result.
In addition, no assurance can be given that the FDIC would
not attempt to exercise control over the receivables or the
other assets of RFC III, RFC IV, or the trust on an interim
or a permanent basis. If this were to occur, payments to you
could be delayed or reduced.
RFC III, RFC IV, and the trust have been established so as to
minimize the risk that any of them would become insolvent or
enter bankruptcy. Nevertheless, each of them may be eligible
to file for bankruptcy, and no assurance can be given that
the risk of insolvency or bankruptcy has been eliminated. If
RFC III, RFC IV, or the trust were to become insolvent or
were to enter bankruptcy, you could suffer a loss on your
investment. Risks also exist that, if RFC III, RFC IV, or the
trust were to enter bankruptcy, any of the others and their
assets (including the receivables) would be treated as part
of the bankruptcy estate.
If TRS or any of its affiliates were to become a debtor in a
bankruptcy case, the court could exercise control over the
receivables or the other assets of RFC III, RFC IV, or the
trust on an interim or a permanent basis. If this were to
occur, payments to you could be delayed or reduced. The
court, moreover, may have the power to choose whether or not
the terms of the transaction documents will continue to
apply. Thus, regardless of what the transaction documents
provide, the court could
o authorize TRS to stop servicing the receivables or to stop
providing administrative services for RFC III or RFC IV;
o prevent the appointment of a successor servicer for the trust or the
appointment of a successor administrator for RFC III or RFC IV;
o alter the terms on which TRS continues to service the receivables or
to provide administrative services for RFC III or RFC IV, including
the amount of fees paid to TRS;
o prevent or limit the commencement of an early amortization period or
a rapid accumulation period, or instead do the opposite and require
those to commence;
o prevent or limit the early liquidation of the receivables and the
termination of the trust, or instead do the opposite and require
those to occur; or
o prevent or limit the continued transfer of receivables, or instead do
the opposite and require those to continue.
11
If any of these events were to occur, payments to you could
be delayed or reduced. You also may suffer a loss if the FDIC
were to argue that any term of the transaction documents
violates applicable regulatory requirements.
Regardless of any decision made by the FDIC or ruling made by
a court, moreover, the mere fact that the Centurion, FSB,
TRS, RFC III, RFC IV, the trust, or any of their affiliates
has become insolvent or entered conservatorship,
receivership, or bankruptcy could have an adverse effect on
the value of the receivables and on the liquidity and value
of the certificates.
Prior to April 16, 2004, 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 COULD RESULT IN LOSSES.
Centurion is regulated and supervised by the Utah Department
of Financial Institutions and the FDIC. FSB is regulated and
supervised by the Office of Thrift Supervision. These
regulatory authorities, and possibly others, have broad
powers of enforcement with respect to the banks and their
affiliates.
If any of these regulatory authorities were to conclude that
an obligation under the transaction documents were an unsafe
or unsound practice or violated any law, regulation, written
condition, or agreement applicable to a bank or its
affiliates, that authority may have the power to order that
bank or the related affiliate to rescind the transaction
document, to refuse to perform the obligation, to amend the
terms of the obligation, or to take any other action
determined by that authority to be appropriate. In addition,
that bank or the related affiliate probably would not be
liable to you for contractual damages for complying with such
an order, and you would be unlikely to have any recourse
against the regulatory authority. Therefore, if such an order
were issued, payments to you could be delayed or reduced.
In one case of which the banks are aware, the regulatory
authority ordered the financial institution to immediately
resign as servicer and to cease performing its duties as
servicer within approximately
12
120 days, to immediately withhold and segregate funds from
collections for payment of its servicing fee (notwithstanding
the priority of payments in the securitization documents and
the perfected security interest of the relevant trust in
those funds), and to increase its servicing fee percentage
above that which was specified in the securitization
documents.
CHANGES TO CONSUMER PROTECTION LAWS MAY IMPEDE COLLECTION
EFFORTS OR REDUCE COLLECTIONS, WHICH MAY RESULT IN
ACCELERATION OF OR REDUCTION IN PAYMENT ON YOUR CERTIFICATES.
Credit card receivables that do not comply with consumer
protection laws may not be valid or enforceable under their
terms against the obligors of those credit card receivables.
Federal and state consumer protection laws regulate the
creation and enforcement of consumer loans, including credit
card receivables. The United States Congress and the states
could further regulate the credit card and consumer credit
industry in ways that make it more difficult for the servicer
or the account owners to collect payments on the receivables
or that reduce the finance charges and other fees that
Centurion, FSB or their affiliates can charge on revolving
credit card account balances, resulting in reduced
collections. For example, if Centurion, FSB or their
affiliates were required to reduce their finance charges and
other fees, resulting in a corresponding decrease in the
effective yield of revolving credit card accounts, a pay out
event could occur and could result in an acceleration of
payment or reduced payment on your certificates. See
"Description of the Certificates--Pay-Out Events and
Reinvestment Events" and "Certain Legal Aspects of the
Receivables--Consumer Protection Laws."
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.
CHANGES TO FEDERAL OR STATE BANKRUPTCY OR DEBTOR LAWS MAY
IMPEDE COLLECTION EFFORTS OR ALTER TIMING AND AMOUNT OF
COLLECTIONS, WHICH MAY RESULT IN ACCELERATION OR REDUCTION IN
PAYMENT OF YOUR CERTIFICATES.
13
If an account holder sought protection under federal or state
bankruptcy or debtor relief laws, a court could reduce or
discharge completely the account holder's obligations to
repay amounts due on its revolving credit card account. As a
result, the related credit card receivables arising in that
credit card account would be written off as uncollectible.
You could suffer a loss if no funds were available from
credit enhancement or other sources and collections of
finance charge receivables allocated to the certificates to
cover the applicable defaulted amount. 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.
14
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 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, terrorist acts against the United
States or other nations, the commencement of hostilities
between the United States and a foreign nation or nations or
natural disasters could have a direct impact on the timing
and amount of payments on your certificates.
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.
COMPETITION IN THE CREDIT CARD INDUSTRY MAY RESULT IN A
DECLINE IN CENTURION'S OR FSB'S ABILITY TO GENERATE NEW
RECEIVABLES. THIS
15
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 American
Express-branded proprietary credit card programs operated by
American Express and its affiliates encounter substantial and
intense competition. As a card issuer, American Express
competes in the United States with financial institutions
(such as Citibank, Bank of America, JPMorgan Chase, MBNA and
Capital One Financial) that are members of the VISA(R)* and/
or MasterCard(R)* associations and that issue general purpose
credit cards, primarily under revolving credit plans, on one
or both of those systems, and the Morgan Stanley affiliate
that issues the Discover Card on the Discover Business
Services network. Limited competition also exists from
businesses that issue their own cards or otherwise extend
credit to their customers, such as retailers and airline
associations, although these cards are not generally
substitutes for general purpose cards because of their
limited acceptance.
As a result of continuing consolidations among banking and
financial services companies and credit card portfolio
acquisitions by major card issuers, there are now a smaller
number of significant issuers, and the largest issuers have
continued to grow using their greater resources, economies of
scale and brand recognition to compete.
Competing card issuers offer a variety of products and
services to attract cardholders, including premium cards with
enhanced services or lines of credit, airline frequent flyer
program mileage credits, cash rebates and other reward or
rebate programs, "teaser" promotional interest rates for both
credit card acquisition and balance transfers, 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.
16
Most financial institutions that offer demand deposit
accounts also issue debit cards to permit depositors to
access their funds. Use of debit cards for point-of-sale
purchases has grown as most financial institutions have
replaced ATM cards with general purpose debit cards bearing
either the VISA or MasterCard logo. As a result, the volume
of transactions made with debit cards in the United States
has continued to increase significantly and, in the United
States, has grown more rapidly than credit and charge card
transactions.
The principal competitive factors that affect the card-
issuing business are:
o the features and the quality of the services, including
rewards programs, provided to cardmembers;
o the number, spending characteristics and credit performance
of cardmembers;
o the quantity and quality of the establishments that accept
a card;
o the cost of cards to cardmembers;
o the pricing, payment and other card account terms and
conditions;
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 promotional
campaigns;
o reputation and brand recognition;
o the ability of issuers to implement operational and cost
efficiencies; and
o the quality of customer service.
American Express-branded cards are issued on the American
Express network. As a network, TRS competes with other charge
and credit card networks, including, among others, VISA, MasterCard,
Diners Club(R) (which, in the United States, has been folded
into the network operated by MasterCard), Discover(R), a
business unit of Morgan Stanley (primarily in the United
States), and JCB Co., Ltd. (primarily in Asia).
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.
CHANGES IN CO-BRANDING ARRANGEMENTS MAY AFFECT THE
PERFORMANCE OF THE TRUST'S RECEIVABLES AND CARDHOLDER USAGE,
AND, CONSEQUENTLY, THE TIMING AND AMOUNT OF PAYMENTS ON YOUR
SERIES.
17
Centurion and FSB enter into co-branding arrangements with
certain unaffiliated retail and services companies. Under
these arrangements, participating cardholders earn "points"
or other benefits, such as frequent flyer miles, hotel
loyalty points and cash back, that may be redeemed with the
co-branding partner. These arrangements are entered into for
a fixed period, generally ranging from five to ten years, and
will terminate in accordance with their terms unless extended
or renewed at the option of the parties. Currently, the two
largest co-branding arrangements are with Delta Air Lines and
Costco Wholesale.
If one or more of Centurion's or FSB's significant co-
branding arrangements were to experience reduced volume or
termination for any reason, including a general decline in
the business of any of its co-branding partners, it could
affect the performance of the trust's receivables, including
repayment patterns, and cardholder usage of the co-branded
accounts. Centurion and FSB cannot predict what effect, if
any, changes in a significant co-branding arrangement would
have on the performance of the trust's receivables or
cardholder usage and, consequently, the timing and amount of
payments on your series. Any reductions in the amount or
timing of interest or principal payments on these receivables
will reduce the amount available for distribution on the
certificates of your series.
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.
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
18
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 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 without notice from
Centurion, FSB, TRS or the transferors to certificateholders
of such change in rating. 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
notice to you and 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.
19
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
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.
20
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 ISSUING ENTITY
American Express Credit Account Master Trust, also referred to as the
issuing entity or the trust, was formed in 1996 pursuant to a pooling and
servicing agreement. This pooling and servicing agreement, as amended and
restated as of January 1, 2006, and as otherwise amended from time to time, 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. The trust does not have any officers or directors.
As permitted by the pooling and servicing agreement, the pooling and
servicing agreement was amended and restated as of April 16, 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
purchase agreement with RFC III and FSB entered into a purchase agreement with
RFC IV. Under the 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
21
with the laws of the State of New York. The fiscal year for the trust will end
on December 31 of each year.
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 purchase agreements.
Uniform Commercial Code financing statements have been and will be filed, to
the extent appropriate, to perfect the ownership or security interests of the
trust and the trustee described herein.
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
22
principal balances of the accounts and the average thereof, the range of
credit limits of the accounts and the average thereof, the range of ages of
the accounts and the average thereof, and delinquency statistics relating to
the accounts.
CENTURION'S 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, 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 business account holders,
and, in the future, Sign & Travel may also be available to these account
holders.
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.
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
23
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.
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. FSB may also determine the eligibility of such persons to
receive an offer based on such person's activities (e.g., membership in a
rewards program, holding credit cards, magazine or newspaper subscriptions,
and college enrollment). Additional screening is conducted on applicants who
reply to pre-screened offers.
The full application process is used for evaluation of unsolicited and non-
pre-screened applications. The primary sources of these applications are the
"inbound" telemarketing program that features a toll-free telephone number,
Internet channels and, on a limited basis, direct mail and the American
Express "Take One" boxes located in a variety of public establishments. The
full application process entails receiving a completed application, evaluating
the application using proprietary scoring models and credit bureau
information, screening out prior 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.
24
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 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 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 variable default rates equal to the prime rate plus a spread of 21.99%)
(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
sum of (i) any amount that is past due, (ii) any overlimit fees added to the
account during the applicable billing period and (iii) the greatest of (a) $15
or, if the balance is less than $15, such balance, (b) 1/50th of the new
balance (excluding any overlimit fee added to the account during the
applicable billing period) and (c) current billed finance charges, plus an
additional $15 if the amount of current billed finance charges is greater than
the amount specified in clause (a) or (b). 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.
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/
25
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 variable default rates equal to the prime
rate plus a spread of 21.99%. 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 (plus
an additional $15 if the amount of current billed finance charges is greater
than the amount specified in clause (a) or (b)). 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.
COLLECTION EFFORTS
Efforts to collect delinquent American Express credit card 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. Each of Centurion
and FSB 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 Centurion and FSB may sell its rights to
certain collections to its affiliates or collection agencies.
26
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
delinquent), 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, in their capacities as issuers of American Express cards,
receive certain fees (referred to in this prospectus and the accompanying
prospectus supplement as "Issuer Rate Fees"), collected by the American
Express network, in connection with account holder charges for merchandise and
services. These Issuer Rate Fees are individually negotiated directly between
Centurion or FSB, as applicable, and TRS, and may change from time to time.
