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PROSPECTUS Rule 424(b)(1)
DATED NOVEMBER 1, 1996 File No. 333-07185
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$228,205,129
BRIDGESTONE/FIRESTONE MASTER TRUST
$200,000,000 6.17% CLASS A ASSET BACKED CERTIFICATES, SERIES 1996-1
$ 28,205,129 6.49% CLASS B ASSET BACKED CERTIFICATES, SERIES 1996-1
FIRESTONE RETAIL CREDIT CORPORATION BRIDGESTONE/FIRESTONE, INC.
TRANSFEROR SERVICER
Each Class A Asset Backed Certificates, Series 1996-1 (the 'Class A
Certificates') and each Class B Asset Backed Certificates, Series 1996-1 (the
'Class B Certificates' and, together with the Class A Certificates, the 'Offered
Certificates') will evidence an undivided interest in the Bridgestone/Firestone
Master Trust (the 'Trust') created pursuant to the Amended and Restated Pooling
and Servicing Agreement, dated as of November 1, 1996, as supplemented by the
Series 1996-1 Supplement, dated as of November 1, 1996, and each among Firestone
Retail Credit Corporation, as transferor (the 'Transferor'),
Bridgestone/Firestone, Inc. ('Bridgestone/Firestone'), as servicer (the
'Servicer'), and The Fuji Bank and Trust Company, as trustee (the 'Trustee').
The Trust assets (the 'Trust Assets') include (i) a portfolio of account
balances (the 'Receivables') generated or to be generated under a private label
credit card program (the 'Credit Card Program') established by Credit First
National Association ('CFNA'; together with any successor originator, the
'Originator'), (ii) a portfolio of certain designated Receivables to be
generated by the Originator under other credit card programs to be established
by the Originator (the 'Alternative Programs'), (iii) all monies due or to
become due under the Receivables, (iv) the right to receive certain merchant
fees attributed to cardholder charges giving rise to Receivables (the 'Merchant
Fees'), (v) all Recoveries on Defaulted
(Continued on the next page)
There currently is no secondary market for the Offered Certificates and there
can be no assurance that one will develop. The Underwriters expect, but are not
obligated, to make a market in the Offered Certificates.
THERE CAN BE NO ASSURANCE THAT ANY SUCH MARKET WILL CONTINUE. POTENTIAL
INVESTORS SHOULD CONSIDER, AMONG OTHER THINGS, THE INFORMATION SET FORTH IN
'RISK FACTORS' ON PAGE 35 IN THE PROSPECTUS.
THE OFFERED CERTIFICATES REPRESENT INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT INTERESTS IN OR RECOURSE OBLIGATIONS OF THE TRANSFEROR, THE SERVICER,
THE ORIGINATOR OR ANY AFFILIATE THEREOF. AN OFFERED CERTIFICATE IS NOT A DEPOSIT
AND NEITHER THE OFFERED CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES
ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (THE 'COMMISSION') OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT TRANSFEROR(1)(2)
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Per Class A Certificate............... 99.5% .32% 99.18%
Per Class B Certificate............... 99.5% .32% 99.18%
Total................................. $227,064,103 $730,256 $226,333,847
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(1) Plus accrued interest, at the Class A Certificate Rate or Class B
Certificate Rate, as applicable, from November 8, 1996.
(2) Before deducting estimated expenses of $510,000 payable by the Transferor.
The Offered Certificates are offered by the Underwriters as described in
'Underwriting', subject to receipt and acceptance by the Underwriters and
subject to their right to reject any order in whole or in part. It is expected
that the Offered Certificates will be delivered in book-entry form on or about
November 8, 1996 (the 'Closing Date') through the facilities of The Depository
Trust Company, Cedel Bank, societe anonyme and the Euroclear System.
CITICORP SECURITIES, INC. CHASE SECURITIES INC.
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(Continued from the previous page)
Receivables, (vi) any Enhancement issued with respect to any Series, (vii) the
proceeds of the Servicer Letter of Credit and the Transferor Letter of Credit,
(viii) all of the Transferor's right, title and interest in and to the Purchase
and Sale Agreement and the Participation Agreement, (ix) all moneys on deposit
in the Collection Account and any other accounts established for the benefit of
any other Series (which other accounts will not be available to
Certificateholders) and (x) all proceeds of any of the foregoing. Concurrently
with the issuance of the Offered Certificates, the Trust will issue $10,000,000
principal amount of an uncertificated interest in the Trust (the 'Collateral
Interest') and the Subordinated Transferor Certificate (the 'Subordinated
Transferor Certificate' and, together with the Collateral Interest and the
Offered Certificates, the 'Series 1996-1 Interests'). The fractional undivided
interest in the Trust represented by the Class B Certificates will be
subordinated to the extent necessary to fund payments with respect to the Class
A Certificates as described herein. The Collateral Interest and the Subordinated
Transferor Certificate will be subordinated to the extent necessary to fund
payments with respect to the Class A Certificates and the Class B Certificates
as described herein. See 'Description of the Offered Certificates and the
Agreement.' The Collateral Interest and the Subordinated Transferor Certificate
are not being offered hereby.
The Class A Certificateholders and the Class B Certificateholders (the
'Offered Certificateholders') will be entitled to certain assets of the Trust,
including the right to receive a varying percentage of each month's collections
with respect to the Receivables at the times and in the manner described herein.
The Trust has also issued a certificate representing a one percent interest in
the Trust to Bridgestone/Firestone, Inc. (the 'Bridgestone/Firestone
Certificate'). The Transferor will own the remaining interest in the Trust not
represented by the Series 1996-1 Interests (subject to the Participation
Agreement (as defined herein) with Bridgestone/Firestone), the
Bridgestone/Firestone Certificate and the interest of holders of other
outstanding Series. In addition, the Transferor will retain the Subordinated
Transferor Certificate (subject to the Participation Agreement with
Bridgestone/Firestone). The Transferor has offered and from time to time may
offer other series of certificates that evidence undivided interests in the
Trust (each, a 'Series'), which may have terms significantly different from the
Series 1996-1 Interests, by exchanging a portion of its interest in the Trust.
See 'Description of the Offered Certificates and the Agreement.'
Interest will accrue on the Class A Certificates at the rate of 6.17% per
annum (the 'Class A Certificate Rate'). Interest will accrue on the Class B
Certificates at the rate of 6.49% per annum (the 'Class B Certificate Rate').
Interest will accrue on the basis of a 360-day year of twelve 30-day months.
Interest with respect to the Offered Certificates is payable monthly on the 1st
of each month (or, if such day is not a business day, the next succeeding
business day) (each, a 'Distribution Date'), commencing in December, 1996.
Principal on the Class A Certificates is scheduled to be distributed on each
Distribution Date commencing on the Distribution Date in December, 1999, and
ending on the Distribution Date in November, 2000, but may be paid earlier or
later under certain limited circumstances described herein. Principal on the
Class B Certificates is scheduled to be distributed on each Distribution Date
commencing November, 2000, but may be paid earlier or later under certain
limited circumstances described herein. No principal will be payable to the
Class B Certificates until the final principal payment has been made to the
Class A Certificates. No principal will be payable to the Collateral Interest
until the final payment has been made to the Class A Certificates and Class B
Certificates. No principal will be payable to the Subordinated Transferor
Certificate until the final payment has been made to the Class A Certificates,
the Class B Certificates and the Collateral Interest. See 'Maturity
Assumptions.' The issuance of the Class B Certificates, the Collateral Interest
and the Subordinated Transferor Certificate are conditions precedent to the
issuance of the Class A Certificates. The issuance of the Collateral Interest
and the Subordinated Transferor Certificate are conditions precedent to the
issuance of the Class B Certificates. See 'Description of the Offered
Certificates and the Agreement.'
An application will be made to list the Offered Certificates on the
Luxembourg Stock Exchange.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OFFERED
CERTIFICATES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE LUXEMBOURG STOCK
EXCHANGE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (as defined herein) are issued,
monthly and annual reports, containing information concerning the Trust and
prepared by the Servicer, will be sent on behalf of the Trust to Cede & Co.
('Cede'), as registered holder of the Offered Certificates, pursuant to the
Agreement. On each Distribution Date a Payment Date Statement (as defined
herein) prepared by the Servicer will be provided setting forth information
regarding the Offered Certificates. Such reports will be made available on a
monthly basis by The Depository Trust Company to Participants (as hereinafter
defined), upon request by such Participants to The Depository Trust Company, in
accordance with the rules, regulations and procedures creating and affecting The
Depository Trust Company. Certificate Owners (as defined herein) may contact
their Participants or the Trustee to receive copies of such reports. See
'Description of the Offered Certificates and the Agreement--Book-Entry
Registration' and '--Reports to Certificateholders.' Such reports will not
contain information that has been examined and reported on by independent public
accountants and will not constitute financial statements prepared in accordance
with generally accepted accounting principles. The Transferor does not intend to
send any of its financial reports to Certificateholders or to the owners of
beneficial interests in the Offered Certificates (the 'Certificate Owners'). The
Servicer on behalf of the Trust will file with the Commission such periodic
reports with respect to the Trust as are required under the Securities Exchange
Act of 1934, as amended (the 'Exchange Act'), and the rules and regulations of
the Commission thereunder. However, in accordance with the Exchange Act and the
rules and regulations of the Commission thereunder, the Transferor expects that
the Trust's obligation to file such reports will be terminated following the end
of 1996. Upon the termination of the Trust's obligation, the Transferor does not
intend to file Exchange Act reports.
AVAILABLE INFORMATION
The Transferor, as originator of the Trust, has filed a Registration
Statement under the Securities Act of 1933, as amended (the 'Act'), with the
Commission with respect to the Offered Certificates offered pursuant to this
Prospectus. For further information, reference is made to the Registration
Statement and amendments and exhibits thereto (the 'Registration Statement'),
which are available for inspection without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; 7 World Trade Center, New York, New York 10048; and Citicorp Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661-2511. Copies of the
Registration Statement may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates and electronically through the Commission's Electronic Data Gathering
Analysis and Retrieval System at the Commission's Web site (http:\\www.sec.gov).
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SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Certain capitalized
terms used in this summary are defined elsewhere in this Prospectus. A listing
of the pages on which some of such terms are defined is found in the 'Index of
Terms' herein.
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Securities Offered........................ $200,000,000 Class A Asset Backed Certificates, Series 1996-1 (the
'Class A Certificates') and $28,205,129 Class B Asset Backed
Certificates, Series 1996-1 (the 'Class B Certificates', together
with the Class A Certificates, the 'Offered Certificates'). The
Offered Certificates will be issued pursuant to the Amended and
Restated Pooling and Servicing Agreement, dated as of November 1,
1996 (the 'Agreement') as supplemented by the Series 1996-1
Supplement, dated as of November 1, 1996 (the 'Series 1996-1
Supplement') (the term 'Agreement,' unless the context requires
otherwise, refers to the Agreement as supplemented by the Series
1996-1 Supplement), among Firestone Retail Credit Corporation, as
transferor (the 'Transferor'), Bridgestone/Firestone, Inc.
('Bridgestone/Firestone'), as servicer (the 'Servicer') and The Fuji
Bank and Trust Company, as trustee (the 'Trustee'). The Collateral
Interest and the Subordinated Transferor Certificate (herein
collectively referred to as the 'Other Interests'), to be issued
pursuant to the Agreement (see 'Description of the Offered
Certificates and the Agreement' below), are not being offered hereby.
The issuance of the Other Interests is a condition precedent to the
issuance of the Offered Certificates. The Other Interests, together
with the Offered Certificates, will be referred to herein as the
'Series 1996-1 Interests.' Any information contained herein regarding
the Other Interests is included solely to permit a better
understanding of the Offered Certificates. See 'Description of the
Offered Certificates and the Agreement--General.'
Bridgestone/Firestone is a direct wholly owned subsidiary of
Bridgestone Corporation, a corporation organized under the laws of
Japan. Bridgestone/Firestone is a multinational organization whose
principal business is the development, manufacture and sale of a
broad line of tires for passenger, truck and agricultural vehicles,
in both the original equipment and replacement markets. Credit First
National Association ('CFNA' or together with any successor
originator, the 'Originator'), a wholly owned subsidiary of
Bridgestone/Firestone, was organized for the purpose of making credit
card loans and activities incidental thereto.
The Offered Certificates represent beneficial interests in the Trust
only and do not represent interests in or recourse obligations of the
Transferor, the Servicer, CFNA or any affiliate thereof.
The Trust has previously issued several other Series. See 'Annex I:
Outstanding Series' for a summary of all Series currently
outstanding.
Transferor................................ Firestone Retail Credit Corporation, a Massachusetts corporation, is
the transferor of the Receivables and the originator of the Trust.
The Transferor is a nominally capitalized special purpose corporation
and was organized for the limited purpose of purchasing, holding,
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owning and selling receivables and any activities incidental to and
necessary or convenient for the accomplishment of the foregoing. The
Transferor's principal executive offices are located at One
International Place, Suite 520, Boston, Massachusetts 02110. Its
telephone number is (617) 951-7690. See 'The Transferor and
Bridgestone/Firestone.'
Servicer.................................. The Receivables will be serviced by Bridgestone/Firestone, Inc., an
Ohio corporation. CFNA will perform certain sub-servicing functions
on behalf of the Servicer including, but not limited to, the approval
of new account applications, the approval of all credit charge
transactions involving existing accounts and collection efforts.
Trust Assets.............................. The Trust Assets include (i) a portfolio of account balances (the
'Receivables') generated or to be generated by the Originator in the
ordinary course of its business and existing or arising in certain
credit card accounts (the 'Accounts') established or to be
established under a private label credit card program described more
fully herein (the 'Credit Card Program') established by the
Originator for customers of (a) Bridgestone/Firestone stores, which
sell tires and automotive maintenance and repair products and
services, (b) dealers and marketers which have contractual
arrangements with Bridgestone/Firestone to market
Bridgestone/Firestone tires and related products, as well as
automotive maintenance and repair services, and (c) certain other
dealers and marketers of automotive products, which include tires and
automotive maintenance and repair services, which dealers and
marketers do not have such contractual arrangements with
Bridgestone/Firestone, (ii) a portfolio of certain designated
Receivables generated or to be generated by the Originator and
existing or arising under certain accounts to be established under
other credit card programs, established or to be established by the
Originator (the 'Alternative Programs'), (iii) all monies due or to
become due under the Receivables on or after the billing cycle cut-
off dates occurring in the Collection Period (as defined below) from
October 19, 1992 to November 18, 1992 (the 'Cut-off Date'), (iv) the
right to receive certain merchant fees attributed to cardholder
charges giving rise to Receivables ('Merchant Fees') pursuant to the
Purchase and Sale Agreement (as defined below), (v) all Recoveries
(as defined below) on Defaulted Receivables (as defined below), (vi)
any Enhancement (as defined below) issued with respect to any Series,
(vii) the proceeds of the Servicer Letter of Credit and the
Transferor Letter of Credit (each as defined below), (viii) all of
the Transferor's right, title and interest in and to the Purchase and
Sale Agreement and the Participation Agreement (as defined below),
(ix) all moneys on deposit in the Collection Account and any other
accounts established for the benefit of any other series (which other
accounts will not be available to Certificateholders) and (x) all
proceeds of any of the foregoing.
On the first Transfer Date (as defined below) after the Closing Date,
CFNA shall transfer Merchant Fees to the Trust in an amount equal to
$350,000. On each Transfer Date thereafter, CFNA shall transfer
Merchant Fees collected during the calendar month preceding the
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related Transfer Date in an amount equal to the lesser of (a)
$350,000 and (b) the amount of Merchant Fees actually collected by
CFNA during such calendar month, to the Transferor. Such Merchant
Fees shall be transferred pursuant to the Purchase and Sale Agreement
(as defined below). The Transferor will transfer such Merchant Fees
to the Trust pursuant to the Agreement.
The Accounts will include (i) eligible credit card accounts
('Eligible Accounts') established under the Credit Card Program as of
and subsequent to the Cut-off Date and (ii) eligible accounts
established under Alternative Programs subsequent to the Closing Date
which are designated by the Transferor as Eligible Alternative
Accounts (as defined below) in accordance with selection criteria
relating to the addition of accounts. See 'The Credit Card
Program--General' and 'Description of the Offered Certificates and
the Agreement--Addition of Accounts' herein.
The term 'Defaulted Receivables' shall mean with respect to any
Collection Period, all Receivables in any Account which are written
off as uncollectible in such Collection Period in accordance with the
Servicer's guidelines. Notwithstanding the foregoing sentence, a
Receivable shall be deemed a Defaulted Receivable no later than the
last day of the Collection Period following the Collection Period in
which it becomes 180 days delinquent. The term 'Recoveries,' with
respect to any Collection Period, shall mean all amounts or payments
received by the Servicer with respect to Receivables which have
previously become Defaulted Receivables in a prior Collection Period,
net of reasonable expenses of the Servicer incurred and deducted from
such amounts or payments. The term 'Enhancement' shall mean, with
respect to any Series or class within a Series, any letter of credit,
guaranteed rate agreement, cash collateral account, cash collateral
guaranty, liquidity facility, maturity guaranty facility, tax
protection agreement, interest rate swap or other contract or
agreement for the benefit of the certificateholders of such Series.
The Receivables have been and will be purchased by the Transferor
from the Originator pursuant to the Second Amended and Restated
Purchase and Sale Agreement, dated as of November 1, 1996 (the
'Purchase and Sale Agreement'), among the Transferor,
Bridgestone/Firestone and the Originator. The Purchase and Sale
Agreement provides, among other things, that the Originator shall
sell and assign to the Transferor, and the Transferor will purchase
from the Originator, on each business day, all Eligible Receivables
(as defined herein) arising in the Accounts under the Credit Card
Program and certain Eligible Alternative Receivables arising in
designated Alternative Accounts (as defined herein) under the
Alternative Programs, provided, among other things, that the
Transferor is not in default thereunder and that no Servicer Event of
Default (as defined herein) and no Originator insolvency shall have
occurred. See 'Description of the Purchase and Sale Agreement.' The
right to receive certain Merchant Fees will also be transferred by
the Originator to the Transferor pursuant to the Purchase and Sale
Agreement. The Transferor has transferred and will transfer such
Receivables and will transfer such Merchant Fees to the Trust
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pursuant to the Agreement. See 'Description of the Offered
Certificates and the Agreement--Conveyance of Receivables.'
The 'Receivables' consist of amounts charged by cardholders under the
Accounts for goods and services, and all late fees, returned check
charges, convenience checks and amounts charged in respect of
credit-related insurance and periodic finance charges as described
herein.
A portion of the Collections (as defined below) received in any
applicable billing cycle for an Account (the monthly billing cycle
periods for the Accounts ending in the period of time commencing on
the 19th calendar day of each calendar month and ending on the 18th
calendar day of the next succeeding calendar month during the term of
the Trust being collectively referred to herein as a 'Collection
Period') allocable to Receivables will be treated as 'Finance Charge
Collections' and a portion will be treated as 'Principal
Collections.' Under the Agreement and as otherwise specified therein,
the Collections on the Receivables for any Collection Period will be
allocated such that all finance charges billed or accrued in respect
of Receivables in the prior Collection Period (less certain rebates
as described herein) will be deemed Finance Charge Collections and
the remaining amount of such Collections will be deemed Principal
Collections. Notwithstanding the foregoing, Recoveries received in
any Collection Period shall be treated as Finance Charge Collections
for such Collection Period for all purposes. In addition, Merchant
Fees transferred to the Trust on any Transfer Date shall be treated
as Finance Charge Collections for the related Collection Period for
all purposes.
As of the Collection Period ended on September 18, 1996 the amount of
Aggregate Receivables (as defined below) in the Trust was
$434,750,566. The total amount of Receivables and Merchant Fees in
the Trust will fluctuate from day to day as a result of the transfer
of new Receivables to the Trust and as a result of collections on
existing Receivables ('Collections'). 'Aggregate Receivables' shall
mean, at any time, (a) the aggregate amount of Eligible Receivables
as of the end of the prior Collection Period minus Defaulted
Receivables minus (b) the amount of Discount Option Receivables as of
the end of the prior Collection Period minus (c) an amount equal to
(i) finance charges billed in respect of such Eligible Receivables in
such Collection Period minus (ii) an amount equal to finance charges
credited as a rebate in respect of such Eligible Receivables during
such prior Collection Period minus (iii) amounts billed in item (i)
above, net of rebates in item (ii) above, with respect to that
portion of such Eligible Receivables that are Discount Option
Receivables.
Addition of Accounts...................... The Accounts consist of Eligible Accounts established under the
Credit Card Program as of and subsequent to the Cut-off Date. In
addition, the Transferor is permitted (subject to certain limitations
and conditions) to designate from time to time additional eligible
Accounts established under Alternative Programs ('Eligible
Alternative Accounts') and to convey to the Trust Receivables of such
Eligible Alternative Accounts, whether such Receivables are then
existing or thereafter created until either the Ten Percent
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Number Test (as defined below) or Ten Percent Aggregate Test (as
defined below) is met. Thereafter, if the Transferor has not obtained
the consent of the applicable rating agencies, as described below,
additional accounts and additional receivables from Alternative
Programs shall not be transferred to the Trust.
Such 'Alternative Programs' are programs for which CFNA underwrites
and originates Accounts and Receivables and may include, but are not
limited to, the establishment of additional private label credit card
programs and the offering of general purpose credit cards. As of the
Closing Date, the Originator has not established any of these
Alternative Programs. The 'Ten Percent Number Test' is determined as
of any date on which Alternative Accounts are to be added to the
Trust and met when the number of Eligible Alternative Accounts as of
such date equals 10% of the number of all Accounts in the Trust as of
such date. The 'Ten Percent Aggregate Test' is determined as of any
date on which Alternative Accounts are to be added to the Trust and
met when the dollar amount of Receivables from such Eligible
Alternative Accounts as of such date equals 10% of the Aggregate
Receivables as of such date. See 'Description of the Offered
Certificates and the Agreement--Addition of Accounts.'
Once the Transferor has met the Ten Percent Number Test or the Ten
Percent Aggregate Test, the Transferor must request written
confirmation from the applicable rating agencies to transfer to the
Trust additional Accounts related to an Alternative Program and all
Receivables arising from such Accounts.
In addition and subject to certain limitations set forth in the
Agreement, on an annual basis, the Transferor will be permitted to
include additional Eligible Accounts and all Eligible Receivables
arising from such Eligible Accounts up to an aggregate number equal
to 20% of the total number of Eligible Accounts at the start of such
calculation period in the Trust without written confirmation from the
applicable rating agencies.
Removal of Accounts....................... The Transferor has the right to accept Accounts for removal from the
Trust in an amount not greater than the lesser of (a) the excess of
the Transferor Amount (plus the B/F Amount and amounts available
under the Transferor Letter of Credit) over 7% of the Aggregate
Certificateholders' Interest (as defined herein) and (b) 5% of
Aggregate Receivables on such date of removal, provided, among other
conditions, that the Transferor has not employed a selection
procedure adverse to the interests of the Certificateholders and the
Transferor reasonably believes that the removal of such Accounts from
the Trust will not result in the occurrence of an Amortization Event.
See 'Description of the Offered Certificates and the
Agreement--Removal of Accounts.'
Description of the Series 1996-1
Interests............................... Payments received on the Trust's assets will be allocated among the
interest of the Class A Certificateholders (the 'Class A Interest'),
the interest of the Class B Certificateholders (the 'Class B
Interest'), the interest of the holder of the Collateral Interest
(the 'Collateral Interest') and the interest of the holder of the
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Subordinated Transferor Certificate (the 'Subordinated Transferor
Interest,' together with the Class A Interest, the Class B Interest
and the Collateral Interest, the 'Certificateholders' Interest'), the
interest of the holders of other outstanding Series (together with
the Certificateholders' Interest, the 'Aggregate Certificateholders'
Interest'), the interest of Bridgestone/Firestone as holder of the
Bridgestone/Firestone Certificate (the 'B/F Interest') and the pari
passu interest of the Transferor (the last being referred to as the
'Transferor Interest'). The amount of the Transferor Interest at any
time (the 'Transferor Amount') shall equal the Aggregate Receivables
at such time minus the sum of the invested amount of the holders of
other outstanding Series, the Class A Invested Amount (as defined
below), Class B Invested Amount, (as defined below), the Collateral
Interest Invested Amount (as defined below), the Subordinated
Transferor Amount (as defined below), and the amount of the B/F
Interest (the 'B/F Amount').
The Transferor Interest will be evidenced by a certificate (the
'Exchangeable Transferor Certificate') which will evidence an
undivided interest in the Trust Assets allocated to the Transferor
Interest. The principal amount of the Transferor Interest will
fluctuate as the amount of the Receivables held by the Trust changes
from time to time. The Transferor Amount (plus the amount available
under the Transferor Letter of Credit (as defined below) and the B/F
Amount) shall at all times equal 7% or more of the aggregate invested
amount of all outstanding Series of certificates. As of the
Collection Period ended September 18, 1996, the initial Transferor
Amount (plus the amount available under the Transferor Letter of
Credit and the B/F Amount) is equal to $33,602,934.
The Class A Certificates offered hereby will evidence undivided
interests in the Trust Assets allocated to the Class A Interest and
will represent the right to receive from such Trust Assets funds up
to (but not in excess of) the amounts required to make payments of
interest at the rate per annum equal to 6.17% (the 'Class A
Certificate Rate') payable monthly on each Distribution Date
commencing December 1996, and the payment of principal on each
Distribution Date commencing December, 1999, or earlier or later
under certain circumstances, to the extent of the Class A Invested
Amount (as defined herein) (which may be less than the aggregate
unpaid principal balance of the Class A Certificates, in certain
circumstances, if the Investor Default Amount (as defined herein)
exceeds available Excess Finance Charge Collections and Reallocated
Principal Collections (as defined herein) and the Class B Invested
Amount, the Collateral Interest Invested Amount and the Subordinated
Transferor Amount are each zero). See 'Description of the Offered
Certificates and the Agreement-- General,' '--Allocation
Percentages,' '--Reallocation of Cash Flows,' '--Distributions from
the Collection Account' and '--Subordination of the Class B
Certificates.'
The Class B Certificates offered hereby will evidence undivided
interests in the Trust Assets allocated to the Class B Interest and
will represent the right to receive from such Trust Assets funds up
to (but not in excess of) the amounts required to make payments of
interest
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at the rate per annum equal to 6.49% (the 'Class B Certificate Rate')
payable monthly on each Distribution Date commencing December 1996,
and the payment of principal on each Distribution Date commencing
November, 2000, or earlier or later under certain circumstances, to
the extent of the Class B Invested Amount (which may be less than the
aggregate unpaid principal balance of the Class B Certificates, in
certain circumstances, if the Investor Default Amount exceeds
available Excess Finance Charge Collections and Reallocated Principal
Collections and the Collateral Interest Invested Amount and the
Subordinated Transferor Amount are each zero). The Class B
Certificates are subordinate in right of payment to the Class A
Certificates to the extent necessary to fund payments with respect to
the Class A Certificates. See 'Description of the Offered
Certificates and the Agreement--General,' '--Allocation Percentages,'
'--Reallocation of Cash Flows,' '--Distributions from the Collection
Account' and '--Subordination of the Class B Certificates.'
The Collateral Interest will evidence undivided interests in the
Trust Assets allocated to the Collateral Interest and will represent
the right to receive from such Trust assets funds up to (but not in
excess of) the amounts required to make payments of interest at a
rate per annum generally equal to the London interbank offered rate
for one month United States dollar deposits ('LIBOR') plus a percent
per annum not in excess of 1.0% (the 'Collateral Interest Rate')
payable monthly on each Distribution Date commencing December, 1996
and of principal with respect to the Collateral Interest to the
extent of the Collateral Interest Invested Amount (which may be less
than the aggregate unpaid principal balance of the Collateral
Interest, in certain circumstances, if the Investor Default Amount
exceeds available Excess Finance Charge Collections and Reallocated
Principal Collections and the Subordinated Transferor Amount is zero)
following the final principal payment with respect to the Offered
Certificates. The Collateral Interest is subordinated in right of
payment to the Offered Certificates to the extent necessary to fund
payments with respect to the Offered Certificates. The Collateral
Interest will be sold pursuant to a Loan Agreement, dated as of the
Closing Date (the 'Loan Agreement'), by and among the Transferor, the
Servicer, the Trustee and the purchaser of the Collateral Interest
(the 'Collateral Interest Holder') and is not being offered hereby.
The Collateral Interest will be in an initial amount of $10,000,000
(the 'Initial Collateral Interest Invested Amount').
The Subordinated Transferor Certificate will evidence an undivided
interest in the Trust Assets allocated to the Subordinated Transferor
Interest and will represent the right to receive from such assets
funds up to (but not in excess of) the amounts required to make
payments of principal with respect to the Subordinated Transferor
Certificate following the final principal payment with respect to the
Collateral Interest (which may be less than the aggregate unpaid
principal balance of the Subordinated Transferor Certificate, in
certain circumstances, if the Investor Default Amount exceeds
available Excess Finance Charge Collections and Reallocated Principal
Collections). The holder of the Subordinated Transferor Certificate
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will not be entitled to receive any payments of interest. The
Subordinated Transferor Certificate is subordinate in right of
payment to the Offered Certificates and the Collateral Interest to
the extent necessary to fund payments with respect to the Offered
Certificates and the Collateral Interest. The Subordinated Transferor
Certificate will be retained by the Transferor and participated to
Bridgestone/Firestone pursuant to the Participation Agreement and is
not being offered hereby. The Subordinated Transferor Certificate
will be in an initial amount of $18,205,129 (the 'Initial
Subordinated Transferor Amount').
The Series 1992-A Certificates and the Series 1992-B Certificates
(collectively, the 'Series 1992 Certificates'), the Series 1995-A
Asset Backed Certificates (the 'Series 1995-A Certificates'), the
Bridgestone/Firestone Certificate and the Exchangeable Transferor
Certificate are the only certificates that have been issued by the
Trust as of the date hereof. None of the Series 1992 Certificates,
the Series 1995-A Certificates, the Collateral Interest, the
Subordinated Transferor Certificate, the Bridgestone/Firestone
Certificate and the Exchangeable Transferor Certificate are being
offered hereby. The Series 1992-A Certificates are no longer
outstanding. On the Closing Date, the Series 1995-A Certificates will
be repaid from the proceeds of the Offered Certificates, as set forth
in 'Use of Proceeds' herein. Each outstanding Series represents a
pari passu interest in the Trust.
The Class A Interest, the Class B Interest, the Collateral Interest
and the Subordinated Transferor Interest will each include the right
to receive (but only to the extent needed to make required payments
under the Agreement) varying percentages of Finance Charge
Collections and Principal Collections during each Collection Period.
Finance Charge Collections and Defaulted Receivables will be
allocated at all times to the Class A Interest, the Class B Interest,
the Collateral Interest and the Subordinated Transferor Interest
based on the Floating Allocation Percentage (as defined herein)
applicable to such Class or Interest during the related Collection
Period. The 'Class A Floating Allocation Percentage', the 'Class B
Floating Allocation Percentage', the 'Collateral Interest Floating
Allocation Percentage' and the 'Subordinated Floating Allocation
Percentage' shall be equal to the percentage equivalent of the ratio
which the Class A Invested Amount, Class B Invested Amount,
Collateral Interest Invested Amount or the Subordinated Transferor
Amount, as applicable, on the last day of the immediately preceding
Collection Period bears to the amount of Aggregate Receivables in the
Trust, or, with respect to Finance Charge Collections, bears to the
sum of the numerators used to calculate the invested percentage with
respect to Finance Charge Collections for all Series of certificates
outstanding during such Collection Period and the B/F Percentage. See
'Description of the Offered Certificates and the
Agreement--Allocation Percentages.'
During the Revolving Period (as defined below), subject to certain
limitations, all Principal Collections allocable to the Series 1996-1
Interests (other than Reallocated Principal Collections (as defined
below) that are used to pay Required Amounts due on the Class A
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and Class B Certificates and the Collateral Interest) will be paid to
the Transferor in respect of the Transferor Interest. During the
Controlled Amortization Period (as defined below) and any Rapid
Amortization Period (as defined below), Principal Collections
allocable to the Series 1996-1 Interests will be allocated to the
Class A Interest, the Class B Interest, the Collateral Interest and
the Subordinated Transferor Interest based on the Fixed Allocation
Percentage with respect to such Class or Interest. The Floating
Allocation Percentage and Fixed Allocation Percentage are sometimes
referred to herein as an 'Invested Percentage.' See 'Principal
Payments; Controlled Amortization Period' herein.
Exchanges................................. The Agreement authorizes the Trustee to issue three types of
certificates: (i) one or more Series of certificates which may be in
one or more classes and which may be transferable and have the
characteristics described below, (ii) the Bridgestone/Firestone
Certificate which is currently and will continue to be held by
Bridgestone/Firestone and which is not transferable, and (iii) the
Exchangeable Transferor Certificate, which is held by the Transferor
and in which Bridgestone/Firestone has a 100% participation pursuant
to an Amended and Restated Participation Agreement, dated as of
November 1, 1996, by and between the Transferor and
Bridgestone/Firestone (the 'Participation Agreement'). The Agreement
also provides that, pursuant to any one or more supplements to the
Agreement (each, a 'Supplement'), the Transferor may tender the
Exchangeable Transferor Certificate or, if permitted by the
applicable Supplement, certificates representing any Series of
certificates and the Exchangeable Transferor Certificate, to the
Trustee and, upon satisfying certain other terms and conditions,
cause the Trustee to issue one or more new series and reissue an
Exchangeable Transferor Certificate (any such tender, an 'Exchange').
Any Exchange involving only the tender of the Exchangeable Transferor
Certificate to the Trustee will have the effect of decreasing the
Transferor Interest.
Under the Agreement, the Transferor may define, with respect to any
Series, the Principal Terms (as defined below) of the Series. The
Transferor may offer any Series to the public or other investors
under a prospectus or other disclosure document (a 'Disclosure
Document') in transactions either registered under the Act or exempt
from registration thereunder, directly or through the Underwriters
(as defined below) or one or more other underwriters or placement
agents, in fixed-price offerings or in negotiated transactions or
otherwise. See Annex I for a listing of all outstanding Series. The
Transferor may offer, from time to time, additional Series issued by
the Trust.
Under the Agreement and pursuant to a Supplement, an Exchange may
occur only upon delivery to the Trustee of the following: (i) a
Supplement specifying the Principal Terms of such Series, (ii) an
opinion of counsel to the effect that the certificates of such Series
under existing law will be characterized as either indebtedness or an
interest in a partnership under existing law for Federal income tax
purposes and that the issuance of such Series will not materially
adversely affect the Federal income tax characterization of any
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outstanding Series that have been the subject of a previous opinion
of tax counsel, (iii) if required by the related Supplement, a form
of Enhancement and any related agreement, (iv) written confirmation
from the applicable Rating Agency (see 'Summary of Terms-- Rating of
the Offered Certificates' below) that the Exchange will not result in
such Rating Agency reducing or withdrawing its rating on any then
outstanding Series rated by it or otherwise adversely affect any
rating on any then outstanding Series, and (v) the existing
Exchangeable Transferor Certificate and, if applicable, the
certificates representing the Series to be exchanged. See
'Description of the Offered Certificates and the Agreement--
Exchanges.'
Registration of the Offered
Certificates............................ The Class A Certificates will be issued in book-entry form only in
the initial principal amount of $200,000,000 (the 'Initial Class A
Invested Amount') (which will be decreased or reinstated under
certain circumstances as described herein). The Class A Certificates
will initially be represented by one or more Class A Certificates
registered in the name of Cede & Co. ('Cede') as the nominee of The
Depository Trust Company ('DTC'), in the United States, or Cedel
Bank, societe anonyme ('CEDEL') or the Euroclear System ('Euroclear')
in Europe. The Class B Certificates will be issued in book-entry form
only in the initial principal amount of $28,205,129 (the 'Initial
Class B Invested Amount') (which will be decreased or reinstated
under certain circumstances as described herein and, accordingly, the
amount available to fund payments with respect to the Class A
Certificates may be decreased). The Class B Certificates will
initially be represented by one or more Certificates registered in
the name of Cede as the nominee of DTC, in the United States or CEDEL
or Euroclear in Europe. Transfers within DTC, CEDEL or Euroclear, as
the case may be, will be in accordance with the usual rules and
operating procedures of the relevant system. So long as Offered
Certificates are in book-entry form, such Offered Certificates will
be evidenced by one or more securities registered in the name of
Cede, as the nominee of DTC or one or the relevant depositaries
(collectively, the 'European Depositaries'). Cross-market transfers
between persons holding directly or indirectly through DTC, on the
one hand, and counterparties holding directly or indirectly through
CEDEL or Euroclear, on the other, will be effected in DTC through
Citibank N.A. ('Citibank') or The Chase Manhattan Bank ('Chase'), the
relevant depositaries of CEDEL and Euroclear, respectively, and each
a participating member of DTC. See 'Description of the Offered
Certificates and the Agreement--Definitive Certificates.' As used
herein, the term 'Class A Certificateholders' refers to registered
holders of the Class A Certificates, the term 'Class B
Certificateholders' refers to registered holders of the Class B
Certificates, the term 'Collateral Interest Holder' refers to
registered holders of the Collateral Interest, and the term 'Offered
Certificateholders' refers to the Class A Certificateholders and the
Class B Certificateholders collectively.
The holders of beneficial interests in the Class A Certificates and
the Class B Certificates (the 'Certificate Owners') will not be
entitled
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to receive a definitive certificate representing such person's
interest, except in the event that Definitive Certificates are issued
under the limited circumstances described herein. In such event,
interests in the Class A Certificates and Class B Certificates will
be available in denominations of $1,000 and in integral multiples
thereof. All references herein to Class A Certificateholders, Class B
Certificateholders or Offered Certificateholders shall refer to
Certificate Owners, except as otherwise specified herein. See
'Description of the Offered Certificates and the Agreement--Book-
Entry Registration' and '--Definitive Certificates.'
Interest on the Class A Certificates...... Interest will accrue on the unpaid principal amount of the Class A
Certificates at a per annum rate equal to the Class A Certificate
Rate and, except as otherwise provided herein, be distributed to
Class A Certificateholders monthly on each Distribution Date,
commencing December, 1996, in an amount equal to one-twelfth of the
product of (i) the Class A Certificate Rate and (ii) the outstanding
principal balance of the Class A Certificates as of the preceding
Distribution Date (or in the case of the first Distribution Date, as
of the Closing Date). Interest for any Distribution Date due but not
paid on any Distribution Date will be due on the next succeeding
Distribution Date together with, to the extent permitted by
applicable law, additional interest on such amount at the Class A
Certificate Rate. Interest for the first Distribution Date will
include accrued interest at the Class A Certificate Rate from the
Closing Date through November 30, 1996. Interest will be calculated
on the basis of a 360-day year of twelve 30-day months ('30/360
Basis'). See 'Description of the Offered Certificates and the
Agreement-- General' and '--Distributions from the Collection
Account.'
Interest on the Class B Certificates...... Interest will accrue on the unpaid principal amount of the Class B
Certificates at a per annum rate equal to the Class B Certificate
Rate and, except as otherwise provided herein, be distributed to
Class B Certificateholders monthly on each Distribution Date,
commencing December, 1996, in an amount equal to one-twelfth of the
product of (i) the Class B Certificate Rate and (ii) the outstanding
principal balance of the Class B Certificates as of the preceding
Distribution Date (or in the case of the first Distribution Date, as
of the Closing Date). Interest for any Distribution Date due but not
paid on any Distribution Date will be due on the next succeeding
Distribution Date together with, to the extent permitted by
applicable law, additional interest on such amount at the Class B
Certificate Rate. Interest for the first Distribution Date will
include accrued interest at the Class B Certificate Rate from the
Closing Date through November 30, 1996. Interest will be calculated
on a 30/360 Basis. See 'Description of the Offered Certificates and
the Agreement-- General' and '--Distributions from the Collection
Account.'
Distribution Date......................... The 1st day of each month (or, if such day is not a business day, the
next succeeding business day).
Record Date............................... The 15th day of the month immediately preceding any Distribution
Date.
Revolving Period.......................... No principal will be payable to the Class A Certificateholders until
the Distribution Date occurring in December, 1999, or upon the
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occurrence of an Amortization Event (as defined below) as described
herein, on the first Distribution Date following the Collection
Period during which an Amortization Event occurs. No principal will
be payable to the Class B Certificateholders until the final
principal payment has been made to the Class A Certificateholders. No
principal will be payable to the Collateral Interest Holder until the
final principal payment has been made to the Offered
Certificateholders. No principal will be payable to the holder of the
Subordinated Transferor Certificate until the final principal payment
has been made to the Offered Certificateholders and the Collateral
Interest Holder. For each Collection Period during the period
beginning after the Closing Date and ending on the day prior to the
day on which the Controlled Amortization Period or the Rapid
Amortization Period commences (the 'Revolving Period'), all Principal
Collections otherwise allocable to the Certificateholders' Interest
(other than Shared Principal Collections paid to holders of
certificates of other Series and any Reallocated Principal
Collections that are used to pay Required Amounts due on the Class A
and Class B Certificates and the Collateral Interest) will, subject
to certain limitations, be distributed to the Transferor in respect
of the Transferor Interest.
