<PAGE>
As filed with the Securities and Exchange Commission on June 27, 1996
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________
BRIDGESTONE/FIRESTONE MASTER TRUST
/(Issuer of the Certificates)/
_________________
FIRESTONE RETAIL CREDIT CORPORATION
/(Originator of the Trust described herein and exact name
of registrant as specified in its government instrument.)/
_________________
<TABLE>
<CAPTION>
<S> <S> <S>
Massachusetts 6141 13-3205598
(State of (Primary Standard (IRS Employer
Incorporation) Industrial Identification
Classification Code Number)
Number)
</TABLE>
c/o Ropes & Gray David M. Donaldson, Esq.
One International Place Ropes & Gray
Boston, Massachusetts 02110-2624 One International Plaza
(617) 951-7000 Boston, Massachusetts 02110-2624
/(Address, including zip code, and /(Address, including zip code, and
telephone number, telephone number,
including area code of registrant's including area code of registrant's
principal executive offices)/ principal executive offices)/
_________________
copies to:
<TABLE>
<CAPTION>
<S> <C> <C>
Saul Solomon, Esq. Reed D. Auerbach, Esq. Cathy Kaplan, Esq.
Bridgestone/Firestone, Inc. Stroock & Stroock & Lavan Brown & Wood
50 Century Boulevard Seven Hanover Square 1 World Trade Center
Nashville, Tennessee 37214 New York, New York 10004-2696 New York, New York 10048
(615) 872-1496 (212) 806-6648 (212) 839-5531
</TABLE>
_________________
Approximate date of commencement of proposed sale to the public. As
soon as practicable on or after the effective date of this Registration
Statement, as determined by market conditions.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 of the Securities Act
of 1933, please check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
__________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum Amount of
Title of Securities Amount Being Offering Price Aggregate Offering Registration
Being Registered Registered(1) Per Unit Price Fee(2)
<S> <C> <C> <C> <c
Class A Floating Rate
Asset Backed Certificates
Series 1996-1 . . . . . $1,000,000 100% $1,000,000 $435
1996-1 . . . . . . . .
Class B Floating Rate
Asset Backed Certificates,
Series 1996-1 . . . . . $1,000,000 100% $1,000,000 $435
</TABLE>
(1) Estimated solely for purposes of determining the registration fee.
(2) Total registration fee of $870.
This Registration Statement, including exhibits, consists of
___ pages, Exhibit Index appears on page ___.
1
<PAGE>
CROSS REFERENCE SHEET
- ------------------------
Form S-1
Item Number and Caption
-----------------------
Location or Caption
in Prospectus
1. Forepart of the Registration Statement and
Outside Front Page of Prospectus . . . . . . Forefront of Regis-
tration Statement
Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover Pages Inside Front Cover,
of Prospectus . . . . . . . . . . . . . . . . Outside Back Cover
Page of Prospectus
3. Summary Information, Risk Factors, and . . . . Summary of Terms;
Ratio of Earnings to Fixed Charges Risk Factors
4. Use of Proceeds . . . . . . . . . . . . . . *
5. Determination of Offering Price . . . . . . . *
6. Dilution . . . . . . . . . . . . . . . . . . *
7. Selling Security Holders . . . . . . . . . . *
8. Plan of Distribution . . . . . . . . . . . . Underwriting
9. Description of Securities to be Registered The Trust; Descrip-
tion of the Offered
Certificates and the
Agreement
10. Interests of Named Experts and Counsel . . *
11. Information with Respect to the Registrant. . The Transferor and
Bridgestone/Firestone
a. Description of Business . . . . . . . . The Transferor and
Bridgestone/Firestone
b. Description of Property . . . . . . . . *
c. Legal Proceedings . . . . . . . . . . . *
d. Market Price of and Dividends on *
the Registrant's Common Equity
and Related Stockholder Matters . . . .
e. Financial Statements . . . . . . . . . *
f. Selected Financial Data . . . . . . . . *
g. Supplementary Financial *
Information . . . . . . . . . . . . .
h. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . *
i. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure . . . . . . . *
j. Directors and Executive Officers . . . . *
k. Executive Compensation . . . . . . . . . *
l. Security Ownership of Certain
Beneficial Owners and
Management . . . . . . . . . . . . . . . *
1
<PAGE>
m. Certain Relationships and Related *
Transactions . . . . . . . . . . . . . .
12. Disclosure of Commission Position on See Part II
Indemnification for Securities Act
Liabilities . . . . . . . . . . . . . . . . .
13. Other Expenses of Income and See Part II
Issuance and Distribution . . . . . . . . . .
14. Indemnification of Directors and Officers . . See Part II
15. Recent Sales of Unregistered Securities . . . *
16. Exhibits and Financial Schedules . . . . . . See Part II
17. Undertakings . . . . . . . . . . . . . . . . See Part II
__________________
*To be furnished by amendment.
2
<PAGE>
PROSPECTUS
__________
$_______
BRIDGESTONE/FIRESTONE MASTER TRUST
$___________ CLASS A FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1996-1
$___________ CLASS B FLOATING RATE ASSET BACKED CERTIFICATES, SERIES 1996-1
Firestone Retail Credit Corporation Bridgestone/Firestone, Inc.
Transferor Servicer
Each Class A Floating Rate Asset Backed Certificates, Series 1996-1 (the
"Class A Certificates") and each Class B Floating Rate 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 Pooling and Servicing Agreement (the "Agreement"),
dated as of __________, as supplemented by the Series 1996-1 Series
Supplement, dated as of ________, and each among Firestone Retail Credit
Corporation, as transferor (the "Transferor"), Bridgestone/Firestone, Inc.,
as servicer (the "Servicer"), and The Fuji Bank and Trust Company, as trustee
(the "Trustee"). The Trust assets (the "Trust Assets") include 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 (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 "Other 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 from October 19, 1992 to November
18, 1992, (iv) the right to receive certain merchant fees attributed to
cardholder charges giving rise to Receivables, (v) all Recoveries on
Defaulted 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 and (ix) all proceeds of any of the foregoing.
Concurrently with the issuance of the Offered Certificates, the Trust
will issue $______ principal amount Class C Floating Rate Asset Backed
Certificates, Series 1996-1 (the "Class C Certificates") and the Transferor
Subordinated Certificate (the "Subordinated Transferor Certificate" and,
together with the Class C Certificates and the Offered Certificates, the
"Certificates"). 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 Class C Certificates and the Transferor Subordinated Certificate will be
subordinated to the extent necessary to find payments with respect to the
Class B Certificates as described herein. See "Description of the Offered
Certificates and the Agreement." The Class C Certificates and the Transferor
Subordinated Certificate are not being offered hereby.
(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. Citicorp Securities, Inc.
expects, but is 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 29 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE 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.
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE (1) DISCOUNT TRANSFEROR(1)(2)
<S> <C> <C> <C>
Per Class A Certificate . . . . . . . . . . . % % %
Per Class B Certificate . . . . . . . . . . . % % %
Total . . . . . . . . . . . . . . . . . . . . $ $ $
</TABLE>
(1) Plus accrued interest, at the Class A Certificate Rate or Class B
Certificate Rate, as applicable, from __________.
(2) Before deducting estimated expenses of $_______ payable by the
Transferor.
The Offered Certificates are offered by the Underwriter as described in
"Underwriting", subject to receipt and acceptance by it and subject to its
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 ______
through the facilities of The Depository Trust Company, CEDEL S.A. and the
Euroclear System.
<PAGE>
CITICORP SECURITIES, INC.
-------------------------
The date of this Prospectus is ________, 1996.
(Continued from the previous page)
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 Certificates (subject to the
Participation Agreement with Bridgestone/Firestone), the
Bridgestone/Firestone Certificate and the interest of holders of other
outstanding Series. 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
Certificates, by exchanging a portion of its interest in the Trust.
Interest will accrue on the Class A Certificates from _____________
through __________ and with respect to each Collection Period (as defined
herein) thereafter, at the rate of ___% per annum above the London interbank
offered rate for one-month United States dollar deposits ("LIBOR"),
determined as described herein, prevailing on the related LIBOR Determination
Date with respect to such Collection Period. Interest will accrue on the
Class B Certificates from _____________ through __________ and with respect
to each Collection Period (as defined herein) thereafter, at the rate of ___%
per annum above LIBOR, determined as described herein, prevailing on the
related LIBOR Determination Date with respect to such Collection Period.