The amount of Issuer Rate Fees included in finance charge collections for each
Monthly Period during calendar year 20[__], as a percentage of total finance
charge collections for each such Monthly Period, ranged from a high of [__]%
to a low of [__]%.
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 sum
of:
o the product of:
o the rate at which Issuer Rate Fees accrued to Centurion or FSB, as
applicable, during the second preceding Monthly Period on credit
accounts owned by Centurion or FSB, as applicable, multiplied by
o a fraction,
o the numerator of which is the aggregate amount of cardholder
charges in all credit accounts owned by Centurion or FSB, as
applicable, excluding balance transfer transactions, purchases
made by convenience checks, cash advances, certain ineligible
products and services offered by TRS or any affiliate or
subsidiary thereof, and all other transactions on which Issuer
Rate Fees did not accrue to Centurion or FSB, as applicable, in
each case with respect to such Monthly Period, and
o the denominator of which is the aggregate amount of cardholder
charges in all credit accounts owned by Centurion or FSB, as
applicable, with respect to such Monthly Period, multiplied by
o new principal receivables that arose during such Monthly Period in
the accounts that constitute credit accounts, plus
o the product of:
o the rate at which Issuer Rate Fees accrued to Centurion or FSB, as
applicable, during the second preceding Monthly Period on charge
accounts or lines of credit owned by Centurion or FSB, as
applicable, multiplied by
o a fraction,
o the numerator of which is the aggregate amount of obligor
charges on all charge accounts or lines of credit owned by
Centurion or FSB, as applicable, excluding balance transfer
transactions, purchases made by convenience checks, cash
advances, certain ineligible products and services offered by
TRS
27
or any affiliate or subsidiary thereof, and all other
transactions on which Issuer Rate Fees did not accrue to
Centurion or FSB, as applicable, in each case with respect to
such Monthly Period, and
o the denominator of which is the aggregate amount of obligor
charges on all charge accounts or lines of credit owned by
Centurion or FSB, as applicable, with respect to such Monthly
Period, multiplied by
o new principal receivables that arose during such Monthly Period in
the accounts that constitute charge accounts or lines of credit.
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, CENTURION, FSB AND TRS
RFC II
RFC II, a depositor and 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. 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. RFC II's executive offices are located at 200
Vesey Street, Room 138, New York, New York 10285-4405, and its telephone
number is (212) 640-2357.
RFC III
RFC III, a depositor and 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.
Since its formation, RFC III has been engaged in these activities solely as
(i) the purchaser of receivables from Centurion pursuant to the related
purchase agreement, (ii) a transferor of
28
receivables to the issuing entity pursuant to the pooling and servicing
agreement, (iii) the holder of the Transferors' Interest in the issuing entity
and (iv) a transferor that executes underwriting, subscription and purchase
agreements in connection with each issuance of certificates. RFC III may also
act as a depositor for other master trusts or other securitization special
purpose entities affiliated with Centurion, but has not done so to date.
A description of RFC III's obligations as a transferor of the receivables to
the trust can be found in "The Pooling and Servicing Agreement
Generally--Conveyance of Receivables," "--Representations and Warranties,"
"--Addition of Accounts or Participation Interests" and "--Removal of
Accounts" in this prospectus.
RFC III was initially capitalized by a cash contribution from Centurion.
Pursuant to a revolving credit agreement, RFC III may borrow funds from
Centurion for the sole purpose of purchasing receivables from Centurion under
the related purchase agreement. Under the revolving credit agreement, payments
from RFC III are due only to the extent that those funds are not required for
any other purpose and so long as the payment will not cause RFC III to default
under the pooling and servicing agreement.
RFC III's executive offices are located at 4315 South 2700 West, Room 1300,
02-01-04, Salt Lake City, Utah 84184, and its telephone number is (801) 945-
2030.
RFC IV
RFC IV, a depositor and 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 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.
Since its formation, RFC IV has been engaged in these activities solely as
(i) the purchaser of receivables from FSB pursuant to the related purchase
agreement, (ii) a transferor of receivables to the issuing entity pursuant to
the pooling and servicing agreement, (iii) the holder of the Transferors'
Interest in the issuing entity and (iv) a transferor that executes
underwriting, subscription and purchase agreements in connection with each
issuance of certificates. RFC IV may also act as a depositor for other master
trusts or other securitization special purpose entities affiliated with FSB,
but has not done so to date.
A description of RFC IV's obligations as a transferor of the receivables to
the trust can be found in "The Pooling and Servicing Agreement
Generally--Conveyance of Receivables," "--Representations and Warranties,"
"--Additions of Accounts or Participation Interests" and "--Removal of
Accounts" in this prospectus.
RFC IV was initially capitalized by a cash contribution from FSB. Pursuant
to a revolving credit agreement, RFC IV may borrow funds from FSB for the sole
purpose of purchasing receivables from FSB under the related purchase
agreement. Under the revolving credit agreement, payments from RFC IV are due
only to the extent that those funds are not required for any other purpose and
so long as the payment will not cause RFC IV to default under the pooling and
servicing agreement.
RFC IV's executive offices are located at 4315 South 2700 West, Room 1300,
02-01-58, Salt Lake City, Utah 84184, and its telephone number is (801) 945-
2068.
29
CENTURION
Centurion is a sponsor of the trust and, as such, organizes and initiates
the asset-backed securities transactions of the trust. Centurion also is an
account owner of certain consumer credit or charge card accounts or features,
the receivables of which are included in the trust. See "Centurion's and FSB's
Revolving Credit Businesses" in this prospectus. In addition, on behalf of TRS
as servicer, Centurion performs limited servicing functions with respect to
receivables in the trust. See "The Pooling and Servicing Agreement
Generally--Collection and Other Servicing Procedures" in this prospectus for a
description of certain matters relating to the servicing functions provided by
Centurion.
Centurion has been involved in the securitization of consumer credit card
receivables since 1996, when it formed the trust. In addition, Centurion is an
account owner of certain charge accounts, the receivables of which are
included in the American Express Issuance Trust, which securitizes consumer,
small business and, in the future, commercial charge receivables. The American
Express Issuance Trust was formed in 2005, but Centurion has been involved in
the securitization of consumer charge receivables since 1998 when it was added
as a transferor to the American Express Master Trust.
Centurion is an industrial bank incorporated under Utah laws in 1987. It
received FDIC insurance in 1989. Its principal office is located at 4315 South
2700 West, Salt Lake City, Utah 84184, and its telephone number is (801) 945-
5000. 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
with respect to the accounts owned by it.
FSB
FSB is a sponsor of the trust and, as such, organizes and initiates the
asset-backed securities transactions of the trust. FSB also is an account
owner of certain consumer credit or charge card accounts or features, the
receivables of which are included in the trust. See "Centurion's and FSB's
Revolving Credit Businesses" in this prospectus. In addition, on behalf of TRS
as servicer, FSB performs limited servicing functions with respect to
receivables in the trust. See "The Pooling and Servicing Agreement
Generally--Collection and Other Servicing Procedures" in this prospectus for a
description of certain matters relating to the servicing functions provided by
FSB.
FSB has been involved in the securitization of consumer credit card
receivables since 2004, when it was added as an account owner. In addition,
FSB is an account owner of certain charge accounts, the receivables of which
are included in the American Express Issuance Trust, which securitizes
consumer, small business and, in the future, commercial charge receivables.
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 and received FDIC
insurance in 2000. Its principal office is located at 4315 South 2700 West,
Salt Lake City, Utah 84184, and its telephone number is (801) 945-3000. FSB is
a wholly-owned subsidiary of TRS.
30
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 200 Vesey Street, New York, New York 10285-4405, and its telephone
number is (212) 640-2000.
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
31
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:
(i) the surviving entity is an eligible servicer under the pooling and
servicing agreement;
(ii) the surviving entity is a corporation organized and existing under
the laws of the United States of America, any state thereof or the
District of Columbia; and
(iii) in a supplement to the pooling and servicing agreement, the
surviving entity expressly assumes the servicer's obligations
under such agreement.
ASSUMPTION OF A TRANSFEROR'S OBLIGATIONS
The pooling and servicing agreement permits a transfer of all or a portion
of a transferor's credit or charge accounts and the receivables arising
thereunder. This transfer may include all (but not less than all) of the
accounts and such transferor's remaining interest in the receivables arising
thereunder, its interest in participations in receivables and its interest in
the trust, together with all servicing functions and other obligations under
the pooling and servicing agreement or relating to the transactions
contemplated thereby, to another entity that may or may not be affiliated with
that transferor. Pursuant to the pooling and servicing agreement, each
transferor is permitted to assign, convey, and transfer these assets and
obligations to such other entity, without the consent or approval or any
certificateholders, if the following conditions, among others, are satisfied:
(i) the assuming entity is organized under the laws of the United
States of America, any state thereof or the District of Columbia;
(ii) the assuming entity, the transferors and the trustee shall have
entered into a supplement to the pooling and servicing agreement
providing for the entity's assumption of the applicable
transferor's obligations under the pooling and servicing
agreement;
(iii) the applicable transferor shall have delivered to the trustee
(a) an officer's certificate and an opinion of counsel regarding
the enforceability of such assumption agreement against the
assuming entity; and
(b) a Tax Opinion;
(iv) all filings required to perfect the trustee's interest in the
receivables to be conveyed by the assuming entity shall have been
duly made and copies thereof shall have been delivered to the
trustee;
(v) the trustee shall have received an opinion of counsel with respect
to clause (iv) above and certain other matters specified in the
pooling and servicing agreement; and
(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
32
transfer and assumption of such transferor's obligations by the
surviving entity. If the assuming entity is not subject to Title
11 of the United States Code, the applicable transferor shall have
delivered the notice described above and the transferors shall
have received notice that the Rating Agency Condition has been
satisfied.
The pooling and servicing agreement provides that the transferors, the
surviving entity and the trustee may enter into amendments to that agreement
to permit the transfer and assumption described above without the consent of
any certificateholders. After any permitted transfer and assumption, the
assuming entity will be considered to be a "transferor" for all purposes
hereof, and the applicable transferor will have no further liability or
obligation under the pooling and servicing agreement.
THE ACCOUNTS
The receivables have arisen or will arise in certain revolving credit
accounts that have been selected from the Total Portfolio, in each case, on
the basis of criteria set forth in the purchase agreements and 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, with the
consent of RFC III or RFC IV, as applicable, designate 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 purchase agreements
and the pooling and servicing agreement as of the applicable selection date.
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
33
forth in the purchase agreements and the pooling and servicing agreement. See
"The Pooling and Servicing Agreement Generally--Conveyance of Receivables" in
this prospectus. The eligibility of accounts is assessed only on the
applicable selection date, while the eligibility of receivables is assessed
only on the applicable selection date (in the case of receivables then
existing in Additional Accounts on such date) or as of the date of creation
(in the case of new receivables arising in an account). Accordingly, there can
be no assurance that all of such accounts, receivables and participation
interests will continue to meet the eligibility requirements as of any
subsequent date, including any subsequent 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 (including Additional Accounts) and participation
interests, if any. Such receivables 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. 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
34
described in "--Definitive Certificates" below, purchasers of certificates
will not be entitled to have the certificates registered in their names.
Furthermore, these purchasers will not be entitled to receive physical
delivery of the certificates in definitive paper form. Instead, upon issuance,
all the certificates of a class will be represented by one or more fully
registered permanent global certificates, without interest coupons.
Each global certificate will be deposited with a securities depository named
The Depository Trust Company and will be registered in the name of its
nominee, Cede & Co. No global certificate representing book-entry certificates
may be transferred except as a whole by DTC to a nominee of DTC, or by a
nominee of DTC to another nominee of DTC. Thus, DTC or its nominee will be the
only registered holder of the certificates and will be considered the sole
representative of the beneficial owners of certificates for purposes of the
pooling and servicing agreement.
The registration of the global certificates in the name of Cede & Co. will
not affect beneficial ownership and is performed merely to facilitate
subsequent transfers. The book-entry system, which is also the system through
which most publicly traded common stock is held, is used because it eliminates
the need for physical movement of securities. The laws of some jurisdictions,
however, may require some purchasers to take physical delivery of their
certificates in definitive form. These laws may impair the ability to own or
transfer book-entry certificates.
Purchasers of certificates in the United States may hold interests in the
global certificates through DTC, either directly, if they are participants in
that system--such as a bank, brokerage house or other institution that
maintains securities accounts for its customers with DTC or its nominee--or
otherwise indirectly through a participant in DTC. Purchasers of certificates
in Europe may hold interests in the global certificates through Clearstream,
Luxembourg or through Euroclear Bank S.A./N.V., as operator of the Euroclear
system.
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
35
records relating to book-entry certificates. The trust, the trustee and their
agents also will not be responsible or liable for payments made on account of
the book-entry certificates.
Until definitive certificates are issued to the beneficial owners as
described under "--Definitive Certificates" in this prospectus, all references
to "holders" of certificates means DTC. The trust, the trustee and any paying
agent or transfer agent and registrar may treat DTC as the absolute owner of
the certificates for all purposes.