Principal Payments; Controlled
Amortization Period..................... Unless or until an Amortization Event (as defined below) has
occurred, commencing on the Distribution Date occurring in December,
1999, and ending when the Class A Invested Amount has been paid in
full or on July 1, 2003 (the 'Final Series 1996-1 Termination Date')
or on the day on which an Amortization Event occurs or is deemed to
have occurred (the 'Controlled Amortization Period'), Principal
Collections and Shared Principal Collections allocable to the Series
1996-1 Interests (other than Reallocated Principal Collections that
are used to pay Required Amounts due on the Class A and Class B
Certificates and the Collateral Interest) will be distributed monthly
to the Class A Certificateholders, as provided herein, on each
Distribution Date and the Class A Invested Amount is expected to be
paid in full to the Class A Certificateholders on November 1, 2000
(the 'Class A Expected Final Payment Date'). During the Controlled
Amortization Period, the amount of Principal Collections and Shared
Principal Collections allocable to the Class A Certificates will
generally equal the product of such Principal Collections and the
Class A Fixed Allocation Percentage (as defined below) which will be
paid through to the Class A Certificateholders to the extent of the
lesser of (a) such product and certain other amounts and (b)
$16,666,666.67 (the 'Controlled Amortization Amount'). See
'Description of the Offered Certificates and the Agreement--General'
and '--Distributions from the Collection Account.'
Principal Collections received during the Controlled Amortization
Period and Rapid Amortization Period will be allocated to the Class A
Invested Amount, Class B Invested Amount, Collateral Interest and
Subordinated Transferor Invested Amount based on the Class A Fixed
Allocation Percentage, Class B Fixed Allocation Percentage,
Collateral Interest Fixed Allocation Percentage and Subordinated
Transferor Fixed Allocation Percentage, respectively.
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The 'Fixed Allocation Percentage' means, with respect to any
Collection Period, the percentage equivalent of a fraction, the
numerator of which is the sum of the Class A Invested Amount, the
Class B Invested Amount, the Collateral Interest Invested Amount and
the Subordinated Transferor Interest (the 'Invested Amount'), as of
the close of business on the last day of the Revolving Period and the
denominator of which is the greater of (x) the Aggregate Receivables
as of the close of business on the last day of the prior Collection
Period and (y) the sum of the numerators used to calculate the
investor percentages for allocations with respect to Principal
Collections for all Series of certificates outstanding for the
current Distribution Date.
During the Controlled Amortization Period and any Rapid Amortization
Period, all Principal Collections will be allocated to the Class A
Interest, the Class B Interest, the Collateral Interest and the
Subordinated Transferor Interest based on the percentage equivalent
of the ratio which the Class A Invested Amount, the Class B Invested
Amount, the Collateral Interest Invested Amount and the Subordinated
Transferor Amount, as applicable, each as of the last day of the
Revolving Period, bears to the greater of (a) the Aggregate
Receivables on the last day of the prior Collection Period and (b)
the sum of the numerators used to calculate the Invested Percentage
with respect to Principal Collections for all Series of certificates
outstanding for such Collection Period (the 'Class A Fixed Allocation
Percentage', the 'Class B Fixed Allocation Percentage', the
'Collateral Interest Fixed Allocation Percentage' and the
'Subordinated Transferor Fixed Allocation Percentage', as applicable)
and the remainder will be allocated to the Transferor Interest and to
the B/F Interest.
The Class B Certificateholders will not receive any payments of
principal until the Class A Certificateholders have received all
payments of principal due to them. Once the Class A Invested Amount
has been reduced to zero, the Class B Invested Amount is expected to
be paid in full to the Class B Certificateholders on November 1, 2000
(the 'Class B Expected Final Payment Date'). See 'Description of the
Offered Certificates and the Agreement-- General' and
'--Distributions from the Collection Account.'
The Collateral Interest will not receive any payments of principal
until the Class A and the Class B Certificateholders have received
all payments of principal due to them. Once the Class A Invested
Amount and the Class B Invested Amount have been reduced to zero, the
Collateral Interest Invested Amount will be paid in full to the
Collateral Interest Holder.
The holder of the Subordinated Transferor Certificate will not
receive any payments of principal until the Class A and the Class B
Certificateholders and the Collateral Interest Holder have received
all payments of principal due to them. Once the Class A Invested
Amount, the Class B Invested Amount and the Collateral Interest
Invested Amount have been reduced to zero, the Subordinated
Transferor Amount will be paid in full to the holder of the
Subordinated Transferor Certificate.
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Rapid Amortization Period................. During the period from the earlier of the date on which (i) the Class
A Invested Amount has been paid in full or (ii) an Amortization Event
occurs or is deemed to have occurred and ending on the earlier of the
date on which the Invested Amount has been paid in full or the Final
Series 1996-1 Termination Date (the 'Rapid Amortization Period'),
Principal Collections, Shared Principal Collections and certain other
amounts allocable to the Certificateholders' Interest will no longer
be distributed to the Transferor but instead will be distributed as
principal payments on each Distribution Date beginning with the first
Distribution Date following the Collection Period in which the Class
A Invested Amount has been paid in full or an Amortization Event
occurs or is deemed to have occurred. Such Principal Collections,
Shared Principal Collections and certain other amounts will be
distributed to the Class A Certificateholders (to the extent not
already paid in full) and, following the final principal payment to
the Class A Certificateholders, to the Class B Certificateholders
and, following the final principal payment to the Class B
Certificateholders, to the Collateral Interest Holder, and, following
the final principal payment to the Collateral Interest Holder, to the
holder of the Subordinated Transferor Certificate. See 'Description
of the Offered Certificates and the Agreement--Amortization Events.'
Flow of Funds............................. Funds on deposit in the Collection Account allocable to the Class A
and Class B Certificates, the Collateral Interest and the
Subordinated Transferor Certificate with respect to each Distribution
Date shall be applied in the priority set forth below:
(a) the Class A Floating Allocation Percentage of Finance Charge
Collections will be distributed as follows:
(i) Class A Monthly Interest, plus the amount of any unpaid interest
due;
(ii) the Class A Investor Default Amount will be distributed to
the Transferor in respect of the Transferor Interest during the
Revolving Period up to the amount of the Transferor Interest
after the purchase of new Receivables (and thereafter will be
included in the funds available to make principal payments);
(iii) the Class A Monthly Servicing Fee (in the event
Bridgestone/Firestone is not the Servicer, this amount will be
distributed before the amount in clause (ii)); and
(iv) the balance, if any, will constitute a portion of Excess Finance
Charge Collections (as defined below) and will be allocated and
distributed as described under '--Excess Finance Charge
Collections.'
(b) the Class B Floating Allocation Percentage of Finance Charge
Collections will be distributed as follows:
(i) Class B Monthly Interest, plus the amount of any unpaid interest
due;
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(ii) the Class B Monthly Servicing Fee; and
(iii) the balance, if any, will constitute a portion of Excess
Finance Charge Collections and will be allocated and distributed
as described under '--Excess Finance Charge Collections.'
(c) the Collateral Interest Floating Allocation Percentage of Finance
Charge Collections will be distributed as follows:
(i) Collateral Interest Monthly Interest, plus the amount of
any unpaid interest due;
(ii) the Collateral Interest Monthly Servicing Fee; and
(iii) the balance, if any, will constitute a portion of Excess
Finance Charge Collections and will be allocated and distributed
as described under '--Excess Finance Charge Collections.'
(d) the Subordinated Transferor Floating Allocation Percentage of
Finance Charge Collections will be distributed as follows:
(i) the Subordinated Transferor Monthly Servicing Fee; and
(ii) the balance, if any, will constitute a portion of Excess
Finance Charge Collections and will be allocated and distributed
as described under '--Excess Finance Charge Collections.'
(e) For each Distribution Date with respect to the Revolving Period,
the remaining funds on deposit in the Collection Account allocable to
the Class A and Class B Certificates, the Collateral Interest and the
Subordinated Transferor Certificate (other than certain Excess
Finance Charge Collections and Reallocated Principal Collections)
will be applied as Shared Principal Collections and the balance will
be distributed to the Transferor in respect of the Transferor
Interest.
(f) For each Distribution Date with respect to the Controlled
Amortization Period or any Rapid Amortization Period, the remaining
funds on deposit in the Collection Account allocable to the Class A
and Class B Certificates, the Collateral Interest and the
Subordinated Transferor Certificate (other than certain Excess
Finance Charge Collections and Reallocated Principal Collections)
will be distributed as follows:
(i) Class A Monthly Principal for such Distribution Date until the
Class A Invested Amount is paid in full;
(ii) once the Class A Invested Amount is paid in full, the remaining
amount will be distributed to the Class B Certificateholders
until the Class B Invested Amount is paid in full;
(iii) once the Class B Invested Amount is paid in full, the remaining
amount will be distributed to the Collateral Interest Holder
until the Collateral Interest Invested Amount is paid in full;
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(iv) once the Collateral Interest Invested Amount is paid in full,
the remaining amount will be distributed to the holder of the
Subordinated Transferor Certificate until the Subordinated
Transferor Amount is paid in full;
(v) an amount equal to the balance of any such remaining funds on
deposit in the Collection Account will be paid to the Transferor
in respect of the Transferor Interest up to the amount of the
Transferor Interest; and
(vi) the balance will be applied as Shared Principal Collections to
the extent necessary and the remainder will be distributed to
the Transferor in respect of the Transferor Interest.
'Class A Monthly Interest' equals, with respect to any Distribution
Date, one-twelfth of the product of (i) the Class A Certificate Rate
and (ii) the outstanding principal balance of the Class A
Certificates as of the preceding Distribution Date (after subtracting
therefrom the aggregate amount of all distributions of principal made
to the Class A Certificateholders on such Distribution Date) or, with
respect to the first Distribution Date, the Initial Class A Invested
Amount, provided, however, that with respect to the initial
Distribution Date, Class A Monthly Interest shall equal $788,388.89.
'Class B Monthly Interest' equals, with respect to any Distribution
Date, one-twelfth of the product of (i) the Class B Certificate Rate
and (ii) the outstanding principal balance of the Class B
Certificates as of the preceding Distribution Date (after subtracting
therefrom the aggregate amount of all distributions of principal made
to the Class B Certificateholders on such Distribution Date) or, with
respect to the first Distribution Date, the Initial Class B Invested
Amount, provided, however, that with respect to the initial
Distribution Date, Class B Monthly Interest shall equal $116,949.43.
'Collateral Interest Monthly Interest' equals, with respect to any
Distribution Date, the product of (i) the actual number of days in
the related Collateral Interest Accrual Period (as defined below)
divided by 360, (ii) the Collateral Interest Rate and (iii) the
outstanding principal balance of the Collateral Interest as of the
preceding Distribution Date (after subtracting therefrom the
aggregate amount of all distributions of principal made to the
Collateral Interest Holder on such Distribution Date) or, with
respect to the first Distribution Date, the Initial Collateral
Interest Invested Amount. With respect to any Distribution Date, the
'Collateral Interest Accrual Period' is the period from and including
the first day of the preceding calendar to and including the last day
of such preceding calendar month, except the initial Collateral
Interest Accrual Period shall be deemed to be the period from the
Closing Date through the last day of the calendar month preceding the
initial Distribution Date.
'Class A Investor Default Amount' means, a portion of all Defaulted
Receivables which will be allocated to the Class A Certificateholders
for each Distribution Date in an amount equal to the product of the
Class A Floating Allocation Percentage applicable
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during the immediately preceding Collection Period and the amount of
Defaulted Receivables for such Collection Period.
'Class B Investor Default Amount' means, a portion of all Defaulted
Receivables which will be allocated to the Class B Certificateholders
for each Distribution Date in an amount equal to the product of the
Class B Floating Allocation Percentage applicable during the
immediately preceding Collection Period and the amount of Defaulted
Receivables for such Collection Period.
'Collateral Interest Investor Default Amount' means, a portion of all
Defaulted Receivables which will be allocated to the Collateral
Interest Holder for each Distribution Date in an amount equal to the
product of the Collateral Interest Floating Allocation Percentage
applicable during the immediately preceding Collection Period and the
amount of Defaulted Receivables for such Collection Period.
'Subordinated Transferor Default Amount' means, a portion of all
Defaulted Receivables which will be allocated to the holder of the
Subordinated Transferor Certificate for each Distribution Date in an
amount equal to the product of the Subordinated Transferor Floating
Allocation Percentage applicable during the immediately preceding
Collection Period and the amount of Defaulted Receivables for such
Collection Period.
'Investor Default Amount' means the sum of the Class A Investor
Default Amount, the Class B Investor Default Amount, the Collateral
Interest Investor Default Amount and the Subordinated Transferor
Investor Default Amount.
'Monthly Servicing Fee' means, with respect to any Distribution Date,
the sum of (a) the Class A Monthly Servicing Fee, the Class B Monthly
Servicing Fee, the Collateral Interest Monthly Servicing Fee and the
Subordinated Transferor Monthly Servicing Fee and (b) the Servicing
Fee allocable to the Transferor Amount and the B/F Amount.
The portion of the Servicing Fee allocable to the Class A Interest on
each Distribution Date (the 'Class A Monthly Servicing Fee'), to the
Class B Interest on each Distribution Date (the 'Class B Monthly
Servicing Fee'), to the Collateral Interest on each Distribution Date
(the 'Collateral Interest Monthly Servicing Fee') and to the
Subordinated Transferor Interest on each Distribution Date (the
'Subordinated Transferor Monthly Servicing Fee') generally will be
equal to one-twelfth of the product of 2.00% per annum and the amount
of the Class A Invested Amount, the Class B Invested Amount, the
Collateral Interest Invested Amount, or the Subordinated Transferor
Amount, as the case may be, on the last day of the second preceding
Collection Period (in the case of the first Distribution Date, the
initial principal amount of the Class A Certificates and Class B
Certificates, the Collateral Interest or the Subordinated Transferor
Certificate, as the case may be).
'Class A Invested Amount' for any date means an amount equal to (i)
the initial principal balance of the Class A Certificates, minus the
(ii) amount of principal payments made to Class A Certificateholders
prior to such date and minus (iii) the excess, if any, of the
aggregate amount of Class A Investor Charge-Offs (as
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defined below) for all Distribution Dates preceding such date over
the aggregate amount of any reimbursements of Class A Investor
Charge-Offs for all Distribution Dates preceding such date.
'Class B Invested Amount' for any date means an amount equal to (i)
the initial principal balance of the Class B Certificates, minus (ii)
the amount of principal payments made to the Class B
Certificateholders prior to such date, minus (iii) the aggregate
amount of Class B Investor Charge-Offs (as defined below) for all
prior Distribution Dates, minus (iv) the aggregate amount of Class B
Reallocated Principal Collections for all prior Distribution Dates,
minus (v) an amount equal to the aggregate amount by which the Class
B Invested Amount has been reduced to fund the Class A Investor
Default Amount on all prior Distribution Dates as described herein,
and plus (vi) the amount of Excess Finance Charge Collections applied
on all prior Distribution Dates for the purpose of reimbursing
amounts deducted pursuant to the foregoing clauses (iii), (iv) and
(v).
'Collateral Interest Invested Amount' for any date means an amount
equal to (i) the initial principal balance of the Collateral
Interest, minus (ii) the amount of principal payments made to the
Collateral Interest Holder prior to such date, minus (iii) the
aggregate amount of Collateral Interest Investor Charge-Offs (as
defined below) for all prior Distribution Dates, minus (iv) the
aggregate amount of Collateral Interest Reallocated Principal
Collections, minus (v) an amount equal to the aggregate amount by
which the Collateral Interest Invested Amount has been reduced to
fund the Class A and Class B Investor Default Amounts on all prior
Distribution Dates as described herein, and plus (vi) the amount of
Excess Finance Charge Collections applied on all prior Distribution
Dates for the purpose of reimbursing amounts deducted pursuant to the
foregoing clauses (iii), (iv) and (v).
'Subordinated Transferor Amount' for any date means an amount equal
to (i) the initial principal balance of the Subordinated Transferor
Certificate, minus (ii) the amount of principal payments made to the
holder of the Subordinated Transferor Certificate prior to such date,
minus (iii) the aggregate amount of Subordinated Transferor
Charge-Offs (as defined below) for all prior Distribution Dates,
minus (iv) the aggregate amount of Subordinated Transferor
Reallocated Principal Collections for all prior Distribution Dates,
minus (v) an amount equal to the aggregate amount by which the
Subordinated Transferor Amount has been reduced to fund the Class A,
Class B and Collateral Interest Investor Default Amounts on all prior
Distribution Dates as described herein, and plus (vi) the amount of
Excess Finance Charge Collections applied on all prior Distribution
Dates for the purpose of reimbursing amounts deducted pursuant to the
foregoing clauses (iii), (iv) and (v).
'Excess Finance Charge Collections' shall mean, with respect to any
Distribution Date, an amount equal to the sum of the amounts
described in clause (a)(iv), clause (b)(iii), clause (c)(iii) and
clause (d)(ii) above.
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See 'Description of the Offered Certificates and the Agreement--
Distributions from the Collection Account.'
Excess Finance Charge Collections......... Excess Finance Charge Collections will be applied as follows:
(a) to fund the Class A Required Amount;
(b) to distribute Class A Investor Charge-Offs which have not been
previously reimbursed to the Transferor in respect of the Transferor
Interest during the Revolving Period up to the amount of the
Transferor Interest after the purchase of new Receivables (and
thereafter will be included in the funds available to make principal
payments);
(c) to fund the Class B Required Amount;
(d) to distribute the Class B Investor Default Amount to the
Transferor in respect of the Transferor Interest during the Revolving
Period up to the amount of the Transferor Interest after the purchase
of new Receivables (and thereafter will be included in the funds
available to make principal payments);
(e) to distribute an amount equal to the amount by which the Class B
Invested Amount has been reduced below the Initial Class B Invested
Amount (for reasons other than the payment of principal to the Class
B Certificateholders) to the Transferor in respect of the Transferor
Interest during the Revolving Period, up to the amount of the
Transferor Interest after the purchase of new Receivables (and
thereafter will be included in the funds available to make principal
payments);
(f) to fund the Collateral Interest Required Amount;
(g) to distribute the Collateral Interest Investor Default Amount to
the Transferor in respect of the Transferor Interest during the
Revolving Period up to the amount of the Transferor Interest after
the purchase of new Receivables (and thereafter will be included in
the funds available to make principal payments);
(h) to distribute an amount equal to the amount by which the
Collateral Interest Invested Amount has been reduced below the
Initial Collateral Interest Invested Amount (for reasons other than
the payment of principal to the Collateral Interest Holder) to the
Transferor in respect of the Transferor Interest during the Revolving
Period up to the amount of the Transferor Interest after the purchase
of new Receivables (and thereafter will be included in the funds
available to make principal payments);
(i) to fund any additional amounts required to be paid on such
Distribution Date pursuant to the terms of the Loan Agreement;
(j) to distribute the Subordinated Transferor Default Amount to the
Transferor during the Revolving Period up to the amount of the
Transferor Interest after the purchase of new Receivables (and
thereafter will be included in the funds available to make principal
payments);
(k) to distribute the amount by which the Subordinated Transferor
Amount has been reduced below the Initial Subordinated Transferor
Amount (for reasons other than the payment of principal to the holder
of the Subordinated Transferor Certificate) to the Transferor in
respect of the Transferor Interest during the Revolving Period up
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to the amount of the Transferor Interest after the purchase of new
Receivables (and thereafter will be included in the funds available
to make principal payments);
(l) the balance, if any, will be treated as Shared Excess Finance
Charge Collections to the extent necessary; and
(m) any remaining amounts not treated as Shared Excess Finance Charge
Collections will be treated as Shared Principal Collections.
The 'Class A Required Amount' means the amount, if any, by which the
sum of Class A Monthly Interest, any overdue Class A Monthly Interest
(with interest thereon), the Class A Investor Default Amount, the
Class A Monthly Servicing Fee for such Collection Period exceeds the
funds allocable to the Class A Certificates to pay such amounts.
The 'Class B Required Amount' means the amount, if any, by which the
sum of Class B Monthly Interest, any overdue Class B Monthly Interest
(with interest thereon) and the Class B Monthly Servicing Fee for
such Collection Period exceeds the funds allocable to the Class B
Certificates to pay such amounts.
The 'Collateral Interest Required Amount' means the amount, if any,
by which the sum of Collateral Interest Monthly Interest, any overdue
Collateral Interest Monthly Interest (with interest thereon) and the
Collateral Interest Monthly Servicing Fee for such Collection Period
exceeds the funds allocable to the Collateral Interest to pay such
amounts.
The 'Required Amount' shall equal the sum of the Class A Required
Amount, the Class B Required Amount and the Collateral Interest
Required Amount.
See 'Description of the Offered Certificates and the Agreement--
Excess Finance Charge Collections.'
Reallocated Principal Collections......... If Excess Finance Charge Collections available with respect to such
Collection Period are less than the remaining Required Amount, Class
B Investor Default Amount and Collateral Interest Investor Default
Amount, Principal Collections allocable to the Subordinated
Transferor Interest, the Collateral Interest and the Class B Interest
with respect to a Collection Period will be applied in the following
order of priority:
(i) Subordinated Transferor Reallocated Principal Collections, first,
to the remaining components of the Class A Required Amount, if
any, then to the remaining components of the Class B Required
Amount, if any, then to the Class B Investor Default Amount, if
any, then to the remaining components of the Collateral Interest
Required Amount, if any, and then to the Collateral Interest
Investor Default Amount, if any;
(ii) Collateral Interest Reallocated Principal Collections, first, to
the remaining components of the Class A Required Amount, if any,
then to the remaining components of the Class B Required Amount,
if any, and then to the Class B Investor Default Amount, if any;
and
(iii) Class B Reallocated Principal Collections, to the remaining
components of the Class A Required Amount, if any.
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'Subordinated Transferor Reallocated Principal Collections' means,
with respect to each Distribution Date, the Principal Collections
allocable to the Subordinated Transferor Certificate with respect to
such Distribution Date (equal to the Subordinated Transferor Floating
Allocation Percentage of Principal Collections for the related
Collection Period for any such Distribution Date during the Revolving
Period or the Subordinated Transferor Fixed Allocation Percentage of
Principal Collections for any such Distribution Date during the
Controlled Amortization Period or Rapid Amortization Period) in an
amount equal to the Class A, Class B and Collateral Interest Required
Amounts, if any, the Class B Investor Default Amount, if any, and the
Collateral Interest Investor Default Amount, if any, with respect to
such Distribution Date (after giving effect to any payment of such
amounts from Excess Finance Charge Collections).
'Collateral Interest Reallocated Principal Collections' means, with
respect to each Distribution Date, the Principal Collections
Allocable to the Collateral Interest with respect to such
Distribution Date (equal to the Collateral Interest Floating
Allocation Percentage of Principal Collections for the related
Collection Period for any such Distribution Date during the Revolving
Period or the Collateral Interest Fixed Allocation Percentage of
Principal Collections for any such Distribution Date during the
Controlled Amortization Period or Rapid Amortization Period) in an
amount equal to the Class A and Class B Required Amounts, if any, and
the Class B Investor Default Amount, if any, with respect to such
Distribution Date (after giving effect to any payment of such amounts
from Excess Finance Charge Collections and Subordinated Transferor
Reallocated Principal Collections).
'Class B Reallocated Principal Collections' means with respect to
each Distribution Date, the Principal Collections allocable to the
Class B Certificates with respect to such Distribution Date (equal to
the Class B Floating Allocation Percentage of Principal Collections
for the related Collection Period for any such Distribution Date
during the Revolving Period or the Class B Fixed Allocation
Percentage of Principal Collections for any such Distribution Date
during the Controlled Amortization Period or Rapid Amortization
Period) in an amount equal to the Class A Required Amount, if any,
with respect to such Distribution Date (after giving effect to any
payment of the Class A Required Amount from Excess Finance Charge
Collections, Subordinated Transferor Reallocated Principal
Collections and Collateral Interest Reallocated Principal
Collections).
'Reallocated Principal Collections' will equal the sum of
Subordinated Transferor Reallocated Principal Collections, Collateral
Interest Reallocated Principal Collections and Class B Reallocated
Principal Collections.
Collections not applied in the foregoing manner (and therefore not
constituting Reallocated Principal Collections) will during the
Revolving Period, be applied as Shared Principal Collections and,
during the Controlled Amortization Period or any Rapid
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Amortization Period, will be included in the funds available to make
principal payments.
See 'Description of the Offered Certificates and the Agreement--
Reallocated Principal Collections.'
Additional Amounts Available to
Certificateholders...................... Excess Finance Charge Collections will be applied to fund the
Required Amount, if any, as described herein under 'Excess Finance
Charge Collections.' If Excess Finance Charge Collections available
with respect to such Collection Period are less than the remaining
Required Amount, Principal Collections for such Collection Period
will then be used to fund the remaining Required Amount as described
herein under 'Description of the Offered Certificates and the
Agreement--Reallocated Principal Collections.'
If Reallocated Principal Collections with respect to any Collection
Period are insufficient to fund the remaining Class A Required Amount
for such Collection Period, then a portion of the Subordinated
Transferor Amount (after giving effect to reductions for any
Subordinated Transferor Charge-Offs and Subordinated Transferor
Reallocated Principal Collections for such Collection Period) equal
to such insufficiency (but not in excess of the Class A Investor
Default Amount for such Distribution Date) will be allocated to the
Class A Certificates to avoid a charge-off with respect to the Class
A Certificates, and the Subordinated Transferor Amount will be
reduced by such amount. If such reduction would cause the
Subordinated Transferor Amount to be negative, the Subordinated
Transferor Amount will be reduced to zero.
If the Subordinated Transferor Amount is reduced to zero, the
Collateral Interest Invested Amount (after giving effect to
reductions for any Collateral Interest Investor Charge-Offs and any
Collateral Interest Reallocated Principal Collections for such
Collection Period for which the Subordinated Transferor Interest was
not reduced) will be reduced by the amount by which the Subordinated
Transferor Amount would have been reduced below zero (but not by more
than the excess of the Class A Investor Default Amount for such
Distribution Date over the amount of such reduction, if any, of the
Subordinated Transferor Amount for such Distribution Date) and such
amount will be allocated to the Class A Certificates to avoid a
charge-off with respect to the Class A Certificates. If such
reduction would cause the Collateral Interest Invested Amount to be
negative, the Collateral Interest Invested Amount will be reduced to
zero.
If the Collateral Interest Invested Amount is reduced to zero, the
Class B Invested Amount (after giving effect to reductions for any
Class B Investor Charge-Offs and any Class B Reallocated Principal
Collections for such Collection Period for which the Subordinated
Transferor Amount and the Collateral Interest Invested Amount was not
reduced) will be reduced by the amount by which the Collateral
Interest Invested Amount would have been reduced below zero (but not
by more than the excess of the Class A Investor Default Amount for
such Distribution Date over the amount of such reduction, if any, of
the Subordinated Transferor Amount and the Collateral Interest
Invested Amount for such Distribution Date) and such amount will
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be allocated to the Class A Certificates to avoid a charge-off with
respect to the Class A Certificates. If such reduction would cause
the Class B Invested Amount to be negative, the Class B Invested
Amount will be reduced to zero.
If the Class B Invested Amount is reduced to zero, 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 of the Class A Investor Default Amount for such
Distribution Date over the reduction in the Subordinated Transferor
Amount the Collateral Interest Invested Amount and the Class B
Invested Amount for such Collection Period (a 'Class A Investor
Charge-Off '), and the Class A Certificateholders will bear directly
the credit and other risks associated with their undivided interest
in the Trust.
After payment of the Class A Required Amount, if Collateral Interest
Reallocated Principal Collections and Subordinated Transferor
Reallocated Principal Collections not required to fund the Class A
Required Amount with respect to any Collection Period are
insufficient to fund the remaining Class B Required Amount and Class
B Investor Default Amount for such Collection Period, then a portion
of the Subordinated Transferor Amount (after giving effect to
reductions for any Subordinated Transferor Charge-Offs, Subordinated
Transferor Reallocated Principal Collections and any adjustments made
thereto for the benefit of the Class A Certificateholders) equal to
such insufficiency (but not in excess of the Class B Investor Default
Amount for such Distribution Date) will be allocated to the Class B
Certificates to avoid a charge-off with respect to the Class B
Certificates, and the Subordinated Transferor Amount will be reduced
by such amount. If such reduction would cause the Subordinated
Transferor Amount to be negative, the Subordinated Transferor Amount
will be reduced to zero.
If the Subordinated Transferor Amount is reduced to zero, the
Collateral Interest Invested Amount (after giving effect to
reductions for any Collateral Interest Investor Charge-Offs,
Collateral Interest Reallocated Principal Collections and any
adjustments made thereto for the benefit of the Class A
Certificateholders) will be reduced by the amount by which the
Subordinated Transferor 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,
if any, of the Subordinated Transferor Amount for such Distribution
Date) and such amount will be allocated to the Class B Certificates
to avoid a charge-off with respect to the Class B Certificates. If
such reduction would cause the Collateral Interest Invested Amount to
be negative, the Collateral Interest Invested Amount will be reduced
to zero.
If the Collateral Interest Invested Amount is reduced to zero, the
Class B Invested Amount will be reduced by the amount by which the
Collateral Interest 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 reduction in the
Subordinated Transferor Amount and the Collateral Interest Invested
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Amount (a 'Class B Investor Charge-Off'), and the Class B
Certificateholders will bear directly the credit and other risks
associated with their undivided interest in the Trust. If such
reduction would cause the Class B Invested Amount to be negative, the
Class B Invested Amount will be reduced to zero.
After payment of the Class B Required Amount, if Subordinated
Transferor Reallocated Principal Collections with respect to any
Collection Period are insufficient to fund the remaining Collateral
Interest Required Amount and Collateral Interest Investor Default
Amount for such Collection Period, then a portion of the Subordinated
Transferor Amount (after giving effect to reductions for any
Subordinated Transferor Charge-Offs, Subordinated Transferor
Reallocated Principal Collections and any adjustments made thereto
for the benefit of the Class A and Class B Certificateholders) equal
to such insufficiency (but not in excess of the Collateral Interest
Investor Default Amount for such Distribution Date) will be allocated
to the Collateral Interest to avoid a charge-off with respect to the
Collateral Interest, and the Subordinated Transferor Amount will be
reduced by such amount. If such reduction would cause the
Subordinated Transferor Amount to be negative, the Subordinated
Transferor Amount will be reduced to zero.
If the Subordinated Transferor Amount is reduced to zero, the
Collateral Interest Invested Amount will be reduced by the amount by
which the Subordinated Transferor Amount would have been reduced
below zero, but not by more than the excess of the Collateral
Interest Investor Default Amount for such Distribution Date over the
reduction in the Subordinated Transferor Amount (a 'Collateral
Interest Investor Charge-Off '), and the Collateral Interest Holder
will bear directly the credit and other risks associated with their
undivided interest in the Trust. If such reduction would cause the
Collateral Interest Invested Amount to be negative, the Collateral
Interest Invested Amount will be reduced to zero.
On each Distribution Date, if the Subordinated Transferor Default
Amount for such Distribution Date exceeds the amount of Excess
Finance Charge Collections which is allocated and available to fund
such amount as described under 'Excess Finance Charge Collections',
the Subordinated Transferor Amount (after giving effect to reductions
for Subordinated Transferor Reallocated Principal Collections and the
amount of any adjustments made thereto for the benefit of the Class A
or Class B Certificateholders or the Collateral Interest Holder) will
be reduced but not in excess of the Subordinated Transferor Default
Amount (the 'Subordinated Transferor Charge-Off '). If such reduction
would cause the Subordinated Transferor Amount to be negative, the
Subordinated Transferor Amount will be reduced to zero.
In the event that any of the Subordinated Transferor Amount, the
Collateral Interest Invested Amount, the Class B Invested Amount or
the Class A Invested Amount is reduced, such amount will thereafter
be increased (but not to a level in excess of the unpaid principal
balance of the Subordinated Transferor Certificate, the Collateral
Interest, the Class B Certificates or the Class A Certificates, as
applicable) on any Distribution Date by the amount
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of Excess Finance Charge Collections allocated and available for that
purpose as described under '--Excess Finance Charge Collections.'
See 'Description of the Offered Certificates--Additional Amounts
Available to Certificateholders.'
Principal Payments;
Certain Allocations..................... Principal Collections with respect to any Collection Period will be
allocated on the related Determination Date on the basis of the
applicable Invested Percentage. Under the Agreement, such collections
will be either paid to the Transferor in respect of the Transferor
Interest, as described above during the Revolving Period, or to the
holders of the Series 1996-1 Interests in respect of the Class A
Invested Amount, Class B Invested Amount, the Collateral Interest
Invested Amount or Subordinated Transferor Amount, or to both the
Transferor and the holders of the Series 1996-1 Interests. Such
allocations will be performed during the Revolving Period, Controlled
Amortization Period and any Rapid Amortization Period.
In the event that other Series are offered by the Trust, such other
Series may or may not have amortization periods like the Controlled
Amortization Period or the Rapid Amortization Period or revolving
periods like the Revolving Period for the Series 1996-1 Interests,
and such periods may have different lengths and begin on different
dates than the Controlled Amortization Period, the Rapid Amortization
Period or the Revolving Period. Thus, certain Series may be in their
revolving periods, while others are in periods during which Principal
Collections are distributed to such Series. Under certain
circumstances, one or more Series may be in their amortization
periods, while other Series are not. In addition, other Series may
allocate Principal Collections based upon different invested
percentages.
Shared Principal Collections.............. To the extent that Principal Collections and other amounts that are
allocated to the interest of the holders of any class of any series
(other than the Transferor Interest) are not needed to make payments
to the certificateholders of such class, they may be applied to cover
principal payments due to or for the benefit of certificateholders of
another Series ('Shared Principal Collections'). Any such
reallocation will not result in a reduction in the interest of the
holders of the Series to which such Principal Collections were
initially allocated. In addition, Principal Collections and certain
other amounts otherwise allocable to other Series, to the extent such
collections are not needed to make payments to the certificateholders
of such other Series, may be applied to cover principal payments due
to or for the benefit of the holders of the Series 1996-1 Interests.
See 'Description of the Offered Certificates and the
Agreement--Shared Principal Collections.'
Sharing of Excess Finance Charge
Collections............................. Finance Charge Collections on any business day in excess of the
amounts necessary to make required payments on such business day with
respect to the Series 1996-1 Interests will be applied to cover any
shortfalls with respect to amounts payable from Finance Charge
Collections allocable to any other Series then outstanding, pro rata
based upon the amount of the shortfall, if any, with respect to such
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other Series. In addition, Finance Charge Collections in excess of
the amounts necessary to make required payments on such business day
with respect to certificates of other outstanding Series will be
applied to cover any shortfalls with respect to Finance Charge
Collections allocable to the Series 1996-1 Interests. Any Excess
Finance Charge Collections remaining after covering shortfalls with
respect to all outstanding Series will be paid to the Transferor in
respect of the Transferor Interest. See 'Description of the Offered
Certificates and the Agreement--Sharing of Excess Finance Charge
Collections.'
Discount Option........................... The Agreement provides that the Transferor may at any time and from
time to time, but without any obligation to do so, designate a fixed
percentage or a variable percentage based on a formula (the 'Discount
Percentage'), but in either case not to exceed 6%, of Receivables
giving rise to Principal Collections ('Principal Receivables') that
are charges for goods or services or obligations for repayment of
cash advances, part of which have not previously been sold as
Discount Option Receivables, arising from then on to be treated as
Receivables giving rise to Finance Charge Collections ('Finance
Charge Receivables'). Such Receivables will be designated 'Discount
Option Receivables.' After any such designation, pursuant to the
Agreement, the Transferor may, without notice to or consent of the
Certificateholders, from time to time increase, reduce or withdraw
the Discount Percentage. Such increase, reduction or withdrawal will
become effective upon satisfaction of the conditions in the
Agreement, including written confirmation by each Rating Agency.
On each Distribution Date on or after the date the exercise of the
discount option takes effect, the lower of (a) the product of (i) the
Discount Percentage then in effect and (ii) Collections received
during such Collection Period minus the amount of Collections deemed
to be Finance Charge Collections for such Collection Period and (b)
the Discount Option Receivables outstanding at the end of such
Collection Period that otherwise would be Principal Receivables will
be deemed collections of Finance Charge Receivables and will be
applied accordingly. Such feature is intended to permit the
Transferor to increase the Portfolio Yield and thereby decrease the
risk of the occurrence of an Amortization Event.
On the Closing Date, the Transferor will designate an initial
Discount Percentage equal to 2.0%. Any increase, reduction or
withdrawal of such Discount Percentage will be made in accordance
with the conditions described in the Agreement.
See 'Description of the Offered Certificates and the Agreement--
Discount Option.'
Amortization Events....................... An 'Amortization Event' with respect to the Series 1996-1 Interests
refers to any of the following events:
(i) failure on the part of the Servicer, the Originator or the
Transferor to make any payment or deposit required by the terms
of the Agreement on or before five business days after the date
such payment or deposit is required to be made thereunder;
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(ii) the failure on the part of the Servicer, the Originator or the
Transferor duly to observe or perform in any material respect
certain covenants or agreements set forth in the Agreement or
the Purchase and Sale Agreement which, in the case of certain of
such covenants or agreements, continues unremedied for a period
of 60 days after the date on which written notice of such
failure requiring the same to be remedied shall have been given
to the Servicer, the Originator or the Transferor, as
applicable, provided, however, that an Amortization Event shall
not be deemed to occur if the Transferor has accepted the
transfer of the related Receivable (or all of such Receivables,
if applicable) during such period (or such longer period as the
Trustee may specify) in accordance with the provisions of the
Agreement or the Purchase and Sale Agreement;
(iii) any representation or warranty made by the Servicer, the
Originator or the Transferor in the Agreement or the Purchase and
Sale Agreement or any information required to be delivered by the
Transferor shall prove to have been incorrect in any material respect
when made or when delivered, which continues to be incorrect in any
material respect for a period of 60 days after the date on which
written notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer, the Originator or the
Transferor, as applicable, and as a result of which the interests of
the certificateholders are materially and adversely affected;
provided, however, that such an Amortization Event shall not be
deemed to have occurred if the Transferor has accepted the transfer
of the related Receivable (or all of such Receivables, if applicable)
during such period (or such longer period as the Trustee may specify)
in accordance with the provisions of the Agreement;
(iv) certain events of insolvency, conservatorship, receivership or
bankruptcy with respect to the Originator, Bridgestone/Firestone or
the Transferor;
(v) the annualized percentage equivalent of a fraction, the numerator
of which is the amount of Finance Charge Collections for the related
Collection Period, calculated on an accrual basis after subtracting
the Investor Default Amount and that portion of Finance Charge
Collections arising from Receivables that are ninety-one or more days
delinquent, and the denominator of which is the Aggregate Receivables
as of the end of the preceding Collection Period (the 'Portfolio
Yield') averaged over any three consecutive Collection Periods is
less than a fraction, calculated as of the related Determination
Date, the numerator of which is the sum of (a) the product of the
Class A Certificate Rate and the Class A Invested Amount, (b) the
product of the Class B Certificate Rate and the Class B Invested
Amount and (c) the product of the Collateral Interest Rate and the
Collateral Interest Invested Amount, and the denominator which is the
sum of the Class A Invested Amount, the Class B Invested Amount, the
Collateral Interest Invested Amount and the Subordinated Transferor
Amount (each such Certificate Rate and Invested Amount
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calculated as of the related Determination Date and such fraction
equaling the 'Weighted Average Certificate Rate') plus 2.00% per
annum (the 'Base Rate');
(vi) the Trust shall become an 'investment company' within the
meaning of the Investment Company Act of 1940, as amended;
(vii) the Transferor Amount (plus the amount available under the
Transferor Letter of Credit and the B/F Amount) is less than 7% of
the aggregate invested amount of all outstanding Series of
certificates issued by the Trust as of the last day of any Collection
Period;
(viii) the sum of (a) the Transferor Amount, (b) the B/F Amount, (c)
the Subordinated Transferor Amount and (d) the invested amount of any
subordinated class of certificates of any other Series which, when
issued, is retained by the Transferor and with respect to which no
legal opinion is delivered characterizing such certificates as
indebtedness is less than 7% of the Aggregate Receivables as of the
last day of any Collection Period;
(ix) the Class A Invested Amount is not paid in full on the Class A
Expected Final Payment Date or the Class B Invested Amount is not
paid in full on the Class B Expected Final Payment Date;
(x) the Transferor becomes unable for any reason to transfer
Receivables to the Trust in accordance with the provisions of the
Agreement;
(xi) the Aggregate Receivables as of the last day of any Collection
Period are less than the sum of (a) the Transferor Amount (plus the
amount available under the Transferor Letter of Credit and the B/F
Amount) and (b) the aggregate initial invested amount of Series
1996-1; and
(xii) any Servicer Event of Default shall occur which would have a
material adverse effect on the Certificateholders.