Interest with respect to the Certificates is payable monthly on the
__________ of each month (or, if such day is not a business day, the next
succeeding business day) (each, a "Distribution Date"). Principal on the
Class A Certificates is scheduled to be distributed on each Distribution Date
commencing on the Distribution Date in __________ and ending on the
Distribution Date in __________, 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 __________, 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. See "Maturity Assumptions." The issuance of the Class B
Certificates, the Class C Certificates and the Subordinated Transferor
Certificate are conditions precedent to the issuance of the Class A
Certificates. The issuance of the Class C Certificates and the Subordinated
Transferor Certificate are conditions precedent to the issuance of the Class
B Certificates.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER 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 STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
--------------------
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates (defined below) 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. 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 hereinafter defined) 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
("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.
<PAGE>
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
Securities and Exchange Commission (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, 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 and amendments and
exhibits thereto may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
<PAGE>
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.
SECURITIES OFFERED $____________ Class A Floating Rate Asset Backed
Certificates, Series 1996-1 (the "Class A
Certificates") to be fully paid by ________ __,
1999 and $_________________ Class B Floating Rate
Asset Backed Certificates, Series 1996-1 (the
"Class B Certificates", together with the Class A
Certificates, the "Offered Certificates), to be
fully paid by ________ __, 1999. The Offered
Certificates will be issued pursuant to the
Pooling and Servicing Agreement, as supplemented
by the Series 1996-1 Series Supplement, dated as
of ______, 1996 (collectively, the "Agreement"),
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
Class C Certificates and the Subordinated Transferor
Certificate (herein collectively referred to as the
"Other Certificates"), to be issued pursuant
to the Pooling and Servicing Agreement (see
"Description of the Offered Certificates" below),
are not being offered hereby. The issuance of the
Other Certificates is a condition precedent to the
issuance of the Offered Certificates. The Other
Certificates, together with the Offered
Certificates, will be referred to herein as
the "Certificates." Any information contained
herein regarding the Other Certificates is included
solely to permit a better understanding of the
Offered Certificates.
The Certificates represent beneficial interests in
the Trust only and do not represent interests in or
recourse obligations of the Transferor, the
Servicer, Credit First National Association (the
"Originator" or "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, 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.
<PAGE>
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 "Other 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 (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 pursuant to the Merchant Fee Transfer
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 (each
as defined below) and (ix) all proceeds of
any of the foregoing.
The Accounts will include (i) all eligible credit
card accounts ("Eligible Accounts") established
under the Credit Card Program subsequent to the
Cut-off Date and (ii) accounts established
under Other Programs subsequent to the Cut-off
Date which are designated by the Transferor as
Eligible Accounts in accordance with selection
criteria relating to the addition of accounts.
See "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 CFNA guidelines. Notwithstanding
the foregoing sentence, a Receivable shall be
deemed a Defaulted Receivable no later than the
2
<PAGE>
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
Servicer may deduct reasonable expenses in
connection with such Recoveries. 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 a
purchase and sale agreement, as amended and
restated as of October 3, 1989, as amended as of
November 1, 1992, as amended as of October 1, 1993,
as amended and restated as of October 20, 1993,
as amended and restated as of ___________,
1996, among the Transferor, Bridgestone/Firestone
and the Originator (the "Purchase and Sale
Agreement"). The Purchase and Sale Agreement
provides that the Originator shall sell and assign
to the Transferor, and the Transferor will purchase
from the Originator, on each business day, all
Receivables arising in the Accounts under the
Credit Card Program and certain Receivables arising
in designated Accounts under the Other Programs,
provided, among other things, that the Transferor
is not in default thereunder and that no Servicer
Event of Default and no Originator insolvency
shall have occurred. The right to receive
certain merchants fees attributed to cardholder
charges giving rise to Receivables will be
transferred by the Originator to the Transferor
pursuant to a merchant fee purchase agreement,
dated as of ________, 1996 (the "Merchant Fee
Transfer Agreement"), among the Transferor, the
Originator and Bridgestone/Firestone. The
Transferor has transferred and will transfer such
Receivables and the merchant fees to the Trust
pursuant to the Agreement.
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."
3
<PAGE>
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 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 received or accrued in any Collection Period
shall be treated as Finance Charge Collections
for such Collection Period for all purposes.
As of the Collection Period ended on ___________,
1996 the amount of Aggregate Receivables (as
defined below) in the Trust was $_____________.
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").
ADDITION OF ACCOUNTS The Accounts consist of all Accounts established
under the Credit Card Program 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 Accounts established under Other
Programs ("Additional Accounts") and to convey
to the Trust all Receivables of such Additional
Accounts, whether such Receivables are then
existing or thereafter created. On any date,
the Transferor may designate Additional
Accounts and convey the Receivables arising from
such Additional Accounts. Any Receivables arising
from such Accounts which exceed 10% (the "10%
Maximum") of the average amount of Aggregate
Receivables in the Trust as of the last day of
each of the preceding twelve Collection Periods
shall be deemed to be "Ineligible Receivables"
unless the Transferor has obtained the
consent of the applicable rating agencies.
Such Other Programs 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
date of the issuance of the Certificates, the
Originator has not established any of these Other
Programs.
Upon receiving a written confirmation from the
applicable rating agencies, none of the
Receivables arising from Additional Accounts
from designated Other Programs will be deemed to
be "Ineligible Receivables" and the Receivables
from such Additional Accounts will no longer be
subject to the 10% Maximum. The Transferor
may continue to designate Additional Accounts
from Other Programs in accordance with the
selection criteria relating to the Addition of
Accounts.
REMOVAL OF ACCOUNTS The Transferor has the right to accept Accounts for
removal from the Trust in an amount not greater
than the excess of the Transferor Amount (plus
the B/F Amount and amounts available under the
Transferor Letter of Credit) over __% of the
Aggregate
4
<PAGE>
Certificateholders' Interest (as defined herein),
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.
DESCRIPTION OF THE
CERTIFICATES 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
Class C Certificateholders (the "Class C
Interest") and the subordinated interest of the
holder of the Subordinated Transferor Certificate
(the "Subordinated Transferor Interest," together
with the Class A Interest, the Class B Interest
and the Class C 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, Class B and
Class C Invested Amounts, the Subordinated
Transferor Amount 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 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 the London interbank offered rate for ___
month United States dollar deposits ("LIBOR")
plus ____% per annum (the "Class A Certificate
Rate") payable monthly on each Distribution Date,
and the payment of principal on each Distribution
Date commencing ____________, 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
Finance Charge Collections (as defined herein)
and Reallocated Principal Collections (as defined
herein) and the Class B Invested Amount (as
defined herein), the Class C Invested Amount (as
defined herein) and the Subordinated Transferor
Amount are each zero).
5
<PAGE>
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 at the rate per annum
equal to LIBOR plus ____% per annum (the "Class B
Certificate Rate") payable monthly on each
Distribution Date, and the payment of principal
on each Distribution Date commencing ____________,
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 Finance Charge Collections
and Reallocated Principal Collections and the
Class C 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.
The Class C Certificates will evidence undivided
interests in the Trust Assets allocated to the
Class C 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 interest at a rate per annum equal to
LIBOR plus ___% per annum (the "Class C Certificate
Rate") and of principal with respect to the
Class C Certificates to the extent of the
Class C Invested Amount (which may be less than
the aggregate unpaid principal balance of the
Class C Certificates, in certain circumstances,
if the Investor Default Amount exceeds available
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 Class C Certificates
are subordinate in right of payment to
the Offered Certificates to the extent necessary
to fund payments with respect to the
Offered Certificates. The Class C Certificates
will be offered privately and are not being
offered hereby.
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 Class C
Certificates (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
Finance Charge Collections and Reallocated
Principal Collections). The holder of the
Subordinated Transferor Certificate 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 Class C Certificates to the
extent necessary to fund payments with respect to
the Offered Certificates
6
<PAGE>
and the Class C Certificates. The Subordinated
Transferor Certificate will be retained by the
Transferor and is not being offered hereby.
The initial balance of the Subordinated Transferor
Certificate will be equal to ( )% of the sum of
the initial Class A Invested Amount, Class B
Invested Amount and Class C Invested 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 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
Class C Certificates, the Subordinated Transferor
Certificate, the Bridgestone/Firestone Certificate,
the Exchangeable Transferor Certificate are being
offered hereby. Each outstanding Series represents
a pari passu interest in the Trust.