Beneficial owners of book-entry certificates should realize that the trust
will make all distributions of principal and interest on the certificates to
DTC and will send all required reports and notices solely to DTC as long as
DTC is the registered holder of the certificates. DTC and the participants are
generally required by law to receive and transmit all distributions, notices
and directions from the trustee to the beneficial owners through the chain of
intermediaries.
Similarly, the trustee will accept notices and directions solely from DTC.
Therefore, in order to exercise any rights of a holder of certificates under
the pooling and servicing agreement, each person owning a beneficial interest
in the certificates must rely on the procedures of DTC and, in some cases,
Clearstream, Luxembourg or Euroclear. If the beneficial owner is not a
participant in that system, then it must rely on the procedures of the
participant through which that person owns its interest. DTC has advised the
trust that it will take actions under the pooling and servicing agreement only
at the direction of its participants, which in turn will act only at the
direction of the beneficial owners. Some of these actions, however, may
conflict with actions it takes at the direction of other participants and
beneficial owners.
Notices and other communications by DTC to participants, by participants to
indirect participants, and by participants and indirect participants to
beneficial owners will be governed by arrangements among them.
Beneficial owners of book-entry certificates should also realize that book-
entry certificates may be more difficult to pledge because of the lack of a
physical certificate. Beneficial owners may also experience delays in
receiving distributions on their certificates since distributions will
initially be made to DTC and must be transferred through the chain of
intermediaries to the beneficial owner's account.
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.
36
CLEARSTREAM, LUXEMBOURG
Clearstream, Luxembourg is registered as a bank in Luxembourg and is
regulated by the Banque Centrale du Luxembourg, the Luxembourg Central Bank,
which supervises Luxembourg banks. Clearstream, Luxembourg holds securities
for its customers and facilitates the clearance and settlement of securities
transactions by electronic book-entry transfers between their accounts.
Clearstream, Luxembourg provides various services, including safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream, Luxembourg also deals with
domestic securities markets in over 30 countries through established
depository and custodial relationships. Clearstream, Luxembourg has
established an electronic bridge with Euroclear in Brussels to facilitate
settlement of trades between Clearstream, Luxembourg and Euroclear.
Clearstream, Luxembourg currently accepts over 110,000 securities issues on
its books.
Clearstream, Luxembourg's customers are worldwide financial institutions
including underwriters, securities brokers and dealers, banks, trust companies
and clearing corporations. Clearstream, Luxembourg's U.S. customers are
limited to securities brokers and dealers and banks. Currently, Clearstream,
Luxembourg has approximately 2,000 customers located in over 80 countries,
including all major European countries, Canada, and the United States.
Indirect access to Clearstream, Luxembourg is available to other institutions
that clear through or maintain a custodial relationship with an account holder
of Clearstream, Luxembourg.
Euroclear was created in 1968 to hold securities for participants of
Euroclear and to clear and settle transactions between Euroclear participants
through simultaneous electronic book-entry delivery against payment. This
system eliminates the need for physical movement of securities and any risk
from lack of simultaneous transfers of securities and cash. Euroclear includes
various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries. The Euroclear operator
is Euroclear Bank, S.A./N.V. The Euroclear operator conducts all operations.
All Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear operator. The Euroclear operator establishes
policy for Euroclear on behalf of Euroclear participants. Euroclear
participants include banks, including central banks, securities brokers and
dealers and other professional financial intermediaries and may include the
underwriters. Indirect access to Euroclear is also available to other firms
that clear through or maintain a custodial relationship with a Euroclear
participant, either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian
law. These Terms and Conditions govern transfers of securities and cash within
Euroclear, withdrawals of securities and cash from Euroclear, and receipts of
payments with respect to securities in Euroclear. All securities in Euroclear
are held on a fungible basis without attribution of specific securities to
specific securities clearance accounts. The Euroclear operator acts under the
Terms and Conditions only on behalf of Euroclear participants, and has no
record of or relationship with persons holding through Euroclear participants.
This information about DTC, Clearstream, Luxembourg and Euroclear has been
provided by each of them for informational purposes only and is not intended
to serve as a representation, warranty or contract modification of any kind.
37
DISTRIBUTIONS ON BOOK-ENTRY CERTIFICATES
The trust will make distributions of principal of and interest on book-entry
certificates to DTC. These payments will be made in immediately available
funds by the trust's paying agent, The Bank of New York, at the office of the
paying agent in New York City that the trust designates for that purpose.
In the case of principal payments, the global certificates must be presented
to the paying agent in time for the paying agent to make those payments in
immediately available funds in accordance with its normal payment procedures.
Upon receipt of any payment of principal of or interest on a global
certificate, DTC will immediately credit the accounts of its participants on
its book-entry registration and transfer system. DTC will credit those
accounts with payments in amounts proportionate to the participants'
respective beneficial interests in the stated principal amount of the global
certificate as shown on the records of DTC. Payments by participants to
beneficial owners of book-entry certificates will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name,"
and will be the responsibility of those participants.
Distributions on book-entry certificates held beneficially through
Clearstream, Luxembourg will be credited to cash accounts of Clearstream,
Luxembourg customers in accordance with its rules and procedures, to the
extent received by its U.S. depository.
Distribution on book-entry certificates held beneficially through Euroclear
will be credited to the cash accounts of Euroclear participants in accordance
with the Terms and Conditions, to the extent received by its U.S. depository.
In the event definitive certificates are issued, distributions of principal
of and interest on definitive certificates will be made directly to the
holders of the definitive certificates in whose names the definitive
certificates were registered at the close of business on the related Record
Date.
GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES
Initial settlement for the certificates will be made in immediately
available funds. Secondary market trading between DTC participants will occur
in the ordinary way in accordance with DTC's rules and will be settled in
immediately available funds using DTC's Same-Day Funds Settlement System.
Secondary market trading between Clearstream, Luxembourg customers and/or
Euroclear participants will occur in the ordinary way in accordance with the
applicable rules and operating procedures of Clearstream, Luxembourg and
Euroclear. Such secondary market trading will be settled using the procedures
applicable to conventional eurobonds in immediately available funds.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream,
Luxembourg customers or Euroclear participants, on the other, will be effected
in DTC in accordance with DTC's rules on behalf of the relevant European
international clearing system by the U.S. depositories. However, cross-market
transactions of this type will require delivery of instructions to the
relevant European international clearing system by the counterparty in that
system in accordance with its rules and procedures and within its established
deadlines, European time. The relevant European international clearing system
will, if the transaction meets its settlement requirements, deliver
38
instructions to its U.S. depository to take action to effect final settlement
on its behalf by delivering or receiving certificates in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Clearstream, Luxembourg customers and Euroclear
participants may not deliver instructions directly to DTC.
Because of time-zone differences, credits to certificates in Clearstream,
Luxembourg or Euroclear as a result of a transaction with a DTC participant
will be made during subsequent securities settlement processing and will be
credited the business day following a DTC settlement date. The credits to or
any transactions in the certificates settled during processing will be
reported to the relevant Euroclear participants or Clearstream, Luxembourg
customers on that business day. Cash received in Clearstream, Luxembourg or
Euroclear as a result of sales of certificates by or through a Clearstream,
Luxembourg customer or a Euroclear participant to a DTC participant will be
received with value on the DTC settlement date, but will be available in the
relevant Clearstream, Luxembourg or Euroclear cash account only as of the
business day following settlement in DTC.
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
39
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 or more indices 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
40
prospectus for a description of factors that may affect the timing of
principal payments on certificates.
The certificates of each series will have a Revolving Period. During the
Revolving Period, collections of principal receivables and certain other
amounts otherwise allocable to the invested amount of that series will:
o if that series is a principal sharing series, be treated as Shared
Principal Collections and will be distributed to, or for the benefit of,
the certificateholders of other series in the same group; or
o if that series is not a principal sharing series, be paid to the holders
of the Transferor Certificates or deposited into the Special Funding
Account, as more fully described in the related prospectus supplement.
The certificates of any series may have a Controlled Accumulation Period.
During the Controlled Accumulation Period for a series, collections of
principal receivables and certain other amounts allocable to that series
(including Shared Principal Collections, if any) will be deposited on each
Distribution Date in a principal funding account established for the benefit
of the certificateholders of that series and used to make principal
distributions to the certificateholders of that series when due on the
expected final payment date. The amount to be deposited in a principal funding
account for any series on any Distribution Date may, but will not necessarily,
be limited to a controlled accumulation amount specified in the related
prospectus supplement. If a series has more than one class of certificates
that has a Controlled Accumulation Period, each class may have a separate
principal funding account and controlled accumulation amount. In addition, the
related prospectus supplement may describe certain priorities among such
classes with respect to deposits of principal into the principal funding
accounts.
The certificates of any series may have a Controlled Amortization Period.
During the Controlled Amortization Period for a series, collections of
principal receivables and certain other amounts allocable to that series
(including Shared Principal Collections, if any) will be used on each
Distribution Date to make principal distributions to any class of
certificateholders then scheduled to receive those distributions. The amount
to be distributed on any Distribution Date to certificateholders of any series
offered by this prospectus may, but will not necessarily, be limited to a
controlled amortization amount specified in the related prospectus supplement
plus any existing controlled amortization amounts arising from prior
Distribution Dates. If a series has more than one class of certificates that
has a Controlled Amortization Period, each class may have a separate
controlled amortization amount. In addition, the related prospectus supplement
may describe certain priorities among such classes with respect to such
distributions.
If so specified and under the conditions set forth in the related prospectus
supplement for a series having a Controlled Accumulation Period, the
certificates of that series may have an Early Accumulation Period. During the
Early Accumulation Period for a series, collections of principal receivables
and certain other amounts allocable to that series (including Shared Principal
Collections, if any) will be deposited on each Distribution Date in a
principal funding account and used to make distributions of principal to the
certificateholders of that series on the expected final payment date. See
"Series Provisions--Pay-Out Events" in the
41
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 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;
42
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.
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. So long as any series
issued prior to April 16, 2004 is outstanding, 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
43
in writing its inability, or shall be unable, to pay its debts generally as
they become due, file a petition to take advantage of any applicable
insolvency, bankruptcy, reorganization, liquidation, receivership, or
conservatorship statute, make any assignment for the benefit of its creditors
or voluntarily suspend payment of its obligations; or a proceeding shall have
been instituted against such transferor or other holder by a court having
jurisdiction in the premises seeking a decree or order for relief in respect
of any such person in an involuntary case under any bankruptcy, insolvency,
reorganization or liquidation statute, or for the appointment of a receiver,
liquidator, assignee, trustee, custodian, sequestrator, conservator or other
similar official, of such transferor or other holder or for any substantial
part of such transferor's or other holder's property, or for the liquidation
and winding up of such transferor's or other holder's affairs and, if
instituted against such transferor or other holder, any such proceeding shall
continue undismissed or unstayed and in effect for a period of 60 consecutive
days, or any of the actions sought in such proceeding shall occur.
If the only Pay-Out Event or Reinvestment Event to occur with respect to any
series is the bankruptcy, insolvency, liquidation receivership or
conservatorship of a transferor, the trustee may not be permitted to suspend
transfers of receivables to the trust, and the instructions to sell the
receivables may not be given effect.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicer's compensation for its servicing activities and reimbursement
for its expenses for any Monthly Period will be a Servicing Fee payable
monthly. The share of the Servicing Fee allocable to each series of
certificates on any Distribution Date generally will be equal to one-twelfth
of the product of:
(i) the applicable servicing fee percentage for that series; and
(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 at the time 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.
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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 the applicable cut-off-date. To the extent that Credco owns any
receivables arising in any designated Additional Accounts, it may assign those
receivables to RFC II, and 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;
(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;
45
(ii) it has the authority to consummate the transactions contemplated by
the pooling and servicing agreement and each supplement; and
(iii) the pooling and servicing agreement and each supplement constitute:
(a) a valid, binding and enforceable agreement of such
transferor and
(b) a valid sale, transfer and assignment to the trust of all
right, title and interest of such transferor in the
receivables, whether then existing or thereafter created
and the proceeds thereof (including proceeds in any of the
accounts established for the benefit of the
certificateholders) and in recoveries or the grant of a
first-priority perfected security interest under the
applicable UCC in such receivables and the proceeds
thereof (including proceeds in any of the accounts
established for the benefit of the certificateholders) and
in Recoveries, which is effective as to each receivable
then existing on such date.
In the event of a material breach of any of the representations and
warranties described in the above paragraphs that has a material adverse
effect on the certificateholders' interest in the receivables or the
availability of the proceeds thereof to the trust (which determination will be
made without regard to whether funds are then available pursuant to any series
enhancement), either the trustee or certificateholders holding certificates
evidencing not less than 50% of the aggregate unpaid principal amount of all
outstanding certificates, by written notice to the transferors and the
servicer (and to the trustee if given by the certificateholders), may direct
the 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.
46
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 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,
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(d) the aggregate amount of principal receivables in the trust as of the
date of such transfer or assignment will be greater than the Required
Minimum Principal Balance as of such date, and
(e) the transferors or other holders of the original transferor
certificate as of the date of such transfer or assignment shall have a
remaining interest in the trust of not less than, in the aggregate, 2% of
the total amount of principal receivables and funds on deposit in the
Special Funding Account, the principal funding account and any other similar
account.