See 'Description of the Offered Certificates and the Agreement--
Amortization Events.'
Final Payment of Principal; Termination of
the Trust............................... The Series 1996-1 Interests will be subject to optional repurchase by
the Transferor on any Distribution Date on or after which the
Invested Amount is reduced to an amount less than or equal to
$11,910,257 (5% of the sum of the Initial Class A Invested Amount,
Initial Class B Invested Amount and Initial Collateral Interest
Invested Amount), unless certain events of bankruptcy, insolvency or
receivership have occurred with respect to the Transferor. The
repurchase price will be equal to the Invested Amount plus accrued
and unpaid interest on the Series 1996-1 Interests through the day
preceding the Distribution Date on which the repurchase occurs. After
such date, neither the Trust nor the Transferor will have any further
obligation to pay principal or interest on the Series 1996-1
Interests. In any event, the final payment of principal and interest
on
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the Class A Certificates will be no later than the July 1, 2003,
Distribution Date (the 'Final Class A Termination Date') and the
final payment of principal and interest on the Class B Certificates
will be no later than the July 1, 2003, Distribution Date (the 'Final
Class B Termination Date').
Servicing................................. Under the Agreement, the Servicer (initially, Bridgestone/Firestone)
will be responsible for servicing, managing and making collections on
all Receivables in the Trust. Subject to certain conditions including
the availability of the Servicer Letter of Credit (as defined below),
the Servicer may use for its own benefit and not segregate
Collections of Receivables received in each Collection Period until
the business day preceding the Distribution Date for such Collection
Period (the 'Transfer Date'). On the second business day preceding
each Distribution Date (each, a 'Determination Date') or, at the
Servicer's option, more frequently, the Servicer will allocate as
described herein all Collections of Receivables received with respect
to the related Collection Period to the Series 1996-1 Interests, any
other applicable Series, Bridgestone/Firestone and the Transferor and
on the Transfer Date will deposit the portion allocable to the
Certificateholders and the holders of certificates of any other
Series into a segregated trust account held in the name of the
Trustee for the benefit of certificateholders (the 'Collection
Account'). In certain limited circumstances, Bridgestone/Firestone
may resign or be removed as Servicer, in which event either the
Trustee or a third-party servicer may be appointed as successor
Servicer (Bridgestone/Firestone or any such successor Servicer is
referred to herein as the 'Servicer'). As servicing compensation from
the Trust, the Servicer will receive a Servicing Fee from allocations
of Finance Charge Collections based upon the outstanding principal
amount, from time to time, of certificates issued by the Trust. See
'Description of the Offered Certificates and the
Agreement--Collection and Other Servicing Procedures,'
'--Servicer Covenants,' '--Servicing Compensation and Payment of
Expenses,' '--Servicer Events of Default' and '--Certain Matters
Regarding the Servicer.'
The Servicer may perform any of its obligations under the Agreement
through one or more Subservicers. The Servicer will remain liable for
its servicing duties and obligations as if the Servicer alone were
servicing the Receivables. CFNA shall initially act as a Subservicer.
Servicer Letter of Credit................. The Servicer has obtained an irrevocable letter of credit (the
'Servicer Letter of Credit') issued by The Sumitomo Bank, Limited,
acting through its New York Branch (the 'Letter of Credit Bank'), in
favor of the Trustee on behalf of certificateholders of all Series,
to secure timely remittance of Collections by the Servicer to the
Trustee. The Servicer Letter of Credit was initially in the stated
amount of $45,000,000 and will expire on May 30, 1997, unless
extended or earlier terminated by the Letter of Credit Bank. During
the period that Bridgestone/Firestone is the Servicer, if aggregate
Collections at any time held by Bridgestone/Firestone exceed the
amount available under the Servicer Letter of Credit, the Servicer
shall deposit all such Collections in excess of the amount available
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under the Servicer Letter of Credit into the Collection Account no
later than the second business day after the date of processing
thereof. In the event that (i) the Letter of Credit Bank's unsecured
short-term debt ratings are reduced below A-1 + or P-1 or F-1+ (the
'Required Ratings') by the applicable Rating Agency and either (x) a
substitute Servicer Letter of Credit is not delivered to the Trustee,
(y) the Servicer Letter of Credit is not drawn on in full as
described in the Prospectus or (z) the Servicer has not established a
cash collateral account in the name of the Trustee for the benefit of
Certificateholders or (ii) the Servicer is not Bridgestone/Firestone,
the Servicer shall deposit Collections into the Collection Account no
later than the second business day after the date of processing
thereof. In addition, in the event that a substitute Servicer Letter
of Credit is not delivered to the Trustee on or before the fifth
business day prior to the expiration of the Servicer Letter of Credit
or a cash collateral account has not been established, the Servicer
shall commence depositing Collections into the Collection Account no
later than the second business day after the date of processing
thereof.
The Letter of Credit Bank's unsecured short-term debt rating has been
reduced to below the Required Ratings and the full amount of the
proceeds from the Servicer Letter of Credit are currently held in a
segregated trust account available to the Trustee in the event
Bridgestone/Firestone fails to timely remit Collections to the
Collection Account. See 'The Letter of Credit Bank' and 'Description
of the Offered Certificates and the Agreement--The Letters of
Credit.'
Transferor Letter of Credit............... The Transferor has obtained an irrevocable letter of credit (the
'Transferor Letter of Credit') issued by the Letter of Credit Bank in
favor of the Trustee, on behalf of Certificateholders, to secure the
obligation of the Transferor to make certain payments in respect of
returned merchandise and other credit adjustments on the Receivables.
The Transferor Letter of Credit was initially in the stated amount of
$15,000,000 and will expire on May 30, 1997, unless extended or
earlier terminated by the Letter of Credit Bank. The Transferor
Letter of Credit will be available, up to its stated amount, to cover
any shortfall in payments allocated to any Series and required to be
deposited into the Collection Account by the Transferor. The proceeds
of any drawing on the Transferor Letter of Credit will be allocated
in much the same manner as are the Collections (generally speaking,
such allocations to the Series 1996-1 Interests will be based on the
ratio of the Invested Amount to the Aggregate Receivables). As a
result, if other Series of certificates are outstanding, such other
Series will benefit from drawings made on the Transferor Letter of
Credit. See 'The Letter of Credit Bank' and 'Description of the
Offered Certificates and the Agreement--The Letters of Credit.'
Currently, the full amount of the proceeds from the Transferor Letter
of Credit are held in a segregated trust account available to the
Trustee to cover any shortfall in payments allocated to any Series
and required to be deposited in the Collection Account by the
Transferor.
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Certain Federal Income Tax Consequences... Special tax counsel to the Transferor and counsel to the Underwriters
has advised the Transferor that, in its opinion, (i) the Offered
Certificates will be treated for Federal income tax purposes as
indebtedness and (ii) the Trust will not be treated as either an
association or a publicly traded partnership taxable as a corporation
for Federal income tax purposes. Under the Agreement, the Transferor,
the Trustee and, pursuant to the terms of the Offered Certificates by
virtue of the acceptance thereof, the Offered Certificateholders and
the Certificate Owners agree to treat the Offered Certificates as
debt for Federal and state tax purposes. If the Offered Certificates
are not characterized as debt, there may be adverse tax consequences
for Certificate Owners. See 'Federal Income Tax Consequences.'
ERISA Considerations...................... Under the regulations issued by the Department of Labor, the Trust's
assets would not be deemed 'plan assets' of any employee benefit plan
holding interests in the Class A Certificates if certain conditions
are met, including that interests in the Class A Certificates be held
by at least 100 independent persons upon completion of the public
offering being made hereby. The Underwriters expect, although no
assurance can be given, that interests in the Class A Certificates
will be held by at least 100 independent persons, and it is
anticipated that the other conditions of the regulations will be met.
However, if the Class A Certificates are not held by at least 100
independent persons and the Trust's assets were deemed to be 'plan
assets' of such a plan, there is uncertainty as to whether existing
exemptions from the 'prohibited transaction' rules of the Employee
Retirement Income Security Act of 1974, as amended ('ERISA') would
apply to all transactions involving the Trust's assets. Accordingly,
employee benefit plans contemplating purchasing the Class A
Certificates should consult their counsel before making a purchase.
See 'ERISA Considerations.'
The Class B Certificates may not be purchased by any employee benefit
plan subject to the requirements of the fiduciary responsibility
provisions of ERISA, or the provisions of Section 4975 of the
Internal Revenue Code of 1986, as amended (the 'Code'), including any
individual retirement accounts.
Rating of the Offered Certificates........ It is a condition to the issuance of the Class A Certificates that
they be rated 'AAA' by Standard & Poor's Rating Services, a division
of The McGraw-Hill Companies, Inc. ('S&P') and 'Aaa' by Moody's
Investors Service, Inc. ('Moody's'). It is a condition to the
issuance of the Class B Certificates that they be rated 'A' by S&P
and 'A2' by Moody's. Such ratings are based primarily on the quality
of the Receivables and the terms of the subordination of the Class B
Certificates, the Collateral Interest and the Subordinated Transferor
Certificate, as applicable.
Risk Factors.............................. There are risks associated with the purchase of the Offered
Certificates. See 'Risk Factors' herein.
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RISK FACTORS
Investors should consider, among other things, the following factors in
connection with the purchase of the Offered Certificates:
No Assurance that Secondary Market Will Develop. There currently is no
secondary market for the Offered Certificates, and there can be no assurance
that a secondary market will develop or, if it does develop, that it will
provide Offered Certificateholders with liquidity of investment or will continue
for the life of the Offered Certificates. The Underwriters expect, but are not
obligated, to make a market in the Offered Certificates. There can be no
assurance that any such market will continue.
Non-Recourse Obligation. Certificateholders will not have recourse for
payment of their Offered Certificates to any assets of the Transferor, the
Originator, Bridgestone/Firestone, the Servicer or any of their affiliates.
Consequently, the Certificateholders must rely solely upon payments on the
Receivables for the payment of principal of and interest on the Offered
Certificates. Furthermore, under the Agreement, the Certificateholders have an
interest in the Receivables and Collections with respect thereto only to the
extent of the Certificateholders' Interest. Should the Offered Certificates not
be paid in full on a timely basis, Certificateholders may not look to any assets
of any of the Transferor, Bridgestone/Firestone, the Servicer, the Originator or
any affiliates thereof to satisfy their claims.
Commingling. While Bridgestone/Firestone is the Servicer, Collections held
by Bridgestone/Firestone may, subject to certain conditions, including the
availability of the Servicer Letter of Credit, be commingled and used for
Bridgestone/Firestone's own benefit prior to the business day preceding each
Distribution Date and, in the event of the bankruptcy or insolvency of
Bridgestone/Firestone or, in certain circumstances, the lapse of certain time
periods, the Trust may not have a perfected interest in such Collections and
such Collections are subject to risk of loss, including risk of loss due to
Bridgestone/Firestone's bankruptcy or insolvency. During the period that
Bridgestone/Firestone is the Servicer, if aggregate Collections at any time held
by Bridgestone/Firestone exceed the amount available under the Servicer Letter
of Credit, the Servicer shall deposit all such Collections in excess of the
amount available under the Servicer Letter of Credit into the Collection Account
no later than the second business day after the date of processing thereof. In
the event that either (x) the unsecured short-term debt rating of the Letter of
Credit Bank is reduced below A-1+, P-1 or F-1+ by the applicable Rating Agency
(the 'Required Ratings'), within 35 days of notice thereof to the Servicer or
(y) in the event that the Servicer Letter of Credit is scheduled to expire
within five business days, either (i) Bridgestone/Firestone will begin
depositing Collections received within two business days of the date of
processing thereof directly into the Collection Account, (ii)
Bridgestone/Firestone will provide the Trustee with a substitute letter of
credit substantially similar to the Servicer Letter of Credit issued by a
financial institution whose unsecured short-term debt rating is A-1+, P-1 or
F-1+ by the applicable Rating Agency or (iii) the Trustee will, but only with
respect to clause (x) hereof, make a demand under the Servicer Letter of Credit
for the full amount available thereunder and deposit the proceeds of such demand
into a segregated trust account to be available to the Trustee in the event
Bridgestone/Firestone fails to timely remit Collections to the Collection
Account. The Letter of Credit Bank's unsecured short-term debt rating has been
reduced to A-1, which is below the Required Ratings and the full amount of the
proceeds from the Servicer Letter of Credit are currently held in a segregated
trust account available to the Trustee in the event Bridgestone/Firestone fails
to timely remit Collections to the Collection Account. The Letter of Credit
Bank's unsecured short-term rating is unlikely to increase to the Required
Ratings. Furthermore, there can be no assurance that any increase in the Letter
of Credit Bank's unsecured short-term rating will occur. See 'Description of the
Offered Certificates and the Agreement--Allocation of Collections; Deposits in
Collection Account.'
Potential Priority of Certain Liens. The Originator warrants in the
Purchase and Sale Agreement that the sale or transfer of the Receivables
thereunder by it to the Transferor is free and clear of any lien, security
interest, encumbrance or other right, title or interest of any person and that
all filings and recordings required to perfect the title of the Transferor in
the Receivables have been accomplished and are in full force and effect, and the
Transferor warrants in the Agreement that the transfer of such Receivables to
the Trust is either a valid transfer and assignment of the Receivables to the
Trust or the grant to the Trust of a security interest in the Receivables. The
Originator and the Transferor will take all actions as are required under Ohio
and Massachusetts law to perfect the Trust's interest in the Receivables and the
Transferor warrants that if the transfer by the Transferor to
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the Trust granted the Trust a security interest in the Receivables, the Trust
will at all times have a first priority perfected security interest therein and,
with certain exceptions, and for certain limited periods of time, in proceeds
thereof. Nevertheless, if the sale or transfer of Receivables to the Transferor
or the transfer of the Receivables to the Trust is deemed to create a security
interest therein under the New York, Ohio and Massachusetts Uniform Commercial
Code (collectively, the 'UCC'), a tax or government lien or other nonconsensual
lien on property of the Originator or the Transferor arising before any
Receivable comes into existence may have priority over the Transferor's or the
Trust's interest in such Receivable or, if the Federal Deposit Insurance
Corporation were appointed receiver of the Originator, the receiver's
administrative expenses may also have priority over the Trust's interest in such
Receivables. The existence of such liens or the rights of the receiver of the
Originator could reduce the amount payable on the Receivables and result in
possible reductions in the amounts of payments on the Offered Certificates. See
'Certain Legal Aspects of the Receivables--Transfer of Receivables.'
Insolvency or Bankruptcy of Originator. The Originator and the Transferor
have treated and will treat the transfer of Receivables under the Purchase and
Sale Agreement as a sale. A court could treat such transactions as assignments
of collateral as security. To the extent that the Originator has granted or will
grant a security interest in the Receivables to the Transferor and that security
interest was validly perfected before any insolvency of the Originator and was
not granted or taken in or will not be granted or taken in contemplation of
insolvency or with the intent to hinder, delay or defraud the Originator or its
creditors, that security interest should not be subject to avoidance in the
event of the insolvency and receivership of the Originator, and payments to the
Transferor with respect to the Receivables should not be subject to recovery by
a conservator or receiver for the Originator. If, however, the conservator or
receiver were to assert a contrary position, or were to require the Transferor
to establish its rights to those payments by submitting to and completing the
administrative claims procedure established under the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ('FIRREA'), or the conservator or
receiver were to request a stay of proceedings with respect to the Originator as
provided under FIRREA, delays in payments on the Offered Certificates and
possible reductions in the amount of such payments could occur. If a conservator
or receiver is appointed for the Originator, pursuant to the Purchase and Sale
Agreement, new Receivables would not be sold to the Transferor and an
Amortization Event would occur. Upon the occurrence of an Amortization Event, if
a conservator or receiver is appointed for the Originator and no other
Amortization Event other than such conservatorship, receivership or insolvency
of the Originator exists, the conservator or receiver may have the power to
prevent the commencement of the Rapid Amortization Period. See 'Certain Legal
Aspects of the Receivables--Certain Matters Relating to Bankruptcy.'
Sole Remedy for Breaches of Representations and Warranties Relating to the
Receivables. The Transferor will make certain representations and warranties
relating to the validity and enforceability of the Accounts and the Receivables.
However, it is not anticipated that the Trustee will make any examination of the
Receivables or the records relating thereto for the purpose of establishing the
presence or absence of defects, compliance with such representations and
warranties, or for any other purpose. Pursuant to the Agreement, in the event of
a material breach of such representations and warranties with respect to any
Receivables, the Transferor will be obligated to accept the transfer of such
Receivables, whereupon such Receivables will no longer be included in the Trust.
With certain exceptions, such obligation will constitute the sole remedy in the
event of any such breach. Pursuant to the agreement by which
Bridgestone/Firestone purchased a participation interest in the Exchangeable
Transferor Certificate and will purchase a participation interest in the
Subordinated Transferor Certificate (the 'Participation Agreement'),
Bridgestone/Firestone will agree, for the benefit of the Trustee, to purchase
from the Transferor any Ineligible Receivable required to be repurchased by the
Transferor from the Trust. See 'Description of the Offered Certificates and the
Agreement--Covenants, Representations and Warranties.'
Effects of Consumer Protection and Banking Laws. The Accounts and the
Receivables are subject to numerous Federal and state consumer protection laws
which impose requirements on the extension of consumer credit and collections of
such obligations. In addition, the extension of credit, and the interest charged
thereon, by national banks such as the Originator, is subject to regulation
under Federal law. Such laws, as well as any new laws, rulings or decisions
construing such laws or rulings which may be adopted, whether Federal or state,
may adversely affect the ability of the Servicer to collect on the Receivables
or maintain previous levels of monthly finance charges and other charges. One
effect of any legislation which regulates the amount of interest and other
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charges that may be assessed on credit card account balances would be to reduce
the Portfolio Yield on Accounts. If a significant reduction in Portfolio Yield
occurred, an Amortization Event could occur, in which case the Rapid
Amortization Period would commence. See 'Certain Legal Aspects of the
Receivables--Consumer Protection and Banking Laws.'
Application of Federal and state bankruptcy, debtor relief or consumer
protection laws would affect the interest of the Certificateholders in the
Receivables, if such laws result in any Receivables being written off as
uncollectible when there are no funds available from other sources to cover any
resulting shortfalls in amounts payable to Certificateholders. See 'Description
of the Offered Certificates and the Agreement--Defaulted Receivables;
Recoveries, Rebates and Fraudulent Charges.'
Effects of New Legislation. From time to time, there are proposed in the
Congress and certain state legislatures new laws and amendments to existing laws
to regulate further the consumer credit industry. The Transferor is unable to
determine and has no basis on which to predict whether or to what extent changes
in laws or regulations will affect charge use, payment patterns or revenues.
Dependence on Bridgestone/Firestone. Because the credit cards issued under
the Credit Card Program are primarily used by customers of Bridgestone/Firestone
stores and dealers and marketers of Bridgestone/Firestone products, the Trust is
largely dependent upon Bridgestone/Firestone and such dealers and marketers for
the generation of Receivables and new Accounts. In addition to manufacturing a
full line of tires, Bridgestone/Firestone is a major retailer of tires,
automotive maintenance and repair services in the United States with
approximately 1,500 company operated tire and automotive service centers and is
a major supplier of tires to several thousand independent dealer outlets.
However, there are thousands of competitors that compete with
Bridgestone/Firestone operated service centers and independent dealer outlets.
The automotive service and repair industry is highly competitive. Many
considerations enter into the competition for the customer's patronage,
including quality, service, product mix, convenience, price and credit
availability and terms. Further, there can be no assurance that new Accounts or
new Receivables will continue to be generated under the Credit Card Program at
the same rate as in prior years or that the Originator will implement
Alternative Programs.
Competition in the Credit Card Industry. The credit card market is highly
competitive and is experiencing increasing use of advertising, target marketing
and pricing competition in finance charges and other fees as traditional and new
credit card issuers seek to expand or enter the market. The ability of the
Credit Card Program and any Alternative Programs to compete in the credit card
industry will affect the Originator's ability to generate new Accounts and new
Receivables. Bridgestone/Firestone stores and dealers accept certain third-party
credit cards not issued by the Originator. If consumers choose to use competing
sources of payment or credit, the rate at which the new Accounts are opened
and/or new Receivables are generated in Accounts may be reduced and certain
purchase and payment patterns with respect to Receivables may be affected.
Historically, the opening of new Accounts has been a primary source for the
generation of new Receivables. If the rate at which the new Accounts are opened
and/or the new Receivables are generated declines significantly, an Amortization
Event could occur, in which case, a Rapid Amortization Period would commence.
See 'The Credit Card Program.'
Social, Legal and Economic Factors. Changes in card use and payment
patterns by cardholders may result from a variety of legal, economic and social
factors, including the rate of unemployment and inflation and relative interest
rates offered for various types of loans. Such factors will also be reflected in
changes in consumer spending and payment patterns including increased risk of
default by cardholders. The Transferor is unable to determine, and has no means
of predicting, whether or to what extent legal or economic factors will affect
future credit purchases or repayment patterns.
Timing of Payments and Maturity. A number of legal and economic factors
may affect payment patterns and there is no accurate means of predicting the
effect of such factors. The Receivables may be paid at any time and there is no
assurance that any particular pattern of cardholder repayments will occur or
that sufficient eligible Receivables will be generated to maintain required
levels of collateralization. A significant decline in the amount of Receivables
generated or the failure of the Transferor to maintain the Aggregate Receivables
as of the last day of each Collection Period at a level sufficient to result in
(i) the Transferor Amount (plus the amount available to be drawn under the
Transferor Letter of Credit and the B/F Amount) being not less than 7% of the
aggregate invested amount of all outstanding Series of certificates (including
the Series 1996-1 Interests) issued by the Trust or (ii) the Transferor Amount
plus the B/F Amount plus the Subordinated Transferor Amount (plus the
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invested amount of any subordinated class of certificates of additional Series
which, when issued, is retained by the Transferor and with respect to which no
legal opinion is delivered characterizing such certificates as indebtedness)
being not less than 7% of Aggregate Receivables could result in the occurrence
of an Amortization Event. During either the Controlled Amortization Period or a
Rapid Amortization Period (either such period, an 'Amortization Period'), a
significant decrease in the cardholder monthly payment rate could slow the
return of principal. See 'The Credit Card Program' and 'Maturity Assumptions.'
Effect of Subordination. The Class B Certificates will be subordinated in
right of payment of principal to the Class A Certificates. Payments of principal
in respect of the Class B Certificates will not commence until after the Class A
Invested Amount has been paid in full. Moreover, the Class B Invested Amount is
subject to reduction on any Determination Date if Principal Collections
allocable to the Class B Certificates are reallocated to cover the Class A
Required Amount or (b) if Collateral Interest Reallocated Principal Collections
or Subordinated Transferor Reallocated Principal Collections with respect to any
Collection Period are insufficient to fund the remaining Class A Required Amount
and the Subordinated Transferor Amount and the Collateral Interest Invested
Amount have been reduced to zero. If the Class B Invested Amount suffers such a
reduction, Finance Charge Collections allocable to the Class B
Certificateholders' Interest in future Collection Periods will be reduced.
Moreover, to the extent the amount of such reduction in the Class B
Certificateholders is not reimbursed, the amount of principal distributable to
the Class B Certificateholders will be reduced. See 'Description of the Offered
Certificates and the Agreement--Allocation Percentages,' '--Reallocated
Principal Collections,' '--Additional Amounts Available to Certificateholders'
and '--Subordination of the Class B Certificates.'
The Originator's Ability to Change Terms of Receivables or Policies
Relating to the Accounts. Subject to applicable law and with the consent of
Bridgestone/Firestone, the Originator reserves the right to amend the terms or
policies applicable to the Accounts, including, without limitation, the level of
finance charges and other fees applicable from time to time to the Accounts and
the minimum monthly payments required on the Accounts. Except as specified in
the next succeeding sentence, there are no restrictions on the Originator's
ability to change the terms or policies of the Accounts or other credit card
guidelines or policies, including policies on credit approval. Under the
Purchase and Sale Agreement, the Originator will agree that, except as otherwise
required by law or as is deemed by the Originator, in its sole discretion, based
upon a good faith assessment by it of the nature of its competition, to be
necessary or advisable, it will not reduce the annual percentage rate of the
monthly finance charge assessed on the Receivables, if as a result of such
reduction, its reasonable expectation is that the Portfolio Yield (defined
below) (see 'Description of the Offered Certificates and the Agreement--
Amortization Events') would be a rate less than the Base Rate, or reduce the
minimum payment terms or otherwise alter the terms of the Accounts or the
policies applicable thereto, if, as a result of such change, in its reasonable
expectation, an Amortization Event with respect to the Series 1996-1 Interests
or any other Series of certificates would occur. While the Originator and
Bridgestone/Firestone have no current intention of changing the terms of the
Accounts, there can be no assurance that changes in applicable law, in the
marketplace or prudent business practice might not result in a determination by
the Originator and Bridgestone/Firestone to make or to consent to such a change.
Master Trust Considerations and the Effect of the Issuance of Additional
Series. The Trust, as a master trust, may issue additional Series from time to
time. While the Principal Terms of any Series will be specified in a Supplement,
the provisions of a Supplement and, therefore, the terms of any additional
Series, will not be subject to the prior review or consent of holders of the
certificates of any previously issued Series. Such Principal Terms may include
methods for determining applicable investor percentages and allocating
Collections, provisions creating different or additional security or other
credit enhancement, provisions subordinating such Series to another Series or
other Series (if the Supplement relating to such Series so permits) to such
Series, and any other amendment or supplement to the Agreement which is made
applicable only to such Series. As long as the Offered Certificates are
outstanding, a condition to the execution of any Supplement will be that each
applicable Rating Agency shall have advised the Trustee that the issuance of
such Series will not result in the reduction or withdrawal of their rating of
any prior outstanding Series (including the Offered Certificates). See
'Description of the Offered Certificates and the Agreement--Exchanges.' Any such
determination by any such Rating Agency would not, however, provide any
assurance that the issuance of any such Series would not, in fact, have a
materially adverse effect on the Offered Certificates.
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In addition, certain remedies require the consent of a majority of the
holders of all outstanding Series of certificates, and the interest of the
holders of one Series of certificates may conflict with the interest of another
Series of certificates. See 'Description of the Offered Certificates and the
Agreement--Exchanges.'
Scope of Certificate Rating. It is a condition to the issuance of the
Class A Certificates that they be rated at least 'AAA' by S&P and 'Aaa' by
Moody's and to the issuance of the Class B Certificates that they be rated at
least 'A' by S&P and 'A2' by Moody's (the rating agency or rating agencies
requested by the Transferor and initially rating any Series is herein referred
to as the 'Rating Agency'). The rating of the Class A Certificates is based
primarily on the credit quality of the Receivables and the terms of the
subordination of the Class B Certificates, the Collateral Interest and the
Subordinated Transferor Certificate. The rating of the Class B Certificates is
based primarily on the credit quality of the Receivables and the terms of the
subordination of the Collateral Interest and the Transferor Subordinated
Certificate. The ratings of the Offered Certificates are not a recommendation to
purchase, hold or sell the Offered Certificates, and such ratings do not comment
as to market price or suitability for a particular investor. There is no
assurance that the rating will remain for any given period of time or that the
rating will not be lowered or withdrawn entirely by the Rating Agency, if in its
judgment circumstances in the future so warrant.
Discount Option. Pursuant to the Agreement, the Transferor has the option,
from time to time, to designate a fixed or variable percentage of Receivables
(the 'Discount Percentage') that otherwise would be treated as Principal
Receivables to be treated as Finance Charge Receivables. Any such designation
would result in an increase in the amount of Finance Charge Receivables and a
slower rate of payment of collections in respect of Principal Receivables than
otherwise would occur. On the Closing Date, the Transferor will designate an
initial Discount Percentage of 2.0%. Pursuant to the Agreement, the Transferor
can increase, reduce or withdraw such Discount Percentage without notice to or
the consent of the Certificateholders. The Transferor must provide 30 days'
prior written notice to the Servicer, the Trustee, and any provider of
Enhancement and each Rating Agency of any increase, reduction or withdrawal of
the Discount Percentage, and such designation will become effective only if (i)
in the reasonable belief of the Transferor such designation would not cause to
occur a Series 1996-1 Amortization Event or an event which with notice or the
lapse of time or both would constitute a Series 1996-1 Amortization Event and
(ii) each Rating Agency confirms in writing its then current rating on any
outstanding Series. See 'Description of the Offered Certificates--Discount
Option.'
Effects of Book-Entry Registration. The Offered Certificates initially
will be represented by Certificates registered in the name of Cede, the nominee
for DTC, and will not be registered in the names of the Certificate Owners or
their nominees. As a result, unless and until Definitive Certificates are
issued, Certificate Owners will not be recognized by the Trustee as
Certificateholders, as that term is used in the Agreement. Until such time,
Certificate Owners will only be able to receive payments from, and exercise the
rights of Certificateholders indirectly, through DTC, CEDEL or Euroclear and
their participating organizations, and, unless a Certificate Owner requests a
copy of any such report from the Trustee, Certificate Owners will receive
reports and other information provided for under the Agreement only if, when and
to the extent provided to Certificate Owners at such Certificate Owners' request
through DTC and its participating organizations. In addition, the ability of
Certificate Owners to pledge Offered Certificates to persons or entities that do
not participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of physical certificates for such
Certificates. See 'Description of the Offered Certificates and the
Agreement--Book-Entry Registration' and '--Definitive Certificates.'
Effect of the Issuance of New Series. The Trust, as a master trust, is
expected to issue new Series from time to time. While the terms of any Series
will be specified in a Supplement, the provisions of a Supplement and,
therefore, the terms of any new Series, will not be subject to the prior review
or consent of holders of the Certificates of any previously issued Series. Such
terms may include methods for determining applicable investor percentages and
allocating collections, provisions creating different or additional security or
other enhancements, provisions subordinating such Series to other Series or
subordinating other Series (if the Supplement relating to such Series so
permits) to such Series, and any other amendment or supplement to the Pooling
and Servicing Agreement which is made applicable only to such Series. The
obligation of the Trustee to issue any new Series is subject to the condition
that the Trustee shall have received the following: (a) a Supplement in form
satisfactory to the Trustee executed by the Transferor and specifying the
principal terms of such Series, (b) the applicable Enhancement, if any, (c) an
opinion of counsel to the effect that the newly issued Series will be
characterized as
39
<PAGE>
either indebtedness or an interest in a partnership under existing law for
Federal income tax purposes and that the issuance of the newly issued Series
will not have any material adverse impact on the Federal income tax
characterization of any outstanding Series that have been the subject of a
previous opinion of tax counsel, (d) an agreement, if any, to provide
Enhancement, (e) written confirmation from each Rating Agency that such issuance
will not result in the Rating Agency's reducing or withdrawing its rating or
otherwise adversely affect any rating on any then outstanding Series rated by it
and (f) the existing Exchangeable Transferor Certificate or applicable Series,
as the case may be. There can be no assurance, however, that the issuance of any
other Series, including any Series issued from time to time hereafter, might not
have an impact on the timing or amount of payments received by a
Certificateholder.
USE OF PROCEEDS
The net proceeds from the sale of the Series 1996-1 Asset Backed
Certificates will be used first to repay an outstanding Series of Investor
Certificates, the Series 1995-A Certificates. The remaining balance will be paid
to the Transferor. The proceeds will be distributed by the Transferor to
Bridgestone/Firestone in accordance with the Participation Agreement.
THE TRANSFEROR AND BRIDGESTONE/FIRESTONE
The Transferor was incorporated in Massachusetts on October 24, 1983 under
the name 1200 Capital Corporation, which was later amended to Firestone Consumer
Funding Corporation. On October 3, 1989, Firestone Consumer Funding Corporation
filed a Certificate of Merger, merging it with Firestone Retail Credit
Corporation. The Transferor was the surviving corporation. The Transferor is a
nominally capitalized special purpose corporation and was organized for the
limited purpose of purchasing, holding, owning and selling receivables and any
activities incidental to and necessary or convenient for the accomplishment of
such purpose. The Transferor's principal executive office is located at the
following address: c/o JH Management Corporation, One International Place, Suite
520, Boston, Massachusetts 02110, telephone (617) 951-7690.
Bridgestone/Firestone, formerly named The Firestone Tire & Rubber Company,
was incorporated in Ohio on March 4, 1910 and is the successor to the business
founded by Harvey S. Firestone in 1900. Pursuant to a merger which became
effective on May 5, 1988, Bridgestone/Firestone became a direct wholly owned
subsidiary of Bridgestone Corporation, a corporation organized under the laws of
Japan. On August 1, 1989, Bridgestone/Firestone adopted its current name.
Bridgestone/Firestone is a multinational organization whose principal
business is the development, manufacture and sale of a broad line of tires for
passenger, truck and agricultural vehicles, in both the original equipment and
replacement markets. It sells tires under Firestone, Bridgestone, Dayton and
other brand names through a large network of independent dealers.
Bridgestone/Firestone also provides a wide range of automotive maintenance and
repair services and sells tires and automotive replacement parts and supplies
through Bridgestone/Firestone operated retail stores. Other products sold by
Bridgestone/Firestone include single-ply rubber roofing systems, synthetic
rubber, air springs, and synthetic fibers and textiles.
40
<PAGE>
THE CREDIT CARD PROGRAM
GENERAL
The Receivables that the Originator has sold and will sell to the
Transferor pursuant to the Purchase and Sale Agreement and which the Transferor
has or will in turn transfer to the Trust pursuant to the Agreement have been
and will be generated primarily from purchases charged under credit cards issued
by the Originator pursuant to a private label credit card program (the 'Credit
Card Program') established for customers of (a) Bridgestone/Firestone stores,
which sell tires and automotive maintenance and repair products and services,
(b) dealers and marketers which have contractual arrangements with
Bridgestone/Firestone to market Bridgestone/Firestone tires and related products
as well as automotive maintenance and repair services and (c) certain other
dealers and marketers of automotive products, which include tires and automotive
maintenance and repair services, which dealers and marketers do not have such
contractual arrangements with Bridgestone/Firestone (collectively, the 'Retail
Establishments'). The Receivables will also include a portfolio of certain
designated Receivables generated or to be generated by the Originator and
existing or arising under certain accounts to be established under other credit
card programs established or to be established by the Originator (the
'Alternative Programs'). See 'Description of the Offered Certificates and the
Agreement-- Addition of Accounts' herein.
The initial purpose of a credit card program was to support the
merchandising efforts of The Firestone Tire & Rubber Company, now known as
Bridgestone/Firestone, Inc. ('Bridgestone/Firestone'). Credit cards were first
issued in 1978 to revolving account holders at company operated stores. In early
1979, the credit card program was extended to include customers of independent
authorized Firestone dealers. In 1983, the program was extended again to include
independent authorized dealers of Dayton and Road King tires, which are
associate brands manufactured by Bridgestone/Firestone. Such credit card program
was replaced in 1985 by the Credit Card Program described herein.
In July 1989, the Credit Card Program was extended to customers of
Bridgestone dealers. In 1990, the Credit Card Program was extended to
unaffiliated third-parties including Merchants, Inc., and American Car Care
Centers, Inc. In 1992, the program was extended to certain customers of
independent dealers selling Bridgestone/Firestone manufactured private brand
tires. Prior to 1993, Society National Bank ('SNB') acted as originator of the
Credit Card Program. In 1993, Credit First National Association ('CFNA' or the
'Originator'), a wholly owned subsidiary of Bridgestone/Firestone, was organized
for the purpose of making credit card loans and activities incidental to such
purpose and replaced SNB. In 1994, the Credit Card Program with American Car
Care Center, Inc. terminated. Also, in 1994, Bridgestone/Firestone introduced
convenience checks drawn on the Originator for use by existing Credit Card
Program cardholders to purchase consumer merchandise. Such cash advances made
via convenience checks are estimated to be less than 3% of total card sales. In
1995, the Credit Card Program was further extended to Meineke Discount Muffler
Shops, Inc., an unaffiliated third-party.
As originator of the credit cards, the Originator is responsible for all
aspects of the Credit Card Program, including underwriting and granting of
credit, issuance of cards and direct customer service. BFS Credit Services
('Credit Services'), a stand-alone profit center of Bridgestone/Firestone based
in Brook Park, Ohio, provides certain administration and servicing functions on
behalf of the Originator. The Originator earns certain Merchant Fees attributed
to cardholder charges giving rise to Receivables. On the first Transfer Date,
CFNA shall transfer Merchant Fees to the Trust in an amount equal to $350,000.
On each Transfer Date thereafter, Merchant Fees in an amount equal to the lesser
of (a) $350,000 and (b) the Merchant Fees collected by CFNA in the calendar
month preceding such Transfer Date, shall be transferred to the Transferor
pursuant to the Purchase and Sale Agreement. The Transferor will transfer such
Merchant Fees to the Trust pursuant to the Agreement.
The Accounts consist of eligible credit card accounts ('Eligible Accounts')
established under the Credit Card Program as of or subsequent to the Cut-off
Date and accounts to be established under Alternative Programs subsequent to the
Cut-off Date which are designated by the Transferor as Eligible Accounts in
accordance with the selection criteria relating to the addition of accounts. The
Receivables will include all amounts payable by cardholders under the Accounts
as of the Cut-off Date and thereafter. The Initial Invested Amounts were
determined by taking into account, among other considerations, the nature of the
Accounts and the Receivables.
41
<PAGE>
Account balances are created primarily by the purchase of merchandise and
service from the Retail Establishments. The Trust will consequently depend on
the continued ability of the Retail Establishments to generate credit sales. In
addition, since many of the Retail Establishments accept other credit cards,
such as American Express, Diner's Club and Carte Blanche charge cards and Visa,
MasterCard and Discover credit cards, the Trust also will depend upon decisions
of customers purchasing merchandise at the Retail Establishments to use the
cards of the Credit Card Program and any Alternative Programs, rather than other
credit cards. See 'Risk Factors--Competition in the Credit Card Industry.' The
following table shows the relationship between Credit Card Program sales at
Bridgestone/Firestone company operated stores and total Credit Card Program
sales for the periods indicated.
CREDIT CARD PROGRAM SALES AT
BRIDGESTONE/FIRESTONE COMPANY OPERATED STORES
($ IN THOUSANDS)
<TABLE>
<CAPTION>
PERCENT OF
CREDIT CARD CREDIT CARD
SALES AT SALES AT
BRIDGESTONE/FIRESTONE- TOTAL CREDIT BRIDGESTONE/FIRESTONE-
YEAR ENDING DECEMBER 31, OPERATED STORES CARD SALES OPERATED STORES
- ------------------------------------ ---------------------- ------------ ----------------------
<S> <C> <C> <C>
1989................................ $386,001 $528,610 73.02%
1990................................ 409,145 568,364 71.99
1991................................ 419,054 594,152 70.53
1992................................ 412,470 593,284 69.52
1993................................ 396,353 592,392 66.91
1994................................ 401,589 618,219 64.96
1995................................ 392,894 617,485 63.63
September 1996, year to date........ 279,310 446,952 62.49
</TABLE>
MARKETING AND ORIGINATION
CFNA is responsible for the marketing of the Credit Card Program. CFNA
works directly with the sales organizations of Bridgestone/Firestone and other
dealers and marketers of automotive products and services. CFNA promotes each
credit card program primarily through (i) communicating through a wide variety
of mediums (such as point of sale displays and mail promotions) the advantages
of using the credit card; (ii) coordinating the activities of Credit Services'
field account representatives; and (iii) developing client incentive programs to
increase credit card activity and acquire new accountholders. In addition, CFNA
directs and administers various accountholder direct response programs, such as
direct mail merchandise programs and other services available to accountholders,
which promote the use of the credit card and generate additional revenue for the
credit card operations.