The Class A Interest, the Class B Interest, the Class
C 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
Class C Interest and the Subordinated Transferor
Interest based on the Floating Allocation
Percentage applicable to such Class or Interest
during the related Collection Period. The "Class A
Floating Allocation Percentage", the "Class B
Floating Allocation Percentage", the "Class C
Floating Allocation Percentage" and the
"Subordinated Floating Allocation Percentage"
shall be equal to the percentage equivalent of the
ratio which the Class A, Class B, Class C 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.
During the Revolving Period (as defined below),
subject to certain limitations, all Principal
Collections allocable to the Certificates
(other than Reallocated Principal Collections (as
defined below) that are used to pay interest due
on the Class A, Class B and Class C Certificates)
will be paid to the Transferor. During the
Controlled Amortization Period (as defined below)
and any Rapid Amortization Period (as defined
below), Principal Collections will be allocated to
the Class A Interest, the Class B Interest, the
Class C Interest and the Subordinated Transferor
Interest based on the Fixed Allocation Percentage
with respect to such Class or Interest. See
"Principal Payments; Controlled Amortization
Period" herein. The Floating
7
<PAGE>
Allocation Percentage and Fixed Allocation
Percentage are sometimes referred to herein as an
"Invested Percentage."
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 which was sold to
Bridgestone/Firestone pursuant to a Participation
Agreement 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 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 Underwriter (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 (as defined
below) of such Series, (ii) an opinion of
counsel to the effect that the certificates
of such Series under existing law will be
characterized as indebtedness for Federal income
tax purposes and that the issuance of such Series
will not materially adversely affect the Federal
income tax characterization of any outstanding
Series, (iii) if required by the related
Supplement, a form of Enhancement and any related
agreement, (iv) written confirmation from the
applicable Rating Agency (see "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.
8
<PAGE>
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 ($50,000,000) (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 Morgan
Guaranty Trust Company of New York ("Morgan"), the
relevant depositaries of Cedel and Euroclear,
respectively, and each a participating member of
DTC. See "Description of the Certificates--
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 "Class C Certificateholders" refers to
registered holders of the Class C Certificates,
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 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.
9
<PAGE>
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 _________________
in an amount equal to the product of (i) the actual
number of days in the related Collection Period
divided by 360, (ii) the Class A Certificate Rate
and (iii) the outstanding principal balance of the
Class A Certificates as of the preceding Record
Date (or in the case of the first Distribution
Date, as of the Closing Date). Interest for any
Distribution Date will include accrued interest
at the Class A Certificate Rate from and including
the first day of the preceding calendar month or,
in the case of the first Distribution Date from
and including the Closing Date, to but excluding
the first day of the succeeding calendar month.
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 will be calculated
on the basis of the actual number of days elapsed
in the Collection Period and a 360-day year
("Actual/360 Basis").
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
_____________________, in an amount equal to the
product of (i) the actual number of days in the
related Collection Period divided by 360, (ii) the
Class B Certificate Rate and (iii) the outstanding
principal balance of the Class B Certificates as
of the preceding Record Date (or in the case of the
first Distribution Date, as of the Closing Date).
Interest for any Distribution Date will include
accrued interest at the Class B Certificate
Rate from and including the first day of the
preceding calendar month or, in the case of the
first Distribution Date from and including the
Closing Date, to but excluding the first day of
the succeeding calendar month. 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 will
be calculated on an Actual/360 Basis.
RECORD DATE The 15th day of the month immediately preceding any
Distribution Date.
REVOLVING PERIOD No principal will be payable to the Offered
Certificateholders until the Distribution Date
occurring in _____________, or upon the 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
10
<PAGE>
payment has been made to the Class A
Certificateholders. No principal will
be payable to the Class C Certificateholders
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 Class C
Certificateholders. For each Collection Period
during the period beginning after the Cut-off 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 interest due on the Class A, Class B and
Class C Certificates) will, subject to certain
limitations, be distributed to the Transferor.
PRINCIPAL PAYMENTS;
CONTROLLED
AMORTIZATION PERIOD Unless or until an Amortization Event (as defined
below) has occurred, commencing on (the
Distribution Date occurring three years after
the Closing Date) (the "Controlled Amortization
Date") and ending when the Class A Invested Amount
has been paid in full or when the Trust or Series
otherwise terminates 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 Certificates (other
than Reallocated Principal Collections that are
used to pay interest due on the Class A, Class B
and Class C Certificates) will be distributed
monthly to the Class A Certificateholders, as
provided herein, on each Distribution Date
beginning with the Distribution Date following the
Collection Period commencing on the Controlled
Amortization Date. During the Controlled
Amortization Period, the amount of Principal
Collections and Shared Principal Collections
allocable to the Certificates will equal the
product of such Principal Collections and the
Fixed Allocation Percentage (as defined below)
which will be paid through to the Class A
Certificateholders to the extent of the lesser
of such product and $ ____________ (the "Controlled
Amortization Amount"). The Class A Expected Final
Payment Date is ______________________.
During either the Controlled Amortization Period
or any Rapid Amortization Period (described below),
the amount of Principal Collections allocable to
the Certificateholders will equal an amount
determined by multiplying (A) a fraction, the
numerator of which is the sum of the Class A
Invested Amount, the Class B Invested Amount, the
Class C Invested Amount and the Subordinated
Transferor Amount (together, the "Invested
Amount"), each as of the end of the last day of
the Revolving Period and the denominator of which
is the greater of (i) the amount of Receivables
(minus the amount of any Ineligible Receivables)
in the Trust as of the last day of the prior
Collection Period less the amount of finance
charges billed or accrued in respect of such
Receivables in such prior
11
<PAGE>
Collection Period adjusted for finance charges
rebated in such Collection Period (the "Aggregate
Receivables") or (ii) the sum of the numerators
used to calculate the invested percentage with
respect to Principal Collections for all Series of
certificates outstanding for the current
Distribution Date by (B) the Principal Collections
received during the related Collection Period (the
"Fixed Allocation Percentage").
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 will be paid in full to the Class B
Certificateholders. The Class B Expected Final
Payment Date is __________.
The Class C Certificateholders 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 Class C
Invested Amount will be paid in full to the Class C
Certificateholders. The Class C Expected Final
Payment Date is ___________.
The holder of the Subordinated Transferor
Certificates will not receive any payments of
principal until the Class A, the Class B and the
Class C Certificateholders have received all
payments of principal due to them. Once the
Class A Invested Amount, the Class B Invested
Amount and the Class C Invested Amount have been
reduced to zero, the Subordinated Transferor Amount
will be paid in full to the holder of the
Subordinated Transferor Certificate. The Expected
Final Payment Date for the Subordinated Transferor
Certificate is __________.
RAPID AMORTIZATION
PERIOD During the period from the earlier of the date on
which the Class A Invested Amount has been paid in
full or an Amortization Event occurs or is deemed
to have occurred to the earlier of the date on
which the Invested Amount has been paid in full
or the Final Series 1996 Termination Date (see
"Final Payment of Principal; Termination of the
Trust" below) (the "Rapid Amortization Period"),
Principal Collections and Shared Principal
Collections 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 and Shared Principal
Collections 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 Certificate-
holders, to the Class C Certificateholders, and,
following the final principal payment
12
<PAGE>
to the Class C Certificateholders, to the holder of
the Subordinated Transferor Certificate.
FLOW OF FUNDS Funds on deposit in the Collection Account
allocable to the Class A, Class B and Class C
Certificates and the Subordinated Transferor
Certificate with respect to each Distribution
Date shall be applied as 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 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 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;
(ii) the Class B Investor Default Amount will
be distributed 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);
(iii) the Class B 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
and will be allocated and distributed as described
under "Excess Finance Charge Collections."
(c) the Class C Floating Allocation Percentage of
Finance Charge Collections will be distributed as
follows:
13
<PAGE>
(i) Class C Monthly Interest, plus the
amount of any unpaid interest due;
(ii) the Class C Investor Default Amount will
be distributed 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);
(iii) the Class C 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
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,
Class B and Class C Certificates 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.