The primary purpose for such a transfer would be to convey an interest in
the original transferor certificate to another person. Any transfer or
assignment of a Supplemental Certificate is subject to the condition set forth
in (c) above.
If an affiliate of the transferors owns Eligible Accounts, the receivables
of which are eligible for transfer to the trust, the transferors may wish to
designate such affiliate to be included as a "transferor" under the pooling
and servicing agreement (by means of an amendment to the pooling and servicing
agreement that will not require the consent of any certificateholder; see "--
Amendments" below). In connection with the designation of an additional
transferor, the transferors will surrender the transferor certificate to the
trustee in exchange for a newly issued transferor certificate modified to
reflect such additional transferor's interest in the Transferors' Interest;
provided, however, that:
(i) the conditions set forth in clauses (a), (c) and (e) 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 (without
independent verification of their authority) may designate from time to time
Additional Accounts to be included as accounts in the trust. Subject only to
the eligibility requirements in the purchase agreements and the pooling and
servicing agreement and applicable regulatory guidelines, the account owners
have the discretion to select the accounts from the Total Portfolio for
addition to the Trust Portfolio. 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.
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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 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 as of the applicable
selection date. Because Additional Accounts or participation interests may be
created after the initial selection date and may not have been a part of
Centurion's portfolio of accounts as of the initial selection date, they may
not be of the same credit quality as the initial accounts. The Additional
Accounts or participation interests may have been originated at a later date
using credit, origination or underwriting criteria different from those which
were applied to the initial accounts. Furthermore, they may have been acquired
from another revolving credit issuer or entity that had different credit,
origination or underwriting criteria. Consequently, the performance of such
Additional Accounts or participation interests may be better or worse than the
performance of the initial accounts.
REMOVAL OF ACCOUNTS
On any day of any Monthly Period, the transferors (without independent
verification of their authority) 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;
49
o at least eight Business Days prior to the removal, the transferors shall
have delivered written notice of the removal to each Rating Agency and
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 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
50
(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 at the time designated an
initial discount percentage equal to 2.0%. As of the close of business on
March 26, 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.
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
51
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.
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
52
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
TRS has been servicing credit card accounts since 1987 and charge card
accounts since 1958 when American Express began offering such accounts. TRS
has been the servicer for the trust since the trust's formation in 1996. It
has been servicing securitized consumer charge card receivables since 1992 in
its capacity as the servicer of the American Express Master Trust. TRS
currently is the servicer of the American Express Issuance Trust and, in the
future, may be the servicer of other master trusts or other securitization
special purpose entities.
Pursuant to the pooling and servicing agreement, the servicer, whether
acting itself or through one or more subservicers, 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.
If TRS were to become a debtor in a bankruptcy case, a Servicer Default
would occur and TRS could be removed as servicer for the trust and a successor
servicer would be appointed. See "The Pooling and Servicing Agreement
Generally--Servicer Default" in this prospectus for more information regarding
the appointment of a successor servicer.
OUTSOURCING OF SERVICING
Pursuant to the pooling and servicing agreement, TRS, as servicer, has the
right to delegate its duties as servicer to any person who agrees to conduct
such duties in accordance with the pooling and servicing agreement, the
applicable account guidelines and the applicable account agreements.
TRS has outsourced certain of its servicing functions by contracting with
affiliated and unaffiliated third parties. Pursuant to a sub-servicing
agreement, TRS has contracted with Amex Card Services Company, a Delaware
corporation that is a wholly-owned subsidiary of TRS, to act as subservicer
and to perform certain servicing activities consisting of credit
authorization, card fulfillment and replacement, credit operations and
collections, customer servicer and operation of telephone service centers,
fraud services, customer billing and remittance processing. Amex Card Services
Company also provides these services with respect to receivables that have not
been securitized through the issuing entity. TRS also has contracted with
Centurion and FSB to perform certain limited servicing functions with respect
to the receivables arising in the accounts owned by each of Centurion and FSB,
consisting of
53
collecting and depositing or causing to be deposited into the collection
account payments received in respect of such receivables and, when
appropriate, charging off as uncollectible such receivables.
The performance of certain servicing functions has been outsourced by TRS
and its affiliates to third party vendors. Functions that are performed by
outside vendors include card production and fulfillment, card replacement,
contacting of customers to collect delinquent and charged-off balances,
responding to telephone service center inquiries, front end processing of
customer disputes, data entry and imaging and remittance processing. Among
other functions, TRS and its affiliates identify areas of risk, design,
develop and implement models to minimize financial exposure and maximize
customer spending, develop credit underwriting policies and procedures,
underwrite and re-underwrite accounts and formulate risk management and credit
criteria. The logic and rules inherent in the systems used by outside vendors
to route customer inquiries and to make decisions about accounts are developed
by TRS and its affiliates. Third party vendors are required to follow detailed
account management procedures and policies of TRS in connection with any
decisions made with respect to accounts with respect to which they provide
services. TRS and its affiliates regularly audit and assess the performance of
third party vendors to measure vendor quality and compliance. All third party
vendors are required to comply with the account owners' security and
information protection requirements. Decisions to retain a third party vendor
are based on cost, the ability of third parties to provide greater flexibility
to TRS and its affiliates, experience, financial stability and various other
factors.
Regulus West LLC
TRS' proprietary facilities conduct paper payment remittance processing
services. Since 1999, Regulus West LLC, a Delaware limited liability company,
also has performed paper payment remittance processing services pursuant to an
agreement with TRS. Regulus provides these services at three locations in the
United States. Regulus also provides disaster recovery services to TRS. As a
remittance processor, Regulus is responsible for, among other services,
transmitting payment information to TRS, which TRS in turn uses to update its
obligor records. Regulus also is responsible for encoding and processing the
remittance checks received by TRS at these locations. Regulus is required to
perform the services in accordance with service levels and procedures
prescribed by TRS, and TRS regularly monitors Regulus' performance and
compliance with TRS' standards. Regulus may not subcontract any of its duties
to any third party without the prior consent of TRS, which TRS may withhold in
its sole discretion. TRS has also reserved the right to perform for itself or
have a third party perform any of the services performed by Regulus. Regulus
West LLC is a wholly owned subsidiary of Regulus Group LLC, a remittance
processing and print distribution company founded in 1995 and headquartered in
Napa, California. Regulus has provided remittance processing services to
banks, credit card issuers, telecommunications carriers, utilities and
insurance companies since its formation. Regulus is one of the largest retail
remittance processors in the United States, processing more than 45 million
payments per month.
In connection with the remittance processing conducted by TRS at its
proprietary facility, TRS also has outsourced to a vendor in India the
responsibility to manually review and balance paper remittances that cannot be
handled by TRS' automatic payment matching equipment.
54
Notwithstanding any such delegation or outsourcing, the servicer will
continue to be liable for all of its obligations under the transfer and
servicing agreement. In certain circumstances, however, TRS could be relieved
of its duties as servicer upon the assumption of such duties by another
entity. See "--Servicer Default" in this prospectus.
TRS and its affiliates retain the right to change various terms and
conditions of the agreements with the third party vendors, and retain the
right to change the third party vendors themselves. These changes may be the
result of several different factors, including but not limited to: expiration
of the servicing contract with the vendor, customer satisfaction, vendor
quality and financial strength, compliance with required service levels,
adherence to data protection and privacy requirements, adherence to security
standards and requirements, performance and skill evaluations, risk management
policies, and cost considerations. Accordingly, third party vendors who
provide services to TRS, its affiliates and its cardmembers may change from
time to time, and certificateholders will not be notified of any change.
Similarly, to the extent that the terms and conditions are altered for
agreements with third party vendors, certificateholders will not be given
notice of those changes.
If an affiliated or unaffiliated third party performing certain outsourced
or delegated functions were to enter bankruptcy or become insolvent, then the
servicing of the accounts in the Total Portfolio could be delayed and payments
on your certificates could be accelerated, delayed or reduced.
[If an additional unaffiliated servicer will service 10% or more, but less
than 20%, of the pool assets, provide information contemplated in Item
1108(a)(2)(iii) of Regulation AB.]
[If an additional master servicer, affiliated servicer or other material
servicer upon whose responsibilities the performance of the receivables in the
trust is materially dependant will service the receivables in the trust, or if
an unaffiliated servicer will service 20% or more of the pool assets, provide
information contemplated in Item 1108(a)(3) of Regulation AB.]
NEW ISSUANCES
The pooling and servicing agreement provides that, pursuant to one or more
supplements, the transferors may cause the trust 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
provide prior notice to, or 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 purchasers 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,
55
each series may have the benefits of series enhancement issued by enhancement
providers different from the providers of Series Enhancement with respect to
any other series.
Under the pooling and servicing agreement, the trustee shall hold any such
Series Enhancement only on behalf of the certificateholders of the series to
which such Series Enhancement relates. With respect to each such Series
Enhancement, the transferors may deliver a different form of Series
Enhancement agreement. The transferors also have the option under the pooling
and servicing agreement to vary among series the terms upon which a series may
be repurchased by the transferors or remarketed to other investors. There is
no limit to the number of new issuances the transferors may cause under the
pooling and servicing agreement. The trust will terminate only as provided in
the pooling and servicing agreement. There can be no assurance that the terms
of any series might not have an impact on the timing and amount of payments
received by a certificateholder of another series.
Under the pooling and servicing agreement and pursuant to a supplement, a
new issuance may only occur upon the satisfaction of certain conditions. The
obligation of the trustee to authenticate the certificates of such new series
and to execute and deliver the related supplement is subject to the
satisfaction of the following conditions:
o on or before the fifth day immediately preceding the date upon which the
new issuance is to occur, the transferors will give to the trustee, the
servicer and each Rating Agency written notice of such new issuance and
the date upon which the new issuance is to occur;
o the transferors will deliver to the trustee the related supplement,
specifying the terms of the series;
o the transferors will deliver to the trustee any related Series
Enhancement agreement;
o the Rating Agency Condition will be satisfied with respect to the new
issuance;
o each transferor will deliver to the trustee and certain providers of
Series Enhancement an officer's certificate of that transferor to the
effect that such issuance will not have an adverse effect;
o the transferors will deliver to the trustee, each Rating Agency and
certain providers of Series Enhancement a Tax Opinion;
o the transferors or other holders of the original transferor certificate
shall have a remaining interest in the trust of not less than 2% of the
total amount of principal receivables and funds on deposit in the Special
Funding Account and the principal funding account; and
o the aggregate amount of principal receivables plus the principal amount
of any participation interest shall be greater than the Required Minimum
Principal Balance as of the date upon which the new issuance is to occur
after giving effect to such issuance.
COLLECTION ACCOUNT
The servicer has established and maintains for the benefit of the
certificateholders of each series, in the name of the trustee, on behalf of
the trust, an Eligible Deposit Account called the Collection Account. The
Collection Account, which is maintained with The Bank of New York, bears a
designation clearly indicating that the funds deposited therein are held for
the benefit of the certificateholders of each series. If at any time the
Collection Account is no
56
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 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 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, then the servicer may deduct the Servicing Fee and, during the
Revolving Period, the Defaulted Amount (which will be distributed to the
transferors, but not
57
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.
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
58
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
(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.
59
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.
60
----------------------------------------------------------------------------
American Express Credit Account
Master Trust
Finance Charge
Collections
----------------------------------------------------------------------------
|
|
|
----------------------------------------------------------------------------
| | |
| | |
| | |
-------------------------- -------------------------- --------------------------
Series 1 Series 2 Series 3
Series Allocable Finance Series Allocable Finance Series Allocable Finance
Step Charge Collections (based Charge Collections (based Charge Collections (based
1 upon the Series Allocation upon the Series Allocation upon the Series Allocation
Percentage) Percentage) Percentage)
-------------------------- -------------------------- --------------------------
| | | | | |
| | | | | |
| | | | | |
-------------- ------------------- -------------- ------------------- -------------- -------------------
Transferors' Investor Finance Transferors' Investor Finance Transferors' Investor Finance
Step Finance Charge Charge Collections Finance Charge Charge Collections Finance Charge Charge Collections
2 Collections (based upon the Collections (based upon the Collections (based upon the
Floating Allocation Floating Allocation Floating Allocation
Percentage) Percentage) Percentage)
-------------- ------------------- -------------- ------------------- -------------- -------------------
| | |
| | |
Step --------------------------------------------------------------------------------------------
3 Group
------- Investor Finance Charge Collections
| --------------------------------------------------------------------------------------------
|
|---------------------------------------------------
| |
| ---------------------------------|---------------------------------
Step | | | |
4 | --------------------------------------------------------------------------------------------
| Series 1 Series 2 Series 3
| 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
--------------------------------------------------------------------------------------------
61
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
62
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.
So long as no series is in a Controlled Accumulation Period, Early
Accumulation Period, Controlled Amortization Period or Early Amortization
Period, 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
63
Period starts and is continuing for any series, however, any funds on deposit
in the Special Funding Account will be released, deposited in the Collection
Account and treated as collections of principal receivables to the extent
needed to make principal payments due to or for the benefit of the
certificateholders of such series, but only to the extent that doing so would
not cause the Transferor Amount to be less than the Required Transferor
Amount.