NEW ACCOUNT ORIGINATION
The Credit Authorization area ('Credit Authorization') of CFNA is
responsible for (i) processing credit applications to establish new accounts,
(ii) authorizing sales to existing accounts, and (iii) managing credit limits
and continually assessing credit risk. New accounts are generated primarily
through Retail Establishment operations. Credit card applications are available
in the Retail Establishments, whose personnel offer the Credit Card Program to
customers. Customers interested in purchasing specified merchandise or services
on credit may complete a credit card application in the Retail Establishment. An
application may be processed either by direct telephone contact with Credit
Authorization or by mailing a completed application to Credit Authorization.
Most new accounts are opened at the point of sale in a Retail
Establishment. Through the use of a direct computer link with the major credit
bureaus and a computer supported credit scoring system, most decisions on new
credit applications are made within three to four minutes.
In accordance with CFNA credit card policies, Credit Authorization
evaluates the ability of an applicant to repay credit card balances by applying
a credit scoring model jointly developed by CFNA and outside consultants. Credit
scoring is intended to provide a general indication, based upon available
information (including credit bureau reports), of the applicant's willingness
and ability to repay account balances. The result
42
<PAGE>
of the credit scoring computed for a prospective cardholder is the primary
factor in determining the approval decision and the initial credit limit.
The scores required for credit approval are established on the basis of
expected profitability from the accounts. Profitability is projected on the
basis of anticipated finance charge receipts as these may be offset by credit
losses sustained in the accounts. The probability of losses is predicted on the
basis of statistical evaluation performed by the credit scoring models which are
based on past performance, periodically reviewed for statistical accuracy, of
credit card accounts.
Initial credit limits, which are based on an applicant's risk, score and,
in certain cases, income, range from $300 to $2,500. Credit limits for
individual accounts may be adjusted periodically based upon an evaluation of the
cardholder's payment performance. Credit limits may be increased annually for
accounts that exceed a pre-determined score. Credit limits on delinquent
accounts may be reduced at any time if warranted by the risk score. Decisions to
adjust credit limits are based upon a customer's payment history and/or credit
bureau status.
BILLING AND PAYMENT
The accounts are grouped into billing cycles. Each billing cycle has a
separate monthly billing date on which the activity in the related accounts
during the month ended on such billing date is processed and billed to
cardholders. New accounts are assigned to billing cycles in a manner generally
intended, for purposes of administrative convenience, to equalize the number of
accounts in the billing cycles.
In connection with the servicing of the Credit Card Program, Credit
Services generates and mails to each cardholder at the end of each cardholder's
monthly billing cycle a statement summarizing account activity, unless there is
no balance, no payment due (as occurs in the 'No Payment for 90 Days' payment
plan described below) or no account activity. Accordingly, cardholders must make
a minimum monthly payment by the date shown on the monthly statement. The
minimum monthly payment is calculated by taking 5% of the new balance resulting
after a purchase of products and services that are charged to the account and
rounding that amount to an even $5.00 increment. To that amount Credit Services
adds any past due to establish the total minimum payment due. The minimum
payment due will not be less than $10.00 except where the remaining balance plus
unpaid finance charges and other fees is less than $10.00.
A monthly finance charge is assessed on the account when the account is not
paid in full. The periodic rate now ranges between 1.587% and 1.82% monthly (or
between 19.04% and 21.84% per annum). The finance charge is a flat rate, based
on competitive conditions. No finance charge is assessed on unpaid finance
charges. The monthly finance charge is calculated by multiplying the periodic
rate times the average daily balance. The average daily balance is determined,
where permitted by applicable state law, by taking the beginning balance each
day, subtracting any payments or credits and adding any new purchases each day.
All the daily balances are added for the billing cycle and divided by the number
of days in the billing cycle.
The Originator currently has a 'No Payment for 90 Days' payment plan where
if the full amount of any qualifying purchase made under such plans is not paid
within the specified time (i.e., within 90 days from the initial billing date),
finance charges associated with the purchase will be imposed from the date of
purchase. A minimum monthly payment is not required under this plan during the
90-day period. A pay-ahead option is also available for cardholders who are not
past due and who make a payment of at least twice the amount of the minimum
payment due. A minimum monthly payment will not be due in the following month.
There are also special promotions, in which certain rights under the credit card
agreement may be waived from time to time for limited periods for qualifying
purchases.
LOSS AND DELINQUENCY EXPERIENCE
CFNA performs certain collection activity on behalf of Credit Services.
Collection methods with regard to delinquent credit card receivables include
collection activity by company personnel, collection agencies and attorneys in
private practice.
Delinquent cardholders who do not make scheduled payments by the payment
due date may be subject to several actions. These actions include billing
statement notices, collection letters, automated telephone reminders, telephone
contact with collectors for accounts delinquent from 30-150 days and placement
with third-party collection agencies or collection attorneys for accounts
delinquent beyond 150 days. The specific action or
43
<PAGE>
actions depend on the number of missed payments, the dollar amount of the
outstanding balance and a statistical probability of further delinquency which
is developed using a customized statistical scoring model.
An account generally is closed to further purchases when two payments are
past due. Pursuant to the Agreement, Receivables in any Account will be deemed
defaulted and classified as 'Defaulted Receivables' on the last day of the
Collection Period following the Collection Period in which such Receivable
becomes 180 days delinquent or earlier upon the Servicer's receipt of notice of
bankruptcy.
Cardholders requesting financial relief may be given a reduction in their
minimum monthly payment if certain conditions are met and upon receipt of the
new monthly payment amount. If qualified, the account is re-aged to current.
Credit Card Program credit evaluation, servicing and charge-off policies and
collection practices may change at any time in accordance with the Agreement,
the Purchase and Sale Agreement and applicable law and the business judgment of
the Originator and the Servicer.
Losses and delinquencies are affected by a number of factors such as
competitive behavior and general economic conditions, including consumer debt
levels. Bridgestone/Firestone has informed the Transferor that it is unable to
determine the extent to which, if any, loss and delinquency experience described
herein reflects the influence of these or other factors.
The following tables set forth the historical default and delinquency
experience for the Receivables generated in Eligible Accounts under the Credit
Card Program. The statistics are with respect to payments by cardholders for the
Collection Periods noted. There can be no assurance, however, that default and
delinquency experience for the Receivables in the future will be similar to the
historical experience.
DEFAULTED RECEIVABLES
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NINE COLLECTION TWELVE COLLECTION PERIODS
PERIODS ENDING ENDING DECEMBER 18,
SEPTEMBER 18, --------------------------------
1996 1995 1994 1993
--------------- -------- -------- --------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(1)......................... $ 448,907 $457,317 $445,293 $418,862
Defaulted Receivables(2):
Contractual Past-due aging (210 days past due)............. $ 29,143 $ 28,234 $ 21,102 $ 21,593
Bankrupt/Other............................................. 8,628 9,416 8,106 8,925
Less--Recoveries(3)........................................ (5,694) (6,448) (6,576) (7,064)
--------------- -------- -------- --------
Net Defaulted Receivables................................ $ 32,077 $ 31,202 $ 22,632 $ 23,454
Percent per annum of Average
Receivables Outstanding............................... 9.53% 6.82% 5.08% 5.60%
</TABLE>
- ------------------
(1) Average Receivables Outstanding is a thirteen-point average. It averages the
December 19 receivables balance at the start of the first Collection Period
ending in the year indicated with the ending balances of each of the twelve
Collection Periods ending in the year indicated (or in the case of 1996,
with the ending balance of each of the nine Collection Periods through
September 18, 1996).
(2) 'Contractual Past-due aging' Defaulted Receivables represent those
Receivables deemed Defaulted Receivables on the last day of the Collection
Period following the period in which such Receivable becomes 180 days
delinquent. 'Bankrupt' Defaulted Receivables represents those Receivables
deemed Defaulted Receivables upon the Servicer's notice of bankruptcy.
(3) Recoveries are gross account receivable recoveries. They are not net of
collection costs and commission.
44
<PAGE>
AVERAGE DELINQUENCIES
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NINE COLLECTION TWELVE COLLECTION PERIODS ENDING DECEMBER 18,
PERIODS ENDING -----------------------------------------------------------------
SEPTEMBER 18,
1996 1995 1994 1993
------------------------- ------------------------- ------------------------- ---------
AMOUNT(1) PERCENTAGE(2) AMOUNT(1) PERCENTAGE(2) AMOUNT(1) PERCENTAGE(2) AMOUNT(1)
--------- ------------- --------- ------------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Delinquent Receivables:
1-30 Days............ $ 63,650 14.18% $ 64,633 14.13% $ 67,425 15.14% $ 78,719
31-60 Days............ 19,820 4.42 18,932 4.14 17,007 3.82 19,630
61-90 Days............ 9,169 2.04 8,042 1.76 6,694 1.50 7,208
91-180 Days........... 15,123 3.37 12,081 2.64 9,460 2.13 9,672
Average Receivables
Outstanding......... $ 448,907 100.00% $ 457,317 100.00% $ 445,293 100.00% $ 418,862
<CAPTION>
PERCENTAGE(2)
-------------
<S> <C>
Delinquent Receivables:
1-30 Days............ 18.79%
31-60 Days............ 4.69
61-90 Days............ 1.72
91-180 Days........... 2.31
Average Receivables
Outstanding......... 100.00%
</TABLE>
- ------------------
(1) Average amounts outstanding of Delinquent Receivables and total receivables
are calculated by the thirteen-point average method, described in Footnote 1
of the table titled 'Defaulted Receivables.'
(2) Percentages are calculated by dividing Delinquent Receivables by Average
Receivables Outstanding for the applicable period.
REVENUE EXPERIENCE
The following table sets forth the gross revenues from monthly finance
charge billings for the Collection Periods noted. The table includes only the
Receivables and finance charge billings generated in Eligible Accounts under the
Credit Card Program.
The historic gross revenue figures in the table are calculated on an as
billed basis and represent amounts billed to cardholders before deduction of
charge-offs, reductions due to fraud, returned goods and customer disputes and
other expenses. Future cash collections on Receivables may not reflect the
historical experience in the table. During periods of increasing delinquencies,
billings of monthly finance charges may exceed cash as amounts collected on
Receivables lag behind amounts billed to cardholders. Conversely, as
delinquencies decrease, cash may exceed billings of monthly finance charges as
amounts collected in a current period may include amounts billed during prior
periods. However, the Transferor believes that during the periods shown,
revenues on a billed basis closely approximated revenues on a cash basis.
Revenues from monthly finance charges on both a billed and a cash basis will be
affected by numerous factors, including the monthly finance charges on principal
receivables, the percentage of cardholders who pay off their balances in full
each month and do not incur monthly finance charges on purchases, the number of
promotional programs offered to cardholders and changes in the delinquency rate
on the Receivables.
REVENUE EXPERIENCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NINE COLLECTION TWELVE COLLECTION PERIODS
PERIODS ENDING ENDING DECEMBER 18,
SEPTEMBER 18, --------------------------------
1996 1995 1994 1993
--------------- -------- -------- --------
<S> <C> <C> <C> <C>
Average Start-of-Month Receivables(1)...................... $ 449,771 $456,513 $444,147 $417,475
Finance Charges Billed(2).................................. $ 58,856 $ 81,026 $ 78,828 $ 78,547
Finance Charges Billed as Percentage of Average Receivables
Outstanding.............................................. 17.45% 17.75% 17.75% 18.81%
</TABLE>
- ------------------
(1) 'Average Start-of-Month Receivables' is a twelve-point average. It averages
the receivables balances at the start of each of the twelve Collection
Periods ending in the year indicated. It differs from the Average
Receivables in the 'Defaulted Receivables' and 'Average Delinquencies'
tables, which are thirteen-point averages.
(2) Finance Charges are as billed during the Collection Periods noted in each
column, adjusted for rebated finance charges and accruals of 'No Payment for
90 Days' finance charges.
45
<PAGE>
PROMOTIONS
The Credit Card Program features a 'No Payment for 90 Days' payment plan
which is intended to increase sales to existing cardholders and to generate new
accounts. Under this program, if customers pay the full purchase price of
merchandise or services within 90 days from the initial billing date, the
finance charges associated with the initial purchase will not be imposed on the
account. If the customer does not pay the full purchase price within the
specified 90-day period, finance charges associated with the purchase will be
imposed from the date of purchase.
Special financing programs are offered to customers from time to time to
promote merchandise and service sales and the greater utilization of the Credit
Card Program. The most frequently offered program is a deferred payment program
in which customers may be allowed to defer their payment obligations for a
period generally ranging from two to six months. Typically, finance charges
accrue during the deferral period.
THE ACCOUNTS
The following tables summarize the portfolio of Active and Creditworthy
Accounts in the Credit Card Program by various criteria as of September 30,
1996. An Account is an 'Active Account' if it currently has a balance. An
Account is a 'Creditworthy Account' if it does not currently have a balance, but
it has had a balance within the last 17 months and is eligible for further
sales. Given the specialized nature of the eligible merchandise and services
offered under the Credit Card Program, customers typically use their credit
cards infrequently. Because the future composition of the Credit Card Program
portfolio will change over time, these tables are not necessarily indicative of
future results.
As of September 30, 1996, the Active and Creditworthy Accounts in the Credit
Card Program totaled 4,289,184 Accounts and Receivables outstanding totaled
$435,910,099. Approximately 10.53%, 9.21%, 8.93% and 5.75% of the Total
Receivables Outstanding related to Account holders having billing addresses in
Texas, Florida, California and Ohio, respectively. Economic and social
conditions in these states may negatively impact the ability of obligors in such
states to pay their outstanding card balances in a timely manner or to pay such
balances at all. Not more than 5% of the Receivables related to Account holders
having billing addresses in any other single state.
COMPOSITION OF ACTIVE AND CREDITWORTHY ACCOUNTS BY TYPE OF RETAILER
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NUMBER OF TOTAL OF TOTAL
OF NUMBER RECEIVABLES RECEIVABLES
CARD PROGRAM PARTICIPANTS ACCOUNTS OF ACCOUNTS OUTSTANDING OUTSTANDING
- ---------------------------------------------------------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Bridgestone/Firestone operated stores and Participating
Dealers................................................. 4,040,958 94.21% $420,471,205 96.46%
Third-Party Dealers and marketers without contractual
arrangements............................................ 248,226 5.79 15,438,895 3.54
--------- ----------- ------------ -----------
Total................................................ 4,289,184 100.00% $435,910,099 100.00%
</TABLE>
COMPOSITION OF ACTIVE AND CREDITWORTHY ACCOUNTS BY CREDIT LIMIT
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER RECEIVABLES RECEIVABLES
CREDIT LIMIT(1) ACCOUNTS OF ACCOUNTS OUTSTANDING OUTSTANDING
- ---------------------------------------------------------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
$0(2)..................................................... 265,025 6.2% $ 61,492,900 14.1%
$100 to $500.............................................. 360,190 8.4 41,499,281 9.5
$600 to 1,000............................................. 1,848,572 43.1 156,143,445 35.8
$1,100 to $1,500.......................................... 1,081,816 25.2 66,306,727 15.2
$1,600 to $2,000.......................................... 686,955 16.0 105,567,049 24.2
$2,100 or More............................................ 46,626 1.1 4,900,698 1.1
--------- ----------- ------------ -----------
Total................................................ 4,289,184 100.0% $435,910,099 100.0%
</TABLE>
(Footnotes on next page)
46
<PAGE>
(Footnotes from previous page)
- ------------------
(1) Credit limits are in increments of $100.
(2) Credit policy sets credit limit to $0 for any cardholder 90 days or more
delinquent.
COMPOSITION OF ACTIVE AND CREDITWORTHY ACCOUNTS BY ACCOUNTS BALANCE
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER RECEIVABLES RECEIVABLES
ACCOUNT BALANCE ACCOUNTS OF ACCOUNTS OUTSTANDING OUTSTANDING
- ---------------------------------------------------------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Credit Balance(1)......................................... 16,939 0.39% $ (684,627) (0.16)%
No Balance(2)............................................. 3,081,723 71.85 -- --
$.01 to $100.............................................. 221,279 5.16 10,524,448 2.41
$101 to $200.............................................. 194,116 4.53 29,148,835 6.69
$201 to $300.............................................. 187,853 4.38 46,886,809 10.76
$301 to $400.............................................. 167,179 3.90 58,401,262 13.40
$401 to $500.............................................. 133,773 3.12 59,891,809 13.74
$501 to $600.............................................. 88,741 2.07 48,508,844 11.13
$601 to $1,000............................................ 139,075 3.24 104,878,819 24.06
$1,001 and up............................................. 58,506 1.36 78,353,900 17.97
--------- ----------- ------------ -----------
Total................................................ 4,289,184 100.0% $435,910,099 100.0%
</TABLE>
- ------------------
(1) Credit balances are a result of cardholder payments and credit adjustments
applied in excess of an Account's unpaid balance. Accounts currently with a
credit balance are included, as Receivables may be generated with respect
thereto in the future.
(2) Accounts currently with no balance are included, as Receivables may be
generated with respect thereto in the future.
COMPOSITION OF ACTIVE AND CREDITWORTHY ACCOUNTS BY AGE
AS OF SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
NUMBER OF NUMBER RECEIVABLES RECEIVABLES
AGE(1) ACCOUNTS OF ACCOUNTS OUTSTANDING OUTSTANDING
- ---------------------------------------------------------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Under 6 months............................................ 300,988 7.02% $ 50,382,519 11.56%
6 months to 1 year........................................ 295,649 6.89 39,070,155 8.96
1-2 years................................................. 675,884 15.76 75,596,531 17.34
2-3 years................................................. 537,860 12.54 43,669,963 10.02
3-4 years................................................. 481,247 11.22 30,800,234 7.07
4-5 years................................................. 497,923 11.61 26,455,882 6.07
5-6 years................................................. 339,263 7.91 24,042,440 5.52
6-7 years................................................. 257,738 6.01 21,423,891 4.91
7-8 years................................................. 171,169 3.99 16,259,922 3.73
8-9 years................................................. 109,710 2.56 11,910,929 2.73
9-10 years................................................ 103,387 2.41 12,281,658 2.82
10 years or older......................................... 518,366 12.09 84,015,975 19.27
--------- ----------- ------------ -----------
Total................................................ 4,289,184 100.0% $435,910,099 100.0%
</TABLE>
- ------------------
(1) Age is calculated based on the initial opening of the account.
47
<PAGE>
MATURITY ASSUMPTIONS
The Agreement provides that the Controlled Amortization Period will
commence three years after the Closing Date and that the Rapid Amortization
Period will commence on the earlier of the day on which (i) an Amortization
Event occurs or is deemed to occur and (ii) the Class A Invested Amount has been
reduced to zero. Although it is anticipated that principal payments will be made
on the Class A Certificates in an amount equal to the Controlled Amortization
Amount beginning on the December, 1999 Distribution Date and on the Class B
Certificates beginning on the November, 2000 Distribution Date, no assurance can
be given in that regard. Payments of principal are scheduled to be made on the
Class A Certificates on each Distribution Date during the Controlled
Amortization Period in an amount equal to the lesser of (a) the Controlled
Amortization Amount and (b) (i) the product of the Fixed Allocation Percentage
and all Principal Collections in respect of the applicable Collection Period
(other than Reallocated Principal Collections that are used to pay Required
Amounts due on the Class A Certificates, Class B Certificates and the Collateral
Interest) plus (ii) certain other amounts. Based on the following assumptions,
among others: cardholder monthly payment rates for the Accounts not being less
than 7.893% of Aggregate Receivables (before giving effect to Discount Option
Receivables) (which rate is below the average monthly payment rate shown in the
'Monthly Payment Rates' table below), Aggregate Receivables (before giving
effect to Discount Option Receivables) being constant, the Defaulted Receivables
and the Finance Charge Collections (before giving effect to finance charges
manufactured from Discount Option Receivables) as a percentage of Aggregate
Receivables (before giving effect to Discount Option Receivables) remaining
constant at the levels indicated in the tables above for the Collection Period
ended September 18, 1996, the Series 1992-B Certificates are not outstanding and
revolving, there is sharing of principal among Series, no Amortization Event,
Servicer Event of Default (defined below) or default by the Transferor under the
Purchase and Sale Agreement occurring during the Controlled Amortization Period
and a Discount Percentage of 2.0% is exercised, the Transferor believes that
there will be sufficient funds on each Distribution Date of the Controlled
Amortization Period to pay the Controlled Amortization Amount on such date.
However, the actual rate of payment of principal to Certificateholders will
depend, among other factors, on the rate of repayment, the rate of default by
cardholders and the amount of Aggregate Receivables.
In the event of the occurrence of an Amortization Event, the Rapid
Amortization Period will begin on the day on which such Amortization Event
occurs or is deemed to occur. During the Rapid Amortization Period,
distributions of principal to Class A Certificateholders will not be subject to
the Controlled Amortization Amount. Principal Collections allocable to the
Certificateholders' Interest will no longer be distributed to the Transferor but
instead will be distributed as principal payments to the Class A
Certificateholders and, following the final principal payment to the Class A
Certificateholders, to the Class B Certificateholders. Although the Transferor
believes that the likelihood of an Amortization Event occurring is remote, there
can be no assurance that an Amortization Event will not occur. See 'Description
of the Offered Certificates and the Agreement-- Amortization Events.'
The following table sets forth the cardholder payment rates for Eligible
Accounts under the Credit Card Program. For the groups of nine or twelve
Collection Periods noted, the table gives the lowest payment rate for any
Collection Period, the highest payment rate for any Collection Period, and the
average payment rate for all nine or twelve Collection Periods. The payment rate
for any Collection Period represents the payments received under Eligible
Accounts for the Collection Period, divided by the Receivables outstanding under
Eligible Accounts as of the beginning of such Collection Period. Payments shown
in the table include amounts which would be deemed Principal Collections and
Finance Charge Collections (except Recoveries on Defaulted Receivables, certain
credit-related insurance proceeds and Merchant Fees) under the Agreement.
MONTHLY PAYMENT RATES
<TABLE>
<CAPTION>
TWELVE COLLECTION
PERIODS
NINE COLLECTION ENDING DECEMBER 18,
PERIODS ENDING -----------------------
PAYMENT RATE SEPT. 18, 1996 1995 1994 1993
- --------------------------------------------------- ---------------- ----- ----- -----
<S> <C> <C> <C> <C>
Low................................................ 11.00% 11.60% 11.30% 12.14%
High............................................... 13.34% 13.07% 12.87% 13.62%
Average............................................ 12.51% 12.30% 12.41% 13.20%
</TABLE>
48
<PAGE>
The amount of Collections may vary from period to period, due to seasonal
variations, general economic conditions and payment habits of individual
cardholders. Accordingly, there can be no assurance that future cardholder
monthly payment rate experience, and thus the rate at which Certificateholders
could expect to receive payments of principal on their Offered Certificates
during any Rapid Amortization Period, will be similar to the historical
experience shown above. See 'Risk Factors.'
THE LETTER OF CREDIT BANK
The Servicer Letter of Credit and Transferor Letter of Credit has been
issued by The Sumitomo Bank, Limited, New York Branch (the 'Letter of Credit
Bank'), a New York state licensed branch of The Sumitomo Bank, Limited (the
'Bank'). Upon request therefor, the Bank will provide without charge to each
person to whom this Prospectus is delivered, a copy of the annual report of the
Bank which contains the consolidated statements of the Bank for fiscal year
ended 1995. Written requests should be sent to The Sumitomo Bank, Limited, New
York Branch, 277 Park Avenue, New York, NY 10172 Attention: Loan Operations.
DESCRIPTION OF THE OFFERED CERTIFICATES AND THE AGREEMENT
The Series 1996-1 Interests will be issued pursuant to the Agreement, as
supplemented by the Series 1996-1 Supplement, each entered into among the
Transferor, the Servicer and the Trustee, substantially in the forms filed as
exhibits to the Registration Statement of which this Prospectus is a part.
Pursuant to the Agreement, the Transferor may execute further Supplements
thereto between the Transferor and the Trustee in order to issue additional
Series. See '--Exchanges.' The Trustee will provide a copy of the Agreement
(without exhibits or schedules), including any Supplements, to Offered
Certificateholders without charge upon written request. The following summary
describes certain terms of the Agreement and the Series 1996-1 Supplement.
GENERAL
The Class A Certificates and the Class B Certificates will represent
undivided interests in the Trust, including the right to receive the Class A
Invested Percentage and the Class B Invested Percentage, respectively, of all
Collections received with respect to the Receivables in the Trust. The Trust
Assets will consist of the following: (i) the Receivables existing on or created
after the Cut-off Date under the Accounts established under the Credit Card
Program, (ii) Receivables arising under designated Accounts established under
Alternative Programs, (iii) all amounts due or to become due on or after the
Cut-off Date, (iv) all Recoveries with respect to previously Defaulted
Receivables, net of reasonable expenses of the Servicer incurred and deducted
from such amounts or payments, (v) the right to receive certain Merchant Fees
attributed to cardholder charges giving rise to Receivables, (vi) all of the
Transferor's right, title and interest under the Purchase and Sale Agreement and
the Participation Agreement, (vii) the proceeds of the Servicer Letter of Credit
and the Transferor Letter of Credit, (viii) all moneys on deposit in the
Collection Account and any other accounts established for the benefit of any
other Series (which other accounts will not be available to Certificateholders),
(ix) payments made in respect of Enhancements issued with respect to any other
Series (the drawing on or payment of such Enhancement not being available to
Certificateholders) and (x) all proceeds of any of the foregoing. The term
'Enhancement' is defined in the Agreement as any letter of credit, liquidity
facility, guaranteed rate agreement, maturity guaranty, facility, cash
collateral account, cash collateral guaranty, tax protection agreement, interest
rate swap or other contract or agreement for the benefit of the
certificateholders of any Series issued by the Trust. As of the Closing Date,
the Initial Class A Invested Amount will be $200,000,000 and the Initial Class B
Invested Amount will be $28,205,129.
The Transferor will initially hold the interest (the 'Transferor Interest')
not represented by the Series 1996-1 Interests, the Bridgestone/Firestone
Certificate and any other Series of certificates issued or to be issued. The
Transferor Interest will be evidenced by the Exchangeable Transferor Certificate
and will represent an undivided interest in the Trust, which may vary from month
to month. The Transferor has participated its interest in the Exchangeable
Transferor Certificate to Bridgestone/Firestone pursuant to the Participation
Agreement and will participate its interest in the Subordinated Transferor
Certificate to Bridgestone/Firestone pursuant to the Participation Agreement.
The issuance of the Class B Certificates, the Collateral Interest and the
Subordinated Transferor Certificate are conditions precedent to the issuance of
the Class A Certificates. The issuance of the
49
<PAGE>
Collateral Interest and the Subordinated Transferor Certificate are conditions
precedent to the issuance of the Class B Certificates.
Interest will accrue on the unpaid principal amount of the Class A
Certificates at a per annum rate equal to the Class A Certificate Rate and,
except as otherwise provided herein, be distributed to the Class A
Certificateholders monthly on each Distribution Date, commencing December, 1996,
in an amount equal to Class A Monthly Interest. 'Class A Monthly Interest'
equals, with respect to any Distribution Date, one-twelfth of the product of (i)
the Class A Certificate Rate and (ii) the outstanding principal balance of the
Class A Certificates as of the preceding Distribution Date (after subtracting
therefrom the aggregate amount of all distributions of principal made to the
Class A Certificateholders on such Distribution Date) or, with respect to the
first Distribution Date, the Initial Class A Invested Amount, provided, however,
that with respect to the initial Distribution Date, Class A Monthly Interest
shall equal $788,388.89.
Interest will accrue on the unpaid principal amount of the Class B
Certificates at a per annum rate equal to the Class B Certificate Rate and,
except as otherwise provided herein, be distributed to the Class B
Certificateholders monthly on each Distribution Date, commencing December, 1996,
in an amount equal to Class B Monthly Interest. 'Class B Monthly Interest'
equals, with respect to any Distribution Date, one-twelfth of the product of (i)
the Class B Certificate Rate and (ii) the outstanding principal balance of the
Class B Certificates as of the preceding Distribution Date (after subtracting
therefrom the aggregate amount of all distributions of principal made to the
Class B Certificateholders on such Distribution Date) or, with respect to the
first Distribution Date, the Initial Class B Invested Amount, provided, however,
that with respect to the initial Distribution Date, Class B Monthly Interest
shall equal $116,949.43.
No principal payments will be made to the Class A Certificateholders until
the Distribution Date occurring in December, 1996, or, upon the occurrence of an
Amortization Event as described herein. No principal payments will be made to
the Class B Certificateholders until the final principal payment has been made
to the Class A Certificateholders. No principal payments will be made to the
Collateral Interest Holder until the final principal payment has been made to
the Class B Certificateholders. The holder of the Subordinated Transferor
Certificate will not receive any payments of principal until the Offered
Certificateholders and the Collateral Interest Holder have received all payments
of principal due them. On each Distribution Date with respect to the Revolving
Period (and, at the option of the Servicer, more frequently), Principal
Collections allocable to the Certificateholders' Interest will, subject to
certain limitations, including certain Excess Finance Charge Collections and the
reallocation of any Reallocated Principal Collections with respect to the
related Collection Period, be applied as Shared Principal Collections and the
balance will be paid to the Transferor in respect of the Transferor Interest to
maintain the Class A Invested Amount, the Class B Invested Amount, the
Collateral Interest Invested Amount and the Subordinated Transferor Amount.
Unless and until an Amortization Event shall have occurred, on each
Distribution Date with respect to the Controlled Amortization Period, all
Principal Collections allocable to the Certificateholders' Interest plus certain
other amounts comprising Class A Monthly Principal and principal allocable to
the Class B Certificates and the Collateral Interest and certain other amounts
will no longer be paid to the Transferor as described above but instead an
amount thereof up to the Controlled Amortization Amount will be distributed to
the Class A Certificateholders. Any such collections in excess of the Controlled
Amortization Amount will be paid to the Transferor in respect of the Transferor
Interest.
Distributions of principal and interest on the Offered Certificates will be
made by the Trustee directly to Certificateholders in accordance with the
procedures set forth herein and in the Agreement. Interest payments and any
principal payments on each Distribution Date will be made to Certificateholders
in whose name the Offered Certificates were registered (expected to be Cede, as
nominee of DTC) at the close of business on the 15th day of the calendar month
preceding such Distribution Date (each a 'Record Date') (however, the final
payment on any Offered Certificates will be made only upon presentation and
surrender of such Offered Certificate). Distributions will be made to DTC in
immediately available funds.
The Offered Certificates will initially be represented by one or more
Certificates registered in the name of the nominee of The Depository Trust
Company ('DTC') (together with any successor depository selected by the
Transferor, the 'Depository') except as set forth below. The interests of
holders of beneficial interests in the Class A Certificates and the Class B
Certificates ('Certificate Owners') will be available for purchase in
50
<PAGE>
denominations of $1,000 and integral multiples thereof in book-entry form only.
The Transferor has been informed by DTC that DTC's nominee will be Cede.
Accordingly, Cede is expected to be the holder of record of the Offered
Certificates. Unless and until Definitive Certificates are issued under the
limited circumstances described herein, no Certificate Owner will be entitled to
receive a certificate representing such person's interest in the Offered
Certificates. All references herein to actions by Certificateholders shall refer
to actions taken by DTC upon instructions from its participating organizations
(the 'Participants') and all references herein to distributions, notices,
reports and statements to Certificateholders shall refer to distributions,
notices, reports and statements to DTC or Cede, as the registered holder of the
Class A Certificates and the Class B Certificates, as the case may be, for
distribution to Certificate Owners in accordance with DTC procedures. See
'--Book-Entry Registration' and '--Definitive Certificates.'
BOOK-ENTRY REGISTRATION
Holders of the Certificates or the Offered Certificates (the 'Offered
Certificates') may hold through DTC (in the United States) or, solely in the
case of the Offered Certificates, CEDEL or Euroclear (in Europe) if they are
participants of such systems, or indirectly through organizations that are
participants in such systems. The Certificates may not be held, directly or
indirectly, through CEDEL or Euroclear.
Cede, as nominee for DTC, will hold the Offered Certificates. CEDEL and
Euroclear will hold omnibus positions in the Offered Certificates on behalf of
the CEDEL Participants and the Euroclear Participants, respectively, through
customers' securities accounts in CEDEL's and Euroclear's names on the books of
their respective depositaries (collectively, the 'Depositaries'), which in turn
will hold such positions in customers' securities accounts in the Depositaries'
names on the books of DTC.
Transfers between DTC's participating organizations (the 'Participants')
will occur in accordance with DTC rules. Transfers between CEDEL Participants
and Euroclear Participants will occur in the ordinary way in accordance with
their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a Participant will be received with
value on the DTC settlement date but will be available in the relevant CEDEL or
Euroclear cash account only as of the business day following settlement in DTC.
For a description of transfers between persons holding directly or
indirectly through DTC, see also 'Global Clearance, Settlement and Tax
Documentation Procedures' in Annex II to this Prospectus.
Cedel Bank, societe anonyme ('CEDEL') is incorporated under the laws of
Luxembourg as a professional depository. CEDEL holds securities for its
participating organizations ('CEDEL Participants') and facilitates the clearance
and settlement of securities transactions between CEDEL Participants through
electronic book-entry changes in accounts of CEDEL Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to its CEDEL Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. CEDEL
51
<PAGE>
interfaces with domestic markets in several countries. As a professional
depository, CEDEL is subject to regulation by the Luxembourg Monetary Institute.
CEDEL Participants are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations and may include the
Underwriters. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ('Euroclear Participants') and to clear and
settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need for
physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in Euroclear
in any of 32 currencies, including United States dollars. The Euroclear System
includes various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described in 'Global Clearance,
Settlement and Tax Documentation Procedures' in Annex II of the Prospectus. The
Euroclear System is operated by Morgan Guaranty Trust Company of New York,
Brussels, Belgium office (the 'Euroclear Operator' or 'Euroclear'), under
contract with Euroclear Clearance System, S.C., a Belgian cooperative
corporation (the 'Cooperative'). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the Underwriters. Indirect access to the Euroclear System is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the 'Terms and Conditions'). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Offered Certificates held through CEDEL or
Euroclear will be credited to the cash accounts of CEDEL Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. See 'Federal Income Tax Consequences' herein and 'Global Clearance,
Settlement and Tax Documentation Procedures' in Annex II to this Prospectus.
CEDEL or the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Certificateholder under the Indenture on behalf of a
CEDEL Participant or Euroclear Participant only in accordance with its relevant
rules and procedures and subject to its Depositary's ability to effect such
actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Offered Certificates among participants of
DTC, CEDEL and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
In the event that any of DTC, CEDEL or Euroclear should discontinue its
services, the Administrator would seek an alternative depository (if available)
or cause the issuance of Definitive Securities to the owners thereof or their
nominees in the manner described in 'Global Clearance, Settlement and Tax
Document Procedures' in Annex II to this Prospectus.
52
<PAGE>
DEFINITIVE CERTIFICATES
The Offered Certificates will be issued in fully registered, certificated
form to Certificate Owners or their nominees (the 'Definitive Certificates'),
rather than to DTC or its nominee, only if (i) the Transferor advises the
Trustee in writing that DTC is no longer willing or able to discharge properly
its responsibilities as Depository with respect to the Offered Certificates, and
the Trustee or the Transferor is unable to locate a qualified successor, (ii)
the Transferor, at its option, elects to terminate the book-entry system through
DTC, or (iii) after the occurrence of a Servicer Event of Default, Certificate
Owners representing in the aggregate not less than a majority of the aggregate
invested amount of all Series then issued and outstanding advise the Trustee and
DTC through Participants in writing that the continuation of a book-entry system
through any Depository is no longer in the best interest of the Certificate
Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee, through DTC, is required to notify all
Participants of the availability through DTC of Definitive Certificates. Upon
surrender by DTC to the Trustee of the Definitive Certificates representing the
Offered Certificates and instructions for re-registration, the Trustee will
issue the Offered Certificates as Definitive Certificates, and thereafter the
Trustee will recognize the holders of such Definitive Certificates as holders
under the Agreement ('Holders').
Distributions of principal and interest on the Offered Certificates will be
made by the Paying Agent directly to Holders of Definitive Certificates in
accordance with the procedures set forth herein and in the Agreement. Interest
and principal payments on each Distribution Date will be made to Holders in
whose names the Definitive Certificates were registered at the close of business
on the related Record Date. Distributions will be made by check mailed to the
address of such Holder as it appears on the certificate register. The final
payment on any Offered Certificate (whether Definitive Certificates or the
Offered Certificates registered in the name of Cede representing the Offered
Certificates), however, will be made only upon presentation and surrender of
such Offered Certificate at the office or agency specified in the notice of
final distribution to Certificateholders. The Trustee will provide such notice
to registered Certificateholders not later than the day of such final
distribution.
Definitive Certificates will be transferable and exchangeable at the
offices of the transfer agent and registrar, which shall initially be the
Trustee. No service charge will be imposed for any registration of transfer or
exchange, but the transfer agent and registrar may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
therewith.
CONVEYANCE OF RECEIVABLES
Pursuant to the Agreement, the Transferor has transferred and assigned to
the Trust all of its right, title and interest in and to Eligible Receivables in
the Accounts outstanding as of the Cut-off Date, all of the Eligible Receivables
thereafter created under the Eligible Accounts and the proceeds of all of the
foregoing (including Recoveries with respect to previously charged-off
Receivables). Prior to such transfer and assignment, and pursuant to the
Purchase and Sale Agreement, the Originator sold to the Transferor all Eligible
Receivables existing under the Eligible Accounts as of the Cut-off Date.
Pursuant to the Purchase and Sale Agreement, provided, among other things, that
the Transferor is not in default of its obligations under the Purchase and Sale
Agreement and no Servicer Event of Default or Originator insolvency shall have
occurred, the Originator has agreed to sell and assign to the Transferor, and
the Transferor has agreed to purchase from the Originator, on each business day,
all Eligible Receivables arising in the Accounts. On the Closing Date, the
Trustee will authenticate the Offered Certificates and deliver such Offered
Certificates to the Transferor which will in turn deliver the Offered
Certificates to the Underwriters against payment of the net proceeds of the sale
of the Offered Certificates. The Trustee will also deliver a newly issued
Exchangeable Transferor Certificate and the Subordinated Transferor Certificate
to the Transferor.
In connection with the sale of the Receivables by the Originator to the
Transferor and the transfer of the Receivables by the Transferor to the Trust,
the Originator and Bridgestone/Firestone will indicate in their computer files
that such Receivables have been sold to the Transferor and then transferred to
the Trust and the Transferor will indicate in its files that such Receivables
have been transferred from the Transferor to the Trust. Bridgestone/Firestone,
as initial Servicer, will retain and will not deliver to the Trustee any other
records or agreements relating to the Accounts or the Receivables. Except as set
forth above, the records and agreements
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relating to the Accounts and the Receivables will not be segregated from those
relating to other consumer accounts and receivables and neither the computer
files nor the physical documentation relating to the Accounts or Receivables
will be stamped or marked to reflect the transfer of Receivables to the Trust.
The Trustee will have reasonable access to such records and agreements as
required by applicable law or to enforce the rights of the Certificateholders.
The Originator will file one or more financing statements under the Uniform
Commercial Code in accordance with Ohio state law to perfect the Transferor's
interest in the Receivables. The Transferor, in turn, will file one or more
financing statements in accordance with Massachusetts state law to perfect the
Trust's interest in the Receivables. See 'Risk Factors' and 'Certain Legal
Aspects of the Receivables.'
ADDITION OF ACCOUNTS
The Accounts consist of Eligible Accounts established under the Credit Card
Program as of and subsequent to the Cut-off Date. In addition, the Transferor is
permitted (subject to certain limitations and conditions) to designate from time
to time eligible Accounts established under Alternative Programs ('Eligible
Alternative Accounts') and to convey to the Trust Receivables of such Eligible
Additional Accounts, whether such Receivables are then existing or thereafter
created until either the Ten Percent Number Test (as defined below) or Ten
Percent Aggregate Test (as defined below) is met. Thereafter, if the Transferor
has not obtained the consent of the applicable rating agencies, as described
below, additional accounts and additional receivables from Alternative Programs
shall not be transferred to the Trust.
Such 'Alternative Programs' are programs for which CFNA underwrites and
originates Accounts and Receivables and may include, but are not limited to, the
establishment of additional private label credit card programs and the offering
of general purpose credit cards. As of the Closing Date, the Originator has not
established any of these Alternative Programs. The 'Ten Percent Number Test' is
determined as of any date on which Alternative Accounts are to be added to the
Trust and met when the number of Eligible Alternative Accounts as of such date
equals 10% of the number of all Accounts in the Trust as of such date. The 'Ten
Percent Aggregate Test' is determined as of any date on which Alternative
Accounts are to be added to the Trust and met when the dollar amount of
Receivables from such Eligible Alternative Accounts as of such date equals 10%
of the Aggregate Receivables as of such date. See 'Description of the Offered
Certificates and the Agreement--Addition of Accounts.'