(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,
Class B and Class C Certificates 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;
14
<PAGE>
(iii) once the Class B Invested Amount is paid
in full, the remaining amount will be
distributed to the Class C Certificateholders
until the Class C Invested Amount is paid in
full;
(iv) once the Class C 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 up to the
amount of the Transferor Interest; and
(vi) the balance will be applied as Shared
Principal Collections and the balance will be
distributed to the Transferor.
"Class A Monthly Interest" means, with respect to
any Distribution Date, the Class A Monthly Interest
equals the product of (i) the actual number of
days in the related Collection Period divided by
360, (ii) the Class A Certificate Rate and (iii) 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 Class A Monthly
Principal made to the Class A Certificateholders
on such Distribution Date) or, with respect to the
first Distribution Date, the Class A Initial Invested
Amount, provided, however, that with respect to the
initial Distribution Date, Class A Monthly Interest
shall equal $_______________.
"Class B Monthly Interest" means, with respect to any
Distribution Date, the Class B Monthly Interest
equals the product of (i) the actual number of
days in the related Collection Period divided by
360, (ii) the Class B Certificate Rate and (iii)
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 Class B Monthly
Principal made to the Class B Certificateholders on
such Distribution Date) or, with respect to the
first Distribution Date, the Class B Initial
Invested Amount, provided, however, that with
respect to the initial Distribution Date, Class
B Monthly Interest shall equal $_______________.
"Class C Monthly Interest" means, with respect to any
Distribution Date, the Class C Monthly Interest
equals the product of (i) the actual number of
days in the related Collection Period divided
by 360, (ii) the Class C Certificate Rate and
(iii) the outstanding principal balance of the
Class C Certificates as of the preceding
Distribution Date (after subtracting
therefrom the aggregate amount of all
distributions of Class C Monthly Principal made
to the Class C Certificateholders on such
Distribution Date) or, with respect to the first
Distribution Date, the Class C Initial Invested
Amount, provided, however, that with respect to
the initial Distribution Date, Class C Monthly
Interest shall equal $_______________.
15
<PAGE>
"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.
"Class C Investor Default Amount" means, a portion
of all Defaulted Receivables which will be
allocated to the Class C Certificateholders for
each Distribution Date in an amount equal to the
product of the Class C 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.
"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 Class C 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 Class C Interest
on each Distribution Date (the "Class C 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 Class C 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,
the Class C Certificates or the Subordinated
Transferor Certificate, as the case may be).
"Class A Invested Amount" for any date means an
amount equal to the initial principal balance of
the Class A Certificates, minus the amount
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<PAGE>
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 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 for
which the Subordinated Transferor Amount and the
Class C Invested Amount have not been reduced,
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).
"Class C Invested Amount" for any date means an
amount equal to (i) the initial principal balance
of the Class C Certificates, minus (ii) the amount
of principal payments made to the Class C
Certificateholders prior to such date, minus (iii)
the aggregate amount of Class C Investor
Charge-Offs (as defined below) for all prior
Distribution Dates, minus (iv) the aggregate
amount of Class C Reallocated Principal Collections
for all prior Distribution Dates for which the
Subordinated Transferor Amount has not been
reduced, minus (v) an amount equal to the
aggregate amount by which the Class C 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 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 Class C 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).
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"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)(iv), clause (c)(iv) and clause
(d)(ii) above.
EXCESS FINANCE
CHARGE COLLECTIONS Excess Finance Charge Collections will be applied as
follows:
(a) to fund the Class A Required Amount;
(b) Class A Investor Charge-Offs which have not
been previously reimbursed will be distributed 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);
(c) to fund the Class B Required Amount;
(d) 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) will be distributed 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);
(e) to fund the Class C Required Amount;
(f) an amount equal to the amount by which the
Class C Invested Amount has been reduced below the
Initial Class C Invested Amount (for reasons
other than the payment of principal to the
Class C Certificateholders) will be distributed
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);
(g) the Subordinated Transferor Default Amount
will be distributed 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);
(h) 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 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);
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(i) the balance, if any, will be treated as Shared
Excess Finance Charge Collections to the extent
necessary; and
(j) the balance, if any, 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), the Class B Investor
Default Amount, the Class B Monthly Servicing
Fee for such Collection Period exceeds the funds
allocable to the Class B Certificates to pay
such amounts.
The "Class C Required Amount" means the amount,
if any, by which the sum of Class C Monthly
Interest, any overdue Class C Monthly Interest
(with interest thereon), the Class C Investor
Default Amount, the Class C Monthly Servicing Fee
for such Collection Period exceeds the funds
allocable to the Class C Certificates to pay such
amounts.
The "Required Amount" shall equal the sum of the
Class A, Class B and Class C Required Amounts.
REALLOCATED PRINCIPAL
COLLECTIONS Principal Collections allocable first to the
Subordinated Transferor Interest, then to the
Class C Interest and then to the Class B
Interest with respect to a Collection Period
will be applied as follows:
(a) an amount equal to the excess of (i) the
Required Amount over (ii) the Excess Finance Charge
Collections will be used to fund the Required
Amount; and
(b) 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).
The amounts described in the following paragraph
will equal the "Subordinated Transferor Reallocated
Principal Collections", the "Class C Reallocated
Principal Collections" and the "Class B Reallocated
Principal Collections", as applicable. "Reallocated
Principal Collections" will equal the sum of
Subordinated Transferor Reallocated Principal
Collections, Class C Reallocated Principal
Collections and Class B Reallocated Principal
Collections.
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<PAGE>
With respect to any Collection Period during the
Revolving Period, Reallocated Principal Collections
will be allocated to each of the Subordinated
Transferor Interest, the Class C Interest and the
Class B Interest based on the Subordinated
Transferor Floating Allocation Percentage, the Class
C Floating Allocation Percentage or the Class B
Floating Allocation Percentage for such Collection
Period, as applicable. With respect to any
Collection Period during the Controlled
Amortization Period or any Rapid Amortization
Period, Reallocated Principal Collections will be
allocated to each of the Subordinated Transferor
Interest, the Class C Interest and the Class B
Interest based on the Fixed Allocation Percentage
of Principal Collections for such Collection Period
multiplied by a fraction the numerator of which is
equal to the Subordinated Transferor Amount, the
Class C Invested or the Class B Invested Amount,
as applicable, as of the close of business on the
last day of the prior Collection Period and the
denominator of which is equal to the Invested Amount
at the close of business on such day.
ADDITIONAL AMOUNTS
AVAILABLE TO
CERTIFICATEHOLDERS If Finance Charge Collections allocable to interest
for any Collection Period are insufficient to pay
the Required Amount, Excess Finance Charge
Collections will be applied to fund the Required
Amount as described herein under "Excess Finance
Charge Collections". If Excess Finance Charge
Collections available with respect to such
Collection Period are less than the Required Amount,
Principal Collections for such Collection Period
will then be used to fund the remaining Required
Amount as described herein under "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 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 the Subordinated Transferor Amount is reduced to
zero, the Class C Invested Amount (after giving
effect to reductions for any Class C Investor
Charge-Offs and any Class C Reallocated Principal
Collections for such Collection Period) 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.
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<PAGE>
If the Class C 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) will be
reduced by the amount by which the Class C 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 Class C
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 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 in excess of
the Class A Investor Default Amount for such
Distribution Date (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
Class C Reallocated Principal Collections and
Subordinated Transferor Reallocated Principal
Collections with respect to any Collection Period
are insufficient to fund the remaining Class B
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, 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 Class C Invested Amount (after giving
effect to reductions for any Class C Investor
Charge-Offs, Class C 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 Class C Invested Amount is reduced to zero,
the Class B Invested Amount will be reduced by the
amount by which the Class C Invested Amount would
have been reduced below zero, but not in excess of
the Class B Investor Default Amount for such
Distribution Date (a "Class B Investor Charge-Off"),
and the Class B
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<PAGE>
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 Class C
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, Reallocated
Principal Collections and any adjustments made
thereto for the benefit of the Class B and Class A
Certificateholders) equal to such insufficiency
(but not in excess of the Class C Investor Default
Amount for such Distribution Date) will be
allocated to the Class C Certificates to
avoid a charge-off with respect to the Class C
Certificates, and the Subordinated Transferor
Amount will be reduced by such amount.