If the transferors determine that by decreasing the amount on deposit in the
Special Funding Account, one or more series for which the related supplements
permit partial amortization, may be prevented from experiencing a Pay-Out
Event due to the insufficiency of yield, funds on deposit in the Special
Funding Account may be applied to each such series (on a pro rata basis
according to each series' invested amount) to reduce the invested amount
thereof. Such reduction would enable that series to avoid a yield
insufficiency Pay-Out Event, but may be done only to the extent that it would
not cause the Transferor Amount to be less than the Required Transferor
Amount. The transferors, at their option, may instruct the trustee to deposit
to the Special Funding Account any Shared Principal Collections that would
otherwise be payable to the holders of the transferor certificates in
accordance with the foregoing.
Funds on deposit in the Special Funding Account will be invested by the
trustee, at the direction of the servicer, in Eligible Investments. Any
earnings (net of losses and investment expenses) earned on amounts on deposit
in the Special Funding Account during any Monthly Period will be withdrawn
from the Special Funding Account and treated as collections of finance charge
receivables for that Monthly Period.
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.
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.
64
If so specified in the related prospectus supplement, moneys in the
prefunding account will be invested by the trustee in Eligible Investments or
will be subject to a guaranteed rate or investment agreement or other similar
arrangement. In connection with each Distribution Date during the Funding
Period, investment earnings on funds in the prefunding account during the
related Monthly Period will be withdrawn from the prefunding account and
deposited, together with any applicable payment under a guaranteed rate or
investment agreement or other similar arrangement, into the Collection Account
for distribution in respect of interest on the certificates of the related
series in the manner specified in the related prospectus supplement.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES
Receivables in any account will be charged off as uncollectible in
accordance with the account guidelines and the servicer's customary and usual
policies and procedures for servicing charge and other credit account
receivables comparable to the receivables. The current policy of Centurion and
FSB is to charge off the receivables in an account when the account is six
contractual payments past due (i.e., approximately 180 days delinquent) 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 Transferor Amount--and not
the investors' interests--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 AND OTHER SUPPORT
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
65
series will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance of the certificates and
interest thereon. If losses occur that exceed the amount covered by the credit
enhancement or that are not covered by the credit enhancement,
certificateholders will bear their allocable share of such losses. In
addition, if specific credit enhancement is provided for the benefit of more
than one class or series, certificateholders of any such class or series will
be subject to the risk that such credit enhancement will be exhausted by the
claims of certificateholders of other classes or series.
If credit enhancement is provided for a series offered by this prospectus,
the related prospectus supplement will include a description of:
o the amount payable under such credit enhancement,
o any conditions to payment thereunder not otherwise described in this
prospectus,
o the conditions (if any) under which the amount payable under such credit
enhancement may be reduced and under which such credit enhancement may be
terminated or replaced, and
o any material provisions of any agreement relating to such credit
enhancement.
Additionally, in certain cases, the related prospectus supplement may set
forth certain information about the provider of any credit enhancement,
including:
o a brief description of its principal business activities,
o its principal place of business, place of incorporation or the
jurisdiction under which it is chartered or licensed to do business,
o if applicable, the identity of regulatory agencies that exercise primary
jurisdiction over the conduct of its business, and
o its total assets, and its stockholders' or policyholders' surplus, if
applicable, as of a date specified in the prospectus supplement.
If so described in the related prospectus supplement, credit enhancement for
a series offered by this prospectus may be available to pay principal of the
certificates of such series following the occurrence of certain Pay-Out Events
or Reinvestment Events for that series. In such event, the credit enhancement
provider may have a subordinated interest in the receivables or certain cash
flows in respect of the receivables to the extent described in such prospectus
supplement, called the collateral invested amount.
[If an entity or group of affiliated entities providing credit enhancement
will be liable or contingently liable for payments representing 10% or more,
but less than 20%, of the cash flow supporting any offered class, provide
information contemplated in Item 1114(b)(1) and (b)(2)(i) of Regulation AB.]
[If an entity or group of affiliated entities providing credit enhancement
will be liable or contingently liable for payments representing 20% or more of
the cash flow supporting any offered class, provide information contemplated
in Item 1114(b)(1) and (b)(2)(ii) of Regulation AB.]
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
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interest on any payment date will be subordinated to the rights of the holders
of the certificates that are senior to such subordinated certificates to the
extent set forth in the related prospectus supplement. The related prospectus
supplement will also set forth information concerning the amount of
subordination of a class or classes of subordinated certificates in a series,
the circumstances in which such subordination will be applicable, the manner,
if any, in which the amount of subordination will decrease over time, and the
conditions under which amounts available from payments that would otherwise be
made to the holders of such subordinated certificates will be distributed to
the holders of certificates that are senior to such subordinated certificates.
The amount of subordination will decrease whenever amounts otherwise payable
to the holders of subordinated certificates are paid to the holders of the
certificates that are senior to such subordinated certificates.
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.
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A surety bond may be purchased for the benefit of the holders of any series
or class of certificates offered by this prospectus to assure distributions of
interest or principal for such series or class of certificates in the manner
and amount specified in the related prospectus supplement.
SPREAD ACCOUNT
Support for a series or one or more classes of a series offered by this
prospectus may be provided by the periodic deposit of certain available excess
cash flow from the trust assets into a spread account intended to assist with
the subsequent distributions of interest and principal on the certificates of
such class or series in the manner specified in the related prospectus
supplement.
MATURITY LIQUIDITY FACILITY
Support for a series or one or more classes thereof may 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.
DERIVATIVE AGREEMENTS
Some certificates may have the benefits of one or more derivative
agreements, which may be a currency swap, interest rate swap, a cap
(obligating a derivative counterparty to pay all interest in excess of a
specified percentage rate), a collar (obligating a derivative counterparty to
pay all interest below a specified percentage rate and above a higher
specified percentage rate) or a guaranteed investment contract (obligating a
derivative counterparty to pay a guaranteed rate of return over a specified
period) with various counterparties. In general, the trust will receive
payments from counterparties to the derivative agreements in exchange for the
trust's payments to them, to the extent required under the derivative
agreements. The specific terms of a derivative agreement applicable to a
series or class of certificates and a description of the related counterparty
will be included in the related prospectus supplement. The banks or any of
their affiliates may be counterparties to a derivative agreement.
[If the certificates of a series or class have the benefit of a derivative
agreement, provide information contemplated in Item 1115(a) of Regulation AB.]
[If the aggregate significance percentage related to any entity or group of
affiliated entities providing derivative instruments is 10% or more, but less
than 20%, provide information contemplated in Item 1115(b)(1) of Regulation
AB.]
[If the aggregate significance percentage related to any entity or group of
affiliated entities providing derivative instruments is 20% or more, provide
information contemplated in Item 1115(b)(2) of Regulation AB.]
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SUPPLEMENTAL CREDIT ENHANCEMENT AGREEMENTS AND SUPPLEMENTAL LIQUIDITY
AGREEMENTS
Some certificates may have the benefit of one or more additional forms of
credit enhancement agreements--referred to herein as "supplemental credit
enhancement agreements"--such as letters of credit, cash collateral guarantees
or accounts, surety bonds or insurance policies with various credit
enhancement providers. In addition, some certificates may have the benefit of
one or more forms of supplemental liquidity agreements--referred to herein as
"supplemental liquidity agreements"--such as a liquidity facility with various
liquidity providers. The specific terms of any supplemental credit enhancement
agreement or supplemental liquidity agreement applicable to a series or class
of certificates and a description of the related provider will be included in
the related prospectus supplement for a series or class of certificates. The
banks or any of their affiliates may be providers of any supplemental credit
enhancement agreement or supplemental liquidity agreement.
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 authorize 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 trustee in the receivables
or the related accounts; and
(d) not reschedule, revise or defer payments due on the receivables except
in accordance with its guidelines for servicing receivables.
Under the terms of the pooling and servicing agreement, if the servicer
discovers, or receives written notice from the trustee, that:
o any covenant of the servicer set forth in clauses (a) through (d) above
has not been complied with in all material respects and
o such noncompliance has not been cured within 60 days (or such longer
period as may be agreed to by the trustee and the transferors) thereafter
and has a material adverse effect on the certificateholders' interest in
such receivables,
then all receivables in the related account will be assigned and transferred
to the servicer and the account will no longer be included as an account in
the trust portfolio.
Such assignment and transfer will be made when the servicer deposits an
amount equal to the amount of such receivables in the Collection Account on
the Business Day preceding the Distribution Date following the Monthly Period
during which such obligation arises. This transfer and assignment to the
servicer constitutes the sole remedy available to the certificateholders if
such covenant or warranty of the servicer is not satisfied and the trust's
interest in any such assigned receivables will be automatically assigned to
the servicer.
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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. Any such termination and appointment is called a service transfer.
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. See "Risk Factors--The conservatorship,
receivership, bankruptcy, or insolvency of Centurion, FSB, TRS, a transferor,
the trust, or any of their affiliates could result in accelerated, delayed, or
reduced payments to you."
The rights and interest of the transferors under the pooling and servicing
agreement in the Transferors' Interest will not be affected by any termination
notice or service transfer. If, within 60 days of receipt of a termination
notice, the trustee does not receive any bids from eligible servicers but
receives an officer's certificate from each transferor to the effect that the
servicer cannot in good faith cure the Servicer Default which gave rise to the
termination notice, then the trustee shall, except when the Servicer Default
is caused by certain events of bankruptcy, insolvency, conservatorship or
receivership of the servicer, offer the transferors a right of first refusal
to purchase the certificateholders' interest on the Distribution Date in the
next calendar month. The purchase price for the certificateholders' interest
will be equal to the sum of the amounts specified therefor for each
outstanding series in the related prospectus supplement, and for any
certificates offered hereby, in such prospectus supplement.
The trustee will, as promptly as possible, appoint a successor servicer. The
successor servicer may be Centurion, FSB, the trustee or an entity which, at
the time of its appointment
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as successor servicer, (1) services a portfolio of charge or credit accounts,
(2) is legally qualified and has the capacity to service the trust, (3) has,
in the sole determination of the trustee, demonstrated the ability to service
professionally and competently a portfolio of similar accounts in accordance
with high standards of skill and care, (4) is qualified to use the software
that is then being used to service the accounts or obtains the right to use or
has its own software which is adequate to perform its duties under the pooling
and servicing agreement and other securitization agreements and (5) has a net
worth of at least $50,000,000 as of the end of its most recent fiscal quarter.
The successor servicer shall accept its appointment by written instrument
acceptable to the trustee. The successor servicer is entitled to compensation
out of collections; however, that compensation will not be in excess of the
servicing fee. See "Description of the Certificates--Servicing Compensation
and Payment of Expenses" in this prospectus for a discussion of the monthly
servicing fee. Because TRS, as servicer, has significant responsibilities with
respect to the servicing of the receivables, the trustee may have difficulty
finding a suitable successor servicer. Potential successor servicers may not
have the capacity to adequately perform the duties required of a successor
servicer or may not be willing to perform such duties for the amount of the
servicing fee currently payable under the pooling and servicing agreement. 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. The Bank of New York, the
trustee, does not have credit card operations. If The Bank of New York is
automatically appointed as successor servicer, it may not have the capacity to
perform the duties required of a successor servicer and current servicing
compensation under the pooling and servicing agreement may not be sufficient
to cover its actual costs and expenses of servicing the accounts. 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 fiscal year for the trust will end on December 31 of each year. The
servicer will file with the SEC an annual report on Form 10-K on behalf of the
trust 90 days after the end of its fiscal year.
The servicer will deliver to the trustee and, if required, file with the SEC
as part of an annual report on Form 10-K filed on behalf of the trust, the
following documents:
o a report regarding its assessment of compliance during the preceding
fiscal year with all applicable servicing criteria set forth in relevant
SEC regulations with respect to asset-backed securities transactions
taken as a whole involving the servicer that are backed by the same types
of assets as those backing the certificates;
o with respect to each assessment report described immediately above, a
report by a registered public accounting firm that attests to, and
reports on, the assessment made by the asserting party, as set forth in
relevant SEC regulations; and
o a servicer compliance certificate, signed by an authorized officer of the
servicer, to the effect that:
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(i) a review of the servicer's activities during the reporting
period and of its performance under the pooling and servicing
agreement has been made under such officer's supervision.
(ii) to the best of such officer's knowledge, based on such review,
the servicer has fulfilled all of its obligations under the
pooling and servicing agreement in all material respects
throughout the reporting period or, if there has been a failure
to fulfill any such obligation in any material respect,
specifying each such failure known to such officer and the
nature and status thereof.
The servicer's obligation to deliver any servicing assessment report or
attestation report and, if required, to file the same with the SEC, is limited
to those reports prepared by the servicer and, in the case of reports prepared
by any other party, those reports actually received by the servicer.
Copies of all statements, certificates and reports furnished to the trustee
may be obtained by a request in writing delivered to the trustee. Except as
described above or as described in this prospectus or the related prospectus
supplement, there will not be any independent verification that any duty or
obligation to be performed by any transaction party - including the servicer -
has been performed by that party.