Once the Transferor has met the Ten Percent Number Test or the Ten Percent
Aggregate Test, the Transferor must request written confirmation from the
applicable rating agencies to transfer to the Trust additional Accounts related
to an Alternative Program and all Receivables arising from such Accounts.
In addition and subject to certain limitations set forth in the Agreement,
on an annual basis, the Transferor will be permitted to include additional
Eligible Accounts and all Eligible Receivables arising from such Eligible
Accounts up to an aggregate number equal to 20% of the total number of Eligible
Accounts at the start of such calculation period in the Trust without written
confirmation from the applicable rating agencies.
REMOVAL OF ACCOUNTS
Subject to the conditions set forth in the next succeeding sentence, on
each Determination Date on which the Transferor Amount (plus the B/F Amount and
any amounts available under the Transferor Letter of Credit) exceeds 7% of the
aggregate invested amount of all outstanding Series of certificates issued by
the Trust, the Transferor may, but shall not be obligated to, accept all
Receivables and proceeds thereof from certain Accounts offered to it by the
Trustee ('Removed Accounts'), without notice to the Certificateholders, in an
aggregate amount not greater than the lesser of (a) the excess of the Transferor
Amount (plus amounts available to be drawn under the Transferor Letter of Credit
or the Transferor Escrow Account plus the B/F Amount) over 7% of the Aggregate
Certificateholders' Interest and (b) 5% of Aggregate Receivables on such date of
removal. The Transferor may, at its sole discretion, accept such offer in an
aggregate amount equal to an amount not greater than the excess of the
Transferor Amount (plus the B/F Amount and any amounts available under the
Transferor Letter of Credit) over 7% of the aggregate invested amount of all
outstanding Series of certificates issued by the Trust. The Transferor is
permitted to designate and require reassignment to it of the Receivables from
Removed Accounts only upon satisfaction of the conditions set forth in the
Agreement, including the following conditions: (i) the Trustee shall have
executed and delivered to the Transferor a written reassignment and the
Transferor shall
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have delivered a computer file or microfiche list containing a true and complete
list of all Accounts in the Trust after such removal, the Accounts to be
identified by account number, (ii) the Transferor shall represent and warrant
that no selection procedure used by the Transferor which is adverse to the
interests of the certificateholders was utilized in selecting the Removed
Accounts, (iii) the removal of any Receivables of any Removed Accounts shall
not, in the reasonable belief of the Transferor, cause an Amortization Event to
occur, (iv) the Transferor shall have delivered written notice twenty days prior
to such removal to each Rating Agency which has rated any outstanding Series and
prior to the date on which such Receivables are to be removed the Trustee shall
have received confirmation from each Rating Agency of its intention not to
reduce or withdraw the rating of any Series of certificates as a result of such
removal and (v) the Transferor shall have delivered to the Trustee an officer's
certificate confirming the items set forth in clauses (i) through (iv) above.
EXCHANGES
The Agreement provides for the Trustee to issue four types of certificates:
(i) one or more Series of certificates which generally are transferable and have
the characteristics described below, (ii) the Bridgestone/Firestone Certificate,
which is currently and will continue to be held by Bridgestone/Firestone and
which generally is not transferable, (iii) the Exchangeable Transferor
Certificate, a certificate which evidences the Transferor Interest, and (iv) the
Subordinated Transferor Certificate, a certificate of the Transferor which
evidences an interest subordinate to the Transferor Certificate. The
Exchangeable Transferor Certificate was initially held by the Transferor and
participated to Bridgestone/Firestone pursuant to a Participation Agreement by
and between the Transferor and Bridgestone/Firestone (the 'Participation
Agreement'). The Subordinated Transferor Certificate will also be participated
to Bridgestone/Firestone pursuant to the Participation Agreement. The Agreement
also provides that, pursuant to any one or more Supplements, the Transferor may
tender the Exchangeable Transferor Certificate, or the Exchangeable Transferor
Certificate and the certificates evidencing any Series of certificates to the
Trustee in exchange for one or more new Series and a reissued Exchangeable
Transferor Certificate. Under the Agreement, the Transferor may define, with
respect to any newly issued Series: (i) its name or designation, (ii) its
initial principal amount (or method for calculating such amount), (iii) its
coupon rate (or formula for the determination thereof), (iv) the interest
payment date or dates and the date or dates from which interest shall accrue,
(v) the method for allocating collections to certificateholders, (vi) the names
of any accounts to be used by such Series and the terms governing the operation
of any such accounts, (vii) the percentage used to calculate monthly servicing
fees, (viii) the minimum transferor interest percentage, (ix) the minimum amount
of Aggregate Receivables required to be maintained by the Transferor, (x) the
issuer and terms of any Enhancement with respect thereto, (xi) the base rate
applicable to such Series, (xii) the terms on which the certificates of such
Series may be repurchased by the Transferor or remarketed to other investors,
(xiii) the Series termination date, (xiv) any deposit into any account
maintained for the benefit of certificateholders, (xv) the number of classes of
such Series, and if more than one class, the rights and priorities of each such
class, (xvi) the extent to which the certificates of such Series will be
issuable in bearer form and any limitations imposed thereon, (xvii) the priority
of any Series with respect to any other Series, (xviii) the rights of the holder
of the Exchangeable Transferor Certificate that have been transferred to the
holders of such Series and (xix) any other relevant terms (all such terms, the
'Principal Terms' of such Series). None of the Transferor, the Servicer, the
Trustee or the Trust is required to obtain the consent of any Certificateholder
to issue any additional Series. However, as a condition of an Exchange, the
Transferor will deliver to the Trustee written confirmation that the Exchange
will not result in the applicable Rating Agency reducing or withdrawing its
rating of any outstanding Series or otherwise adversely affect any rating on any
then outstanding Series, including the Offered Certificates. The Transferor may
offer any Series to the public under a Disclosure Document in transactions
either registered under the Act or exempt from registration thereunder directly,
through the Underwriters or one or more other underwriters or placement agents,
in fixed-price offerings or in negotiated transactions or otherwise. Any such
Series may be issued in fully registered or book-entry form in minimum
denominations determined by the Transferor. See Annex I for a listing of
Outstanding Series. The Transferor may offer, from time to time, additional
Series.
The Agreement provides that the Transferor may perform Exchanges and define
Principal Terms such that each Series has a period during which amortization of
the principal amount thereof is intended to occur which may have a different
length and begin on a different date than such period for any other Series.
Further, one or more Series may be in their amortization periods while other
Series are not. Thus, certain Series may be in their
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revolving periods, while other Series are amortizing. Moreover, each Series may
have the benefits of a form of Enhancement issued by issuers different from the
issuers of the form of Enhancement with respect to any other Series. Under the
Agreement, the Trustee shall hold any such Enhancement only on behalf of the
Series with respect to which each relates. Likewise, with respect to each such
Enhancement, the Transferor may deliver a different form of Enhancement
agreement. The Agreement also provides that the Transferor may specify different
coupon rates and monthly servicing fees with respect to each Series. Finance
Charge Collections not used to pay interest on the certificates, the monthly
servicing fee, the investor default amount or investor charge-offs with respect
to any Series will be allocated as provided in such form of Enhancement
agreement, if applicable. The Transferor also has the option under the Agreement
to vary between Series the terms upon which a Series may be repurchased by the
Transferor or remarketed to other investors. Additionally, certain Series may be
subordinated to other Series, or classes within a Series may have different
priorities. No Series of certificates may be senior to this Series 1996-1
Interests. The Class B Certificates will be subordinate to the Class A
Certificates but not to any other Series of certificates. The Collateral
Interest and the Subordinated Transferor Certificate will be subordinated to the
Class A and Class B Certificates but not to any other Series of Certificates.
There is no limit to the number of Exchanges that the Transferor may perform
under the Agreement. The Trust will terminate only as provided in the Agreement.
Under the Agreement and pursuant to a Supplement, an Exchange may only
occur upon the satisfaction of certain conditions provided in the Agreement.
Under the Agreement, the Transferor may perform an Exchange by notifying the
Trustee, at least five days in advance of the date upon which the Exchange is to
occur. Under the Agreement, the notice will state the designation of any Series
to be issued on the date of the Exchange and, with respect to each such Series:
(i) its initial principal amount (or method for calculating such amount) and
(ii) its certificate rate. On the date of the Exchange, the Agreement provides
that the Trustee will issue any such Series only upon delivery to it of the
following: (i) a Supplement in form satisfactory to the Trustee signed by the
Transferor and specifying the Principal Terms of such Series, (ii) an opinion of
counsel to the effect that certificates of such Series will be characterized as
either indebtedness or an interest in a partnership under existing law for
Federal income tax purposes and that the issuance of such Series will not
materially adversely impact the Federal income tax characterization of any
outstanding Series that have been the subject of a previous opinion of counsel,
(iii) the Enhancement, if any, and the form of Enhancement agreement, if any,
with respect thereto executed by the Transferor and the provider of the form of
Enhancement, (iv) written confirmation from the applicable Rating Agency that
the Exchange will not result in such Rating Agency reducing or withdrawing its
rating on any outstanding Series or otherwise adversely affect any rating on any
then outstanding Series and (v) the existing Exchangeable Transferor Certificate
and the applicable certificates of the Series to be exchanged, if applicable.
Upon satisfaction of such conditions, the Trustee will cancel the existing
Exchangeable Transferor Certificate and the certificates of the exchange Series,
if applicable, and issue the new Series and a new Exchangeable Transferor
Certificate.
COVENANTS, REPRESENTATIONS AND WARRANTIES
The Transferor will covenant to the Trustee for the benefit of all
certificateholders of all Series which from time to time may have an interest in
the Trust that, as to the Receivables and the Accounts, unless cured within 60
days from the earlier to occur of the discovery of such event by the Transferor
or Bridgestone/Firestone or receipt of notice by the Transferor or
Bridgestone/Firestone from the Trustee, the Servicer or the Originator, the
Transferor will accept the transfer of any Receivable which is determined to be
an Ineligible Receivable. Additionally, the Transferor covenants in the
Agreement to accept, under certain conditions, the transfer of each Receivable
which is subject to certain specified liens immediately upon the discovery of
such liens.
The Transferor shall accept the transfer of any Receivable as described
above (an 'Ineligible Receivable') by paying the principal balance of such
Receivables to the Trust (the 'Transfer Deposit Amount'). In the event that such
payment is not made, the principal balance of such Receivables shall be deducted
from the amount of Aggregate Receivables used to calculate the Transferor
Interest; provided, however, that if such deduction would reduce the Transferor
Interest below zero or would otherwise not be permitted by law, the principal
balance of such Receivables shall be deducted from the B/F Amount. In the event
that such removal would reduce the B/F Amount below zero, such Ineligible
Receivable shall not be removed from the Trust. Any such deposit shall be
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treated as a collection of such Receivable and be allocated as provided in the
Agreement. Such remedy with respect to such breach will constitute the sole
remedy of the Certificateholders in the event of any such breach.
In the Agreement, the Transferor has made additional representations and
warranties as to the following: (i) the organization and good standing of the
Transferor and the legality and enforceability of the Agreement against the
Transferor, (ii) that the Agreement constitutes a valid transfer to the Trust of
all right, title and interest of the Transferor in and to the Receivables,
whether then existing or thereafter created in the applicable Accounts, and the
proceeds thereof (including amounts in any of the accounts established for the
benefit of the Certificateholders) or the grant of a first priority perfected
security interest in such Receivables and the proceeds thereof (including
amounts in any of the accounts established for the benefit of the
Certificateholders), which is effective as to each Receivable upon the transfer
thereof to the Trust or upon its creation, as the case may be, (iii) that all
material information with respect to the Accounts and Receivables provided to
the Trustee was true and correct in all material respects as of the Closing
Date, (iv) each Receivable conveyed to the Trust is free and clear of liens
(except for liens which may be permitted by the Agreement), (v) the Transferor
has obtained all consents, licenses, approvals or authorizations required in
connection with the conveyance of the Receivables to the Trust, (vi) the due
qualification of the Transferor, (vii) the due authorization of the Transferor
to execute and deliver the Purchase and Sale Agreement, the Participation
Agreement, the Agreement and the Series 1996-1 Interests, (viii) the creation of
a binding obligation of the Transferor by the Purchase and Sale Agreement, the
Participation Agreement and the Agreement, (ix) the non-violation by the
execution and delivery of the Purchase and Sale Agreement, the Participation
Agreement, the Agreement and the Series 1996-1 Interests of any agreement
binding the Transferor or its property, (x) the non-existence of any proceedings
threatening the transfer of the Receivables or the issuance of the Series 1996-1
Interests and (xi) the eligibility of each Receivable. In the event that any of
the representations and warranties described in clauses (ii), (iii), (iv), (v)
and (viii) above are not true and correct and such event has a material adverse
effect on the interests of holders of the certificates of all Series, either the
Trustee or the holders of certificates evidencing undivided interests in the
Trust aggregating more than 50% of the outstanding principal balance of all
Series, by written notice to the Transferor (and to the Trustee and the
Servicer, if given by the certificateholders), may direct the Transferor to
purchase all certificates of all Series outstanding (including the Series 1996-1
Interests) within 60 days of such notice. The Transferor shall be obligated to
purchase all Series on a Distribution Date occurring within such applicable
period, unless the representations and warranties shall then be satisfied in all
material respects and any adverse effect on the certificateholders caused
thereby shall have been cured. The purchase price for the certificates shall be
equal to the aggregate invested amount of all Series on the Record Date related
to the applicable payment date on which the purchase is scheduled to be made
plus an amount equal to all interest accrued but unpaid on all Series at the
applicable certificate rates through the end of the interest accrual periods of
such Series. The payment of such purchase price into the Collection Account in
immediately available funds will be considered a prepayment in full of all
Receivables and will be paid in full to the certificateholders upon presentation
and surrender of their certificates. The obligations described above shall be
the sole remedies respecting the foregoing representations, warranties and
events available to the Trustee or the certificateholders. Pursuant to the
Participation Agreement, Bridgestone/Firestone will agree, for the benefit of
the Trustee, to purchase from the Transferor any Ineligible Receivable
repurchased by the Transferor from the Trust and any certificates purchased by
the Transferor as described above.
An 'Eligible Receivable' is defined to mean each receivable (i) which has
risen under an Eligible Account or an Eligible Alternative Account (as defined
below), (ii) which was created in compliance with all requirements of law and
pursuant to an accountholder agreement which complies with all requirements of
law in either case other than those with respect to which there is no reasonable
likelihood that a failure to comply could have a material adverse effect upon
certificateholders, (iii) with respect to which all consents, licenses,
approvals or authorizations of, or registrations with, any governmental
authority required to be obtained or given in connection with the creation of
such Receivable or the execution, delivery and performance of the related
accountholder agreement have been duly obtained or given and are in full force
and effect as of such date of creation, (iv) as to which the Trust will at all
times have good and marketable title, free and clear of all liens, encumbrances,
charges and security interests (except those permitted by the Agreement), (v)
which has been the subject of either a valid transfer and assignment from the
Transferor to the Trust of all of the Transferor's right, title and interest
therein or the grant to the Trust of a perfected security interest therein (and
in the proceeds thereof) which is prior to any interest of all third-parties,
effective until the termination of the Trust, (vi) which will at all times be
the legal,
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valid and binding payment obligation of the accountholder thereof enforceable
against such accountholder in accordance with its terms, subject to certain
bankruptcy and equity related exceptions, (vii) which constitutes either an
'account' or a 'general intangible' under and as defined in Article 9 of the UCC
as then in effect in the States of New York and Ohio and the Commonwealth of
Massachusetts, (viii) which, at the time of its transfer to the Trust, has not
been waived or modified except as permitted by the Agreement, (ix) which is not
subject to any right of rescission, setoff, counterclaim or other defense
(including the defense of usury), other than certain bankruptcy and equity
related defenses and adjustments permitted by the Agreement to be made by the
Servicer, (x) as to which each of the Originator and the Transferor has
satisfied all obligations to be fulfilled pursuant to the credit card agreement
or in connection with the transfer of the Receivable at the time of transfer of
the Receivable to the Trust or at the time of sale of such Receivable to the
Transferor and (xi) as to which the Originator and the Transferor have done
nothing, at the time of its transfer to the Trust, to impair the rights of the
Trust or certificateholders therein. An 'Eligible Account' is defined to mean an
account (i) which has been established under the Credit Card Program, (ii) which
is denominated in U.S. dollars, (iii) the credit card or cards related to which
have not been reported lost or stolen, (iv) the obligor on which has provided,
as its most recent billing address, an address with a zip code in the United
States or its territories or possessions, (v) which is not an account of an
obligor in bankruptcy or an account as to which the Servicer has any confirmed
record of any fraud-related activity, and (vi) the Receivables in which have not
been charged off or the account itself has not been closed prior to its billing
cycle cut-off date. An 'Eligible Alternative Account' is defined to mean an
account (i) which has been established under an Alternative Program subsequent
to the Closing Date, (ii) which has been designated by the Transferor in
accordance with the criteria relating to the Addition of Accounts, (iii) which
is denominated in U.S. dollars, (iv) the credit card or cards related to which
have not been reported lost or stolen, (v) the obligor on which has provided, as
its most recent billing address, an address with a zip code in the United States
or its territories or possessions, (vi) which is not an account of an obligor in
bankruptcy or an account as to which the Servicer has any confirmed record of
any fraud-related activity, and (vii) the Receivables in which have not been
charged off or the account itself has not been closed prior to its billing cycle
cut-off date.
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,
compliance with the Transferor's representations and warranties or for any other
purpose. In addition, it is not anticipated or required that the Trustee will
make any initial or periodic general examination of the Servicer for the purpose
of establishing the compliance by the Servicer with its representations or
warranties or the performance by the Servicer of its obligations under the
Agreement for any other purpose. The Servicer, however, is required to deliver
to the Trustee on or before March 31 of each year an opinion of counsel with
respect to the necessity of filing additional UCC financing statements or other
filings as may be required under state law to continue the Trust's perfection of
the security interest of the Trust in and to the Receivables and certain other
components of the Trust.
COLLECTION ACCOUNT
The Trustee has caused to be established and maintained an account with
respect to the Certificates (the 'Collection Account') for deposit of
Collections received from the Servicer. Funds on deposit in the Collection
Account shall be invested in one or more Permitted Investments maturing no later
than the next succeeding Transfer Date. Net investment earnings on funds in the
Collection Account will be paid monthly to the Transferor. The Servicer has the
revocable power to withdraw funds from the Collection Account and to instruct
the Trustee to make withdrawals and payments from the Collection Account for the
purpose of carrying out the Servicer's or the Trustee's duties under the
Agreement.
The term 'Permitted Investments' means (a) investments having maturities at
the date of purchase of not later than the next succeeding Transfer Date in the
following: (i) obligations issued by, or the principal of and interest on which
is fully guaranteed by, the United States of America; (ii) commercial paper
rated A-1+ by S&P, F-1+ by Fitch Investors Service, Inc. ('Fitch') and P-1 by
Moody's; (iii) certificates of deposit, other deposits or bankers' acceptances,
which are rated A-1+ by S&P, F-1+ by Fitch and P-1 by Moody's, or money market
funds rated A-1+ by S&P, F-1+ by Fitch and P-1 by Moody's, (iv) investments in
money market funds having the highest long-term rating granted by the applicable
Rating Agency and maintained by commercial banks having unimpaired capital and
unimpaired surplus of at least $500,000,000; (v) eurodollar time deposits that
have been
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rated A-1+ by S&P and F-1+ by Fitch and P-1 by Moody's; and (vi) repurchase
agreements involving any of the Permitted Investments described in clauses (i)
through (iv) above so long as the other party to the repurchase agreement has
the rating described in clause (ii) above and (vii) any other investment the
applicable Rating Agency confirms will not adversely affect any ratings of the
Series 1996-1 Interests and (b) demand deposit or time deposits in any
institution described in clause (iii) above.
SUBORDINATION OF THE CLASS B CERTIFICATES
The Class B Certificate will be subordinated to the extent necessary to
fund certain payments with respect to the Class A Certificates. Certain
principal payments otherwise allocable to the Class B Certificateholders may be
reallocated to cover amounts in respect of the Class A Certificates and the
Class B Invested Amount may be reduced if the Collateral Interest Invested
Amount and the Subordinated Transferor Amount are equal to zero. To the extent
the Class B Invested Amount is reduced, the percentage of collections of Finance
Charge Receivables allocated to the Class B Certificates in subsequent
Collection 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, and the amounts available to be distributed with
respect to interest on, the Class B Certificateholders will be reduced. No
principal will be paid to the Class B Certificateholders until the Class A
Invested Amount is paid in full. See 'Risk Factors--Effect of Subordination' and
'--Allocation Percentages,' '--Reallocated Principal Collections' and
'--Additional Amounts Available to Certificateholders.'
ALLOCATION PERCENTAGES
Pursuant to the Agreement, for each Collection Period the Servicer will
allocate Finance Charge Collections (including Recoveries on Defaulted
Receivables and Merchant Fees), all Principal Collections and the amount of all
Defaulted Receivables (defined below) (see '--Defaulted Receivables; Recoveries;
Rebates and Fraudulent Charges') among the Class A Interest, the Class B
Interest, the Collateral Interest, the Subordinated Transferor Interest, any
other Series of certificates issued by the Trust, the B/F Interest and, in the
case of Principal Collections and the amount of Defaulted Receivables, the
Transferor Interest. Finance Charge Collections will be allocated at all times
to the Class A Interest, the Class B Interest, the Collateral Interest and the
Subordinated Transferor Interest based on the percentage equivalent of the ratio
which the amount of the Class A Invested Amount, the Class B Invested Amount,
the Collateral Interest Invested Amount or the Subordinated Transferor Amount,
as applicable, on the last day of the immediately preceding Collection Period
bears to the amount of Aggregate Receivables in the Trust, or, with respect to
Finance Charge Collections, bears to the sum of the numerators used to calculate
the Invested Percentage with respect to Finance Charge Collections for all
Series of certificates outstanding during such Collection Period and the B/F
Percentage (the 'Class A Floating Allocation Percentage,' the 'Class B Floating
Allocation Percentage,' the 'Collateral Interest Floating Allocation Percentage'
and the 'Subordinated Transferor Floating Allocation Percentage,' in each case
with respect to Finance Charge Collections). The amount of Defaulted Receivables
will be allocated to the Class A Interest, the Class B Interest, the Collateral
Interest and the Subordinated Transferor Interest based on the percentage
equivalent of the ratio which the Class A Invested Amount, the Class B Invested
Amount, the Collateral Interest Invested Amount and the Subordinated Transferor
Amount, as applicable, on the last day of the immediately preceding Collection
Period bears to the Aggregate Receivables on the last day of the immediately
preceding Collection Period (the 'Class A Floating Allocation Percentage,' the
'Class B Floating Allocation Percentage,' the 'Collateral Interest Floating
Allocation Percentage' and the 'Subordinated Transferor Floating Allocation
Percentage,' in each case with respect to the amount of Defaulted Receivables).
During the initial Collection Period following the Closing Date, the Class A
Floating Allocation Percentage, the Class B Floating Allocation Percentage, the
Collateral Interest Floating Allocation Percentage and the Subordinated
Transferor Floating Allocation Percentage will be calculated by reference to the
date of such issuance. During the Revolving Period, all Principal Collections
will be allocated and paid to the Transferor (except for Reallocated Principal
Collections used to pay Required Amounts on the Class A Certificates, Class B
Certificates and the Collateral Interest, as described under '--Reallocation of
Cash Flows' and Shared Principal Collections distributable to the holder of the
Bridgestone/Firestone Certificate in accordance with its interest in the Trust)
but not exceeding the Transferor Interest after giving effect to any purchases
of Receivables. During the Controlled Amortization Period and any Rapid
Amortization Period, all Principal Collections will be allocated to the Class A
Interest, the Class B Interest, the Collateral Interest and the Subordinated
Transferor Interest based on the percentage equivalent of the ratio
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which the Class A Invested Amount, the Class B Invested Amount, the Collateral
Interest Invested Amount and the Subordinated Transferor Amount, as applicable,
each as of the last day of the Revolving Period, bears to the greater of (a) the
Aggregate Receivables on the last day of the prior Collection Period and (b) the
sum of the numerators used to calculate the Invested Percentage with respect to
Principal Collections for all Series of certificates outstanding for such
Collection Period (the 'Class A Fixed Allocation Percentage', the 'Class B Fixed
Allocation Percentage', the 'Collateral Interest Fixed Allocation Percentage'
and the 'Subordinated Transferor Fixed Allocation Percentage', as applicable)
and the remainder will be allocated to the Transferor Interest and to the B/F
Interest.
'Class A Invested Amount' for any date means an amount equal to the initial
principal balance of the Class A Certificates, minus the amount of principal
payments made to Class A Certificateholders prior to such date and minus the
excess, if any, of the aggregate amount of Class A Investor Charge-Offs (as
defined below) for all Distribution Dates preceding such date over the aggregate
amount of any reimbursements of Class A Investor Charge-Offs for all
Distribution Dates preceding such date.
'Class B Invested Amount' for any date means an amount equal to (i) the
initial principal balance of the Class B Certificates, minus (ii) the amount of
principal payments made to Class B Certificateholders prior to such date, minus
(iii) the aggregate amount of Class B Investor Charge-Offs (as defined below)
for all prior Distribution Dates, minus (iv) the aggregate amount of Class B
Reallocated Principal Collections for all prior Distribution Dates, minus (v) an
amount equal to the aggregate amount by which the Class B Invested Amount has
been reduced to fund the Class A Investor Default Amount on all prior
Distribution Dates as described herein and plus (vi) the amount of Excess
Finance Charge Collections applied on all prior Distribution Dates for the
purpose of reimbursing amounts deducted pursuant to the foregoing clauses (iii),
(iv) and (v).
'Collateral Interest Invested Amount' for any date means an amount equal to
(i) the initial principal balance of the Collateral Interest, minus (ii) the
amount of principal payments made to the Collateral Interest Holder prior to
such date, minus (iii) the aggregate amount of Collateral Interest Investor
Charge-Offs (as defined below) for all prior Distribution Dates, minus (iv) the
aggregate amount of Collateral Interest Reallocated Principal Collections for
all prior Distribution Dates, minus (v) an amount equal to the aggregate amount
by which the Collateral Interest Invested Amount has been reduced to fund the
Class A and Class B Investor Default Amount on all prior Distribution Dates as
described herein, and plus (vi) the amount of Excess Finance Charge Collections
applied on all prior Distribution Dates for the purpose of reimbursing amounts
deducted pursuant to the foregoing clauses (iii), (iv) and (v).
'Subordinated Transferor Amount' for any date means an amount equal to (i)
the initial principal balance of the Subordinated Transferor Certificate, minus
(ii) the amount of principal payments made to the holder of the Subordinated
Transferor Certificate prior to such date, minus (iii) the aggregate amount of
Subordinated Transferor Charge-Offs (as defined below) for all prior
Distribution Dates, minus (iv) the aggregate amount of Subordinated Transferor
Reallocated Principal Collections for all prior Distribution Dates, minus (v) an
amount equal to the aggregate amount by which the Subordinated Transferor Amount
has been reduced to fund the Class A, Class B and Collateral Interest Investor
Default Amount on all prior Distribution Dates as described herein, and plus
(vi) the amount of Excess Finance Charge Collections applied on all prior
Distribution Dates for the purpose of reimbursing amounts deducted pursuant to
the foregoing clauses (iii), (iv) and (v).
'Invested Amount' means the sum of the Class A Invested Amount, the Class B
Invested Amount, the Collateral Interest Invested Amount and the Subordinated
Transferor Amount.
'Transferor Percentage' means (i) when used with respect to Principal
Collections during the Revolving Period and the amount of Defaulted Receivables,
100% minus the sum of the applicable Floating Allocation Percentages with
respect to all Series of certificates then issued and outstanding and 1% (the
'B/F Percentage') and (ii) when used with respect to Principal Collections
during the Controlled Amortization Period and any Rapid Amortization Period,
100% minus the sum of the Fixed Allocation Percentages with respect to all
Series of certificates then issued and outstanding and the B/F Percentage.
As a result of the Class A Floating Allocation Percentage, the Class B
Floating Allocation Percentage, the Collateral Interest Floating Allocation
Percentage and the Subordinated Transferor Floating Allocation Percentage,
Finance Charge Collections allocated to the Class A and Class B
Certificateholders, Collateral
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Interest Holder and the Subordinated Transferor Certificateholder may change
each Collection Period based on the relationship between the amount of the Class
A Invested Amount, the Class B Invested Amount, the Collateral Interest Invested
Amount and the Subordinated Transferor Amount to the aggregate invested amount
of all Series of certificates issued by the Trust. In addition, the portion of
Defaulted Receivables allocated to the Class A and Class B Certificateholders,
Collateral Interest Holder and the Subordinated Transferor Certificateholder
will change each Collection Period based in part on the relationship of the
amount of the Class A Invested Amount, the Class B Invested Amount, the
Collateral Interest Invested Amount and the Subordinated Transferor Amount to
the Aggregate Receivables on the last day of the immediately preceding
Collection Period. The numerator used to calculate the Fixed Allocation
Percentage each day during the Controlled Amortization Period or any Rapid
Amortization Period will remain fixed; however, the denominator used to
calculate such percentage may increase or decrease from time to time.
ALLOCATION OF COLLECTIONS; DEPOSITS IN COLLECTION ACCOUNT
The Servicer, no later than the second business day following the date of
processing, will deposit into the Collection Account any payment collected by
the Servicer on the Receivables and will make the allocations and payments
described below to the Collection Account and the parties shown below on the day
of such deposit; provided, however, that for so long as Bridgestone/Firestone is
the Servicer, and either (i) the unsecured short-term debt ratings of the Letter
of Credit Bank have not been reduced below A-1+ or F-1+ by the applicable Rating
Agency or withdrawn by the Rating Agency for a period in excess of 35 days of
notice to the Servicer thereof, and at least five business days remain prior to
the expiration of the Servicer Letter of Credit, (ii) the Servicer has delivered
to the Trustee a substitute Servicer Letter of Credit issued by a financial
institution whose unsecured short-term debt ratings are A-1+ and F-1+ by the
applicable Rating Agency and at least five business days remain prior to the
expiration of such substitute Servicer Letter of Credit or (iii) the Trustee has
drawn the full amount available under the Servicer Letter of Credit and
deposited the proceeds of such demand into a segregated trust account available
to the Trustee in the event the Servicer fails to timely remit Collections to
the Collection Account, then the Servicer may use for its own benefit all such
Collections up to the amount of the Servicer Letter of Credit until the business
day preceding the Distribution Date, at which time the Servicer will make a
deposit to the Collection Account in an amount equal to the net amount of such
deposits and withdrawals which would have been made had the conditions of this
proviso not applied.
While Collections are held by the Servicer pending deposit into the
Collection Account, the Servicer shall be permitted to use such funds for its
own benefit and the certificateholders of all Series (including the
Certificateholders) are subject to risk of loss, including risk of loss
resulting from the bankruptcy or insolvency of the Servicer. The Servicer Letter
of Credit will be available in the event that Bridgestone/Firestone as Servicer
fails to deposit the required amount of Collections into the Collection Account
on the business day prior to any Distribution Date, including any such failure
caused by the bankruptcy or insolvency of Bridgestone/Firestone as Servicer. The
Servicer will not pay to the Trust any fee for use of the Collections. See 'Risk
Factors--Commingling.' Under the Agreement, the Collections on the Receivables
for any Collection Period will be allocated such that all finance charges billed
or accrued in respect of Receivables in the prior Collection Period (less the
aggregate amount of finance charges billed or accrued on Accounts in prior
periods which are rebated to cardholders during such Collection Period) will be
deemed Finance Charge Collections and the remaining amount of such Collections
will be deemed Principal Collections. Notwithstanding the foregoing, Recoveries
received in any Collection Period shall be treated as Finance Charge Collections
for such Collection Period for all purposes. In addition, when any Discount
Percentage is in effect, certain Principal Receivables will be deemed to be
Finance Charge Receivables and the collections thereon will be treated as
Finance Charge Collections. Merchant Fees received or accrued in any Collection
Period shall also be treated as Finance Charge Collections for such Collection
Period for all purposes.
If the amount in respect of Finance Charge Collections to be deposited into
the Collection Account on any Distribution Date pursuant to the preceding
sentence exceeds the sum of (a) the Class A Monthly Interest for such
Distribution Date, any overdue Class A Monthly Interest (plus any additional
interest accrued on such overdue Class A Monthly Interest), the Class A Investor
Default Amount, the Class B Monthly Interest for such Distribution Date, any
overdue Class B Monthly Interest (plus any additional interest accrued on such
overdue Class B Monthly Interest), the Collateral Interest Monthly Interest for
such Distribution Date and any overdue
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Collateral Interest Monthly Interest (plus any additional interest accrued on
such overdue Collateral Interest Monthly Interest for such Distribution Date)
and (b) the Class A Monthly Servicing Fee, the Class B Monthly Servicing Fee,
the Collateral Interest Monthly Servicing Fee and the Subordinated Transferor
Monthly Servicing Fee (collectively, the 'Monthly Servicing Fee'), the Servicer
may deduct the Monthly Servicing Fee (see '--Servicing Compensation and Payment
of Expenses'), and during the Revolving Period, the Class A Investor Default
Amount, the Class B Investor Default Amount, the Collateral Interest Investor
Default Amount and the Subordinated Transferor Default Amount (which will be
distributed to the Transferor in respect of the Transferor Interest, but not in
an amount exceeding the Transferor Interest 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.
APPLICATION OF COLLECTIONS
Any amounts in respect of Principal Collections not distributed to the
Transferor because such Principal Collections would exceed the Transferor
Interest (after giving effect to any new Receivables transferred to the Trust
for the Collection Period relating to such Determination Date) ('Unallocated
Principal Collections') will be held in the Collection Account until
distributable to the Transferor or, if the Controlled Amortization Period or the
Rapid Amortization Period has commenced, on each Distribution Date all or a
portion thereof will be treated as part of Class A Monthly Principal. Any
Transfer Deposit Amounts, Adjustment Payments and the proceeds of any sale,
disposition or liquidation of Receivables following the occurrence of an
Amortization Event caused by the bankruptcy or insolvency of the Transferor or
Bridgestone/Firestone or in connection with the Final Series 1996-A Termination
Date will also be deposited into the Collection Account immediately upon receipt
and will be allocated as Principal Collections or Finance Charge Collections, as
applicable.
THE LETTERS OF CREDIT
Bridgestone/Firestone as Servicer has delivered to the Trustee the Servicer
Letter of Credit. The Servicer Letter of Credit will be available, up to its
stated amount, to cover any shortfall in Collections allocated to any Series and
required to be deposited into the Collection Account by the Servicer. The
Servicer Letter of Credit shall provide that the Trustee may make a demand
thereunder on any day on which Bridgestone/Firestone as Servicer fails to remit
to the Collection Account the full amount of Collections required to be remitted
pursuant to the Agreement. The amount of any such demand shall be equal to the
difference between the total Collections required to be so deposited and the
total Collections actually so deposited. The initial stated amount of the
Servicer Letter of Credit shall be $45,000,000. The proceeds of any drawing on
the Servicer Letter of Credit will be allocated among all outstanding Series of
certificates (including the Series 1996-1 Interests issued by the Trust). Such
allocations will be performed in much the same manner as are allocations of
Collections (generally speaking, such allocations will be based on the ratio of
the Invested Amount to the Aggregate Receivables). During the period that
Bridgestone/Firestone is the Servicer, if aggregate Collections at any time held
by the Servicer exceed the amount available under the Servicer Letter of Credit,
the Servicer shall deposit all such Collections in excess of the amount
available under the Servicer Letter of Credit into the Collection Account no
later than the second business day after the date of processing thereof.
In the event that either the unsecured short-term debt rating of the Letter
of Credit Bank is lowered below A-1+, P-1 or F-1+ by the applicable Rating
Agency, then within 35 days of notice to the Servicer of such event (or
immediately if such rating is reduced to or below A-2, P-2 or F-2 by the
applicable Rating Agency) or in the event that five business days or less remain
prior to the expiration of the Servicer Letter of Credit, Bridgestone/Firestone
shall either (i) commence depositing Collections into the Collection Account
within two business days of the date of processing thereof or (ii) deliver to
the Trustee an irrevocable letter of credit substantially identical to the
Servicer Letter of Credit (a 'Substitute Servicer Letter of Credit') issued by a
financial institution whose unsecured short-term debt is rated A-1+, P-1 or F-1+
by the applicable Rating Agency or (iii) only in the event that the unsecured
short-term debt rating of the Servicer Letter of Credit Bank is lowered below
A-1+, P-1, or F-1+ by the applicable Rating Agency, the Trustee shall draw on
the Servicer Letter of Credit in full and deposit the proceeds of such drawing
in a segregated trust account maintained for the benefit of the
certificateholders of all Series. Any amounts on deposit in such account shall
be invested in Permitted Investments. The Trustee shall withdraw funds from such
account under the same circumstances as it would have
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drawn under the Servicer Letter of Credit. Upon the earlier of (x) the delivery
to the Trustee of a Substitute Servicer Letter of Credit meeting the
requirements described in clause (ii) above or (y) the originally scheduled
expiration date of the Servicer Letter of Credit, the Trustee shall release to
the Letter of Credit Bank any funds on deposit in such account.
The Transferor Letter of Credit will be delivered to the Trustee on the
Closing Date. The Transferor Letter of Credit will be available, up to its
stated amount, to cover any shortfall in payments allocated to any Series and
required to be deposited into the Collection Account by the Transferor. The
Transferor Letter of Credit shall provide that the Trustee may make a demand
thereunder on any day on which the Transferor fails to make any required deposit
to the Collection Account in respect of Adjustment Payments (see '--Defaulted
Receivables; Recoveries; Rebates and Fraudulent Charges' below). The amount of
any such demand shall be the difference between the amount of any required
Adjustment Payment and the amount in respect thereof actually deposited into the
Collection Account. The Transferor Letter of Credit shall be issued by the
Letter of Credit Bank and shall have an initial stated amount of $15,000,000.
The proceeds of any drawing on the Transferor Letter of Credit will be allocated
among all outstanding Series of certificates (including the Series 1996-1
Interests issued by the Trust). Such allocations will be performed in much the
same manner as are allocations of Collections (generally speaking, such
allocations will be based on the ratio of the Invested Amount to the Aggregate
Receivables).
In the event that either the unsecured short-term debt rating of the Letter
of Credit Bank is lowered below A-1+, P-1 or F-1+ (the 'Required Rating') by the
applicable Rating Agency, then within 35 days of notice to the Servicer of such
event (or immediately if such rating is reduced to or below A-2, P-2 or F-2 by
the applicable Rating Agency) or in the event that five business days or less
remain prior to the expiration of the Transferor Letter of Credit, either (i)
there shall be delivered to the Trustee an irrevocable letter of credit
substantially similar to the Transferor Letter of Credit (a 'Substitute
Transferor Letter of Credit') issued by a financial institution whose unsecured
short-term debt is rated A-1+, P-1 or F-1+ by the applicable Rating Agency or
(ii) only in the event that the unsecured short-term debt rating of the Letter
of Credit Bank has been lowered below A-1+, P-1 or F-1+ by the applicable Rating
Agency, the Trustee shall draw on the Transferor Letter of Credit in full and
deposit the proceeds of such drawing in a segregated trust account maintained
for the benefit of the certificateholders of all Series. Any amounts on deposit
in such account shall be invested in Permitted Investments. The Trustee shall
withdraw funds from such account under the same circumstances as it would have
drawn under the Transferor Letter of Credit. Upon the earlier of (x) the
delivery to the Trustee of a Substitute Transferor Letter of Credit meeting the
requirements described in clause (i) above or (y) the originally scheduled
expiration date of the Transferor Letter of Credit, the Trustee shall release to
the Letter of Credit Bank any funds on deposit in such account. If the
Transferor Letter of Credit expires and is not replaced, an Amortization Event
may occur if the sum of the Transferor Amount and the B/F Amount does not equal
at least 7% of the aggregate invested amounts of the outstanding Series of
certificates issued by the Trust. See '--Amortization Events.'
The Letter of Credit Bank's unsecured short-term debt rating has been
reduced to A-1, which is below the Required Ratings and the full amount of the
proceeds from the Servicer Letter of Credit are currently held in a segregated
trust account available to the Trustee in the event Bridgestone/Firestone fails
to timely remit Collections to the Collection Account. In addition, the full
amount of the proceeds from the Transferor Letter of Credit are held in a
segregated trust account available to the Trustee to cover any shortfall in
payments required to be deposited in the Collection Account by the Transferor.