If the Subordinated Transferor Amount is reduced to
zero, the Class C Invested Amount will be reduced
by the amount by which the Subordinated Transferor
Amount would have been reduced below zero, but not
in excess of the Class C Investor Default Amount for
such Distribution Date (a "Class C Investor
Charge-Off"), and the Class C Certificateholders
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 Reallocated Principal Collections
and the amount of any adjustments made thereto for
the benefit of the Class A, Class B or Class C
Certificateholders) 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 Class C 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, the Class C Certificates, 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 "Subordinated Transferor Amount" will initially
be equal to $___________ and the "Class C Invested
Amount" will initially be equal to $___________.
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<PAGE>
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,
as described above during the Revolving Period,
or to the holders of the Certificates in respect
of the Class A Invested Amount, Class B Invested
Amount, the Class C Invested Amount or Subordinated
Transferor Amount, or to both the Transferor and
the holders of the Certificates. 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 Certificates, 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 certificate-
holders 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 Certificates.
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
Certificates 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
Certificates. Any Excess Finance Charge Collections
23
<PAGE>
remaining after covering shortfalls with respect to
all outstanding Series will be paid to the
Transferor.
DISCOUNT OPTION The Agreement provides that the Transferor may at
any time 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". On the date of processing any
Discount Option Receivables, an amount equal to
the product of (i) the Aggregate Certificate-
holders' Interest with respect to Finance Charge
Receivables and (ii) the amount of each Finance
Charge Receivable will be deposited by the
Transferor into a finance charge account and an
amount equal to the product of the Transferor
Interest and the amount of the Discount Option
Receivables will be paid to the holder of the
Exchangeable Transferor Certificate.
Simultaneously with such reassignment, the
Transferor will retransfer the Receivable to the
Trust, making the representations and warranties
with respect to such Receivable as if such
Receivable were a new Receivable created in an
existing Account, and the amount of the Transferor
Interest will be increased to reflect the addition
of such Receivable to the Trust. Collections with
respect to such Receivable will be treated as
Principal Collections.
AMORTIZATION EVENTS An "Amortization Event" with respect to the
Certificates 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
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<PAGE>
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 (as defined in the
Agreement) averaged over any three consecutive
Collection Periods is less than the Base Rate (as
defined in the Agreement);
(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 __% 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
and 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 __% of
the Aggregate Receivables as of the last day of any
Collection Period; or
(ix) any Servicer Event of Default shall occur which
would have a material adverse effect on the
Certificateholders.
FINAL PAYMENT OF
PRINCIPAL; TERMINATION
OF THE TRUST The Certificates 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
$________ (5% of the sum of the initial 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 Certificates 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
Certificates. In any event, the final payment
of principal and interest
25
<PAGE>
on the Class A Certificates will be no later than
the _______________ 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 ______
Distribution Date (the "Final Class B Termination
Date"). The final payment of principal and
interest with respect to the Other Certificates
will be no later than ___________, _________ (the
"Final Series 1996 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 Certificates, 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 out-
standing principal amount, from time to time,
of certificates issued by the Trust and certain
other amounts, as described herein.
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 certificate-
holders of all Series (including the Series 1992
Certificates and the Certificates), 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.
The Servicer Letter of Credit is available, up to
its stated amount, to cover any shortfall in
Collections allocated to any Series and required
to be deposited
26
<PAGE>
into the Collection Account by the Servicer. The
proceeds of any drawing on the Servicer Letter
of Credit will be allocated in much the same
manner as are Collections (generally speaking,
such allocations to the Certificates 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 Servicer Letter of Credit. Initially, the
Invested Amount of the Certificates will be
approximately __% of the Aggregate Receivables.
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 (i) the
Letter of Credit Bank's unsecured short-term debt
ratings are reduced below A-I + or P-I or F-I+
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 Certificate-
holders 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.
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 Certificate-
holders, 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 Certificates 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. Initially, the
Invested Amount of the Certificates will be
approximately __% of the Aggregate Receivables.
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CERTAIN FEDERAL INCOME TAX
CONSEQUENCES Special tax counsel to the Transferor has advised
the Transferor that, in its opinion, the Offered
Certificates will be treated for Federal income
tax purposes as indebtedness. Under the Agreement,
the Transferor, the Trustee and, pursuant to the
terms of the Offered Certificates by virtue of
the acceptance thereof, the Offered Certificate-
holders 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.
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. If 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 Class A Certificates should consult
their counsel before making a purchase. (The
Class B Certificates may not be sold to employee
benefit plans.)
RATING OF THE OFFERED
CERTIFICATES It is a condition to the issuance of the Class
A Certificates that they be rated by at least one
nationally recognized rating agency in such
agency's highest rating category. It is a
condition to the issuance of the Class B
Certificates that they be rated "A" by at least
one nationally recognized rating agency. Such
ratings are based primarily on the quality
of the Receivables and the terms of the
subordination of the Class B Certificates, the
Class C Certificates and the Subordinated
Transferor Certificate, as applicable.
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RISK FACTORS
Investors should consider, among other things, the following factors in
connection with the purchase of the Offered Certificates:
LIMITED LIQUIDITY. 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. Citicorp Securities, Inc. expects, but is 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.
DEPOSIT OF COLLECTIONS. 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 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 "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
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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 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 Receivables. The existence of such liens or the
rights of the receiver of the Transferor could reduce the amount payable on
the Receivables and result in possible reductions in the amounts of payments
on the Certificates. See "Certain Legal Aspects of the Receivables--Transfer
of Receivables."
INSOLVENCY-RELATED MATTERS. 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."
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 and certificates
purchased by the Transferor as described above. See "Description of the
Offered Certificates and the Agreement--Covenants, Representations
and Warranties."
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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 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 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--Defaulted Receivables; Recoveries,
Rebates and Fraudulent Charges."
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. 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 ( ) 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 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 Other 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 Other Programs to compete in
the credit card industry will affect the Originator's ability to generate new
Receivables. Bridgestone/Firestone stores and dealers accept certain
third-party credit cards not issued by the Originator. The acceptance of
such other credit cards also may affect the amount of Receivables generated.
If the rate at which 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
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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.
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 __% of the aggregate invested amount of all outstanding Series
of certificates (including the Certificates) issued by the Trust or (ii) the
Transferor Amount plus the B/F Amount plus the Class B Invested Amount (plus
the invested amount of the Series 1992-B Certificates and 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 __% 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 OF CLASS B CERTIFICATES; PRINCIPAL PAYMENTS.
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 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 Class C 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--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 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 Class
A Certificate Rate plus 2.00% per annum (the "Class A Base Rate") or a rate
less than the Class B Certificate Rate plus 2.00% per annum (the "Class B 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
Certificates 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
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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. 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. 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."
RATING OF THE OFFERED CERTIFICATES. It is a condition to the issuance
of the Class A Certificates that they be rated in the highest rating category
by at least one nationally recognized rating agency and to the issuance of
the Class B Certificates that they be rated "A" by at least one nationally
recognized rating agency (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 quality of the Receivables and the terms of the subordination of the
Class B Certificates, the Class C Certificates and the Subordinated
Transferor Certificate. The rating of the Class B Certificates is based
primarily on the quality of the Receivables and the terms of the
subordination of the Class C Certificates 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 to designate a fixed or variable percentage of Receivables 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.
Pursuant to the Agreement, the Transferor can make such a designation 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 such designation, 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."
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
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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."
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 c/o Ropes & Gray at 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.
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
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existing or arising under certain accounts to be established under other
credit card programs established or to be established by the Originator (the
"Other Programs"). See "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, 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 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. Such
merchant fees shall be transferred to the Transferor pursuant to the Merchant
Fee Transfer Agreement. The Transferor will transfer such merchant fees to
the trust pursuant to the Agreement.
The Accounts consist of all eligible credit card accounts ("Eligible
Accounts") established under the Credit Card Program as of the Cut-Off Date
and accounts to be established under Other 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.
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 Other
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.
35
<PAGE>
CREDIT CARD PROGRAM SALES AT
BRIDGESTONE/FIRESTONE COMPANY OPERATED STORES
<TABLE>
<CAPTION>
CREDIT CARD SALES AT PERCENT OF CREDIT CARD SALES
BRIDGESTONE/FIRESTONE- AT BRIDGESTONE/FIRESTONE-
YEAR OPERATED STORES TOTAL CREDIT 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%
</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 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.
36
<PAGE>
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 date (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.
From time to time, in connection with the Credit Card Program, various
finance charge rebate plans may be offered (such as "No Payment for 90 Days"
payment plan defined below). If the full amount of any qualifying purchase
made under such plans is not paid within the specified time, 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 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 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.