AMENDMENTS
The pooling and servicing agreement and any supplement may be amended from
time to time, including in connection with:
o the issuance of a Supplemental Certificate,
o the addition to the trust of a participation interest,
o the designation of additional transferors,
o the addition to the trust of receivables arising from charge or credit
accounts other than the revolving credit accounts, or
o to change the definition of Monthly Period, Determination Date or
Distribution Date.
Amendments to the pooling and servicing agreement and any supplement may be
made by agreement of the trustee, the transferors and the servicer without the
consent of the certificateholders of any series, so long as:
o the Rating Agency Condition shall have been satisfied,
o each transferor delivers to the trustee an officer's certificate to the
effect that such amendment will not have an adverse effect, and
o such amendment will not effect a change in the permitted activities of
the trust except for those changes necessary for compliance with
accounting requirements or tax requirements or required to cure any
ambiguity or correct or supplement any provision contained in the pooling
and servicing agreement or any supplement which may be defective or
inconsistent with any provisions thereof.
The pooling and servicing agreement or any supplement also may be amended by
the trustee, the transferors and the servicer:
(a) in the case of a change in the permitted activities of the trust which
is not materially adverse to holders of certificates, with the consent of
certificateholders evidencing not less
72
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 series
of certificates will not be considered an amendment to the pooling and
servicing agreement.
It is a condition to any such amendment that the Rating Agency Condition be
satisfied. The amendments which the transferors may make 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 or FSB 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
73
supplement. Furthermore, such amendment shall be subject to the delivery by
the transferors of a Tax Opinion.
DEFEASANCE
Only if so expressly 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.
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
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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, a New York banking corporation, is the 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, Attention:
Corporate Trust Administration--Asset Backed Securities, New York, New York
10286. The Bank of New York has and currently is serving as trustee for
numerous securitization transactions and programs involving pools of credit
card receivables. The transferors, the servicer, the account owners and their
respective affiliates may from time to time enter into normal banking and
trustee relationships with the trustee and its affiliates. The trustee or the
transferors may hold certificates in their own names; however, any
certificates so held shall not be entitled to participate in any decisions
made or instructions given to the trustee by the certificateholders as a
group. In addition, for purposes of meeting the legal requirements of certain
local jurisdictions, the trustee shall have the power to appoint, with the
consent of the transferors (who shall not unreasonably withhold their
consent), 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.
Under the terms of the pooling and servicing agreement, the servicer agrees
to pay to the trustee reasonable compensation for performance of its duties
under the pooling and servicing agreement. The trustee has agreed to perform
only those duties specifically set forth in the pooling and servicing
agreement. Many of the duties of the trustee are described in "The Pooling and
Servicing Agreement Generally" and throughout this prospectus and the related
prospectus supplement. Under the terms of the pooling and servicing agreement,
the trustee's limited responsibilities include the following:
o to deliver to certificateholders of record certain notices, reports and
other documents received by the trustee, as required under the pooling
and servicing agreement;
o to authenticate, deliver, cancel and otherwise administer the investor
certificates;
o to remove and reassign ineligible receivables and accounts from the
trust;
o to establish and maintain necessary trust accounts and to maintain
accurate records of activity in those accounts;
o to serve as the initial transfer agent, paying agent and registrar, and,
if its resigns these duties, to appoint a successor transfer agent,
paying agent and register;
o to invest funds in the trust accounts at the direction of the servicer;
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o to represent the certificateholders in interactions with clearing
agencies and other similar organizations;
o to distribute and transfer funds at the direction of the servicer, as
applicable, in accordance with the terms of the pooling and servicing
agreement;
o to file with the appropriate party all documents necessary to protect the
rights and interests of the certificateholders;
o to enforce the rights of the certificateholders against the servicer, if
necessary;
o to notify the certificateholders and other parties, to sell the
receivables, and to allocate the proceeds of such sale, in the event of
the termination of the trust; and
o to perform certain other administrative functions identified in the
pooling and servicing agreement.
In addition to the responsibilities described above, the trustee has the
discretion to require the transferors or the servicer, as applicable, to cure
a potential Pay-Out Event and to declare a Pay-Out Event. See "--Pay-Out
Events and Reinvestment Events."
In the event that a transferor becomes insolvent, if any series of investor
certificates issued on or prior to April 16, 2004 is outstanding, the trustee
shall: (1) notify the certificateholders of the insolvency, (2) dispose of the
receivables in a commercially reasonable manner, and (3) allocate the proceeds
of such sale. See "--Pay Out Events and Reinvestment Events."
If a servicer default occurs, in addition to the responsibilities described
above, the trustee may be required to appoint a successor servicer or to take
over servicing responsibilities under the pooling and servicing agreement. See
"--Servicer Default." In addition, if a servicer default occurs, the trustee,
in its discretion, may proceed to protect its rights or the rights of the
investor certificateholders under the pooling and servicing agreement by a
suit, action or other judicial proceeding.
The trustee is not liable for any errors of judgment as long as the errors
are made in good faith and the trustee was not negligent. The trustee may
resign at any time, and it may be forced to resign if the trustee fails to
meet the eligibility requirements specified in the pooling and servicing
agreement.
The holders of a majority of investor certificates have the right to direct
the time, method or place of conducting any proceeding for any remedy
available to the trustee under the pooling and servicing agreement.
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.
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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.
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 sum of
(i) the product of (A) the rate at which Issuer Rate Fees accrued to Centurion
or FSB, as applicable, during the second preceding Monthly Period on credit
accounts owned by Centurion or FSB, as applicable, multiplied by (B) a
fraction, (I) the numerator of which is the aggregate amount of cardholder
charges in all credit accounts owned by Centurion or FSB, as applicable,
excluding balance transfer transactions, purchases made by convenience checks,
cash advances, certain ineligible products and services offered by TRS or any
affiliate or subsidiary thereof, and all other transactions on which Issuer
Rate Fees did not accrue to Centurion or FSB, as applicable, in each case with
respect to such Monthly Period, and (II) the denominator of which is the
aggregate amount of cardholder charges in all credit accounts owned by
Centurion or FSB, as applicable, with respect to such Monthly Period,
multiplied by (C) new principal receivables that arose during such Monthly
Period in the accounts that constitute credit accounts, plus (ii) the product
of (A) the rate at which Issuer Rate Fees accrued to Centurion or FSB, as
applicable, during the second preceding Monthly Period on charge accounts or
lines of credit owned by Centurion or FSB, as applicable, multiplied by (B) a
fraction, (I) the numerator of which is the aggregate amount of obligor
charges on all charge accounts or lines of credit owned by Centurion or FSB,
as applicable, excluding balance transfer transactions, purchases made by
convenience checks, cash
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advances, certain ineligible products and services offered by TRS or any
affiliate or subsidiary thereof, and all other transactions on which Issuer
Rate Fees did not accrue to Centurion or FSB, as applicable, in each case with
respect to such Monthly Period, and (II) the denominator of which is the
aggregate amount of obligor charges on all charge accounts or lines of credit
owned by Centurion or FSB, as applicable, with respect to such Monthly Period,
multiplied by (C) new principal receivables that arose during such Monthly
Period in the accounts that constitute charge accounts or lines of credit.
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;
o as of each applicable selection date, each of the receivables then
existing in the accounts was an Eligible Receivable;
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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 under the pooling and servicing
agreement or to replace RFC IV with an affiliate of RFC IV as
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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
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, 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,
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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.
The Servicemembers Civil Relief Act allows individuals on active duty in the
military to cap the interest rate and fees on debts incurred before 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.
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.
RECENT LITIGATION
American Express Company and its affiliates (collectively, "American
Express"), including the servicer and the account owners, are, from time to
time, subject to various pending or threatened legal proceedings arising out
of their card origination, servicing and merchant network services activities.
The potential effect of these lawsuits on the certificates issued by the trust
cannot be predicted at this time. American Express has been named in a number
of purported class actions in which the plaintiffs allege an unlawful
antitrust tying arrangement between American Express' charge cards, on the one
hand, and its credit cards and debit cards, on the other, in violation of
various state and federal laws. The plaintiffs in these actions seek
injunctive relief and an unspecified amount of damages. American Express filed
a motion to dismiss all of the actions that were filed prior to April 30, 2004
pending in the Southern District of New York and, with respect to one case
pending in California, to stay the action pending resolution of the motion to
dismiss. A decision on the motion is pending. American Express filed a motion
to dismiss an action filed in the Southern District of New York subsequent to
April 30, 2004, and on July 1, 2005, the Court denied this motion. American
Express has also been named in purported class actions alleging that American
81
Express' policy prohibiting merchants from imposing restrictions on the use of
American Express cards that are not imposed equally on other forms of payment
violates U.S. antitrust laws. The suits seek injunctive relief. American
Express has moved to dismiss the complaint in one of the actions and has not
yet been served in the other action.
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. Further, certificate owners should be
aware that this summary and the opinions contained herein may not be able to
be relied upon to avoid any income tax penalties that may be imposed with
respect to the certificates. 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.
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The determination of whether the economic substance of a purchase of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed
to determine whether the transferor has relinquished (and the purchaser has
obtained) substantial incidents of ownership in the property. Among those
factors, the primary ones examined are whether the purchaser has the
opportunity to gain if the property increases in value, and has the risk of
loss if the property decreases in value. Except to the extent otherwise
specified in the related prospectus supplement, Orrick, Herrington & Sutcliffe
LLP, special federal income tax counsel to the transferors ("Special Tax
Counsel"), is of the opinion that, under current law as in effect on the
series closing date, although no transaction closely comparable to that
contemplated herein has been the subject of any Treasury regulation, revenue
ruling or judicial decision, for federal income tax purposes the certificates
offered hereunder will not constitute an ownership interest in the receivables
but will properly be characterized as debt. Except where indicated to the
contrary, the following discussion assumes that the certificates offered
hereunder are debt for federal income tax purposes.
DESCRIPTION OF OPINIONS
As more fully described in this "Tax Matters" section, Special Tax Counsel
is of the opinion generally to the effect that the trust will not be subject
to federal income tax, and further that the certificates will be characterized
as debt for United States federal income tax purposes. Additionally, Special
Tax Counsel is of the opinion generally to the effect that the statements set
forth in this section, to the extent that they constitute matters of law or
legal conclusions, are correct in all material respects.
Special Tax Counsel has not been asked to opine on any other federal income
tax matter, and the balance of this discussion does not purport to set forth
any opinion of Special Tax Counsel concerning any other particular federal
income tax matter. For example, the discussion of original issue discount
below is a general discussion of federal income tax consequences relating to
an investment in certificates that are treated as having original issue
discount, which discussion Special Tax Counsel opines is correct in all
material respects as described above; however, that discussion does not set
forth any opinion as to whether any particular series of certificates will be
treated as having original issue discount. Additionally, those matters as to
which Special Tax Counsel renders opinions should be understood to be subject
to the additional considerations in the discussions relating to those opinions
set forth below.
Special Tax Counsel has not been asked to, and does not, render any opinion
regarding the state or local income tax consequences of the purchase,
ownership and disposition of a beneficial interest in the certificates. See
"--State and Local Tax Consequences" below.
This description of the substance of the opinions rendered by Special Tax
Counsel is not intended as a substitute for an investor's review of the
remainder of this discussion of income tax consequences, or for consultation
with its own advisors or tax return preparer.
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
83
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.
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
84
market" or its "substantial equivalent." The transferors have taken and intend
to take measures designed to reduce the risk that the trust could be
classified as a publicly traded partnership by reason of interests in the
trust other than the publicly traded certificates. However, certain of the
actions that may be necessary for avoiding the treatment of such interests as
"readily tradable on a secondary market (or the substantial equivalent
thereof)" are not fully within the control of the transferors. As a result,
there can be no assurance that the measures the transferors intend to take
will in all circumstances be sufficient to prevent the trust from being
classified as a publicly traded partnership under the Regulations.
If the trust was treated as a partnership but nevertheless was not treated
as a publicly traded partnership taxable as a corporation, that partnership
would not be subject to federal income tax. Rather, each item of income, gain,
loss and deduction of the partnership generated through the ownership of the
related receivables would be taken into account directly in computing taxable
income of the transferors (or the holders of the original transferor
certificate) and any certificate owners treated as partners in accordance with
their respective partnership interests therein. The amounts and timing of
income reportable by any certificate owners treated as partners would likely
differ from that reportable by such certificate owners had they been treated
as owning debt. In addition, if the trust were treated in whole or in part as
a partnership other than a publicly traded partnership, income derived from
the partnership by any certificate owner that is a pension fund or other tax-
exempt entity may be treated as unrelated business taxable income. Partnership
characterization also may have adverse state and local income or franchise tax
consequences for a certificate owner. If the trust were treated in whole or in
part as a partnership and the number of holders of interests in the publicly
offered certificates and other interests in the trust treated as partners
equaled or exceeded 100, the transferors may cause the trust to elect to be an
"electing large partnership." The consequence of such election to investors
could include the determination of certain tax items at the partnership level
and the disallowance of otherwise allowable deductions. No representation is
made as to whether such election will be made.