After any drawing under either the Servicer Letter of Credit or the
Transferor Letter of Credit for any reason other than a clerical error by the
Servicer or Transferor or a drawing resulting from a lowering of the Letter of
Credit Bank's short-term debt rating, then (i) Bridgestone/Firestone will begin
daily deposits of Collections into the Collection Account, (ii) the Letter of
Credit Bank may, at its option, terminate the Servicer Letter of Credit upon 21
days advance notice to the Servicer and (iii) the Transferor shall purchase
Class A REMARCs in order to increase the Transferor Amount to a level such that
the sum of the Transferor Amount and the B/F Amount equals at least 7% of the
aggregate invested amounts of the outstanding Series of certificates issued by
the Trust, after which time the Transferor Letter of Credit may be terminated.
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REALLOCATION OF CASH FLOWS
On each Determination Date, the Servicer will determine the Class A
Required Amount, the Class B Required Amount and the Collateral Interest
Required Amount. The 'Class A Required Amount' means the amount, if any, by
which the sum of Class A Monthly Interest, any overdue Class A Monthly Interest
(with interest thereon), the Class A Investor Default Amount and the Class A
Monthly Servicing Fee for such Collection Period exceeds the funds allocable to
the Class A Certificates to pay such amounts. The 'Class B Required Amount'
means the amount, if any, by which the sum of Class B Monthly Interest, any
overdue Class B Monthly Interest (with interest thereon) and the Class B Monthly
Servicing Fee for such Collection Period exceeds the funds allocable to the
Class B Certificates to pay such amounts. The 'Collateral Interest Required
Amount' means the amount, if any, by which the sum of Collateral Interest
Monthly Interest, any overdue Collateral Interest Monthly Interest (with
interest thereon) and the Collateral Interest Monthly Servicing Fee for such
Collection Period exceeds the funds allocable to the Collateral Interest to pay
such amounts. The 'Required Amount' shall equal the sum of the Class A, Class B
and Collateral Interest Required Amounts.
If Finance Charge Collections allocable to interest for any Collection
Period are insufficient to pay the Required Amount, Excess Finance Charge
Collections will be used to pay the Required Amount with respect to such
Distribution Date. See '--Excess Finance Charge Collections.' If such Excess
Finance Charge Collections are insufficient to pay the Required Amount,
Principal Collections allocable to the Subordinated Transferor Interest, the
Collateral Interest and the Class B Interest will then be used to fund the
remaining Required Amount. See '--Reallocated Principal Collections.' If
Reallocated Principal Collections with respect to any Collection Period are
insufficient to fund the remaining Required Amount for such Collection Period,
then a portion of the Subordinated Transferor Amount, the Collateral Interest
Invested Amount and the Class B Invested Amount, as applicable, may be reduced
for the benefit of interests senior to such interests. In the event of such
reductions, Excess Finance Charge Collections in subsequent periods, if any,
will be used to increase the Class B Invested Amount, Collateral Interest
Invested Amount and the Subordinated Transferor Amount, as applicable (but not
in excess of the initial invested amounts). See '--Additional Amounts Available
to Certificateholders.'
In certain instances, Principal Collections and certain other amounts
otherwise allocable to other Series, to the extent such collections are not
needed to make payments to the certificateholders of such other series, may be
applied to cover principal payments due to or for the benefit of the holders of
the Series 1996-1 Interests. See '--Shared Principal Collections.' In addition,
Finance Charge Collections in excess of the amounts necessary to make required
payments with respect to certificates of other outstanding series will be
applied to cover shortfalls with respect to Finance Charge Collections allocable
to the Series 1996-1 Interests. See '--Sharing of Excess Finance Charge
Collections.'
DISTRIBUTIONS FROM THE COLLECTION ACCOUNT
On any day on which the Servicer makes a deposit into the Collection
Account with respect to the Revolving Period, the Servicer will withdraw from
the Collection Account and pay to the Transferor an amount equal to the
aggregate amount of such deposits in respect of Principal Collections (other
than Reallocated Principal Collections used to pay Required Amounts due on the
Class A Certificates, Class B Certificates and the Collateral Interest), but not
exceeding the Transferor Interest on such day (after giving effect to any new
Receivables transferred to the Trust on such day). On any day on which the
Servicer makes a deposit into the Collection Account with respect to the
Controlled Amortization Period and any Rapid Amortization Period, the Servicer
will withdraw from the Collection Account and pay to the Transferor an amount
equal to the Transferor's Percentage of the amount of such deposits in respect
of Principal Collections, except that the amount of such payments with respect
to Principal Collections shall not exceed the amount of the Transferor Interest
on such day (after giving effect to any new Receivables transferred to the Trust
on such day). On any such day, the Servicer shall also withdraw from the
Collection Account and pay to Bridgestone/Firestone, as holder of the
Bridgestone/Firestone Certificate, the B/F Percentage of the aggregate amount of
such deposits in respect of Principal Collections and Finance Charge
Collections.
There will also be deposited into the Collection Account, Collections which
are not allocable to the Series 1996-1 Interests, the Bridgestone/Firestone
Certificate or the Transferor (i.e., such Collections will be allocable to other
Series, including the Series 1992-B Certificates). Such Collections will be
distributed as provided in the
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Supplement to the Agreement relating to such other Series and will not be
available for distribution to the Certificateholders.
The Servicer shall apply or shall cause the Trustee to apply the funds on
deposit in the Collection Account allocable to the Series 1996-1 Interests with
respect to each Distribution Date in the priority set forth below:
(a) An amount equal to the Class A Floating Allocation Percentage of
Finance Charge Collections deposited in the Collection Account for the
collection Period immediately preceding such Distribution Date will be
distributed in the following priority:
(i) an amount equal to the Class A Monthly Interest for such
Distribution Date, plus the amount of any Class A Monthly Interest
previously due but not paid on a prior Distribution Date, plus any
additional interest for such Distribution Date, plus the amount of any
additional interest with respect to interest amounts that were due but not
paid on a prior Distribution Date, will be distributed to the Class A
Certificateholders;
(ii) an amount equal to the aggregate Class A Investor Default Amount
for such Distribution Date will be distributed to the Transferor in respect
of the Transferor Interest on Distribution Dates with respect to the
Revolving Period (unless such amount has been previously netted against
deposits to the Collection Account), but not exceeding the Transferor
Interest (after giving effect to any new Receivable transferred to the
Trust on such date) and thereafter will be included in the funds available
to make principal payments;
(iii) an amount equal to the Class A Monthly Servicing Fee for such
Distribution Date will be distributed to the Servicer (unless such amount
has been previously netted against deposits to the Collection Account) (in
the event Bridgestone/Firestone is not the Servicer, amounts described in
this clause (iii) shall have priority over the amounts described in clause
(ii) above); and
(iv) the balance, if any, will constitute a portion of Excess Finance
Charge Collections and will be allocated and distributed as described under
'--Excess Finance Charge Collections.'
(b) An amount equal to the Class B Floating Allocation Percentage of
Finance Charge Collections deposited in the Collection Account for the
Collection Period immediately preceding such Distribution Date will be
distributed in the following priority:
(i) an amount equal to the Class B Monthly Interest for such
Distribution Date, plus the amount of any Class B Monthly Interest
previously due but not paid on a prior Distribution Date, plus any
additional interest for such Distribution Date, plus the amount of any
additional interest with respect to interest amounts that were due but not
paid on a prior Distribution Date, will be distributed to the Class B
Certificateholders;
(ii) an amount equal to the Class B Monthly Servicing Fee for such
Distribution Date will be distributed to the Servicer (unless such amount
has been previously netted against deposits to the Collection Account); and
(iii) the balance, if any, will constitute a portion of Excess Finance
Charge Collections and will be allocated and distributed as described under
'--Excess Finance Charge Collections.'
(c) An amount equal to the Collateral Interest Floating Allocation
Percentage of Finance Charge Collections deposited in the Collection Account for
the Collection Period immediately preceding such Distribution Date will be
distributed in the following priority:
(i) an amount equal to the Collateral Interest Monthly Interest for
such Distribution Date, plus the amount of any Collateral Interest Monthly
Interest previously due but not paid on a prior Distribution Date, plus any
additional interest for such Distribution Date, plus the amount of any
additional interest with respect to interest amounts that were due but not
paid on a prior Distribution Date, will be distributed to the Collateral
Interest Holders;
(ii) an amount equal to the Collateral Interest Monthly Servicing Fee
for such Distribution Date will be distributed to the Servicer (unless such
amount has been previously netted against deposits to the Collection
Account); and
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(iii) the balance, if any, will constitute a portion of Excess Finance
Charge Collections and will be allocated and distributed as described under
'--Excess Finance Charge Collections.'
(d) An amount equal to the Subordinated Transferor Floating Allocation
Percentage of Finance Charge Collections deposited in the Collection Account for
the Collection Period immediately preceding such Distribution Date will be
distributed in the following priority:
(i) an amount equal to the Subordinated Transferor Monthly Servicing
Fee for such Distribution Date will be distributed to the Servicer (unless
such amount has been previously netted against deposits to the Collection
Account); and
(ii) the balance, if any, will constitute a portion of Excess Finance
Charge Collections and will be allocated and distributed as described under
'--Excess Finance Charge Collections.'
(e) For each Distribution Date with respect to the Revolving Period, the
remaining funds on deposit in the Collection Account allocable to the Class A
and Class B Certificates, the Collateral Interest and the Subordinated
Transferor Certificate (other than certain Excess Finance Charge Collections and
Reallocated Principal Collections) will be applied as Shared Principal
Collections and the balance will be distributed to the Transferor in respect of
the Transferor Interest.
(f) For each Distribution Date with respect to the Controlled Amortization
Period or any Rapid Amortization Period, the remaining funds on deposit in the
Collection Account allocable to the Class A and Class B Certificates, the
Collateral Interest and the Subordinated Transferor Certificate (other than
certain Excess Finance Charge Collections and Reallocated Principal Collections)
will be distributed as follows:
(i) an amount equal to Class A Monthly Principal for such Distribution
Date will be distributed to the Class A Certificateholders until the Class
A Invested Amount is paid in full;
(ii) once the Class A Invested Amount is paid in full, the remaining
amount will be distributed to the Class B Certificateholders until the
Class B Invested Amount is paid in full;
(iii) once the Class B Invested Amount is paid in full, the remaining
amount will be distributed to the Collateral Interest Holder until the
Collateral Interest Invested Amount is paid in full;
(iv) once the Collateral Interest Invested Amount is paid in full, the
remaining amount will be distributed to the holder of the Subordinated
Transferor Certificate until the Subordinated Transferor Amount is paid in
full;
(v) an amount equal to the balance of any such remaining funds on
deposit in the Collection Account will be paid to the Transferor in respect
of the Transferor Interest up to the amount of the Transferor Interest; and
(vi) an amount equal to the balance will be applied as Shared
Principal Collections, to the extent necessary, and the remainder will be
distributed to the Transferor in respect of the Transferor Interest.
Class A Monthly Interest means, with respect to any Distribution Date, the
Class A Monthly Interest equals one-twelfth of the product of (i) the Class A
Certificate Rate and (ii) the outstanding principal balance of the Class A
Certificates as of the preceding Distribution Date (after subtracting therefrom
the aggregate amount of all distributions of principal made to the Class A
Certificateholders on such Distribution Date) or, with respect to the first
Distribution Date, the Initial Class A Invested Amount, provided, however, that
with respect to the initial Distribution Date, Class A Monthly Interest shall
equal $788,388.89.
Class B Monthly Interest means, with respect to any Distribution Date, the
Class B Monthly Interest equals one-twelfth of the product of (i) the Class B
Certificate Rate and (ii) the outstanding principal balance of the Class B
Certificates as of the preceding Distribution Date (after subtracting therefrom
the aggregate amount of all distributions of principal made to the Class B
Certificateholders on such Distribution Date) or, with respect to the first
Distribution Date, the Initial Class B Invested Amount, provided, however, that
with respect to the initial Distribution Date, Class B Monthly Interest shall
equal $116,949.43.
Collateral Interest Monthly Interest means, with respect to any
Distribution Date, the product of (i) the actual number of days in the related
Collateral Interest Accrual Period divided by 360, (ii) the Collateral Interest
Certificate Rate and (iii) the outstanding principal balance of the Collateral
Interest as of the preceding Distribution Date (after subtracting therefrom the
aggregate amount of all distributions of principal made to the
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Collateral Interest Holder on such Distribution Date) or, with respect to the
first Distribution Date, the Initial Collateral Interest Invested Amount.
Class A Investor Default Amount means, a portion of all Defaulted
Receivables which will be allocated to the Class A Certificateholders for each
Distribution Date in an amount equal to the product of the Class A Floating
Allocation Percentage applicable during the immediately preceding Collection
Period and the amount of Defaulted Receivables for such Collection Period.
Class B Investor Default Amount means, a portion of all Defaulted
Receivables which will be allocated to the Class B Certificateholders for each
Distribution Date in an amount equal to the product of the Class B Floating
Allocation Percentage applicable during the immediately preceding Collection
Period and the amount of Defaulted Receivables for such Collection Period.
Collateral Interest Investor Default Amount means, a portion of all
Defaulted Receivables which will be allocated to the Collateral Interest Holders
for each Distribution Date in an amount equal to the product of the Collateral
Interest Floating Allocation Percentage applicable during the immediately
preceding Collection Period and the amount of Defaulted Receivables for such
Collection Period.
Subordinated Transferor Default Amount means, a portion of all Defaulted
Receivables which will be allocated to the holder of the Subordinated Transferor
Certificate for each Distribution Date in an amount equal to the product of the
Subordinated Transferor Floating Allocation Percentage applicable during the
immediately preceding Collection Period and the amount of Defaulted Receivables
for such Collection Period.
Investor Default Amount shall equal the sum of the Class A Investor Default
Amount, Class B Investor Default Amount, Collateral Interest Investor Default
Amount and Subordinated Transferor Default Amount.
Monthly Servicing Fee means, with respect to any distribution date, the sum
of (a) the Class A Monthly Servicing Fee, the Class B Monthly Servicing Fee, the
Collateral Interest Monthly Servicing Fee and the Subordinated Transferor
Monthly Servicing Fee and (b) the Servicing Fee allocable to the Transferor
Amount and the B/F Amount.
The portion of the Servicing Fee allocable to the Class A Interest on each
Distribution Date (the 'Class A Monthly Servicing Fee'), to the Class B Interest
on each Distribution Date (the 'Class B Monthly Servicing Fee'), to the
Collateral Interest on each Distribution Date (the 'Collateral Interest Monthly
Servicing Fee') and to the Subordinated Transferor Interest on each Distribution
Date (the 'Subordinated Transferor Monthly Servicing Fee') generally will be
equal to one-twelfth of the product of 2.00% per annum and the amount of the
Class A Invested Amount, the Class B Invested Amount, the Collateral Interest
Invested Amount, or the Subordinated Transferor Amount, as the case may be, on
the last day of the second preceding Collection Period (in the case of the first
Distribution Date, the initial principal amount of the Class A Certificates,
Class B Certificates or the Collateral Interest, as the case may be).
Class A Monthly Principal with respect to any Distribution Date relating to
the Controlled Amortization Period or any Rapid Amortization Period will equal
the sum of (i) an amount equal to the Fixed Allocation Percentage of Principal
Collections received during the Collection Period immediately preceding such
Distribution Date (other than Reallocated Principal Collections used to pay the
Class A Required Amount), (ii) the amount of Shared Principal Collections
allocated to the Class A Certificates with respect to the preceding Collection
Period equal to the product of (a) a fraction, the numerator of which is the
Invested Amount and the denominator of which is the aggregate invested amounts
of all Series then accumulating or amortizing principal and (b) the amount, if
any, of Unallocated Principal Collections on deposit in the Collection Account
on such Distribution Date and (iii) the amount, if any, of Finance Charge
Collections and Excess Finance Charge Collections allocated and available on
such Distribution Date to (A) fund the Class A Investor Default Amount, the
Class B Investor Default Amount, the Collateral Interest Investor Default Amount
and the Subordinated Transferor Default Amount with respect to such Distribution
Date and (B) reimburse Class A Investor Charge-Offs and previous reductions in
the Class B Invested Amount, the Collateral Interest Invested Amount and the
Subordinated Transferor Invested Amount; provided, however, that for each
Distribution Date with respect to the Controlled Amortization Period (unless and
until an Amortization Event shall have occurred), Class A Monthly Principal may
not exceed the Controlled Distribution Amount for such Distribution Date; and
provided further, that with respect to any Termination Payment Date, Class A
Monthly Principal will be an amount equal to the Class A Invested Amount.
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Controlled Distribution Amount for any Distribution Date with respect to
the Controlled Amortization Period shall mean an amount equal to the sum of the
Controlled Amortization Amount and any existing Deficit Controlled Amortization
Amount.
Controlled Amortization Amount means $16,666,666.67.
Deficit Controlled Amortization Amount shall mean, on the first
Distribution Date with respect to the Controlled Amortization Period, the
excess, if any, of the Controlled Amortization Amount over the amount
distributed as Class A Monthly Principal for such Distribution Date and, on each
subsequent Distribution Date with respect to the Controlled Amortization Period,
the excess, if any, of the Controlled Amortization Amount and any then existing
Deficit Controlled Amortization Amount over the aggregate Class A Monthly
Principal distributed on such Distribution Date.
Excess Finance Charge Collections shall mean, with respect to any
Distribution Date, an amount equal to the sum of the amounts described in clause
(a)(iv), clause (b)(iii) and clause (c)(iii) under '--Distributions from the
Collection Account' above.
Termination Payment Date shall mean the earlier of the first Distribution
Date following the liquidation or sale of the Receivables as a result of an
insolvency event as described under '--Amortization Events' or the occurrence of
the Final Series 1996-1 Termination Date.
EXCESS FINANCE CHARGE COLLECTIONS
On each Distribution Date, the Servicer will apply or cause the Trustee to
apply Excess Finance Charge Collections with respect to the Collection Period
immediately preceding such Distribution Date, to make the following
distributions in the following priority:
(a) an amount equal to the Class A Required Amount, if any, with respect to
such Collection Period will be used to fund the Class A Required Amount;
(b) an amount equal to the aggregate amount of Class A Investor Charge-Offs
which have not been previously reimbursed (after giving effect to the allocation
on such Distribution Date of certain other amounts applied for that purpose)
will be distributed to the Transferor in respect of the Transferor Interest on
Distribution Dates with respect to the Revolving Period, but not in an amount
exceeding the Transferor Interest (after giving effect to any new Receivables
transferred to the Trust on such date) and thereafter will be included in the
funds available to make principal payments;
(c) an amount equal to the Class B Required Amount, if any, with respect to
such Collection Period will be used to fund the Class B Required Amount;
(d) an amount equal to the aggregate Class B Investor Default Amount for
such Distribution Date will be distributed to the Transferor in respect of the
Transferor Interest on Distribution Dates with respect to the Revolving Period
(unless such amount has been previously netted against deposits to the
Collection Account), but not exceeding the Transferor Interest (after giving
effect to any new Receivable transferred to the Trust on such date) and
thereafter will be included in the funds available to make principal payments;
(e) an amount equal to the amount by which the Class B Invested Amount has
been reduced below the Initial Class B Invested Amount (for reasons other than
the payment of principal to the Class B Certificateholders), if any, for such
Distribution Date will be distributed to the Transferor in respect of the
Transferor Interest on Distribution Dates with respect to the Revolving Period,
but not in an amount exceeding the Transferor Interest (after giving effect to
any new Receivables transferred to the Trust on such date) and thereafter will
be included in the funds available to make principal payments;
(f) an amount equal to the Collateral Interest Required Amount, if any,
with respect to such Collection Period will be used to fund the Collateral
Interest Required Amount;
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(g) an amount equal to the aggregate Collateral Interest Investor Default
Amount for such Distribution Date will be distributed to the Transferor in
respect of the Transferor Interest on Distribution Dates with respect to the
Revolving Period (unless such amount has been previously netted against deposits
to the Collection Account), but not exceeding the Transferor Interest (after
giving effect to any new Receivable transferred to the Trust on such date) and
thereafter will be included in the funds available to make principal payments;
(h) an amount equal to the amount by which the Collateral Interest Invested
Amount has been reduced below the Initial Collateral Interest Invested Amount
(for reasons other than the payment of principal to the Collateral Interest
Holder) will be distributed to the Transferor on Distribution Dates with respect
to the Revolving Period, but not in an amount exceeding the Transferor Interest
in respect of the Transferor Interest on such day (after giving effect to any
new Receivables transferred to the Trust on such date) and thereafter will be
included in the funds available to make principal payments;
(i) any additional amounts required to be paid on such Distribution Date
pursuant to the terms of the Loan Agreement;
(j) an amount equal to the Subordinated Transferor Default Amount will be
distributed to the Transferor in respect of the Transferor Interest on
Distribution Dates with respect to the Revolving Period, but not in an amount
exceeding the Transferor Interest (after giving effect to any new Receivables
transferred to the Trust on such date) and thereafter will be included in the
funds available to make principal payments;
(k) an amount equal to the amount by which the Subordinated Transferor
Amount has been reduced below the initial Subordinated Transferor Amount (for
reasons other than the payment of principal to the holder of the Subordinated
Transferor Certificate) will be distributed to the Transferor in respect of the
Transferor Interest on Distribution Dates with respect to the Revolving Period,
but not in an amount exceeding the Transferor Interest on such day (after giving
effect to any new Receivables transferred to the Trust on such date) and
thereafter will be included in the funds available to make principal payments);
(l) the balance, if any, will be treated as Shared Excess Finance Charge
Collections to the extent necessary; and
(m) any remaining amounts not treated as Shared Excess Finance Charge
Collections will be treated as Shared Principal Collections.
REALLOCATED PRINCIPAL COLLECTIONS
If Excess Finance Charge Collections available with respect to such
Collection Period are less than the remaining Required Amount, Class B Investor
Default Amount and Collateral Interest Investor Default Amount, Principal
Collections allocable to the Subordinated Transferor Interest, the Collateral
Interest and the Class B Interest with respect to a Collection Period will be
applied in the following order of priority:
(i) Subordinated Transferor Reallocated Principal Collections, first, to
the remaining components of the Class A Required Amount, if any, then to the
remaining components of the Class B Required Amount, if any, then to the Class B
Investor Default Amount, if any, then to the remaining components of the
Collateral Interest Required Amount, if any and then to the Collateral Interest
Investor Default Amount, if any;
(ii) Collateral Interest Reallocated Principal Collections, first, to the
remaining components of the Class A Required Amount, if any, then to the
remaining components of the Class B Required Amount, if any, and then to the
Class B Investor Default Amount, if any, and
(iii) Class B Reallocated Principal Collections, to the remaining
components of the Class A Required Amount, if any.
Subordinated Transferor Reallocated Principal Collections means, with
respect to each Distribution Date, the Principal Collections allocable to the
Subordinated Transferor Certificate with respect to such Distribution Date
(equal to the Subordinated Transferor Floating Allocation Percentage of
Principal Collections for the related Collection Period for any such
Distribution Date during the Revolving Period or the Subordinated Transferor
Fixed Allocation Percentage of Principal Collections for any such Distribution
Date during the Controlled Amortization Period or Rapid Amortization Period) in
an amount equal to the Class A, Class B and Collateral
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Interest Required Amounts, if any, the Class B Investor Default Amount, if any,
and the Collateral Interest Investor Default Amount, if any, with respect to
such Distribution Date (after giving effect to any payment of such amounts from
Excess Finance Charge Collections).
Collateral Interest Reallocated Principal Collections means, with respect
to each Distribution Date, the Principal Collections allocable to the Collateral
Interest with respect to such Distribution Date (equal to the Collateral
Interest Floating Allocation Percentage of Principal Collections for the related
Collection Period for any such Distribution Date during the Revolving Period or
the Collateral Interest Fixed Allocation Percentage of Principal Collections for
any such Distribution Date during the Controlled Amortization Period or Rapid
Amortization Period) in an amount equal to the Class A and Class B Required
Amounts, if any, and the Class B Investor Default Amount, if any, with respect
to such Distribution Date (after giving effect to any payment of such amounts
from Excess Finance Charge Collections and Subordinated Transferor Reallocated
Principal Collections).
Class B Reallocated Principal Collections means with respect to each
Distribution Date, the Principal Collections allocable to the Class B
Certificates with respect to such Distribution Date (equal to the Class B
Floating Allocation Percentage of Principal Collections for the related
Collection Period for any such Distribution Date during the Revolving Period or
the Class B Fixed Allocation Percentage of Principal Collections for any such
Distribution Date during the Controlled Amortization Period or Rapid
Amortization Period) in an amount equal to the Class A Required Amount, if any,
with respect to such Distribution Date (after giving effect to any payment of
the Class A Required Amount from Excess Finance Charge Collections, Subordinated
Transferor Reallocated Principal Collections and Collateral Interest Reallocated
Principal Collections).
Reallocated Principal Collections will equal the sum of Subordinated
Transferor Reallocated Principal Collections, Collateral Interest Reallocated
Principal Collections and Class B Reallocated Principal Collections.
Collections not applied in the foregoing manner (and therefore not
constituting Reallocated Principal Collections) will during the Revolving
Period, be applied as Shared Principal Collections and, during the Controlled
Amortization Period or any Rapid Amortization Period, will be included in the
funds available to make principal payments.
ADDITIONAL AMOUNTS AVAILABLE TO CERTIFICATEHOLDERS
Excess Finance Charge Collections will be applied to fund the Required
Amount, if any. If Excess Finance Charge Collections available for such
Collection Period are less than the remaining Required Amount, Principal
Collections for such Collection Period will then be used to fund the remaining
Required Amount.
If Reallocated Principal Collections with respect to any Collection Period
are insufficient to fund the remaining Class A Required Amount for such
Collection Period, then a portion of the Subordinated Transferor Amount (after
giving effect to reductions for any Subordinated Transferor Charge-Offs and
Subordinated Transferor Reallocated Principal Collections for such Collection
Period) equal to such insufficiency (but not in excess of the Class A Investor
Default Amount for such Distribution Date) will be allocated to the Class A
Certificates to avoid a charge-off with respect to the Class A Certificates, and
the Subordinated Transferor Amount will be reduced by such amount. If such
reduction would cause the Subordinated Transferor Amount to be negative, the
Subordinated Transferor Amount will be reduced to zero.
If the Subordinated Transferor Amount is reduced to zero, the Collateral
Interest Invested Amount (after giving effect to reductions for any Collateral
Interest Investor Charge-Offs and any Collateral Interest Reallocated Principal
Collections for such Collection Period for which the Subordinated Transferor
Amount was not reduced) will be reduced by the amount by which the Subordinated
Transferor Amount would have been reduced below zero (but not by more than the
excess of the Class A Investor Default Amount for such Distribution Date over
the amount of such reduction, if any, of the Subordinated Transferor Amount for
such Distribution Date) and such amount will be allocated to the Class A
Certificates to avoid a charge-off with respect to the Class A Certificates. If
such reduction would cause the Collateral Interest Invested Amount to be
negative, the Collateral Interest Invested Amount will be reduced to zero.
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If the Collateral Interest Invested Amount is reduced to zero, the Class B
Invested Amount (after giving effect to reductions for any Class B Investor
Charge-Offs and any Class B Reallocated Principal Collections for such
Collection Period for which the Subordinated Transferor Amount and the
Collateral Interest Invested Amount were not reduced) will be reduced by the
amount by which the Collateral Interest Invested Amount would have been reduced
below zero (but not by more than the excess of the Class A Investor Default
Amount for such Distribution Date over the amount of such reduction, if any, of
the Subordinated Transferor Amount and the Collateral Interest Invested Amount
for such Distribution Date) and such amount will be allocated to the Class A
Certificates to avoid a charge-off with respect to the Class A Certificates. If
such reduction would cause the Class B Invested Amount to be negative, the Class
B Invested Amount will be reduced to zero.
If the Class B Invested Amount is reduced to zero, 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 of the Class A
Investor Default Amount for such Distribution Date over the reduction in the
Subordinated Transferor Amount, the Collateral Interest Invested Amount and the
Class B Invested Amount for such Collection Period (a 'Class A Investor
Charge-Off'); and the Class A Certificateholders will bear directly the credit
and other risks associated with their undivided interest in the Trust.
After payment of the Class A Required Amount, if Collateral Interest
Reallocated Principal Collections and Subordinated Transferor Reallocated
Principal Collections not required to fund the Class A Required Amount with
respect to any Collection Period are insufficient to fund the remaining Class B
Required Amount and Class B Investor Default Amount for such Collection Period,
then a portion of the Subordinated Transferor Amount (after giving effect to
reductions for any Subordinated Transferor Charge-Offs, Subordinated Transferor
Reallocated Principal Collections and any adjustments made thereto for the
benefit of the Class A Certificateholders) equal to such insufficiency (but not
in excess of the Class B Investor Default Amount for such Distribution Date)
will be allocated to the Class B Certificates to avoid a charge-off with respect
to the Class B Certificates, and the Subordinated Transferor Amount will be
reduced by such amount.
If the Subordinated Transferor Amount is reduced to zero, the Collateral
Interest Invested Amount (after giving effect to reductions for any Collateral
Interest Investor Charge-Offs, Collateral Interest Reallocated Principal
Collections and any adjustments made thereto for the benefit of the Class A
Certificateholders) will be reduced by the amount by which the Subordinated
Transferor 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, if any, of the Subordinated Transferor Amount for
such Distribution Date) and such amount will be allocated to the Class B
Certificates to avoid a charge-off with respect to the Class B Certificates.
If the Collateral Interest Invested Amount is reduced to zero, the Class B
Invested Amount will be reduced by the amount by which the Collateral Interest
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 reduction in the Subordinated Transferor Amount and the Collateral Interest
Invested Amount (a 'Class B Investor Charge-Off'); and the Class B
Certificateholders will bear directly the credit and other risks associated with
their undivided interest in the Trust.
After payment of the Class B Required Amount, if Subordinated Transferor
Reallocated Principal Collections with respect to any Collection Period are
insufficient to fund the remaining Collateral Interest Required Amount and
Collateral Interest Investor Default Amount for such Collection Period, then a
portion of the Subordinated Transferor Amount (after giving effect to reductions
for any Subordinated Transferor Charge-Offs, Subordinated Transferor Reallocated
Principal Collections and any adjustments made thereto for the benefit of the
Class A and Class B Certificateholders) equal to such insufficiency (but not in
excess of the Collateral Interest Investor Default Amount for such Distribution
Date) will be allocated to the Collateral Interest to avoid a charge-off with
respect to the Collateral Interest, and the Subordinated Transferor Amount will
be reduced by such amount.
If the Subordinated Transferor Amount is reduced to zero, the Collateral
Interest Invested Amount will be reduced by the amount by which the Subordinated
Transferor Amount would have been reduced below zero, but not by more than the
excess of the Collateral Interest Investor Default Amount for such Distribution
Date over the reduction in the Subordinated Transferor Amount (a 'Collateral
Interest Investor Charge-Off'), and the
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Collateral Interest Holder will bear directly the credit and other risks
associated with their undivided interest in the Trust.
On each Distribution Date, if the Subordinated Transferor Default Amount
for such Distribution Date exceeds the amount of Excess Finance Charge
Collections which is allocated and available to fund such amount as described
under 'Excess Finance Charge Collections', the Subordinated Transferor Amount
(after giving effect to reductions for Subordinated Transferor Reallocated
Principal Collections and the amount of any adjustments made thereto for the
benefit of the Class A or Class B Certificateholders or the Collateral Interest
Holder) will be reduced but not in excess of the Subordinated Transferor Default
Amount (the 'Subordinated Transferor Charge-Off').
In the event that any of the Subordinated Transferor Amount, the Collateral
Interest Invested Amount, the Class B Invested Amount or the Class A Invested
Amount is reduced, such amount will thereafter be increased (but not in excess
of the unpaid principal balance of the Subordinated Transferor Certificate,
Collateral Interest, the Class B Certificates or the Class A Certificates, as
applicable) on any Distribution Date by the amount of Excess Finance Charge
Collections allocated and available for that purpose as described under
'--Excess Finance Charge Collections.'
The 'Initial Subordinated Transferor Amount' will be equal to $18,205,129
and the 'Initial Collateral Interest Invested Amount' will be equal to
$10,000,000.
SHARED PRINCIPAL COLLECTIONS
To the extent that Principal Collections and other amounts that are
allocated to the interest of the holders of any class of any series (other than
the Transferor Interest) are not needed to make payments to the
certificateholders of such class, they may be applied to cover principal
payments due to or for the benefit of certificateholders of another Series
('Shared Principal Collections'). Any such reallocation will not result in a
reduction in the interest of the holders of the Series to which such Principal
Collections were initially allocated. In addition, Principal Collections and
certain other amounts otherwise allocable to other Series, to the extent such
collections are not needed to make payments to the certificateholders of such
other Series, may be applied to cover principal payments due to or for the
benefit of the holders of the Series 1996-1 Interests.
SHARING OF EXCESS FINANCE CHARGE COLLECTIONS
Finance Charge Collections on any business day in excess of the amounts
necessary to make required payments on such business day with respect to the
Series 1996-1 Interests will be applied to cover any shortfalls with respect to
amounts payable from Finance Charge Collections allocable to any other Series
then outstanding, pro rata based upon the amount of the shortfall, if any, with
respect to such other Series. In addition, Finance Charge Collections in excess
of the amounts necessary to make required payments on such business day with
respect to certificates of other outstanding Series will be applied to cover any
shortfalls with respect to Finance Charge Collections allocable to the Series
1996-1 Interests. Any Excess Finance Charge Collections remaining after covering
shortfalls with respect to all outstanding Series will be paid to the Transferor
in respect of the Transferor Interest.
DISTRIBUTIONS TO THE CERTIFICATEHOLDERS
Payments to the Certificateholders will be made from the Collection
Account. In addition to the amounts deposited in the Collection Account as
described above, the proceeds of any optional repurchase of the Series 1996-1
Interests by the Transferor will be deposited in the Collection Account on the
Distribution Date on which such repurchase occurs.
The Servicer shall instruct the Trustee or the Paying Agent to distribute
from the Collection Account on each Distribution Date the amounts described
under '--Distributions from the Collection Account' above.
The paying agent (the 'Paying Agent') shall initially be the Trustee. The
Paying Agent shall have the revocable power to withdraw funds from the
Collection Account for the purpose of making distributions to the
Certificateholders.
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On each Distribution Date, the Servicer will pay to the Transferor any
investment earnings (net of losses and investment expenses) with respect to the
Collection Account.
Distribution Date shall mean December 2, 1996, and the first day of each
calendar month thereafter, or, if such first day is not a business day, the next
succeeding business day.
DEFAULTED RECEIVABLES; RECOVERIES; REBATES AND FRAUDULENT CHARGES
'Defaulted Receivables' for any Collection Period are Receivables in any
Account which were written off as uncollectible in such Collection Period in
accordance with Servicer Guidelines. Receivables in any Account will be
considered charged off for the purposes of the Agreement on the earlier of (i)
the last day of the Collection Period immediately following the Collection
Period in which such Receivable becomes 180 days delinquent and (ii) the cycle
billing date on which such Account is charged off in accordance with the
customary and usual servicing procedures of the Servicer. The amount of
Defaulted Receivables for any Collection Period will be an amount equal to the
principal amount of the Receivables that became Defaulted Receivables in such
Collection Period less the full amount of any Defaulted Receivables for which
the Transferor or the Servicer becomes obligated to accept reassignment for such
Collection Period unless certain events of bankruptcy, insolvency or
receivership have occurred with respect to the Transferor or the Servicer. A
portion of all Defaulted Receivables will be allocated to the Class A
Certificateholders, the Class B Certificateholders, the Collateral Interest
Holder and the Subordinated Transferor Certificateholder. See '--Distributions
from the Collection Account.'
The term 'Recoveries,' with respect to any Collection Period, shall mean
all amounts or payments received by the Servicer with respect to Receivables
which have previously become Defaulted Receivables in a prior Collection Period,
net of reasonable expenses of the Servicer incurred and deducted from such
amounts or payments.
If the Servicer makes a downward adjustment of the amount of any Receivable
because of a rebate, refund, unauthorized charge, billing error or certain other
noncash items to a cardholder, or if the Servicer otherwise adjusts downward the
amount of any Receivable without receiving Collections therefor or without
charging off such amount as uncollectible, or any Receivable is discovered as
having been created through a fraudulent or counterfeit action the Transferor
will be obligated to make a deposit into the Collection Account in immediately
available funds in an amount equal to any such adjustment or principal amount of
the fraudulent or counterfeit Receivable. If the Transferor fails to make any
such deposit the Trustee shall make a drawing under the Transferor Letter of
Credit (any such payment or proceeds of a drawing under the Transferor Letter of
Credit, 'Adjustment Payments'). If funds are not available under the Transferor
Letter of Credit, the Transferor Amount will be reduced by the amount of the
adjustment or the principal amount of the fraudulent or counterfeit Receivable;
provided, however, that if such deduction would reduce the Transferor Amount
below zero or would otherwise not be permitted by law, the B/F Amount will be
reduced by the amount of any such adjustment or the principal amount of the
fraudulent or counterfeit Receivable. Any Adjustment Payments so paid by the
Transferor or the proceeds of any drawing under the Transferor Letter of Credit
in respect thereof shall be allocated in respect of Finance Charge Collections
and Principal Collections as provided in the Agreement.
DISCOUNT OPTION
The Agreement provides that the Transferor may at any time and from time to
time, but without any obligation to do so, designate a fixed percentage or a
variable percentage based on a formula (the 'Discount Percentage'), but in
either case not to exceed 6%, of Receivables giving rise to Principal
Collections ('Principal Receivables') that are charges for goods or services or
obligations for repayment of cash advances, part of which have not previously
been sold as Discount Option Receivables, arising from then on to be treated as
Receivables giving rise to Finance Charge Collections ('Finance Charge
Receivables'). Such Receivables will be designated 'Discount Option
Receivables.' After any such designation, pursuant to the Agreement, the
Transferor may, without notice to or consent of the Certificateholders, from
time to time increase, reduce or withdraw the Discount Percentage. Such
increase, reduction or withdrawal will become effective upon satisfaction of the
conditions in the Agreement, including written confirmation by each Rating
Agency.
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On each Distribution Date on or after the date the exercise of the discount
option takes effect, the lower of (a) the product of (i) the Discount Percentage
then in effect and (ii) Collections received during such Collection Period minus
the amount of Collections deemed to be Finance Charge Collections for such
Collection Period and (b) the Discount Option Receivables outstanding at the end
of such Collection Period that otherwise would be Principal Receivables will be
deemed collections of Finance Charge Receivables and will be applied
accordingly. Such feature is intended to permit the Transferor to increase the
Portfolio Yield and thereby decrease the risk of the occurrence of an
Amortization Event.
On the Closing Date, the Transferor will designate an initial Discount
Percentage equal to 2.0%. Any increase, reduction or withdrawal of such Discount
Percentage will be made in accordance with the conditions described in the
Agreement.
FINAL PAYMENT OF PRINCIPAL; TERMINATION OF TRUST
The Series 1996-1 Interests will be subject to optional repurchase by the
Transferor on any Distribution Date on or after which the Class A, Class B and
Collateral Interest Invested Amount is reduced to an amount less than or equal
to $11,910,257 (5% of the Initial Class A, Initial Class B and Initial
Collateral Interest Invested Amount), unless certain events of bankruptcy,
insolvency or receivership have occurred with respect to the Transferor. The
repurchase price will be equal to the Invested Amount plus accrued and unpaid
interest on the Series 1996-1 Interests through the day preceding the
Distribution Date on which the repurchase occurs. After such date, neither the
Trust nor the Transferor will have any further obligation to pay principal or
interest of the Series 1996-1 Interests.
Subject to prior termination as provided above, the Agreement provides that
the final distribution of principal and interest on the Class A Certificates
will be made no later than the July, 2003 Distribution Date (the 'Final Class A
Termination Date') and the final payment of principal and interest on the Class
B Certificates will be made no later than the July, 2003 Distribution Date (the
'Final Class B Termination Date'). The final payment of principal and interest
with respect to the Other Interests will be no later than July, 2003 (the 'Final
Series 1996-1 Termination Date'). In the event that the Invested Amount of the
Series 1996-1 Interests is greater than zero on the Final Series 1996-1
Termination Date, the Trustee will sell or cause to be sold, and apply the
proceeds to the extent necessary to pay such remaining amounts to all
Certificateholders pro rata as final payment of the Series 1996-1 Interests, an
amount of Receivables at the close of business on such date, as provided in the
Agreement. The proceeds of any such sale will be treated as Collections on the
Receivables allocable to the Series 1996-1 Interests and applied as provided
above in '--Application of Collections.' Such proceeds will be allocated first
to pay amounts due to the Class A Certificateholders and then to pay amounts due
to the Class B Certificateholders.