37
<PAGE>
An account generally is closed to further purchases when two payments
are past due. Current policy is to recognize bankruptcy losses immediately
following notification and to recognize other contractual losses at 390 days
from the account billing date. Pursuant to the Agreement, unless earlier
charged off in accordance with the Servicer's customary and usual procedures,
Receivables in any Account will be charged off on the last day of the
Collection Period following the Collection Period in which such Receivable
becomes 180 days delinquent.
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 loss and delinquency
experience for the Credit Card Program portfolio with respect to payments by
cardholders for each of the periods shown. There can be no assurance,
however, that loss and delinquency experience for the Receivables in the
future will be similar to the historical experience.
LOSS EXPERIENCE
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1995 1994 1993 1992
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Average Receivables Outstanding/1/ . . $444,867 $432,518 $425,140 $448,548
Charge-Offs/2/ . . . . . . . . . . . . 31,612 26,940 28,877 36,088
Less Recoveries/3/ . . . . . . . . . (2,898) (2,726) (2,842) (2,874)
-------- -------- ------- -------
Net Charge-Offs . . . . . . . . . . . . $ 28,715 $ 24,214 $26,035 $33,214
Net Charge-Offs as a Percentage of
Average
Receivables Outstanding . . . . . . . . 6.45% 5.60% 6.12% 7.40%
</TABLE>
__________________________
1 Average Receivables Outstanding is a thirteen-point average. It
averages the January 1 balance of the Receivables with the balance of
the Receivables as of the last day of the month for each month in the year
shown.
2 Charge-Offs are determined in accordance with the Originator's policies
and include losses due to bankruptcies. The amounts reflected are before
recoveries.
3 Recoveries are gross account receivables recoveries. They are not net
of collection costs and commission.
38
<PAGE>
AVERAGE DELINQUENCIES
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Average of Twelve Months Ended December 31,
1995 1994 1993 1992
---- ---- ---- ----
DELINQUENT DELINQUENT DELINQUENT DELINQUENT
AMOUNT PERCENTAGE(1) AMOUNT PERCENTAGE(1) AMOUNT PERCENTAGE(1) AMOUNT PERCENTAGE(1)
--------- ------------- ---------- ------------- ------------ ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1-30 Days
Delinquent $35,696 8.02% $34,635 8.01% $41,041 9.65% $45,239 10.09%
31-60 Days
Delinquent 12,775 2.87 11,007 2.54 12,944 3.04 14,679 3.27
61-90 Days
Delinquent 6,781 1.52 5,441 1.26 5,696 1.34 6,622 1.48
Over 90 Days
Delinquent 24,624 5.55 19,473 4.50 19,470 4.59 22,979 5.12
Average
Receivables
Outstanding
444,867 100.00% 432,518 100.00% 425,140 100.00% 448,548 100.00%
</TABLE>
- ----------------------
(1) The percentages are the result of dividing the Delinquent Amount by
Average Receivables Outstanding for the applicable period. Average
Receivables Outstanding is calculated as described in footnote 1 of
the table entitled "Loss Experience."
REVENUE EXPERIENCE
The following table sets forth the gross revenues of the Credit Card
Program portfolio from monthly finance charges billed to cardholders for each
of the four years in the period ended December 31, 1992, 1993, 1994 and 1995.
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.
The following table sets forth the gross revenue experience for the
Credit Card Program portfolio.
39
<PAGE>
REVENUE EXPERIENCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1995 1994 1993 1992
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Average Receivables Outstanding (1) . . $444,867 $432,518 $425,140 $448,548
Finance Charges Billed (2) . . . . . . $ $ $ $
Average Finance Charges Billed as % of
Average Receivables Outstanding . . % % % %
</TABLE>
- ---------------
(1) Average Receivables Outstanding is the average of beginning and ending
accounts receivable balances for the period shown.
(2) Finance Charges Billed is net of rebated finance charges for 1992 and
1993.
PROMOTIONS
The Credit Card Program for Bridgestone/Firestone operated stores and
for Bridgestone/Firestone, Dayton and Road King brand dealers features a
finance charge rebate offer to customers ("No Payment for 90 Days") 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 May 31, 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.
40
<PAGE>
COMPOSITION OF ACTIVE AND CREDITWORTHY
ACCOUNTS BY TYPE OF RETAILER
AS OF MAY 31, 1996
<TABLE>
<CAPTION>
Percentage Percentage
of Total of Total
Number of Number Receivables Receivables
Card Program Participants Accounts of Accounts Outstanding Outstanding
- ----------------------------------------- --------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Bridgestone/Firestone operated stores and
Participating Dealers . . . . . . . . . . 4,087,297 94.40% $417,846,531 96.80%
Third Party Dealers and marketers
without contractual arrangements. . . . 242,559 5.60% $13,846,199 3.20%
--------- ------ ----------- ------
Total . . . . . . . . . . . . . . . . . 4,329,856 100.00% $431,692,730 100.00%
</TABLE>
COMPOSITION OF ACTIVE AND CREDITWORTHY
ACCOUNTS BY CREDIT LIMIT
AS OF MAY 31, 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) . . . . . . . . . . . 277,097 6.4% $60,437,793 14.0%
$100 to $500 . . . . . . . 375,578 8.7% 40,972,339 9.5%
$600 to 1,000 . . . . . . . 1,950,245 45.0% 155,953,143 36.1%
$1,100 to $1,500 . . . . . 1,042,712 24.1% 66,346,150 15.4%
$1,600 to $2,000 . . . . . 646,000 14.9% 103,489,838 24.0%
$2,100 and up . . . . . . . 38,224 0.9% 4,493,466 1.0%
--------- ------ ------------ ------
Total . . . . . . . . . 4,329,856 100.0% $431,692,730 100.0%
</TABLE>
- --------------------
(1) Credit limits are in increments of $100.
(2) Credit policy sets credit limit to $0 for any cardholder 90 days or
more delinquent.
41
<PAGE>
COMPOSITION OF ACTIVE AND CREDITWORTHY
ACCOUNTS BY ACCOUNT BALANCE
AS OF MAY 31, 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) . . . . . . . . 18,255 0.42% ($737,417) -0.17%
No Balance(2) . . . . . . . . . . 3,133,146 72.36% --
$.01 to $100 . . . . . . . . . . 221,832 5.12% 10,405,974 2.41%
$101 to $200 . . . . . . . . . . 191,879 4.43% 28,834,511 6.68%
$201 to $300 . . . . . . . . . . 184,295 4.26% 46,020,710 10.66%
$301 to $400 . . . . . . . . . . 164,314 3.79% 57,367,436 13.29%
$401 to $500 . . . . . . . . . . 130,931 3.02% 58,653,933 13.59%
$501 to $600 . . . . . . . . . . 87,527 2.02% 47,841,599 11.08%
$601 to $1,000 . . . . . . . . . 138,988 3.21% 104,868,100 24.29%
$1,001 and up . . . . . . . . . . 58,689 1.36% 78,437,884 18.17%
--------- ------ ------------ ------
Total . . . . . . . . . . . . . 4,329,856 100.00% $431,692,730 100.00%
</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.
42
<PAGE>
COMPOSITION OF ACTIVE AND CREDITWORTHY
ACCOUNTS BY AGE
AS OF MAY 31, 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 . . . . . . . . . . . 307,600 7.10% $47,074,538 10.90%
6 months to 1 year . . . . . . . . . 325,131 7.51% 45,376,129 10.51%
1-2 years . . . . . . . . . . . . . . 686,871 15.86% 73,482,123 17.02%
2-3 years . . . . . . . . . . . . . . 524,888 12.12% 42,073,904 9.75%
3-4 years . . . . . . . . . . . . . . 487,307 11.25% 30,203,440 7.00%
4-5 years . . . . . . . . . . . . . . 521,329 12.04% 27,399,330 6.35%
5-6 years . . . . . . . . . . . . . . 328,304 7.58% 23,262,222 5.39%
6-7 years . . . . . . . . . . . . . . 262,869 6.07% 21,252,812 4.92%
7-8 years . . . . . . . . . . . . . . 150,090 3.47% 14,485,288 3.36%
8-9 years . . . . . . . . . . . . . . 114,371 2.64% 12,169,120 2.82%
9-10 years . . . . . . . . . . . . . 104,428 2.41% 12,269,735 2.84%
10 years or older . . . . . . . . . . 516,668 11.93% 82,644,088 19.14%
--------- ------- ------------ -------
Total . . . . . . . . . . . . . . . 4,329,856 100.00% $431,692,730 100.00%
</TABLE>
__________________
(1) Age is calculated based on the initial opening of the account.