If the arrangement created by the pooling and servicing agreement were
treated in whole or in part as a publicly traded partnership taxable as a
corporation, that entity would be subject to federal income tax at corporate
tax rates on its taxable income generated by ownership of the related
receivables. That tax could result in reduced distributions to certificate
owners. No distributions from the trust would be deductible in computing the
taxable income of the corporation, except to the extent that any certificates
were treated as debt of the corporation and distributions to the related
certificate owners were treated as payments of interest thereon. In addition,
distributions to certificate owners not treated as holding debt would be
dividend income to the extent of the current and accumulated earnings and
profits of the corporation (and certificate owners may not be entitled to any
dividends received deduction in respect of such income).
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.
85
ORIGINAL ISSUE DISCOUNT
If the certificates are issued with original issue discount, the provisions
of Sections 1271 through 1273 and 1275 of the Internal Revenue Code will apply
to the certificates. Under those provisions, a U.S. certificate owner
(including a cash basis holder) generally would be required to accrue the
original issue discount on its interest in a certificate in income for federal
income tax purposes on a constant yield basis, resulting in the inclusion of
original issue discount in income somewhat in advance of the receipt of cash
attributable to that income. In general, a certificate will be treated as
having original issue discount to the extent that its "stated redemption
price" exceeds its "issue price," if such excess equals or exceeds 0.25
percent multiplied by the weighted average life of the certificate (determined
by taking into account only the number of complete years following issuance
until payment is made for any partial principal payments). Under
Section 1272(a)(6) of the Internal Revenue Code, special provisions apply to
debt instruments on which payments may be accelerated due to prepayments of
other obligations securing those debt instruments. However, no regulations
have been issued interpreting those provisions, and the manner in which those
provisions would apply to the certificates is unclear. Additionally, the IRS
could take the position based on Treasury regulations that none of the
interest payable on a certificate is "unconditionally payable" and hence that
all of such interest should be included in the certificate's stated redemption
price at maturity. If sustained, such treatment should not significantly
affect the tax liability of most certificate owners, but prospective U.S.
certificate owners should consult their own tax advisers concerning the impact
to them in their particular circumstances.
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
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the certificate was held as a capital asset. Capital losses generally may be
used only to offset capital gains.
FOREIGN CERTIFICATE OWNERS
Under United States federal income tax law now in effect, payment of
interest by the trust to a certificate owner who, for United States federal
income tax purposes, is a nonresident alien individual or a foreign
corporation (a "foreign person"), generally will be considered "portfolio
interest" and generally will not be subject to U.S. federal income tax and
withholding tax, provided the interest is not effectively connected with the
conduct of a trade or business within the United States by the foreign person,
unless:
(i) the foreign person actually or constructively owns 10 percent or more
of the total combined voting power of all classes of stock of either
transferor entitled to vote (or of a profits or capital interest in the
trust if characterized as a partnership),
(ii) the foreign person is a controlled foreign corporation that is
related to the transferors (or the trust if treated as a partnership)
through stock ownership,
(iii) the foreign person is a bank receiving interest described in
Internal Revenue Code Section 881(c)(3)(A),
(iv) such interest is contingent interest described in Internal Revenue
Code Section 871(h)(4), or
(v) the foreign person bears certain relationships to any holder of either
(x) the original transferor certificate other than the transferors or (y)
any other interest in the trust not properly characterized as debt.
To qualify for the exemption from taxation, the withholding agent, who
generally is the last U.S. Person in the chain of payment prior to payment to
a foreign person, must have received (in the year in which a payment of
interest or principal occurs or in either of the two preceding years) a
statement that:
(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.
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Generally, any gain or income realized by a foreign person upon retirement
or disposition of an interest in a certificate will not be subject to U.S.
federal income tax, provided that:
(i) in the case of a certificate owner that is an individual, such
certificate owner is not present in the United States for 183 days or more
during the taxable year in which such retirement or disposition occurs,
(ii) in the case of gain representing accrued interest, the conditions for
exemption from withholding described above are satisfied, and
(iii) such gain is not effectively connected with the conduct of a trade or
business in the United States by the foreign person.
Certain exceptions may be applicable, and an individual foreign person is
cautioned to consult a tax advisor.
If the certificates were treated as an interest in a partnership, the
recharacterization could cause a non-U.S. certificate owner to be treated as
engaged in a trade or business in the United States. In that event, the non-
U.S. certificate owner would be required to file a federal income tax return
and, in general, would be subject to U.S. federal income tax (including the
branch profits tax) on its net income from the partnership. Further, certain
withholding obligations apply with respect to income allocable or
distributions made to a foreign partner. That withholding may be at a rate as
high as the highest applicable marginal rate. If some or all of the
certificates were treated as stock in a corporation, any related dividend
distributions to a non-U.S. certificate owner generally would be subject to
withholding of tax at the rate of 30 percent, unless that rate were reduced by
an applicable tax treaty.
The U.S. Treasury Department has recently issued final Treasury regulations
which revise various procedural matters relating to withholding taxes.
Certificate owners are cautioned to consult their tax advisors regarding the
procedures whereby they may establish an exemption from withholding.
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
88
tax law. Each investor is cautioned to consult its own tax advisor regarding
state and local tax consequences.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended, and Section 4975 of the Internal Revenue Code prohibit a Plan from
engaging in certain transactions involving "plan assets" with persons that are
"parties in interest" under ERISA or "disqualified persons" under the Internal
Revenue Code, collectively, "parties in interest," with respect to the Plan. A
violation of these "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and Section 4975 of the Internal Revenue Code
for such persons, unless a statutory, regulatory or administrative exemption
is available. Plans that are government plans (as defined in Section 3(32) of
ERISA) and certain church plans (as defined in Section 3(33) of ERISA) are not
subject to ERISA requirements.
Moreover, additional prohibited transactions could arise if the trust assets
were deemed to constitute "plan assets" of any Plan that owned certificates.
The Department of Labor has issued a final regulation, referred to as the plan
asset regulation, concerning the definition of what constitutes "plan assets"
of a Plan subject to ERISA or Section 4975 of the Internal Revenue Code. Under
the plan asset regulation, the assets and properties of corporations,
partnerships and certain other entities in which a Plan makes an investment in
an "equity interest" could be deemed to be "plan assets" of the Plan in
certain circumstances. Accordingly, if Plans (or other entities whose assets
include "plan assets") purchase certificates, the trust could be deemed to
hold "plan assets" and result in non-exempt prohibited transactions, unless
either of the following exceptions applies.
The first exception applies to a "publicly-offered security." A publicly-
offered security is a security that is:
(i) freely transferable,
(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.
89
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 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;
(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
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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 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
91
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 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
92
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 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.
93
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
Monthly reports containing information on the certificates and the
collateral securing the certificates will be filed with the Securities and
Exchange Commission to the extent required by the SEC. These reports will not
be sent to certificateholders. 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 reports on Form 10-
K, periodic reports on Form 10-D and current reports on Form 8-K.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room at 100 F Street, N.E., Washington, D.C.
20549. You can request copies of these documents, upon payment of a
duplicating fee, by writing to the SEC. Please call the SEC at (800) SEC-0330
for further information on the operation of the public reference rooms. Our
SEC filings are also available to the public on the SEC Internet Web site
(http://www.sec.gov). Our SEC filings may be located by using the SEC Central
Index Key (CIK) for American Express Credit Account Master Trust, 0001003509.
Reports that are filed with the SEC by the servicer pursuant to the
Securities Exchange Act of 1934, as amended, may be accessed by any investor,
free of charge, through an Internet Web site at http://[o]. In the event this
Internet Web site is temporarily unavailable, TRS will
94
provide to investors electronic or paper copies of such reports free of charge
upon request. For purposes of any electronic version of this prospectus, the
URL in this paragraph is an inactive textual reference only. We have taken
steps to ensure that the URL in this paragraph was inactive at the time we
created any electronic version of this prospectus.
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., 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.
"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
96
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 each credit or charge account or line of credit
(if, with respect to the line of credit, the full receivable balance is not
due upon receipt of a monthly billing statement (excluding the billing
statement with respect to the final payment of such balance) and the line of
credit contains a code designation in the related securitization field as
described in the Pooling and Servicing Agreement) 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 line of credit:
(i) in existence and maintained by an account owner or such successors or
assignees,
(ii) is payable in United States dollars,
97
(iii) has not been sold or pledged to any other party except for any
other account owner that has entered into a 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.
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"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;
99
provided, however, that Eligible Investments shall not include securities
issued by, or other obligations of, any account owner; and provided further
that no Eligible Investments shall be contrary to the status of the trust as
a qualified special purpose entity under existing accounting literature.
"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;
100
(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;
(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.
101
"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.
"ISSUER RATE FEES" has the meaning described in "Centurion's and FSB's
Revolving Credit Businesses--Issuer Rate Fees" in this prospectus.
"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.
102
"PRINCIPAL ALLOCATION PERCENTAGE" for any series will be determined as set
forth in the related prospectus supplement.
"RATING AGENCY" is a nationally recognized statistical rating organization
selected by the transferors to rate a series or class of certificates.
"RATING AGENCY CONDITION" means, with respect to any action, that each
Rating Agency shall have notified the transferors, the servicer and the
trustee in writing that such action will not result in a reduction or
withdrawal of the then existing rating of any outstanding series or class with
respect to which it is a Rating Agency.
"REALLOCATED INVESTOR FINANCE CHARGE COLLECTIONS" means the amount of Group
Investor Finance Charge Collections allocated to the certificateholders'
interest (including any collateral invested amount) for a particular series
offered by this prospectus.
"REALLOCATION GROUP" means, for any series, the group of series that will be
subject to reallocations of collections of receivables and other amounts or
obligations among the series in that group.
"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
103
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 referred to under clauses (b) or (c) for a period
of 60 Business Days after the applicable
104
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 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.
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AMERICAN EXPRESS CREDIT ACCOUNT MASTER TRUST
ISSUING ENTITY
SERIES 200[_]-[_]
$[_________]
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
DEPOSITORS AND TRANSFERORS
AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
SERVICER
AMERICAN EXPRESS CENTURION BANK
AMERICAN EXPRESS BANK, FSB
SPONSORS
[GRAPHIC OMITTED]
------------------------
PROSPECTUS SUPPLEMENT
------------------------
UNDERWRITERS
[A CO.]
[B CO.]
[C 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, such delivery obligation generally may
be satisfied through the filing of the prospectus supplement and prospectus
with the Securities and Exchange Commission.
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 ................................................. $ 107**
Printing and Engraving Expenses .................................. $ *
Trustee's Fees and Expenses ...................................... $ *
Legal Fees and Expenses .......................................... $ *
Blue Sky Fees and Expenses ....................................... $ *
Accountants' Fees and Expenses ................................... $ *
Rating Agency Fees ............................................... $ *
Miscellaneous Fees ............................................... $ *
-----------
Total ......................................................... $ *
===========
- -------------------------
* 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.
To the fullest extent permitted by the Delaware Limited Liability Company
Act and in accordance with its Limited Liability Company Agreement, American
Express Receivables Financing Corporation III LLC will indemnify any member,
officer, director, employee or agent of American Express Receivables Financing
Corporation III LLC who is, was or is threatened to be made a party to any
proceeding (including a proceeding by or in the right of American Express
Receivables Financing Corporation III LLC or by or on behalf of a member) by
reason of the fact that he, she or it is or was a member, officer or director
of American Express Receivables Financing Corporation III LLC, is or was
acting on behalf of American Express Receivables Financing Corporation III LLC
in good faith or is or was serving, at the request of American Express
Receivables Financing Corporation III LLC, as a director, manager, officer,
employee or agent of any other legal entity, or is a fiduciary of any employee
benefit plan established at the direction of American Express Receivables
Financing Corporation III LLC, against all liabilities and reasonable expenses
incurred in the proceeding except such liabilities and expenses as are
incurred because of such individual's gross negligence or willful misconduct.
To the fullest extent permitted by the Delaware Limited Liability Company
Act and in accordance with its Limited Liability Company Agreement, American
Express Receivables Financing Corporation IV LLC will indemnify any member,
officer, director, employee or agent of American Express Receivables Financing
Corporation IV LLC who is, was or is threatened to be made a party to any
proceeding (including a proceeding by or in the right of American Express
Receivables Financing Corporation IV LLC or by or on behalf of a member) by
reason of the fact that he, she or it is or was a member, officer or director
of American Express Receivables Financing Corporation IV LLC, is or was acting
on behalf of American Express Receivables Financing Corporation IV LLC in good
faith or is or was serving, at the request of American Express Receivables
Financing Corporation IV LLC, as a director, manager, officer, employee or
agent of any other legal entity, or is a fiduciary of any employee benefit
plan established at the direction of American Express Receivables Financing
Corporation IV LLC, against all liabilities and reasonable expenses incurred
in the proceeding except such liabilities and expenses as are incurred because
of such individual's gross negligence or willful misconduct.
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, members 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
underwriters. American Express Receivables Financing Corporation III LLC and
American Express Receivables Financing Corporation III LLC have been advised
that
II-3
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 (incorporated by reference to Exhibit 1.1 to Registration No. 333-113579).
3.1 Amended and Restated Limited Liability Company Agreement of American Express Receivables Financing Corporation III
LLC (incorporated by reference to Exhibit 3.1 to Registration No. 333-113579).