Subject to laws of general applicability regarding trusts, unless the
Transferor instructs the Trustee otherwise, the Trust will only terminate on the
earlier to occur of: (a) the day after the Distribution Date following the date
on which funds shall have been deposited in the Collection Account for the
payment to certificateholders outstanding sufficient to pay in full the
aggregate investor interest of all Series outstanding plus interest thereon at
the applicable certificate rates to the next Distribution Date and (b) September
15, 2092 (the 'Final Trust Termination Date'). Upon the termination of the Trust
and the surrender of the Exchangeable Transferor Certificate, the Trustee shall
convey to the Transferor all right, title and interest of the Trust in and to
the Receivables and other funds of the Trust (other than amounts in the accounts
maintained by the Trust for the final payment of principal and interest to
Certificateholders).
AMORTIZATION EVENTS
The Revolving Period will continue through the end of the Collection Period
related to the November, 1999 Distribution Date and the Controlled Amortization
Period will begin at such time, unless an Amortization Event occurs. The Rapid
Amortization Period will commence on the day on which an Amortization Event
occurs or is
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deemed to occur. An 'Amortization Event' occurs, either automatically, after
specified notice or within a designated cure period, as specified in the
Agreement and refers to any of the following events:
(i) failure on the part of the Servicer or the Transferor to make any
payment or deposit required by the terms of the Agreement or before five
business days after the date such payment or deposit is required to be made
thereunder;
(ii) the failure on the part of the Servicer, the Originator or the
Transferor duly to observe or perform in any material respect certain
covenants or agreements set forth in the Agreement or the Purchase and Sale
Agreement which, in the case of certain of such covenants or agreements,
continues unremedied for a period of 60 days after the date on which
written notice of such failure requiring the same to be remedied shall have
been given to the Servicer, the Originator or the Transferor, as
applicable, provided, however, that an Amortization Event shall not be
deemed to occur if the Transferor has accepted the transfer of the related
Receivable (or all of such Receivables, if applicable) during such period
(or such longer period as the Trustee may specify not to exceed an
additional 60 days) in accordance with the provisions of the Agreement or
the Purchase and Sale Agreement;
(iii) any representation or warranty made by the Servicer, the
Originator or the Transferor in the Agreement or the Purchase and Sale
Agreement or any information required to be delivered by the Transferor
shall prove to have been incorrect in any material respect when made or
when delivered, which continues to be incorrect in any material respect for
a period of 60 days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Servicer,
the Originator or the Transferor, as applicable, and as a result of which
the interests of the certificateholders are materially and adversely
affected; provided, however, that such an Amortization Event shall not be
deemed to have occurred if the Transferor has accepted the transfer of the
related Receivable (or all of such Receivables, if applicable) during such
period (or such longer period as the Trustee may specify) in accordance
with the provisions of the Agreement;
(iv) certain events of insolvency, conservatorship, receivership or
bankruptcy with respect to the Originator, Bridgestone/Firestone or the
Transferor;
(v) the Portfolio Yield averaged over any three consecutive Collection
Periods is less than the Base Rate;
(vi) the Trust shall become an 'investment company' within the meaning
of the Investment Company Act of 1940, as amended;
(vii) the Transferor Amount (plus the amount available under the
Transferor Letter of Credit and the B/F Amount) is less than 7% of the
aggregate invested amount of all outstanding Series of certificates issued
by the Trust as of the last day of any Collection Period;
(viii) the sum of the Transferor Amount plus the B/F Amount plus the
Subordinated Transferor Amount (plus any subordinated class of certificates
of additional Series which, when issued, is retained by the Transferor and
with respect to which no legal opinion is delivered characterizing such
certificates as indebtedness) is less than 7% of the Aggregate Receivables
as of the last day of any Collection Period;
(ix) the Class A Invested Amount is not paid in full on the Class A
Expected Final Payment Date or the Class B Invested Amount is not paid in
full on the Class B Expected Final Payment Date;
(x) the Transferor becomes unable for any reason to transfer
Receivables to the Trust in accordance with the provisions of the
Agreement;
(xi) the Aggregate Receivables as of the last day of any Collection
Period are less than the sum of (a) the Transferor Amount (plus the amount
available under the Transferor Letter of Credit and the B/F Amount) and (b)
the aggregate initial invested amount of Series 1996-1; and
(xii) any Servicer Event of Default shall occur which would have a
material adverse effect on the Certificateholders.
The Rapid Amortization Period will commence on the day on which an Amortization
Event occurs or is deemed to occur. Monthly distributions of principal to the
Class A Certificateholders will begin (if they have not already)
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on the Distribution Date with respect to the Collection Period in which an
Amortization Event occurs or is deemed to have occurred. Following the final
principal payment to the Class A Certificateholders, the Class B
Certificateholders will begin to receive monthly distributions of principal.
Thus, Class A and Class B Certificateholders may begin receiving distributions
of principal earlier than they otherwise would have, which may shorten the final
maturity of the Class A Certificates and Class B Certificates. If the only
Amortization Event to occur is either the insolvency of the Transferor or the
appointment of a receiver or bankruptcy trustee for the Transferor, the receiver
or bankruptcy trustee for the Transferor may have the power to delay or prevent
commencement of the Rapid Amortization Period.
In addition to the consequences of an Amortization Event discussed above,
if the Transferor or Bridgestone/Firestone voluntarily files a bankruptcy
petition or goes into liquidation or any person is appointed a receiver or
bankruptcy trustee of the Transferor or Bridgestone/Firestone, on the day of
such appointment the Transferor will immediately cease transferring Receivables
to the Trust and promptly give notice to the Trustee of such appointment. Within
15 days, the Trustee will publish a notice of the liquidation or the appointment
stating that the Trustee intends to sell, dispose of or otherwise liquidate the
Receivables in a commercially reasonable manner and to the best of its ability.
Unless otherwise instructed within a specified period by the certificateholders
representing undivided interests aggregating more than 50% of the aggregate
principal amount of each Series (or in the case of a series having more than one
class of investor certificates, each class of such Series), the Trustee will
sell, dispose of or otherwise liquidate the Receivables in a commercially
reasonable manner and on commercially reasonable terms. The proceeds from the
sale, disposition or liquidation of the Receivables will be treated as
Collections and such proceeds will be distributed to certificateholders. If the
portion of such proceeds allocable to the Certificateholders' Interest and the
proceeds of any Collections in the Collection Account are not sufficient to pay
in full the remaining amount due on the Class A and Class B Certificates, the
Class A and Class B Certificateholders will suffer a corresponding loss. See
'Certain Legal Aspects of the Receivables--Certain Matters Relating to
Bankruptcy.'
INDEMNIFICATION
The Agreement will provide that, subject to certain exceptions specified
therein, the Servicer will indemnify the Trust, for the benefit of
certificateholders, and the Trustee, including its officers, directors and
employees, from and against any loss (excluding any investment loss), liability,
expense, damage or injury suffered or sustained and arising out of activities of
the Trust or the Trustee (or such other Person) pursuant to the Agreement on any
supplement, including those arising out of the Servicer's actions or omissions
with respect to the Trust pursuant to the Agreement or any Supplement.
Under the Agreement, the Transferor and Bridgestone/Firestone will
indemnify an injured party for the entire amount of any losses, claims, damages
or liabilities arising out of or based on the Agreement or the actions of the
Servicer taken pursuant to the Agreement as though the Agreement created a
partnership under the Uniform Partnership Act. The Transferor and
Bridgestone/Firestone will also indemnify each certificateholder for any such
losses, claims, damages or liabilities (other than those incurred by a
certificateholder in its capacity as an investor in the certificates) except to
the extent that they arise from any action by any certificateholder. In the
event of a Service Transfer (defined below), the successor Servicer will
indemnify the Transferor for any losses, claims, damages and liabilities of the
Transferor as described in this paragraph arising from the grossly negligent
actions or omissions of such successor Servicer.
The Agreement provides that none of the Transferor, the Servicer or any of
their directors, officers, employees or agents will be under any other liability
to the Trust, the Trustee, the certificateholders, any Enhancement provider or
any other person for any action taken, or for refraining from taking any action,
in good faith pursuant to the Agreement. However, none of the Transferor, the
Servicer or any of their directors, officers, employees or agents will be
protected against any liability which would otherwise be imposed by reason of
willful misfeasance, bad faith or gross negligence of any such person in the
performance of their duties or by reason of reckless disregard of their
obligations and duties thereunder.
In addition, the Agreement provides that the Servicer is not under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its servicing responsibilities under the Agreement. The Servicer
may, in its sole discretion, undertake any such legal action which it may deem
necessary or desirable for the
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benefit of certificateholders with respect to the Agreement and the rights and
duties of the parties thereto and the interest of the certificateholders
thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Agreement, the Servicer will be responsible for servicing,
collecting, enforcing and administering the Receivables in accordance with the
policies and procedures and the degree of skill and care applied or exercised
with respect to revolving credit receivables owned or serviced by the Servicer.
The Servicer will be required to maintain fidelity bond coverage insuring
against losses through wrongdoing of its officers and employees who are involved
in the servicing of receivables covering such actions and in such amounts as the
Servicer believes to be reasonable from time to time.
Servicing activities performed by the Servicer with respect to the Accounts
include collecting and recording payments, communicating with cardholders,
investigating payment delinquencies, providing billing records to cardholders
and maintaining internal records. Managerial and custodial services performed by
the Servicer on behalf of the Trust include providing assistance in any
inspections of the documents and records relating to the Accounts and
Receivables by the Trustee pursuant to the Agreement, maintaining the
agreements, documents and files relating to the Accounts and Receivables as
custodian for the Trust and providing related data processing and reporting
services for Certificateholders and on behalf of the Trustee.
The Agreement provides that the Servicer may delegate its duties under that
agreement to any entity (a 'Subservicer') that agrees to conduct such duties in
accordance with the Agreement and the credit account guidelines set forth
therein. CFNA shall initially act as a Subservicer. Notwithstanding any such
delegation the Servicer will continue to be liable for all of its obligations
under the Agreement.
SERVICER COVENANTS
In the Agreement, the Servicer will covenant to the Certificateholders and
the Trustee as to each Receivable and related Account that: (i) it will duly
fulfill all obligations on its part to be fulfilled under or in connection with
the Receivable or Account, and will maintain in effect all qualifications
required in order to service the Receivable or Account and will comply with all
requirements of law in connection with servicing the Receivable and the Account
the failure to comply with which would have a material adverse effect on
Certificateholders; (ii) it will not permit any rescission or cancellation of
the Receivable, except as ordered by a court of competent jurisdiction and (iii)
it will do nothing to impair the rights of the Certificateholders in the
Receivables and will not reschedule, revise or defer payments due on any
Receivable, except in accordance with the Servicer's usual and customary
servicing practices.
Under the terms of the Agreement, the Servicer is obligated to accept the
transfer of any Receivable if it discovers, or receives written notice from the
Trustee, that (i) any covenant of the Servicer set forth above has not been
complied with, with respect to such Receivable or (ii) the Servicer has not
complied in all material respects with all requirements of law applicable to the
Receivable or Account, and in either case such noncompliance has not been cured
within 60 days thereafter and the Receivable has been charged off as
uncollectible or the proceeds of the Receivable are not available to the Trust.
Such assignment and transfer will be made when the Servicer deposits an amount
equal to the amount of such Receivable (including monthly finance charges
thereon through the end of the related Collection Period) in the Collection
Account on the business day preceding the Distribution Date following the
Collection Period during which such obligation arises. The amount of such
deposit shall be deemed a payment in respect of the related Receivable and will
be treated under the Agreement in the same manner as are payments received by
the Servicer from cardholders under the Accounts. Any amounts so paid by the
Servicer shall be allocated in respect of Finance Charge Collections and
Principal Collections as provided in the Agreement.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities is a monthly
servicing fee (the 'Servicing Fee') in an amount, on any Distribution Date,
equal to the sum of, with respect to all Series, one-twelfth of the sum for each
Series of the product of (a) the applicable servicing fee percentages with
respect to each Series and (b) the sum of an allocable portion of the amount of
the Transferor Amount and the B/F Amount and the aggregate
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invested amount with respect to each Series on the last day of the second
preceding Collection Period. The Servicing Fee will be allocated among the
Transferor Amount, the B/F Amount, the Certificateholders and certificateholders
of all of the other Series. The portion of the Servicing Fee allocable to the
Class A Interest on each Distribution Date (the 'Class A Monthly Servicing Fee')
to the Class B Interest on each Distribution Date (the 'Class B Monthly
Servicing Fee'), to the Collateral Interest on each Distribution Date (the
'Collateral Interest Monthly Servicing Fee') and to the Subordinated Transferor
Interest on each Distribution Date (the 'Subordinated Transferor Monthly
Servicing Fee') generally will be equal to one-twelfth of the product of 2.00%
per annum and the amount of the Class A Invested Amount, the Class B Invested
Amount, the Collateral Interest Invested Amount on the Subordinated Transferor
Invested Amount, as the case may be, on the last day of the second preceding
Collection Period (in the case of the first Distribution Date, the initial
principal amount of the Class A Certificates, Class B Certificates, the
Collateral Interest or the Subordinated Transferor Certificate, as the case may
be). The remaining portion of the Servicing Fee will be allocable to the
Transferor Amount and the B/F Amount. The Class A Monthly Servicing Fee, Class B
Monthly Servicing Fee, the Collateral Interest Monthly Servicing Fee and the
Subordinated Transferor Monthly Servicing Fee will be paid with respect to each
Collection Period from the Collection Account (unless such amount has been
netted against deposits to the Collection Account) as described under
'Distributions from the Collection Account' above.
The Servicer may perform any of its obligations under the Agreement through
one or more subservicers. The Servicer shall remain liable for its servicing
duties and obligations as if the Servicer alone were servicing the Receivables.
The Servicer shall be responsible for the fees and expenses of any such
subservicer.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Accounts and the Receivables
including, without limitation, expenses related to enforcement of the
Receivables, payment of fees and disbursements of the Trustee and independent
accountants, payment of fees and expenses of any subservicer and all other fees
and expenses which are not expressly stated in the Agreement to be payable by
the Trust or the Certificateholders other than Federal, state and local income
and franchise taxes, if any, of the Trust.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under the
Agreement, except upon determination that such duties are no longer permissible
under applicable law or upon the appointment of a successor Servicer in the
business of servicing credit card receivables with a net worth of at least
$100,000,000 and delivery of written confirmation that the ratings of the Series
1996-1 Interests will not be withdrawn or reduced as a result of such Service
Transfer (defined below) and that there will not be a material adverse impact on
the Federal income tax characteristics of the Series 1996-1 Interests. No such
resignation will become effective until the Trustee or a successor to the
Servicer has assumed the Servicer's responsibilities and obligations under the
Agreement. Under circumstances described in '--Conveyance of Accounts' below,
the obligation of the Servicer may be transferred to a new servicer.
Any person into which, in accordance with the Agreement, the Transferor or
the Servicer may be merged or consolidated or any person resulting from any
merger or consolidation to which the Transferor or the Servicer is a party, or
any person succeeding to the business of the Transferor or the Servicer, will be
the successor to the Transferor or the Servicer, as the case may be, under the
Agreement.
SERVICER EVENTS OF DEFAULT
Pursuant to the terms of the Agreement, a 'Servicer Event of Default'
refers to any of the following events:
(i) failure by the Servicer to make any payment, transfer or deposit,
or to give instructions to the Trustee to make any withdrawal, on the date
the Servicer is required to do so under the Agreement or any Supplement (or
within a five business day grace period);
(ii) failure on the part of the Servicer to observe or perform any
other term, covenant, condition or agreement provided for in the Agreement
or any Supplement or breach by the Servicer of any representation or
warranty in the Agreement if such failure or breach has a material adverse
effect on the certificateholders, which continues unremedied for a period
of 60 days after the earlier of discovery by the Servicer or the date
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on which written notice has been given and which continues to materially
adversely affect the rights of the certificateholders of any Series then
outstanding for such period, or the Servicer assigns its duties under the
Agreement, except as specifically permitted thereunder;
(iii) any representation, warranty or certification made by the
Servicer in the Agreement or any Supplement or in any certificate delivered
pursuant to the Agreement or any Supplement proves to have been incorrect
when made, which has a material adverse effect on the rights of the
certificateholders, and which material adverse effect continues for the
certificateholders for a period of 60 days after written notice and which
continues to materially adversely affect the rights of the
certificateholders of any Series then outstanding for such period; and
(iv) the occurrence of certain events of bankruptcy, insolvency or
receivership of the Servicer.
In the event of any Servicer Event of Default, either the Trustee or
certificateholders evidencing undivided interests aggregating more than 50% of
the aggregate invested amount of all Series, by written notice to the Servicer
(and to the Trustee, if given by the certificateholders), may terminate all of
the rights and obligations of the Servicer, in its capacity as servicer under
the Agreement, to all of the Receivables held by the Trust with respect to all
Series, and the proceeds thereof, and appoint a new Servicer (a 'Service
Transfer'). The Transferor may grant to any Enhancement provider the right to
exercise such rights on behalf of any related Series. The Trustee shall as
promptly as possible appoint (with the consent of the Originator) a successor
Servicer and if no successor Servicer has been appointed by the Trustee and has
accepted such appointment by the time the Servicer ceases to act as Servicer,
all authority, power and obligations of the Servicer under the Agreement will
pass to, and be vested in, the Trustee. Prior to any Service Transfer, the
Trustee will seek to obtain bids from potential Servicers meeting certain
eligibility requirements set forth in the Agreement to serve as a successor
Servicer for servicing compensation not in excess of the Servicing Fee. In the
event that a successor Servicer has not been appointed and has not accepted its
appointment at the time when the Servicer ceases to act as Servicer, the Trustee
without further action will automatically be appointed the successor Servicer.
Notwithstanding the above, the Trustee will, if it is legally unable so to act,
petition a court of competent jurisdiction to appoint any established financial
institution having a net worth of not less than $100,000,000 and whose regular
business includes the servicing of credit card receivables as the successor
Servicer.
Upon its appointment, the successor Servicer shall be the successor in all
respects to the Servicer with respect to servicing functions under the Agreement
and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions thereof, and
all references in the Agreement to the Servicer will be deemed to refer to the
successor Servicer. The successor Servicer shall expressly be authorized to
delegate any of its duties under the Agreement to the Servicer on and after the
date of any transfer of servicing pursuant to the Agreement.
In connection with such appointment and assumption, the successor Servicer
shall be entitled to servicing compensation not in excess of the Servicing Fee.
The Transferor and Bridgestone/Firestone have agreed that if a successor
Servicer shall be appointed, such successor Servicer may withhold from amounts
otherwise payable to the Transferor or Bridgestone/Firestone an amount equal to
the Monthly Servicing Fee with respect to the Transferor Interest and the B/F
Interest for such related Collection Period.
REPORTS TO CERTIFICATEHOLDERS
No later than the second business day prior to each Distribution Date, the
Servicer will forward to the Trustee a statement (the 'Monthly Servicer's
Certificate') prepared by the Servicer setting forth certain information with
respect to the Trust and the Series 1996-1 Interests, including, among other
things: (a) the aggregate amount of Collections, the aggregate amount of Finance
Charge Collections and the aggregate amount of Principal Collections processed
during the immediately preceding Collection Period; (b) the Class A Floating
Allocation Percentage, the Class B Floating Allocation Percentage, the
Collateral Interest Floating Allocation Percentage and the Subordinated
Transferor Floating Allocation Percentage for such Collection Period and, during
the Controlled Amortization Period and any Rapid Amortization Period, the Fixed
Allocation Percentage; (c) the aggregate outstanding balance of the Accounts
which were delinquent by 30 days to 60 days and by 61 days or more as of the end
of the immediately preceding Collection Period; (d) the Class A Investor Default
Amount, Class B Investor Default Amount, the Collateral Interest Investor
Default Amount and the Subordinated
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Transferor Investor Default Amount for such Distribution Date; (e) the amount of
Class A Investor Charge-Offs, Class B Investor Charge-Offs, Collateral Interest
Investor Charge-Offs and Subordinated Transferor Investor Charge-Offs and the
amount of reimbursements of each for such Distribution Date; (f) the amount of
the Class A Monthly Servicing Fee, Class B Monthly Servicing Fee, Collateral
Interest Monthly Servicing Fee and Subordinated Transferor Monthly Servicing Fee
for such Distribution Date; (g) the existing Deficit Controlled Amortization
Amount; (h) the Aggregate Receivables at the close of business on the last day
of the Collection Period preceding such Distribution Date; (i) the Class A
Invested Amount, the Class B Invested Amount, the Collateral Interest Invested
Amount and the Subordinated Transferor Amount at the close of business on the
last day of the Collection Period immediately preceding such Distribution Date;
and (j) the amount of Class B Reallocated Principal Collections, Collateral
Interest Reallocated Principal Collections and Subordinated Transferor
Reallocated Principal Collections for such Distribution Date. The Trustee will
make such statement available to the Certificateholders upon request.
On each Distribution Date, the Paying Agent, on behalf of the Trustee, will
forward to each Class A Certificateholder and Class B Certificateholder of
record a statement (the 'Payment Date Statement') prepared by the Servicer
setting forth the information with respect to the Offered Certificates set forth
in the Monthly Servicer's Certificate supplied to the Trustee as described in
the preceding paragraph since the immediately preceding Distribution Date and
the following additional information (which, in the case of (a), (b) and (c)
below, will be stated on the basis of an original principal amount of $1,000 per
Class A Certificate or Class B Certificate, as applicable): (a) the total amount
distributed; (b) the amount of such distribution allocable to principal on the
Offered Certificates; (c) the amount of such distribution allocable to interest
on the Offered Certificates; (d) the amount, if any, by which the principal
balance of the Class A Certificates exceeds the Class A Invested Amount and the
Class B Certificates exceed the Class B Invested Amount as of the Record Date
with respect to such Distribution Date, as the case may be; and (e) the 'Class A
Pool Factor' and 'Class B Pool Factor' as of the end of the Record Date with
respect to such Distribution Date (consisting of an eight-digit decimal
expressing the Class A Invested Amount or Class B Invested Amount, as
applicable, as of such Record Date (determined after taking into account any
increase or decrease in the Class A Invested Amount or Class B Invested Amount,
as applicable, which will occur on the following Distribution Date) as a
proportion of the Class A Initial Invested Amount or Class B Initial Invested
Amount). The Payment Date Statement and the Monthly Servicer's Certificate will
be available to Certificate Owners, as described under 'Special
Considerations--Book Entry Registration' and 'Available Information.'
On or before January 31 of each calendar year, the Paying Agent, on behalf
of the Trustee, will furnish or cause to be furnished to each person who at any
time during the preceding calendar year was a Certificateholder of record (or,
if so provided in applicable Treasury regulations, made available to Certificate
Owners) a statement prepared by the Trustee containing the information required
to be provided by an issuer of indebtedness under the Code for such calendar
year or the applicable portion thereof during which such person was a
Certificateholder, together with such other customary information as the
Servicer deems necessary or desirable to enable the Certificateholders to
prepare their tax returns. See 'Federal Income Tax Consequences.'
EVIDENCE AS TO COMPLIANCE
The Agreement provides that on or before March 31 of each calendar year,
the Servicer will cause a firm of independent public accountants to furnish a
report to the effect that such firm has applied certain agreed-upon procedures
to certain documents and records relating to the servicing of the Receivables
and that, based upon such agreed-upon procedures, no matters came to their
attention that caused them to believe that such servicing was not conducted in
compliance with certain applicable terms and conditions set forth in the
Agreement except for such exceptions or errors as such firm shall believe to be
immaterial and such other exceptions as shall be set forth in such statement. In
addition, on or before March 31 of each calendar year such accountants will
compare the mathematical calculations of the amounts contained in the Monthly
Servicer's Certificates and other certificates delivered during such year with
the computer reports of the Servicer and statements of any agents engaged by the
Servicer to perform servicing activities which were the source of such amounts
and deliver a certificate to the Trustee confirming that such amounts are in
agreement except for such exceptions as they believe to be immaterial and such
other exceptions which shall be set forth in such report.
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The Agreement provides for delivery to the Trustee on or before March 31 of
each calendar year, of a statement signed by an officer of the Servicer to the
effect that the Servicer has, or has caused to be, fully performed its
obligations in all material respects under the Agreement throughout the
preceding year or, if there has been a default in the performance of any such
obligation, specifying the nature and status of the default.
Copies of all statements, certificates and reports furnished to the Trustee
may be obtained by a request in writing delivered to the Trustee.
CONVEYANCE OF ACCOUNTS
Subject to the conditions set forth in the succeeding sentence, the
Originator may transfer or otherwise convey its interest in the Accounts,
including the Receivables in such Accounts (subject to the interest of the
Transferor and the Trustee on behalf of the certificateholders), in whole or in
part. The Originator will be permitted to convey Accounts only upon satisfaction
of the following conditions: (i) the acquiring person will (a) be organized and
existing under the laws of the United States of America or any state or the
District of Columbia, and be a bank or other entity that is not subject to the
Bankruptcy Code of 1978 which may be established by and owned by
Bridgestone/Firestone, and (b) expressly assume by an agreement supplemental to
the Purchase and Sale Agreement the performance of the Originator's obligations
with respect to such Accounts; (ii) the Transferor will deliver to the Trustee
opinions of counsel (a) stating that all conditions precedent to the conveyance
have been complied with and (b) to the effect that the conveyance will not
adversely affect the treatment of the Series 1996-1 Interests as debt for
Federal and applicable state income tax purposes or materially adversely impact
the Federal income tax consequences that affect any certificateholder and
generally to the effect that the transfer would not affect the Federal income
tax ownership of the Receivables; and (iii) the Transferor will obtain from each
Rating Agency a letter confirming that the rating of all outstanding Series of
certificates, after such conveyance, will not be lowered or withdrawn.
AMENDMENTS
The Agreement and any Supplement may be amended by the Transferor, the
Servicer and the Trustee, without certificateholder consent, to cure any
ambiguity, to correct or supplement any provision therein which may be
inconsistent with any other provision therein or to add any other provisions
with respect to matters or questions arising under the Agreement or any
Supplement which are not inconsistent with the provisions of the Agreement or
any Supplement; provided, however, that such action shall not, as evidenced by
an opinion of counsel, adversely affect in any material respect the interests of
any of the holders of certificates.
The Agreement and any Supplement may also be amended from time to time by
the Servicer, the Transferor and the Trustee, without the consent of any of the
certificateholders, for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the Agreement, or of
modifying, in any manner the rights of the holders of certificates; provided
that (i) the Servicer will have provided an officer's certificate to the Trustee
and any Enhancement provider to the effect that such amendment will not
materially and adversely affect the interests of the certificateholders, (ii)
such amendment will not, as evidenced by an opinion of counsel, cause the Trust
to be characterized for Federal income tax purposes as an association taxable as
a corporation or otherwise have any material adverse impact on the Federal
income taxation of any outstanding Series of certificates or any Certificate
Owner and (iii) the Rating Agencies shall confirm that such amendment will not
cause a reduction or withdrawal of the rating of any outstanding Series of
certificates; provided, further, that such amendment will not reduce in any
manner the amount of, or delay the timing of, distributions which are required
to be made on any certificate of such Series without the consent of the related
certificateholder, change the definition of or the manner of calculating the
interest of any certificateholder of such Series without the consent of the
related certificateholder or reduce the percentage pursuant to the next
paragraph required to consent to any such amendment, in each case without the
consent of all such certificateholders; provided, further, that (x) the transfer
of the Accounts and/or the servicing functions with respect thereto as described
above under '--Conveyance of Accounts' and the appointment of an entity as
Servicer under the Agreement in connection with such transfer, (y) any
transaction effected in accordance with the merger and consolidations provisions
of the Agreement relating to the Servicer, (z) any other transactions related,
supplemental or incidental thereto will be deemed not to materially and
adversely affect the interests of the certificateholders and will not require
the delivery of an officer's certificate pursuant to clause (i) above.
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The Agreement and any Supplement may be amended by the Transferor, the
Servicer and the Trustee with the consent of the holders of certificates
evidencing undivided interests aggregating not less than 66 2/3% of the
principal amount of all Series adversely affected, for the purpose of adding any
provisions to, changing in any manner or eliminating any of the provisions of
the Agreement or any Supplement or of modifying in any manner the rights of
certificateholders of any Series then issued and outstanding. No such amendment,
however, may (i) reduce in any manner the amount of, or delay the timing of,
distributions required to be made on such Series, (ii) change the definition or
the manner of calculating the interest of any certificateholder of such Series,
or (iii) reduce the aforesaid percentage of undivided interests the
certificateholders of which are required to consent to any such amendment, in
each case without the consent of all certificateholders of all Series adversely
affected. Promptly following the execution of any amendment to the Agreement or
any Supplement, the Trustee will furnish written notice of the substance of such
amendment to each certificateholder of all Series (or with respect to an
amendment of a Supplement, to the applicable Series).
Pursuant to the Series Supplement providing for the issuance of the Series
1992-B Certificates, the enhancement providers with respect to the Series 1992-B
Certificates (of which there are two providing unequal amounts of enhancement)
shall be entitled to vote as if such enhancement providers were
Certificateholders under the Agreement to the exclusion of the holders of the
Series 1992-B Certificates.
LIST OF CLASS A AND CLASS B CERTIFICATEHOLDERS
Upon written request of three or more Class A Certificateholders of record
or any Class A Certificateholder or group of Class A Certificateholders of
record representing undivided interests in the Trust aggregating not less than
5% of the Class A Invested Amount, the Trustee will afford such Class A
Certificateholders access during business hours to the current list of Class A
Certificateholders of the Trust for purposes of communicating with other Class A
Certificateholders with respect to their rights under the Agreement.
Upon written request of three or more Class B Certificateholders of record
or any Class B Certificateholder or group of Class B Certificateholders of
record representing undivided interests in the Trust aggregating not less than
5% of the Class B Invested Amount, the Trustee will afford such Class B
Certificateholders access during business hours to the current list of Class B
Certificateholders of the Trust for purposes of communicating with other Class B
Certificateholders with respect to their rights under the Agreement.
The Agreement does not provide for any annual or other meetings of Class A
and Class B Certificateholders.
THE TRUSTEE
The Fuji Bank and Trust Company is Trustee under the Agreement. The
Transferor, the Servicer and their respective affiliates may from time to time
enter into normal banking and trustee relationships with the Trustee and its
affiliates. The Trustee, the Transferor, the Servicer and any of their
respective affiliates may hold Certificates in their own names; however, any
Certificates so held shall not be entitled to participate in any decisions made
or instructions given to the Trustee by the Certificateholders as a group. The
Trustee's address is Two World Trade Center, 81st Floor, New York, New York
10048, Attention: Trust Administration Department.
For purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee will have the power to appoint a co-trustee or
separate trustees of all or any part of the Trust. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the Trustee will be conferred or imposed upon and exercised or performed by
the Trustee and such separate trustee or co-trustee jointly, or, in any
jurisdiction in which the Trustee will be incompetent or unqualified to perform
certain acts, singly upon such separate trustee or co-trustee who shall exercise
and perform such rights, powers, duties and obligations solely at the direction
of the Trustee.
The Trustee may resign at any time, in which event the Transferor will be
obligated to appoint a successor Trustee. The Servicer may also remove the
Trustee, if the Trustee ceases to be eligible to continue as such under the
Agreement or if the Trustee becomes insolvent. In such circumstances, the
Servicer will be obligated to appoint a successor Trustee. Any resignation or
removal of the Trustee and appointment of a successor Trustee does not become
effective until acceptance of the appointment by the successor Trustee.
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DESCRIPTION OF THE PURCHASE AND SALE AGREEMENT
The Receivables originated under the Accounts established under the Credit
Card Program transferred to the Trust by the Transferor and existing as of the
Cut-off Date and Receivables originated under the Accounts established under the
Credit Card Program transferred to the Trust by the Transferor and originated
after the Cut-off Date have or will be purchased by the Transferor from the
Originator pursuant to the Purchase and Sale Agreement. Receivables originated
under Eligible Alternative Accounts will also be purchased by the Transferor
from the Originator pursuant to the Purchase and Sale Agreement. The following
summary describes certain terms of the Purchase and Sale Agreement.
SALE OF RECEIVABLES
Under the Purchase and Sale Agreement, the Originator has sold Receivables
originated on and before the Cut-off Date and, provided that the Transferor is
not in default thereunder and that no Servicer Event of Default shall have
occurred, for so long as any Series of certificates is outstanding, the
Originator will sell, as applicable, to the Transferor all its right, title and
interest in and to the Receivables originated under the Accounts existing on and
originated after the Cut-off Date. Pursuant to the Agreement, all such
Receivables will be transferred by the Transferor to the Trust, and the
Transferor will assign its rights in, to and under the Purchase and Sale
Agreement with respect to such Receivables to the Trust. The purchase price of
the purchased Receivables will be payable by the Transferor in cash. Pursuant to
the Purchase and Sale Agreement, on the first Transfer Date after the Closing
Date, CFNA shall transfer Merchant Fees in amount equal to $350,000. On each
Transfer Date thereafter, CFNA shall transfer Merchant Fees collected during the
calendar month preceding the related Transfer Date in an amount equal to the
lesser of (a) $350,000 and (b) the amount of Merchant Fees actually collected by
CFNA during such calendar month, to the Transferor. The Transferor will transfer
such Merchant Fees to the Trust.
The Purchase and Sale Agreement provides that the Originator may convey its
interest in the Accounts (subject to the interest of the Transferor and the
Trustee on behalf of certificateholders). See 'Description of the Offered
Certificates and the Agreement--Conveyance of Accounts' above.
In connection with the Purchase and Sale Agreement, the Originator has
indicated and will indicate in its records, including any computer files, that
the Receivables arising under the Accounts have been or will be sold to the
Transferor by the Originator and that such Receivables have been transferred by
the Transferor to the Trust. The records and agreements relating to such
Accounts and Receivables will not be segregated by Bridgestone/Firestone from
other documents and agreements relating to other charge accounts and receivables
and will not be stamped or marked to reflect the sale thereof to the Transferor.
The Originator has filed UCC financing statements meeting the requirements of
state law in Ohio with respect to such Receivables. See 'Risk Factors--Potential
Priority of Certain Liens' and 'Certain Legal Aspects of the Receivables.'
REPRESENTATIONS AND WARRANTIES
The Originator represents and warrants to the Transferor to the effect,
among other things, that as of the Closing Date: (a) the Originator is duly
organized and validly existing in good standing under the laws of the United
States as a national banking association, (b) the Purchase and Sale Agreement
constitutes a legal, valid and binding obligation of the Originator and (c) the
sale by the Originator of Receivables pursuant to the Purchase and Sale
Agreement and the performance of its obligations has been duly authorized by all
requisite corporate action.
The Originator has also agreed to indemnify the Transferor and to hold the
Transferor harmless from and against any and all losses, damages and expenses
(including reasonable attorneys' fees) suffered or incurred by the Transferor as
a result of the breach by the Originator of any representation, warranty,
covenant or agreement set forth in the Purchase and Sale Agreement.
In addition, the Originator expressly acknowledges and consents to the
Transferor's assignment of its rights relating to the interests sold by the
Originator under the Purchase and Sale Agreement to the Trustee for the benefit
of the Certificateholders.
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TERMINATION
If pursuant to certain provisions of Federal law, the Originator becomes
party to any insolvency or similar proceeding (other than as a claimant) and, if
such proceeding is not voluntary and it is not dismissed within 90 days of its
institution, or if a receiver is appointed for the Originator, the Originator
will immediately cease selling Receivables to the Transferor.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
At the time of the formation of the Trust, pursuant to the Purchase and
Sale Agreement, the Originator sold to the Transferor all its right, title and
interest in and to those Receivables existing under the Eligible Accounts as of
the Cut-off Date and, provided that the Transferor is not in default thereunder
and no Servicer Event of Default shall have occurred, its right, title and
interest to those Receivables arising under the Eligible Accounts from time to
time thereafter. The Transferor conveyed to the Trust, without recourse, all
Receivables existing under the Eligible Accounts, as of the Cut-off Date and
thereafter created. The Transferor has covenanted and warranted that such
transfer constitutes either a valid transfer and assignment to the Trust of all
right, title and interest of the Transferor in and to the Receivables, except
for the interest of the Transferor as holder of the Exchangeable Transferor
Certificate, or a grant of a security interest to the Trust in and to the
Receivables. The Transferor also covenanted and warranted to the Trust in the
Agreement that, in the event the transfer of Receivables by the Transferor to
the Trust is deemed to create a security interest under the UCC and assuming
that the Transferor is not at the time the subject of any insolvency
proceedings, there exists a valid, subsisting and enforceable first priority
perfected security interest in the Receivables in existence since the time of
the formation of the Trust in favor of the Trust and a valid, subsisting and
enforceable first priority perfected security interest in the Receivables
created thereafter and, with certain exceptions, and for certain limited time
periods, the proceeds thereof, in favor of the Trust on and after their
creation. For a discussion of the Trust's rights arising from these covenants
and warranties not being satisfied, see 'Description of the Offered Certificates
and the Agreement--Covenants, Representations and Warranties.'
The Receivables are 'accounts' or 'general intangibles' as defined in
Article 9 of the UCC. To the extent the Receivables constitute accounts, both
the absolute transfer of such Receivables and the transfer of such Receivables
as security for an obligation are treated under Article 9 of the UCC as creating
a security interest therein and are subject to its provisions, including the
filing of financing statements to perfect the Trust's security interest. To the
extent Receivables constitute general intangibles and the transfer of such
Receivables is deemed to be a transfer as security for an obligation, Article 9
of the UCC is applicable to the same extent as it is applicable to Receivables
constituting accounts. Financing statements covering the Receivables will be
filed under the UCC as in effect in Massachusetts to protect the Transferor and
the Trust. In the event the transfer by the Transferor to the Trust of any
general intangibles is deemed to be an absolute transfer, then the UCC is not
applicable, and no further action is required to perfect the Trustee's interest
in such Receivables from third-party claims.
There are certain limited circumstances under the UCC in which prior or
subsequent transferees of Receivables coming into existence after the Closing
Date could have an interest in such Receivables with priority over the Trust's
interest. A tax or other government lien on property of the Transferor arising
prior to the time a Receivable comes into existence may also have priority over
the interest of the Trust in such Receivables. In addition, under the Agreement,
the Transferor will covenant to accept the reassignment of the Receivables in
any Account containing a Receivable transferred to the Trust that is not free
and clear of the lien of any third-party, except certain permitted tax liens.
Furthermore, the Transferor covenants that it will not sell, pledge, assign,
transfer or grant any lien on any Receivable (or any interest therein) other
than to the Trust.
Unless continuation statements are filed within five years of the original
filings the time specified in the UCC in respect of the security interest of
either the Transferor or the Trust in the Receivables, the perfection of such
security interest will lapse. Pursuant to the Agreement, the Servicer will be
required to cause such statements to be filed.
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Because the Trust's interest in certain of the Receivables is dependent
upon the Transferor's interest in such Receivables, any adverse change in the
priority or perfection of the Transferor's security interest would
correspondingly affect the Trust's interest in the affected Receivables.
Collections of Receivables will, except in certain circumstances, be
available for use by the Servicer until deposited into the Collection Account on
the business day preceding each Distribution Date. In the event of insolvency or
receivership of the Servicer or, in certain circumstances, the lapse of certain
time periods, the Trust may not have a perfected interest in such cash
Collections.
CERTAIN MATTERS RELATING TO BANKRUPTCY
The Originator and the Transferor have treated and will treat the transfer
of Receivables under the Purchase and Sale Agreement as a sale. A court could
treat such transactions as assignments of collateral as security. To the extent
that the Originator has granted or will grant a security interest in the
Receivables to the Transferor and that security interest was validly perfected
before any insolvency of the Originator and was not granted or taken in or will
not be granted or taken in contemplation of insolvency or with the intent to
hinder, delay or defraud the Originator or its creditors, that security interest
should not be subject to avoidance in the event of the insolvency and
receivership of the Originator, and payments to the Transferor with respect to
the Receivables should not be subject to recovery by a conservator or receiver
for the Originator. If, however, the conservator or receiver were to assert a
contrary position, or were to require the Transferor to establish its rights to
those payments by submitting to and completing the administrative claims
procedure established under the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ('FIRREA'), or the conservator or receiver were to
request a stay of proceedings with respect to the Originator as provided under
FIRREA, delays in payments on the Offered Certificates and possible reductions
in the amount of such payments could occur. If a conservator or receiver is
appointed for the Originator, pursuant to the Purchase and Sale Agreement, new
Receivables would not be sold to the Transferor and an Amortization Event would
occur. Upon the occurrence of an Amortization Event, if a conservator or
receiver is appointed for the Originator and no other Amortization Event other
than such conservatorship, receivership or insolvency of the Originator exists,
the conservator or receiver may have the power to prevent the commencement of
the Rapid Amortization Period.