43
<PAGE>
COMPOSITION OF ACTIVE AND CREDITWORTHY ACCOUNTS
BY GEOGRAPHIC DISTRIBUTION(1)
AS OF MAY 31, 1996
<TABLE>
<CAPTION>
Percentage Percentage
of Total of Total
Number of Number Receivables Receivables
Accounts of Accounts Outstanding Outstanding
State --------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Texas . . . . . . . . . . . . . . . 342,894 7.92% $45,931,479 10.64%
California . . . . . . . . . . . . 398,539 9.20% 38,901,457 9.01%
Florida . . . . . . . . . . . . . . 358,722 8.28% 39,801,013 9.22%
Ohio . . . . . . . . . . . . . . . 261,529 6.04% 24,961,943 5.78%
New York . . . . . . . . . . . . . 249,680 5.77% 21,311,315 4.94%
Virginia . . . . . . . . . . . . . 195,251 4.51% 17,523,233 4.06%
North Carolina . . . . . . . . . . 121,386 2.80% 15,997,742 3.71%
Illinois . . . . . . . . . . . . . 164,439 3.80% 14,366,058 3.33%
Georgia . . . . . . . . . . . . . . 117,930 2.72% 14,898,058 3.45%
Pennsylvania . . . . . . . . . . . 180,635 4.17% 13,542,505 3.14%
Other(2) . . . . . . . . . . . . . 1,938,851 44.78% 184,457,927 42.73%
--------- ------ ------------ ------
Total . . . . . . . . . . . . . 4,329,856 100.00% $431,692,730 100.00%
</TABLE>
(1) Based on billing address
(2) No other state represents more than 3.14% of Total Receivables
Outstanding.
MATURITY ASSUMPTIONS
The Agreement provides that the Controlled Amortization Period will
commence on the Controlled Amortization Date and that the Rapid Amortization
Period will commence on the day on which an Amortization Event occurs or is
deemed to occur. 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 _________ Distribution Date and on the
Class B Certificates beginning on the __________ 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) the product of (i) 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 interest due on the Class A Certificates, Class B
Certificates and the Class C Certificates). Based on the following
assumptions, among others: cardholder monthly payment rates for the Accounts
being not less than ____% (which rate is below the average monthly payment
rate shown in the "Monthly Payment Rates" table below), Aggregate Receivables
being constant, the net charge-offs as a percentage of average receivables
remaining constant at the levels indicated in the tables above for the period
ended __________ and 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, the Transferor
believes that there will be sufficient funds on each Distribution Date of the
Controlled
44
<PAGE>
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 highest and lowest cardholder monthly
payment rates for the Credit Card Program portfolio during any month in the
period shown and the average cardholder monthly payment rates for all months
during the periods shown, in each case calculated as a percentage of total
Receivables outstanding at the beginning of the periods shown. Payments
shown in the table include amounts which would be deemed Principal
Collections and Finance Charge Collections (except recoveries on charged-off
Receivables, certain credit-related insurance proceeds and merchant fees)
under the Agreement.
MONTHLY PAYMENT RATES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
PAYMENT RATE 1995 1994 1993 1992
------------ ---- ---- ---- ----
<S> <C> <C> <C> <C>
Low . . . . . . . . . . . . . . . .
High . . . . . . . . . . . . . . .
Average . . . . . . . . . . . . . .
</TABLE>
The amount of Collections may vary from month to month 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 will be
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"). (According to the American Banker, the Bank was Japan's second-
largest bank in terms of assets as of March 31, 1992. As of such date, the
Bank operated a network of 331 offices in Japan with 17 branches and 25
representative offices throughout the world.)
(As of March 31, 1992 the Bank had total assets exceeding (Yen)61.6
trillion (U.S. $463.7 billion), total liabilities exceeding (Yen)59.4
trillion (U.S. $447.4 billion) and total equity exceeding (Yen)2.2 trillion
(U.S. $16.6 billion). U.S. dollar figures were translated using an exchange
rate of 132.85 Japanese yen to each U.S. dollar.)
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 March 31, 1995. Written requests should be sent to (The Sumitomo
Bank, Limited, New York Branch, Suite 9651, One World Trade Center, New York,
NY 10048 Attention: Loan Operations.)
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DESCRIPTION OF THE OFFERED
CERTIFICATES AND THE AGREEMENT
The Certificates will be issued pursuant to the Agreement, as
supplemented by the Series 1996-1 Supplement, 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 Class A and
Class B Certificateholders without charge upon written request. The
following summary describes certain terms of the Agreement and the Series
1996-1 Series 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 Other Programs, (iii) all amounts due or to become due on
or after the Cut-Off Date, (iv) all Recoveries with respect to previously
charged-off 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 Cut-Off Date, the Class A Invested Amount
will be $__________ and the Class B Invested Amount will be $__________.
The Transferor will initially hold the interest (the "Transferor
Interest") not represented by the Certificates, the Subordinated Transferor
Certificate, the Bridgestone/Firestone Certificate and any other Series of
certificates 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 will
participate an interest in the Exchangeable Transferor Certificate to
Bridgestone/Firestone pursuant to the Participation Agreement. The issuance
of the Class B Certificates, the Class C Certificates and the Subordinated
Transferor Certificate are conditions to the issuance of the Class A
Certificates. The issuance of the Class C Certificates and the Subordinated
Transferor Certificate are conditions 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 __________,
in an amount equal to the product of (i) the actual number of days in the
related Collection Period divided by 360, (ii) the Class A Certificate Rate
and (iii) the outstanding principal balance of the Class A Certificates as
of the preceding Record Date (or in the case of the first Distribution Date,
as of the Closing Date). Interest 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, commencing on __________ in an amount
equal to the product of (i) the actual number of days in the related Collection
Period divided by 360, (ii) the Class B Certificate Rate and (iii) the
outstanding principal balance of the Class A Certificates as of the preceding
Record Date (or in the case of the first Distribution Date, as of the Closing
Date). Interest for any Distribution Date will
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include interest at the applicable Certificate Rate from and including the
first day of the preceding calendar month or, in the case of the first
Distribution Date, from and including the Closing Date to but excluding the
first day of the next succeeding calendar month. Interest will be calculated
on an Actual/360 Basis.
No principal payments will be made to the Class A Certificateholders
until the Distribution Date occurring in _________ 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 Class C Certificateholders 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
Class A, the Class B and the Class C Certificateholders 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 to maintain the
Class A Invested Amount, the Class B Invested Amount, the Class C 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, Class B Monthly
Principal and Class C Monthly Principal (defined below) 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.
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
denominations of $1,000 (representing 1/__________ of the undivided interest
of the Class A Certificateholders in the Trust and 1/__________ of the
undivided interest of the Class B Certificateholders in the Trust) 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
Securities") may hold through DTC (in the United States) or, solely in the
case of the Offered Certificates, CEDEL or Euroclear (in Europe) if they
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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 Securities. 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 certifi-
cates. 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 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
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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 "Certain Federal Income Tax Consequences" in
the Prospectus 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 Documentation Procedures" in Annex II to this Prospectus.
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
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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
Upon creation of the Trust, the Transferor transferred and assigned to
the Trust all of its right, title and interest in and to Receivables in the
Accounts outstanding as of the Cut-Off Date, all of the Receivables
thereafter created under the 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
Receivables existing under the 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 sell and assigned to the Transferor, and the
Transferor purchase from the Originator, on each business day, all
Receivables arising in the Accounts. On the Closing Date, and concurrently
with the transfer of the Receivables to the Trust, 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
Underwriter 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, and the Class C Certificate to the purchaser thereof.