3.2 Amended and Restated Limited Liability Company Agreement of American Express Receivables Financing Corporation IV LLC
(incorporated by reference to Exhibit 3.2 to Registration No. 333-113579).
4.1 Pooling and Servicing Agreement, dated as of May 16, 1996, as amended and restated as of January 1, 2006, among
American Express Receivables Financing Corporation III LLC, American Express Receivables Financing Corporation IV LLC
and American Express Receivables Financing Corporation II, as Transferors, American Express Travel Related Services
Company, Inc., as Servicer, and The Bank of New York, as Trustee and Securities Intermediary.
4.2 Form of Series Supplement, including form of Asset Backed Certificate (incorporated by reference to Exhibit 4.2 to
Registration No. 333-113579).
4.3 Receivable Purchase Agreement, dated as of May 16, 1996, between American Express Credit Corporation and American
Express Receivables Financing Corporation II (incorporated by reference to Exhibit 10.1 to Registration Statement No.
333-67567).
4.4 Receivables Purchase Agreement, dated as of April 16, 2004, between American Express Centurion Bank and American
Express Receivables Financing Corporation III LLC (incorporated by reference to Exhibit 4.4 to Registration No. 333-
113579).
4.5 Receivables Purchase Agreement, dated as of April 16, 2004, between American Express Bank, FSB and American Express
Receivables Financing Corporation IV LLC (incorporated by reference to Exhibit 4.5 to Registration No. 333-113579).
4.6 Amended and Restated Supplemental Servicing Agreement among American Express Travel Related Services Company, Inc.,
American Express Centurion Bank, American Express Bank, FSB, American Express Receivables Financing Corporation II,
American Express Receivables Financing Corporation III LLC and American Express Receivables Financing Corporation IV
LLC.*
4.7 Supplemental Servicing Agreement between American Express Travel Related Services Company, Inc. and Amex Card
Services Company.*
4.8 Remittance Processing Services Agreement between American Express Travel Related Services Company, Inc. and Regulus
West LLC.**
5.1 Opinion of American Express Receivables Financing Corporation II, American Express Receivables Financing Corporation
III LLC and American Express Receivables Financing Corporation IV LLC with respect to legality.
II-4
EXHIBIT
NUMBER DESCRIPTION
------ -----------
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 5.1).
23.3 Consent of American Express Receivables Financing Corporation IV LLC (included in its opinion filed as Exhibit 5.1).
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.***
24.2 Powers of Attorney of American Express Receivables Financing Corporation III LLC.***
24.3 Powers of Attorney of American Express Receivables Financing Corporation IV LLC.***
- ---------------
* to be filed by amendment
** previously filed. Confidential information has been omitted and has been
filed separately with the Securities and Exchange Commission pursuant to a
Confidential Treatment Application filed with the Securities and Exchange
Commission
*** previously filed
ITEM 17. UNDERTAKINGS
(A) RULE 415 OFFERING.
Each undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
posteffective 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 the 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 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; and
II-5
(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) Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not
apply if the registration statement is on Form S-3 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement,
or is contained in a form of prospectus filed pursuant to Rule 424(b) that is
part of this registration statement; and
(B) Provided further, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if this Registration Statement is for an offering of asset-backed
securities on Form S-3 and the information required to be included in a post-
effective amendment is provided pursuant to Item 1100(c) of Regulation AB.
(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 thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) That for the purpose of determining liability under the Securities Act
of 1933 to any purchaser:
If such registrant is relying on Rule 430B:
(A) Each prospectus filed by such registrant pursuant to Rule
424(b)(3) shall be deemed to be part of the registration statement as of
the date the filed prospectus was deemed part of and included in the
registration statement; and
(B) Each prospectus required to be filed pursuant to Rule 424(b)(2),
(b)(5), or (b)(7) as part of a registration statement in reliance on Rule
430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or
(x) for the purpose of providing the information required by section
10(a) of the Securities Act of 1933 shall be deemed to be part of and
included in the registration statement as of the earlier of the date such
form of prospectus is first used after effectiveness or the date of the
first contract of sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability purposes of the
issuer and any person that is at that date an underwriter, such date
shall be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which that
prospectus relates, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; provided,
however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration
statement or prospectus that
II-6
is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such effective date, supersede or modify any
statement that was made in the registration statement or prospectus that
was part of the registration statement or made in any such document
immediately prior to such effective date.
(5) That, for the purpose of determining liability of such registrant under
the Securities Act of 1933 to any purchaser in the initial distribution of the
securities:
Each undersigned registrant undertakes that in a primary offering of
securities of such undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities
to the purchaser, if the securities are offered or sold to such purchaser by
means of any of the following communications, such undersigned registrant will
be a seller to the purchaser and will be considered to offer or sell such
securities to such purchaser:
(i) Any preliminary prospectus or prospectus of such undersigned registrant
relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on
behalf of such undersigned registrant or used or referred to by such
undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the
offering containing material information about such undersigned registrant or
its securities provided by or on behalf of such undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by such
undersigned registrant to the purchaser.
(B) FILINGS INCORPORATING SUBSEQUENT EXCHANGE ACT DOCUMENTS BY REFERENCE.
Each undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
such registrant's annual report pursuant to Section 13(a) or Section 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 herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(C) REQUEST FOR ACCELERATION OF EFFECTIVE DATE.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, each registrant
has 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
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, such registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it
II-7
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(D) FILINGS REGARDING ASSET-BACKED SECURITIES INCORPORATING BY REFERENCE
SUBSEQUENT EXCHANGE ACT DOCUMENTS BY THIRD PARTIES
Each undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 of a third party that is incorporated by reference in the
registration statement in accordance with Item 1100(c)(1) of Regulation AB
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(E) FILINGS REGARDING ASSET-BACKED SECURITIES THAT PROVIDE CERTAIN INFORMATION
THROUGH AN INTERNET WEB SITE
Each undersigned registrant hereby undertakes that, except as otherwise
provided by Item 1105 of Regulation AB, information provided in response to
that Item pursuant to Rule 312 of Regulation S-T through the specified
Internet address in the prospectus is deemed to be a part of the prospectus
included in the registration statement. In addition, each undersigned
registrant hereby undertakes to provide to any person without charge, upon
request, a copy of the information provided in response to Item 1105 of
Regulation AB pursuant to Rule 312 of Regulation S-T through the specified
Internet address as of the date of the prospectus included in the registration
statement if a subsequent update or change is made to the information.
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 Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in New
York, New York, on March 10, 2006.
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION
II,
acting solely in its capacity as a depositor of
American Express Credit Account Master Trust
By: /s/ Maureen Ryan
-------------------------
Name: Maureen Ryan
Title: President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed on March 10, 2006 by the
following persons in the capacities indicated.
SIGNATURE TITLE
--------- -----
/s/ Maureen Ryan President and Director
--------------------------------------------------------- (Principal Executive Officer)
Maureen Ryan
/s/ John D. Koslow* Vice President and Treasurer and Director
--------------------------------------------------------- (Principal Financial Officer and
John D. Koslow Principal Accounting Officer)
/s/ Donald J. Puglisi* Director
---------------------------------------------------------
Donald J. Puglisi
*By: /s/ Maureen Ryan
-------------------------
Name: Maureen Ryan
Title: President
*Note: Powers of Attorney appointing Maureen A. Ryan, John D. Koslow and Carol
V. Schwartz, or any of them acting singly, to execute the Registration
Statement, any amendments thereto and any registration statement for
additional Asset Backed Certificates that is to be effective on filing
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, on
behalf of the above-named individuals, were previously filed with the
Securities and Exchange Commission.
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 Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in Salt
Lake City, Utah, on March 10, 2006.
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION
III LLC,
acting solely in its capacity as a depositor of
American Express Credit Account Master Trust
By: /s/ Andrea J. Moss
-----------------------------
Name: Andrea J. Moss
Title: President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed on March 10, 2006 by the
following persons in the capacities indicated.
SIGNATURE TITLE
--------- -----
/s/ Andrea J. Moss President and Director
--------------------------------------------------------- (Principal Executive Officer)
Andrea J. Moss
/s/ Scott Godderidge Vice President and Treasurer and Director
--------------------------------------------------------- (Principal Financial Officer and
Scott Godderidge Principal Accounting Officer)
/s/ Gregory F. Lavelle* Director
---------------------------------------------------------
Gregory F. Lavelle
*By: /s/ Maureen Ryan
----------------------------
*Note: Powers of Attorney appointing Maureen A. Ryan and Carol V. Schwartz, or
any of them acting singly, to execute the Registration Statement, any
amendments thereto and any registration statement for additional Asset Backed
Certificates that is to be effective on filing pursuant to Rule 462(b) under
the Securities Act of 1933, as amended, on behalf of the above-named
individuals, were previously filed with the Securities and Exchange
Commission.
II-10
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 Amendment No. 3 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in Salt
Lake City, Utah, on March 10, 2006.
AMERICAN EXPRESS RECEIVABLES FINANCING CORPORATION
IV LLC,
acting solely in its capacity as a depositor of
American Express Credit Account Master Trust
By: /s/ Daniel L. Follett
-----------------------------
Name: Daniel L. Follett
Title: President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement has been signed on March 10, 2006 by the
following persons in the capacities indicated.
SIGNATURE TITLE
--------- -----
/s/ Daniel L. Follett President
--------------------------------------------------------- (Principal Executive Officer)
Daniel L. Follett
/s/ David T. Draper* Vice President and Treasurer
--------------------------------------------------------- (Principal Financial Officer and
David T. Draper Principal Accounting Officer)
/s/ Lisa Lambert* Director
---------------------------------------------------------
Lisa Lambert
/s/ David L. Yowan* Director
---------------------------------------------------------
David L. Yowan
/s/ Ruth K. Lavelle* Director
---------------------------------------------------------
Ruth K. Lavelle
*By: /s/ Maureen Ryan
----------------------------
*Note: Powers of Attorney appointing Maureen A. Ryan, David L. Yowan and Carol
V. Schwartz, or any of them acting singly, to execute the Registration
Statement, any amendments thereto and any registration statement for
additional Asset Backed Certificates that is to be effective on filing
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, on
behalf of the above-named individuals, were previously filed with the
Securities and Exchange Commission.
II-11
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
1.1 Form of Underwriting Agreement (incorporated by reference to Exhibit 1.1 to Registration Statement No. 333-113579).
3.1 Amended and Restated Limited Liability Company Agreement of American Express Receivables Financing Corporation III LLC
(incorporated by reference to Exhibit 3.1 to Registration No. 333-113579).
3.2 Amended and Restated Limited Liability Company Agreement of American Express Receivables Financing Corporation IV LLC
(incorporated by reference to Exhibit 3.2 to Registration No. 333-113579).
4.1 Pooling and Servicing Agreement, dated as of May 16, 1996, as amended and restated as of January 1, 2006, among
American Express Receivables Financing Corporation III LLC, American Express Receivables Financing Corporation IV LLC
and American Express Receivables Financing Corporation II, as Transferors, American Express Travel Related Services
Company, Inc., as Servicer, and The Bank of New York, as Trustee and Securities Intermediary.
4.2 Form of Series Supplement, including form of Asset Backed Certificate (incorporated by reference to Exhibit 4.2 to
Registration No. 333-113579).
4.3 Receivable Purchase Agreement, dated as of May 16, 1996, between American Express Credit Corporation and American
Express Receivables Financing Corporation II (incorporated by reference to Exhibit 10.1 to Registration Statement No.
333-67567).
4.4 Receivables Purchase Agreement, dated as of April 16, 2004, between American Express Centurion Bank and American
Express Receivables Financing Corporation III LLC (incorporated by reference to Exhibit 4.4 to Registration No. 333-
113579).
4.5 Receivables Purchase Agreement, dated as of April 16, 2004, between American Express Bank, FSB and American Express
Receivables Financing Corporation IV LLC (incorporated by reference to Exhibit 4.5 to Registration No. 333-113579).
4.6 Amended and Restated Supplemental Servicing Agreement among American Express Travel Related Services Company, Inc.,
American Express Centurion Bank, American Express Bank, FSB, American Express Receivables Financing Corporation II,
American Express Receivables Financing Corporation III LLC and American Express Receivables Financing Corporation IV
LLC.*
4.7 Supplemental Servicing Agreement between American Express Travel Related Services Company, Inc. and Amex Card Services
Company.*
4.8 Remittance Processing Services Agreement between American Express Travel Related Services Company, Inc. and Regulus
West LLC.**
5.1 Opinion of American Express Receivables Financing Corporation II, American Express Receivables Financing Corporation
III LLC and American Express Receivables Financing Corporation IV LLC with respect to legality.
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
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 5.1).
23.3 Consent of American Express Receivables Financing Corporation IV LLC (included in its opinion filed as Exhibit 5.1).
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.***
24.2 Powers of Attorney of American Express Receivables Financing Corporation III LLC.***
24.3 Powers of Attorney of American Express Receivables Financing Corporation IV LLC.***
- ---------------
* to be filed by amendment
** previously filed. Confidential information has been omitted and has been
filed separately with the Securities and Exchange Commission pursuant to a
Confidential Treatment Application filed with the Securities and Exchange
Commission
*** previously filed