The Agreement provides that, upon the appointment of a receiver or
bankruptcy trustee for the Transferor or Bridgestone/Firestone, the Transferor
or Bridgestone/Firestone, respectively, will promptly give notice thereof to the
Trustee, and an Amortization Event with respect to all Series will occur. Under
the Agreement no new Receivables will be transferred to the Trust and, unless
otherwise instructed within a specified period by the holders of certificates
representing undivided interests aggregating more than 50% of the aggregate
principal amount of each Series or unless otherwise required by the receiver or
bankruptcy trustee for the Transferor, the Trustee will proceed to sell, dispose
of or otherwise liquidate the Receivables in a commercially reasonable manner
and on commercially reasonable terms. The proceeds from the sale of the
Receivables would then be treated by the Trustee as Collections on the
Receivables. If the only Amortization Event to occur is the appointment of a
receiver or bankruptcy trustee for the Transferor, such receiver or bankruptcy
trustee may have the power to continue to require the Transferor to continue to
transfer new Receivables to the Trust, as applicable, and to prevent the early
sale, liquidation or disposition of the Receivables and the commencement of a
Rapid Amortization Period. See 'Description of the Offered Certificates and the
Agreement--Amortization Events.'
CONSUMER PROTECTION AND BANKING LAWS
The relationship between the consumer and the provider of consumer credit
is extensively regulated by Federal and state consumer protection laws. With
respect to the credit cards issued under the Credit Card Program the most
significant Federal laws include the Federal Truth-In-Lending, Equal Credit
Opportunity Acts, Fair Credit Billing, Fair Credit Reporting, Fair Credit and
Charge Card Disclosure and Fair Debt Collection Practices Acts and state
consumer protection and retail installment sales laws. Such statutes may also
apply to the credit cards issued under Alternative Programs. These statutes
impose disclosure requirements before and when an Account is opened and at the
end of monthly billing cycles. In addition, cardholders are entitled under these
laws to have payments and credits applied to the account promptly and to require
billing errors to be resolved promptly. The Trust may be liable for certain
violations of consumer protection laws that apply to the Receivables, either as
assignee from the Transferor with respect to obligations arising before transfer
of the
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Receivables to the Trust or as the party directly responsible for obligations
arising after the transfer. In addition, cardholders may be entitled to assert
such violations by way of set off against the obligation to pay the amount of
Receivables owing. The Transferor has agreed to accept the transfer of all
Receivables that were not created in compliance in all material respects with
the requirements of such laws. The Servicer has also agreed in the Agreement to
indemnify the Trust, among other things, for any liability arising from such
violations. For a discussion of the Trust's rights if the Receivables were not
created in compliance in all material respects with applicable laws, see
'Description of the Offered Certificates and the Agreement--Covenants,
Representations and Warranties.'
Application of Federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders, if such laws result in any
Receivables being charged off as uncollectible in excess of the Class B Invested
Amount available to be allocated to the Class A Certificates and in excess of
the Collateral Interest Invested Amount available to be allocated to the Class B
Certificates. See 'Description of the Offered Certificates and the
Agreement--Defaulted Receivables; Recoveries; Rebates and Fraudulent Charges.'
The Originator, and the Originator's extension of credit under the Credit
Card Program, is extensively regulated under Federal law. Any change in such
laws, or in the rules, regulations and decisions (both judicial and
administrative) thereunder, could affect the Servicer's ability to collect the
Receivables or maintain previous levels of monthly finance and other charges.
PROPOSED LEGISLATION
Congress and the states may enact new laws and amendments to existing laws
to regulate further the consumer revolving credit industry or to reduce finance
charges or other fees or charges applicable to consumer revolving credit
accounts. The potential effect of any such legislation could be to reduce the
yield on the Accounts. If such yield is reduced, an Amortization Event could
occur, and the Rapid Amortization Period would commence. See 'Description of the
Offered Certificates--Amortization Events.'
LEGAL MATTERS AND LITIGATION
Pursuant to the Pooling and Servicing Agreement, if the interest of the
Certificateholders in a Receivable is materially adversely affected by the
failure of the Receivable to comply in all material respects with applicable
requirements of law, the interest of such Certificateholders in all Receivables
in the affected Account will be reassigned to the Transferor. On each Series
Closing Date, the Transferor will make certain other representations and
warranties relating to the validity and enforceability of the Accounts and the
Receivables. The sole remedy, if any such representation or warranty is breached
and such breach has a material adverse effect on the interest of
Certificateholders in any Receivable and continues beyond the applicable cure
period, is that the interest of the Certificateholders in the Receivables
affected thereby will be reassigned to the Transferor or assigned to the
Servicer, as the case may be. In addition, in the event of the breach of certain
representations and warranties, the Transferor may be obligated to accept the
reassignment of all of the Receivables in the Accounts in the Trust portfolio.
CLAIMS AND DEFENSES OF CARDHOLDERS AGAINST TRUST
The UCC provides that (a) unless an obligor has made an enforceable
agreement not to assert defenses or claims arising out of a sale, the rights of
the Trust, as assignee, are subject to all the terms of the contract between the
Originator and the obligor and any defense or claim arising therefrom and to any
other defense or claim of the obligor against the Originator which accrues
before the obligor receives notification of the assignment and (b) any obligor
is authorized to continue to pay the Originator until (i) the obligor receives
notification, reasonably identifying the rights assigned, that the amount due or
to become due has been assigned and that payment is to be made to the Trustee
and (ii) if requested by the obligor, the Trustee has furnished reasonable proof
of the assignment.
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FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Set forth below is a discussion of material income tax consequences to
Certificate Owners who are original owners of the Offered Certificates and hold
the Offered Certificates as capital assets under the Internal Revenue Code of
1986, as amended (the 'Code'). This discussion does not purport to be complete
or to deal with all aspects of Federal income taxation that may be relevant to
Certificate Owners in light of their particular circumstances, nor to certain
types of Certificate Owners subject to special treatment under the Federal
income tax laws (for example, banks and life insurance companies). This
discussion is based upon present provisions of the Code, the regulations
promulgated thereunder and judicial and ruling authorities, all of which are
subject to change, which change may be retroactive. PROSPECTIVE INVESTORS ARE
ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE FEDERAL TAX
CONSEQUENCES TO SPECIAL CATEGORIES OF INVESTORS IN THE OFFERED CERTIFICATES WITH
RESPECT TO THE PURCHASE, OWNERSHIP OR DISPOSITION OF INTERESTS IN THE OFFERED
CERTIFICATES, AS WELL AS THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY
STATE, FOREIGN COUNTRY OR OTHER TAXING JURISDICTION.
Characterization of the Offered Certificates as Indebtedness. The
Transferor, the Trustee, the Class A Certificateholders and the Class B
Certificateholders express in the Agreement their intent that, for tax purposes
the Offered Certificates will be indebtedness secured by the Receivables. The
Transferor, the Class A Certificateholders and the Class B Certificateholders,
by acquiring an interest in an Offered Certificate, agree to treat the Offered
Certificates as indebtedness for Federal, state and local tax purposes. However,
because different criteria are used to determine the non-tax accounting
characterization of the transaction, the Transferor will treat the transaction,
for financial accounting purposes, as a sale of an ownership interest in the
Receivables and not as the issuance of a debt obligation.
Based upon the application of existing law to the facts of the transaction
as set forth in the Agreement and other relevant documents, Brown & Wood LLP,
special tax counsel to the Transferor ('Tax Counsel') and counsel to the
Underwriters, has advised the Transferor that, in its opinion, (i) the Offered
Certificates will be treated for Federal income tax purposes as indebtedness and
(ii) the Trust will not be treated as either an association or a publicly traded
partnership taxable as a corporation for Federal income tax purposes. However,
opinions of counsel are not binding on the Internal Revenue Service (the 'IRS'),
and there can be no assurance that the IRS could not successfully challenge this
conclusion.
In general, the characterization of a transaction for Federal income tax
purposes is based upon economic substance, and the substance of the transaction
in which the Offered Certificates are issued is consistent with the treatment of
the Offered Certificates as debt for Federal income tax purposes. Although there
are certain judicial precedents holding that under appropriate circumstances a
taxpayer should be required to treat a transaction in accordance with the form
chosen by the taxpayer, regardless of the transaction's substance, the operative
provisions of the transaction and the Agreement are not inconsistent with
treating the Offered Certificates as debt and, accordingly, these authorities
would not be applied to require sale characterization.
Based on the foregoing, Tax Counsel has concluded that the characterization
of the Offered Certificates, for Federal income tax purposes, would be governed
by the substance of the transaction, which is the issuance of debt.
Other Characterizations of the Offered Certificates. If the Agreement does
not create a debt obligation for Federal income tax purposes, the arrangement
among the Transferor, the Class A Certificateholders and the Class B
Certificateholders could be classified, for Federal income tax purposes,
alternatively as a partnership, a publicly traded partnership taxable as a
corporation, or as an association taxable as a corporation. Because, in the
opinion of Tax Counsel, the Offered Certificates will be characterized as debt
for Federal income tax purposes, no attempt will be made to comply with any
reporting or tax payment requirements which might be applicable if the
arrangement between the Transferor and the Certificate Owners were treated as
creating a partnership or a corporation. No IRS ruling on the Federal income tax
characterization of the arrangement among the Transferor, the Class A
Certificateholders and the Class B Certificateholders will be sought.
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If the arrangement created by the Agreement were characterized as a
partnership among the Transferor and the Certificate Owners, such a partnership
would not be subject to Federal income tax, but each item of income, gain, loss,
deduction and credit generated through the ownership of the Receivables by such
a partnership would generally be passed through to the Transferor and the
Certificate Owners as partners in such a partnership according to their
respective interests therein. The amount, timing, and character of income
reportable by the Certificate Owners as partners could differ materially from
the income reportable by the Certificate Owners if the Offered Certificates are
characterized as debt.
If the arrangement were treated as a publicly traded partnership taxable as
a corporation or as an association taxable as a corporation, it would be subject
to Federal income tax at corporate tax rates on its taxable income generated by
ownership of the Receivables. Such a tax could result in reduced distributions
to Certificate Owners. Distributions to the Transferor and, unless the Offered
Certificates were treated as debt of the corporation if the arrangement were
treated as an association taxable as a corporation, to the Certificate Owners,
would not be deductible in computing the taxable income of the corporation. In
addition, if the Offered Certificates were not treated as debt of the
corporation, all or a portion of any such distributions would, to the extent of
the current and accumulated earnings and profits of such corporation, be treated
as dividend income to the Certificate Owners.
In addition, if the arrangement were treated as a publicly traded
partnership, any income allocated to a Certificate Owner that is a tax-exempt
entity will constitute 'unrelated business taxable income', at least where the
publicly traded partnership is taxed as a partnership.
TAXATION OF INTEREST AND DISCOUNT INCOME OF CERTIFICATE OWNERS
Assuming that the Certificate Owners are owners of debt obligations for
Federal income tax purposes, in the opinion of Tax Counsel, interest generally
will be taxable as ordinary income for Federal income tax purposes when received
by the Certificate Owners utilizing the cash method of accounting and when
accrued by Certificate Owners utilizing the accrual method of accounting.
Interest received on the Offered Certificates may also constitute 'investment
income' for purposes of certain limitations of the Code concerning the
deductibility of investment interest expense.
While it is not anticipated that the Offered Certificates will be issued at
a greater than de minimis discount, in the opinion of Tax Counsel, under the
Treasury regulations (the 'OID Regulations'), it is possible that the Offered
Certificates could nevertheless be deemed to have been issued with original
issue discount ('OID'). This could be the case, for example, if interest
payments were not deemed to be 'qualified stated interest payments.' If such
regulations were to apply, in general, all of the taxable income to be
recognized with respect to the Offered Certificates would be includible in
income of Certificate Owners as OID, but would not be includible again when the
interest is actually received. If the Offered Certificates are in fact issued at
a greater than de minimis discount or are treated as having been issued with OID
under the OID Regulations, the following general rules will apply.
The excess of the 'stated redemption price at maturity' of the Class A
Certificates or Class B Certificates, as applicable, (generally equal to their
principal amount as of the date of original issuance plus all interest other
than 'qualified stated interest payments' payable prior to or at maturity) over
the applicable original issue price (in this case, the initial offering price at
which a substantial amount of the Class A or Class B Certificates, as
applicable, are sold to the public) will constitute OID. A Certificate Owner
must include OID in income over the term of the Offered Certificates under a
constant yield method. In general, OID must be included in income in advance of
the receipt of cash representing that income. In the case of a debt instrument
as to which the repayment of principal may be accelerated as a result of the
prepayment of other obligations securing the debt instrument, the periodic
accrual of OID is determined by taking into account both the prepayment
assumptions used in pricing the debt instrument and the prepayment experience.
If this provision applies to the Offered Certificates, the amount of OID which
will accrue in any given 'accrual period' may either increase or decrease
depending upon the actual prepayment rate.
Certificate Owners should be aware that the resale of an Offered
Certificate may be affected by the market discount rules of the Code. These
rules generally provide that, subject to a de minimis exception, if a holder of
an Offered Certificate acquires it at a market discount (i.e., at a price below
its stated redemption price at maturity or
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its 'revised issue price' if it was issued with OID) and thereafter recognizes
gain upon a disposition of the Offered Certificate, the lesser of such gain or
the portion of the market discount that accrued while the Offered Certificate
was held by such holder will be treated as ordinary interest income realized at
the time of the disposition.
Each Certificate Owner should consult his own tax advisor regarding the
impact of the original issue discount and market discount rules.
SALES OR DEEMED SALES OF OFFERED CERTIFICATES
In the opinion of Tax Counsel, in general, a Certificate Owner will
recognize gain or loss upon the sale, exchange, redemption or other taxable
disposition of an Offered Certificate measured by the difference between (i) the
amount of cash and the fair market value of any property received (other than
amounts attributable to, and taxable as, accrued stated interest) and (ii) the
owner's tax basis in the Class A Certificate or Class B Certificate, as
applicable (as increased by any OID or market discount previously included in
income by the holder and decreased by any deductions previously allowed for
amortizable bond premium and by any payments reflecting principal or OID
received with respect to such Class A Certificate or Class B Certificate, as
applicable). Subject to the market discount rules discussed above and to the
one-year holding requirement for long-term capital gain treatment, any such gain
or loss generally will be long-term capital gain or loss, provided that the
Class A Certificate or Class B Certificate, as applicable was held as a capital
asset. The Federal income tax rates applicable to capital gains for taxpayers
other than individuals, estates and trusts are currently the same as those
applicable to ordinary income; however, the maximum ordinary income rate for
individuals, estates and trusts has increased to 39.6%, whereas the maximum
long-term capital gains rate for such taxpayers remains at 28%. Moreover,
capital losses generally may be used only to offset capital gains.
BACKUP WITHHOLDING
In the opinion of Tax Counsel, a Certificate Owner may be subject to backup
withholding at the rate of 31% with respect to interest paid on the Offered
Certificates if the Certificate Owner, upon issuance, fails to supply the
Trustee or his broker with his taxpayer identification number, fails to report
interest, dividends, or other 'reportable payments' (as defined in the Code)
properly, or under certain circumstances, fails to provide the Trustee or his
broker with a certified statement, under penalty of perjury, that he is not
subject to backup withholding. Information returns will be sent annually to the
IRS and to each Class A and Class B Certificateholder setting forth the amount
of interest paid on the Offered Certificates and the amount of tax withheld
thereon.
STATE, LOCAL AND FOREIGN TAXATION
The discussion above does not address the tax treatment of the Trust, the
Offered Certificates or the Certificate Owners under state and local tax laws or
foreign tax laws. Prospective investors are urged to consult their own tax
advisors regarding the state and local tax treatment of the Trust and the
Offered Certificates, and the consequences of purchase, ownership or disposition
of the Offered Certificates under any state or local tax law or any foreign tax
law, if applicable.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ('ERISA')
imposes certain restrictions on employee benefit plans ('Plans') subject to
ERISA and persons who have certain specified relationships to such plans
('Parties-in-Interest'). ERISA also imposes certain duties on persons who are
fiduciaries of Plans subject to ERISA and prohibits certain transactions between
a plan and Parties-in-Interest with respect to such Plans. Under ERISA, any
person who exercises any authority or control respecting the management or
disposition of the assets of a Plan is considered to be a fiduciary of such Plan
(subject to certain exceptions not here relevant). In accordance with ERISA's
fiduciary standards, before purchasing the Offered Certificates a fiduciary
should determine whether such an investment is permitted under the documents and
instruments governing the plan and is appropriate for the plan in view of its
overall investment policy and the composition and diversification of its
investment portfolio.
89
<PAGE>
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit sharing or other employee benefit plan that is subject to such provisions
from engaging in certain transactions involving 'plan assets' with persons that
are 'parties in interest' under ERISA or 'disqualified persons' under the Code
with respect to the plan. A violation of these 'prohibited transaction' rules
may generate excise tax and other liabilities under ERISA and the Code for such
persons. In addition, investments by Benefit Plans (as defined below) are
subject to ERISA's general fiduciary requirements, including the requirements of
investment prudence and diversification and the requirement that a Benefit
Plan's investments be made in accordance with the documents governing the
Benefit Plan.
On November 13, 1986, the Department of Labor ('DOL') issued a final
regulation (the 'Final Regulation') concerning the definition of what
constitutes the 'plan assets' of an employee benefit plan subject to ERISA or
the Code or an individual retirement account (collectively referred to as
'Benefit Plans'). Under the Final Regulation the assets and properties of
certain entities in which a Benefit Plan makes an equity investment could be
deemed to be assets of the Benefit Plan in certain circumstances. Accordingly,
if Benefit Plans purchase the Offered Certificates, the Trust could be deemed to
hold Benefit Plan assets unless one of the exceptions under the Final Regulation
(or another statutory or administrative exemption) is applicable to the Trust.
The operations of the Trust could result in prohibited transactions if Benefit
Plans that purchase the Offered Certificates are deemed to own an interest in
the underlying assets of the Trust. There may also be an improper delegation of
the responsibility to manage plan assets if Benefit Plans that purchase the
Offered Certificates are deemed to own an interest in the underlying assets of
the Trust.
The Final Regulation only applies to the purchase by a Benefit Plan of an
'equity interest' in an entity. Assuming that the Offered Certificates are
equity interests, the Final Regulation contains an exception that provides that
if a Benefit Plan acquires a 'publicly-offered security' the issuer of the
security is not deemed to hold Benefit Plan assets. A 'publicly-offered
security' is a security that is (i) freely transferable, (ii) part of a class of
securities that is owned by 100 or more investors independent of the issuer and
of one another and (iii) either is (A) a part of a class of securities
registered under section 12(b) or 12(g) of the Securities Exchange Act of 1934,
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
and the class of securities of which such security is a part is registered under
the Securities Exchange Act of 1934 within 120 days (or such later time as may
be allowed by the Commission) after the end of the fiscal year of the issuer
during which the offering of such securities to the public occurred.
It is anticipated that the Class A Certificates will meet the criteria of
publicly-offered securities as set forth above. The Underwriters (defined below)
expect (although no assurance can be given) that the Class A Certificates will
be held by at least 100 independent persons at the conclusion of the offering,
there are no restrictions imposed on the transfer of the Class A Certificates,
and the Class A Certificates will be sold as part of an offering pursuant to an
effective registration statement under the Securities Act of 1933, and then will
be timely registered under the Securities Exchange Act of 1934.
If the Class A Certificates fail to meet the criteria of publicly-offered
securities and the Trust's assets are deemed to include assets of Benefit Plans
that are Class A Certificateholders, transactions involving the Trust and
'parties in interest' or 'disqualified persons' with respect to such plans might
be prohibited under Section 406 of ERISA and Section 4975 of the Code unless an
exemption is applicable. Thus, for example, if a participant in any Benefit Plan
is a credit cardholder under the Credit Card Program, under DOL interpretations
the purchase of the Class A Certificates by such plan could constitute a
prohibited transaction. There are certain class exemptions issued by the DOL
that could apply in such event including DOL Prohibited Transaction Exemption
84-14 (Class Exemption for Plan Asset Transactions Determined by Independent
Qualified Professional Asset Managers), 96-23 (Class Exemption for Plan Asset
Transactions Determined by In-house Asset Managers), 91-38 (Class Exemption for
Certain Transactions Involving Bank Collective Investment Funds) and 90-1 (Class
Exemption for Certain Transactions Involving Insurance Company Pooled Separate
Accounts). There is no assurance that these exemptions, even if all of the
conditions specified therein are satisfied, will apply to all transactions
involving the Trust's assets.
In addition, the Transferor may be considered to be a party in interest or
a fiduciary with respect to some Benefit Plans. Accordingly, an investment by a
Benefit Plan in the Class A Certificates may be a prohibited
90
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transaction under ERISA and the Code unless such investment is subject to a
statutory or administrative exemption.
In light of the foregoing, fiduciaries of a Benefit Plan considering the
purchase of the Class A Certificates should consult their own counsel as to
whether the assets of the Trust which are 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 applicability of
exemptive relief from the prohibited transaction rules.
Moreover, each Benefit Plan fiduciary should determine whether, under the
general fiduciary standards of investment prudence and diversification, an
investment in the Class A Certificates is appropriate for the Benefit Plan,
taking into account the overall investment policy of the Benefit Plan and the
composition of the Benefit Plan's investment portfolio.
The Class B Certificates may not be purchased by any employee benefit plan
subject to the requirements of the fiduciary responsibility provisions of ERISA,
or the provisions of Section 4975 of the Internal Revenue Code of 1986, as
amended (the 'Code'), including any individual retirement accounts.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Transferor has agreed to sell to Citicorp Securities, Inc. and
Chase Securities Inc. (the 'Underwriters') and the Underwriters have agreed to
purchase the principal amount of Offered Certificates set forth opposite its
name:
<TABLE>
<CAPTION>
AMOUNT AMOUNT
OF CLASS A OF CLASS B
UNDERWRITER CERTIFICATES CERTIFICATES
- ------------------------------------------------------------------------ ------------ ------------
<S> <C> <C>
Citicorp Securities, Inc................................................ $160,000,000 $ 22,564,103
Chase Securities Inc.................................................... $ 40,000,000 $ 5,641,026
------------ ------------
Total.............................................................. $200,000,000 $ 28,205,129
------------ ------------
------------ ------------
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Offered
Certificates if any of the Offered Certificates are purchased.
The 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 .200% of the principal amount of
the Class A Certificates. The Underwriters may allow, and such dealers may
reallow, concessions not in excess of .125% of the principal amount of the Class
A Certificates to certain brokers and dealers. After the initial public
offering, the public offering price and other selling terms may be changed by
the Underwriters.
The Underwriters named above 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 .250% of the
principal amount of the Class B Certificates. The Underwriters may allow, and
such dealers may reallow, concessions not in excess of .125% of the principal
amount of the Class B Certificates to certain brokers and dealers. After the
initial public offering, the public offering price and other selling terms may
be changed by the Underwriters.
The Underwriting Agreement provides that the Transferor and
Bridgestone/Firestone will indemnify the Underwriters against certain
liabilities, including liabilities under applicable securities laws, or
contribute to payments the Underwriters may be required to make in respect
thereof.
Each Underwriter has represented and agreed that: (a) it has not offered or
sold, and will not offer or sell any Offered Certificates to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which do not
constitute an offer to the public in the United Kingdom for the purposes of the
Public Offers Securities Regulations 1995, (b) it has complied and will comply
with all applicable provisions of the Financial Services Act 1986 of Great
Britain with respect to anything done by it in
91
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connection with the Offered Certificates in, from or otherwise involving the
United Kingdom and (c) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document in connection with the issue of the
Offered Certificates to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995 or to whom the document may otherwise be lawfully issued or be passed on.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Offered Certificates
for the Transferor will be passed upon by Stroock & Stroock & Lavan, New York,
New York, special New York counsel to the Transferor. Certain legal matters
relating to the issuance of the Offered Certificates for the Underwriters will
be passed upon by Brown & Wood LLP, New York, New York. Certain legal matters
relating to the Federal income tax consequences of the issuance of the
Certificates will be passed upon for the Transferor by Brown & Wood LLP, New
York, New York.
92
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
30/360 Basis........................................................................................ 14
Accounts............................................................................................ 5
Act................................................................................................. 3
Active Account...................................................................................... 46
Aggregate Certificateholders' Interest.............................................................. 9
Aggregate Receivables............................................................................... 7
Agreement........................................................................................... 4
Alternative Programs................................................................................ 1
Amortization Event.................................................................................. 29
Amortization Period................................................................................. 38
Average Delinquencies............................................................................... 45
Average Start-of-Month Receivables.................................................................. 45
Bank................................................................................................ 49
Bankrupt............................................................................................ 44
Base Rate........................................................................................... 31
Benefit Plans....................................................................................... 90
B/F Amount.......................................................................................... 9
B/F Interest........................................................................................ 9
B/F Percentage...................................................................................... 60
Bridgestone/Firestone............................................................................... 1
Bridgestone/Firestone Certificate................................................................... 2
Cede................................................................................................ 3
CEDEL............................................................................................... 13
Cedel Participants.................................................................................. 51
Certificateholders' Interest........................................................................ 9
Certificate Owners.................................................................................. 13
CFNA................................................................................................ 4
Chase............................................................................................... 13
Citibank............................................................................................ 13
Class A Certificateholders.......................................................................... 13
Class A Certificate Rate............................................................................ 2
Class A Certificates................................................................................ 1
Class A Expected Final Payment Date................................................................. 15
Class A Fixed Allocation Percentage................................................................. 16
Class A Floating Allocation Percentage.............................................................. 11
Class A Interest.................................................................................... 8
Class A Invested Amount............................................................................. 20
Class A Investor Charge-Off......................................................................... 26
Class A Investor Default Amount..................................................................... 19
Class A Monthly Interest............................................................................ 19
Class A Monthly Servicing Fee....................................................................... 20
Class A Pool Factor................................................................................. 80
Class A Required Amount............................................................................. 23
Class B Certificate Rate............................................................................ 2
Class B Certificateholders.......................................................................... 13
Class B Certificates................................................................................ 1
Class B Expected Final Payment Date................................................................. 16
Class B Fixed Allocation Percentage................................................................. 16
Class B Floating Allocation Percentage.............................................................. 11
Class B Interest.................................................................................... 8
Class B Invested Amount............................................................................. 21
Class B Investor Charge-Off......................................................................... 26
Class B Investor Default Amount..................................................................... 20
</TABLE>
93
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Class B Monthly Interest............................................................................ 19
Class B Monthly Servicing Fee....................................................................... 20
Class B Pool Factor................................................................................. 80
Class B Reallocated Principal Collections........................................................... 24
Class B Required Amount............................................................................. 23
Closing Date........................................................................................ 1
Collateral Interest Floating Allocation Percentage.................................................. 11
Collateral Interest................................................................................. 2
Collateral Interest Accrual Period.................................................................. 19
Collateral Interest Fixed Allocation Percentage..................................................... 16
Collateral Interest Holder.......................................................................... 10
Collateral Interest Investor Default Amount......................................................... 20
Collateral Interest Invested Amount................................................................. 21
Collateral Interest Investor Charge-Off............................................................. 27
Collateral Interest Monthly Interest................................................................ 19
Collateral Interest Monthly Servicing Fee........................................................... 20
Collateral Interest Rate............................................................................ 10
Collateral Interest Reallocated Principal Collections............................................... 24
Collateral Interest Required Amount................................................................. 23
Code................................................................................................ 34
Collection Account.................................................................................. 32
Collection Period................................................................................... 7
Collections......................................................................................... 7
Commission.......................................................................................... 1
Contractual Past-Due Aging.......................................................................... 44
Controlled Amortization Amount...................................................................... 15
Controlled Amortization Period...................................................................... 15
Cooperative......................................................................................... 52
Credit Authorization................................................................................ 42
Credit Card Program................................................................................. 1
Credit Services..................................................................................... 41
Creditworthy account................................................................................ 46
Cut-off Date........................................................................................ 5
DTC................................................................................................. 13
Defaulted Receivables............................................................................... 6
Definitive Certificates............................................................................. 53
Depositaries........................................................................................ 51
Depository.......................................................................................... 50
Determination Date.................................................................................. 32
Disclosure Document................................................................................. 12
Discount Option Receivables......................................................................... 29
Discount Percentage................................................................................. 29
Distribution Date................................................................................... 2
DOL................................................................................................. 90
Eligible Account(s)................................................................................. 6
Eligible Alternative Account(s)..................................................................... 7
Eligible Receivable................................................................................. 57
Enhancement......................................................................................... 6
ERISA............................................................................................... 34
Euroclear........................................................................................... 13
Euroclear Operator.................................................................................. 52
Euroclear Participants.............................................................................. 52
European Depositories............................................................................... 13
Excess Finance Charge Collections................................................................... 21
Exchange............................................................................................ 12
</TABLE>
94
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Exchange Act........................................................................................ 3
Exchangeable Transferor Certificate................................................................. 9
Final Class A Termination Date...................................................................... 32
Final Class B Termination Date...................................................................... 32
Final Regulation.................................................................................... 90
Final Series 1996-1 Termination Date................................................................ 15
Final Trust Termination Date........................................................................ 74
Finance Charge Collections.......................................................................... 7
Finance Charge Receivables.......................................................................... 29
FIRREA.............................................................................................. 36
Fitch............................................................................................... 58
Fixed Allocation Percentage......................................................................... 16
Holders............................................................................................. 53
Ineligible Receivable............................................................................... 56
Initial Class A Invested Amount..................................................................... 13
Initial Class B Invested Amount..................................................................... 13
Initial Collateral Interest Invested Amount......................................................... 10
Initial Subordinated Transferor Amount.............................................................. 11
Invested Amount..................................................................................... 16
Invested Percentage................................................................................. 12
Investor Default Amount............................................................................. 20
IRS................................................................................................. 87
Loan Agreement...................................................................................... 10
Letter of Credit Bank............................................................................... 32
LIBOR............................................................................................... 10
Merchant Fees....................................................................................... 1
Monthly Payment Rates............................................................................... 48
Monthly Servicer's Certificate...................................................................... 79
Monthly Servicing Fee............................................................................... 20
Moody's............................................................................................. 34
No Payment for 90 Days.............................................................................. 43
Offered Certificateholders.......................................................................... 2
Offered Certificates................................................................................ 1
OID................................................................................................. 88
OID Regulations..................................................................................... 88
Originator.......................................................................................... 1
Other Interests..................................................................................... 4
Participants........................................................................................ 51
Participation Agreement............................................................................. 12
Parties-in-Interest................................................................................. 89
Paying Agent........................................................................................ 72
Payment Date Statement.............................................................................. 80
Permitted Investments............................................................................... 58
Plans............................................................................................... 89
Portfolio Yield..................................................................................... 30
Principal Collections............................................................................... 7
Principal Receivables............................................................................... 29
Principal Terms..................................................................................... 55
Purchase and Sale Agreement......................................................................... 6
Rapid Amortization Period........................................................................... 17
Rating Agency....................................................................................... 39
Reallocated Principal Collections................................................................... 24
Receivables......................................................................................... 1
Record Date......................................................................................... 50
Recoveries.......................................................................................... 6
</TABLE>
95
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Registration Statement.............................................................................. 3
Removed Accounts.................................................................................... 54
Required Amount..................................................................................... 23
Required Ratings.................................................................................... 33
Revolving Period.................................................................................... 15
Retail Establishments............................................................................... 41
S&P................................................................................................. 34
Series.............................................................................................. 2
Series 1992 Certificates............................................................................ 11
Series 1995-A Certificates.......................................................................... 11
Series 1996-1 Interests............................................................................. 2
Service Transfer.................................................................................... 79
Servicer............................................................................................ 1
Servicer Letter of Credit........................................................................... 32
Servicing Fee....................................................................................... 77
SNB................................................................................................. 41
Shared Principal Collections........................................................................ 28
Subordinated Floating Allocation Percentage......................................................... 11
Subordinated Transferor Certificate................................................................. 2
Subordinated Transferor Fixed Allocation Percentage................................................. 16
Subordinated Transferor Default Amount.............................................................. 20
Subordinated Transferor Monthly Servicing Fee....................................................... 20
Subordinated Transferor Amount...................................................................... 21
Subordinated Transferor Reallocated Principal Collections........................................... 23
Subordinated Transferor Charge-Off.................................................................. 27
Subservicer......................................................................................... 77
Substitute Servicer Letter of Credit................................................................ 62
Substitute Transferor Letter of Credit.............................................................. 63
Supplement.......................................................................................... 12
Tax Counsel......................................................................................... 87
Ten Percent Aggregate Test.......................................................................... 8
Ten Percent Number Test............................................................................. 8
Terms and Conditions................................................................................ 52
Transfer Date....................................................................................... 32
Transfer Deposit Amount............................................................................. 56
Transferor.......................................................................................... 1
Transferor Amount................................................................................... 9
Transferor Interest................................................................................. 9
Transferor Letter of Credit......................................................................... 33
Transferor Percentage............................................................................... 60
Trust............................................................................................... 1
Trust Assets........................................................................................ 1
Trustee............................................................................................. 1
UCC................................................................................................. 36
Unallocated Principal Collections................................................................... 62
Underwriters........................................................................................ 91
Union............................................................................................... 37
Weighted Average Certificate Rate................................................................... 31
</TABLE>
96
<PAGE>
ANNEX I
OUTSTANDING SERIES
The table below sets forth the principal characteristics of the other
Series previously issued by the Trust and currently outstanding as of September
30, 1996.
<TABLE>
<S> <C>
1. Series 1995-A Asset Backed Certificates*
Class A Invested Amount........................................................... $ 199,200,000
Class B Invested Amount**......................................................... $ 38,095,238
Servicing Fee Percentage.......................................................... 2.00%
Series Issuance Date.............................................................. June 5, 1995
2. Series 1992-B Certificates
Class A REMARCS................................................................... $ 149,695,000
Class B REMARCS................................................................... $ 29,157,394.14
Servicing Fee Percentage.......................................................... 2.00%
Series Issuance Date.............................................................. January 4, 1993
</TABLE>
- ------------------
* The proceeds from the issuance of the Series 1996-1 Asset Backed Certificates
will be used to retire the Series 1995-A Asset Backed Certificates.
** Issued pursuant to Series 1992-A Asset Backed Certificates.
AI-1
<PAGE>
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<PAGE>
ANNEX II
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally Offered Certificates
(the 'Global Securities') will be available only in book-entry form. Investors
in the Global Securities may hold such Global Securities through any of DTC,
CEDEL or Euroclear. The Global Securities will be traceable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Offered Certificates will be effected on a
delivery-against-payment basis through the respective Depositaries of CEDEL and
Euroclear (in such capacity) and DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, CEDEL and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to prior debt issues. Investors securities
custody accounts will be credited with their holdings against payment in
same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no 'lock-up' or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payments in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to book-entry
securities in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a CEDEL Participant or a Euroclear Participant, the purchaser will
send instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. CEDEL or Euroclear,
as applicable, will instruct its Depositary to receive the Global Securities
against payment. Payment will include interest accrued on
AII-1
<PAGE>
the Global Securities from and including the last coupon payment date to and
excluding the settlement date. Payment will then be made by such Depositary to
the DTC Participant's account against delivery of the Global Securities. After
settlement has been completed, the Global Securities will be credited to the
applicable clearing system and by the clearing system, in accordance with its
usual procedures, to the CEDEL Participant's or Euroclear Participant's account.
The Global Securities credit will appear the next day (European time) and the
cash debit will be back-valued to, and the interest on the Global Securities
will accrue from, the value date (which would be the preceding day when
settlement occurred in New York). If settlement is not completed on the intended
value date (i.e., the trade fails), the CEDEL or Euroclear cash debit will be
valued instead as of the actual settlement date.
CEDEL Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within CEDEL or Euroclear. Under this approach,
they may take on credit exposure to CEDEL or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit to
them, CEDEL Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon the finance settlement. Under
this procedure, CEDEL Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each CEDEL Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of CEDEL Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, CEDEL Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing systems, through
their respective Depositaries, to a DTC Participant. The seller will send
instructions to CEDEL or Euroclear through a CEDEL Participant or Euroclear
Participant at least one business day prior to settlement. In these cases, CEDEL
or Euroclear will instruct their respective Depositaries, as appropriate, to
deliver the bonds to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
coupon payment date to and excluding the settlement date. The payment will then
be reflected in the account of the CEDEL Participant or Euroclear Participant
the following day, and receipt of the cash proceeds in the CEDEL Participant's
or Euroclear Participant's account would be back-valued to the value date (which
would be the preceding day, when settlement occurred in New York). Should the
CEDEL Participant or Euroclear Participant have a line of credit with its
clearing system and elect to be in debit in anticipation of receipt of the sale
proceeds in its account, the back-valuation will extinguish any overdraft
charges incurred over that one-day period. If settlement is not completed on the
intended value date (i.e., the trade fails), receipt of the cash proceeds in the
CEDEL Participant's or Euroclear Participant's account would instead be valued
as of the actual settlement date. Finally, day traders that use CEDEL or
Euroclear and that purchase Global Securities from DTC Participants for delivery
to CEDEL Participants or Euroclear Participants should note that these trades
would automatically fail on the sale side unless affirmative action were taken.
At least three techniques should be readily available to eliminate this
potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary procedures;
AII-2
<PAGE>
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their CEDEL or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the CEDEL Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will be
subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S.
Persons, unless (i) each clearing system, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption of non-U.S. Persons (Form W-8). Beneficial owners of Offered
Certificates that are non-U.S. Persons generally can obtain a complete exemption
from the withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status). If the information shown on Form W-8 changes, a new Form W-8 must be
filed within 30 days of such change.
Exemption for non-U.S. Person with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are beneficial owners of Offered Certificates
residing in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate (depending on the treaty terms) by filing Form
1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty provides
only for a reduced rate, withholding tax will be imposed at that rate unless the
filer alternatively files Form W-8. Form 1001 may be filed by the beneficial
owner of Offered Certificates or such owner's agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, such
owner's agent, files by submitting the appropriate form to the person through
whom it holds the security (the clearing agency, in the case of persons holding
directly on the books of the clearing agency). Form W-8 and Form 1001 are
effective for three calendar years and Form 4224 is effective for one calendar
year.
The term 'U.S. Person' means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (ii) an estate or trust
the income of which is includible in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all aspects
of U.S. federal income tax withholding that may be relevant to foreign holders
of the Global Securities. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of the
Global Securities.
AII-3
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No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus in connection with this offer made
by this Prospectus and, if given or made, such information or representations
must not be relied upon as having been authorized by Bridgestone/Firestone,
Inc., Firestone Retail Credit Corporation or the Underwriter. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstance create an implication that there has been no change in the affairs
of Bridgestone/Firestone, Inc., Firestone Retail Credit Corporation, or the
Receivables since the date thereof. This Prospectus does not constitute an offer
or solicitation by anyone in any state in which such offer or solicitation is
not authorized or in which the person making such offer or solicitation is not
qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports to Certificateholders................. 3
Available Information......................... 3
Summary of Terms.............................. 4
Risk Factors.................................. 35
Use of Proceeds............................... 40
The Transferor and Bridgestone/Firestone...... 40
The Credit Card Program....................... 41
Maturity Assumptions.......................... 48
The Letter of Credit Bank..................... 49
Description of the Offered Certificates and
the Agreement............................... 49
Description of the Purchase and Sale
Agreement................................... 83
Certain Legal Aspects of the Receivables...... 84
Federal Income Tax Consequences............... 87
ERISA Considerations.......................... 89
Underwriting.................................. 91
Legal Matters................................. 92
Index of Terms................................ 93
Annex I: Outstanding Series................... AI-1
Annex II: Global Clearance, Settlement and Tax
Documentation Procedures.................... AII-1
</TABLE>
Until January 30, 1997 (90 days after the date of this Prospectus), all
dealers effecting transactions in the Offered Certificates, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This delivery requirement is in addition to the obligation of dealers to deliver
a Prospectus when acting as an underwriter and with respect to their unsold
allotments or subscriptions.
$228,205,129
BRIDGESTONE/FIRESTONE
MASTER TRUST
$200,000,000 6.17% CLASS A ASSET
BACKED CERTIFICATES, SERIES 1996-1
$28,205,129 6.49% CLASS B ASSET
BACKED CERTIFICATES, SERIES 1996-1
FIRESTONE RETAIL
CREDIT CORPORATION
TRANSFEROR
BRIDGESTONE/FIRESTONE, INC.
SERVICER
------------------------
PROSPECTUS
CITICORP SECURITIES, INC.
CHASE SECURITIES INC.
DATED NOVEMBER 1, 1996
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