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 the Receivables have been sold to the Transferor and then
transferred to the Trust and the Transferor will indicate in its files that
the 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
relating to the Accounts and the Receivables will not be segregated from
those relating to other consumer accounts and receivables and
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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 UCC-1
financing statements in accordance with Ohio state law to perfect the
Transferor's interest in the Receivables. The Transferor, in turn, will file
one or more UCC-1 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 Transferor is permitted (subject to certain limitations and
conditions) to designate from time to time additional Accounts established
under Other Programs to be included as Accounts ("Additional Accounts") and
to transfer to the Trust all Receivables in such Additional Accounts, whether
such Receivables are then existing or thereafter created. On any date, the
Transferor may designate Additional Accounts and convey the Receivables
arising from such Additional Accounts, without obtaining the consent of the
holders of any series of Certificates or the rating agencies. Unless the
Transferor has obtained the consent of the applicable rating agencies, any
Receivables arising from such Accounts which exceed 10% (the "10% Maximum")
of the average amount of Aggregate Receivables in the Trust as of the last
day of each of the preceding twelve Collection Periods shall be deemed to be
"Ineligible Receivables" for the purposes of certain tests set forth herein
but such Ineligible Receivables are not subject to the repurchase obligation
of the Transferor. Such Other Programs 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 date of the issuance of
the Certificates, the Originator has not established any of these Other
Programs.
Upon receiving a written confirmation from the applicable rating
agencies, none of the Receivables arising from Additional Accounts from
designated Other Programs will be deemed to be "Ineligible Receivables" and
the Receivables from such Additional Accounts will no longer be subject to
the 10% Maximum. The Transferor may continue to designate Additional
Accounts from Other Programs in accordance with the selection criteria
relating to the Addition of Accounts.
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 __%
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. 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 __% 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 following
conditions: (i) the Trustee shall have executed and delivered to the
Transferor a written reassignment and the Transferor shall 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.
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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) whether discount revenue or
commissions will be included in funds available to certificateholders,
(xviii) the priority of any Series with respect to any other Series, (xix)
the rights of the holder of the Exchangeable Transferor Certificate that have
been transferred to the holders of such Series and (xx) 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
Underwriter 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
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
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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 of Certificates. The
Class B Certificates will be subordinate to the Class A Certificates but not
to any other Series of certificates. The Class C Certificates and the
Subordinated Transferor Certificates will be subordinate to the 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), (ii) its certificate rate and (iii) the issuer of the form of
Enhancement, if any, which is expected to provide credit support with respect
to it. 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, (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. Any such deposit shall be 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
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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 Cut-Off 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 Agreement and the Certificates, (viii) the creation of a
binding obligation of the Transferor by the Purchase and Sale Agreement and
the Agreement, (ix) the non-violation by the execution and delivery of the
Purchase and Sale Agreement, the Agreement and the Certificates 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 Certificates 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 Certificates) 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.
A "Receivable" is defined to mean each receivable (i) which has risen
under an Eligible Account or an Eligible Additional 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, 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
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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 Additional
Account" is defined to mean an account (i) which has been established under
an Other Program subsequent to the Cut-off 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 beginning in 1994 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 Standard & Poor's Corporation ("S&P"), F-1+
by Fitch Investors Service, Inc. ("Fitch") and P-1 by Moody's Investors
Service, Inc. ("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 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
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clause (ii) above and (vii) any other investment the applicable Rating Agency
confirms will not adversely affect any ratings of the Certificates 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 Class C Invested Amount is
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
"--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 Class C 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 Class C 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 Class C 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 "Class C
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 Class C 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
Class C 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 "Class C 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 date of
issuance of the Certificates, the Class A Floating Allocation Percentage, the
Class B Floating Allocation Percentage, the Class C 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 interest
on the Class A Certificates, Class B Certificates and Class C Certificates,
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 Class C 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 Class C 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
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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 "Fixed Allocation Percentage") 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
for which the Subordinated Transferor Amount and the Class C Invested Amount
have not been reduced, 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).
"Class C Invested Amount" for any date means an amount equal to (i) the
initial principal balance of the Class C Certificates, minus (ii) the amount
of principal payments made to the Class C Certificateholders prior to such
date, minus (iii) the aggregate amount of Class C Investor Charge-Offs (as
defined below) for all prior Distribution Dates, minus (iv) the aggregate
amount of Class C Reallocated Principal Collections for all prior
Distribution Dates for which the Subordinated Transferor Amount has not been
received, minus (v) an amount equal to the aggregate amount by which the
Class C 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
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 Class C 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 Class C Invested Amount and the Subordinated
Transferor Amount and
"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.
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As a result of the Class A Floating Allocation Percentage, the Class B
Floating Allocation Percentage, the Class C Floating Allocation Percentage
and the Subordinated Transferor Floating Allocation Percentage, Finance
Charge Collections allocated to the Class A, Class B, Class C and the
Subordinated Transferor Certificateholders may change each Collection Period
based on the relationship between the amount of the Class A Invested Amount,
the Class B Invested Amount and the Class C Invested 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,
Class B, Class C and the Subordinated Transferor Certificateholders 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 Class C
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 "Special Considerations--Deposit of
Collections." 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, merchant
fees received or accrued in any Collection Period shall 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,
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any overdue Class B Monthly Interest (plus any additional interest accrued on
such overdue Class B Monthly Interest), the Class B Investor Default Amount,
the Class C Monthly Interest for such Distribution Date and any overdue Class C
Monthly Interest (plus any additional interest accrued on such overdue Class C
Monthly Interest for such Distribution Date) and (b) the Class A Monthly
Servicing Fee, the Class B Monthly Servicing Fee, the Class C Monthly Servicing
Fee and the Subordinated 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 Class C Investor Default Amount and the Subordinated Transferor
Default Amount (which will be distributed to the Transferor, 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 will deliver to the Trustee on the
Closing Date 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 Certificates issued by the Trust). Initially, the
Invested Amount of the Certificates will be approximately ____% of the
Aggregate Receivables. 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
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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
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 Certificates issued by the Trust). Initially, the Invested
Amount of the Certificates will be approximately ___% of the Aggregate
Receivables. 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+ 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+ and 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 __% of the
aggregate invested amounts of the outstanding Series of certificates issued
by the Trust. See "--Amortization Events."
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 __% 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 Class C 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), the Class B
Investor Default Amount 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 "Class C Required Amount" means the amount, if any,
by which the sum of Class C Monthly Interest, any overdue Class C Monthly
Interest (with interest thereon), the Class C Investor Default Amount and the
Class C Monthly Servicing Fee for such Collection Period exceeds the funds
allocable to the Class C Certificates to pay such amounts. The "Required
Amount" shall equal the sum of the Class A, Class B and Class C 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 Class C 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 Class C Invested Amount and the Class B Invested Amount, as applicable,
may be reduced for the benefit of Certificates senior to such Certificates.
In the event of such reductions, Excess Finance Charge Collections, if any,
will be used to increase the Class B Invested Amount, Class C 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 Certificates. 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 Certificates. 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 interest due on the Class
A Certificates, Class B Certificates and the Class C Certificates), 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.
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There will also be deposited into the Collection Account, Collections
which are not allocable to the Certificates, 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 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 Certificates with
respect to each Distribution Date shall be applied as 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 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 A Certificateholders;
(ii) an amount equal to the aggregate Class B Investor Default Amount
for such Distribution Date will be distributed to the Transferor 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 C Monthly Servicing Fee for such
Distribution Date will be distributed to the Servicer (unless such
amount has been previously netted against deposits to the
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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."
(c) An amount equal to the Class C 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 C Monthly Interest for such
Distribution Date, plus the amount of any Class C 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 C Investor Default
Amount for such Distribution Date will be distributed to the
Transferor 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 C 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."
(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, Class B and Class C Certificates 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.
(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, Class B and
Class C Certificates and the Subordinated Transferor Certificate
(other than certain Excess Finance Charge Collections and Reallocated
Principal Collections) will be distributed as follows:
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(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 Class C
Certificateholders until the Class C Invested Amount is paid in full;
(iv) once the Class C 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 up
to the amount of the Transferor Interest; and
(vi) an amount equal to the balance will be applied as Shared
Principal Collections and the balance will be distributed to the
Transferor.
Class A Monthly Interest means, with respect to any Distribution Date,
the Class A Monthly Interest equals the product of (i) the actual number of
days in the related Collection Period divided by 360, (ii) the Class A
Certificate Rate and (iii) 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 Class A Monthly Principal made to
the Class A Certificateholders on such Distribution Date) or, with respect to
the first Distribution Date, the Class A Initial Invested Amount, provided,
however, that with respect to the initial Distribution Date, Class A Monthly
Interest shall equal $_______________.
Class B Monthly Interest means, with respect to any Distribution Date,
the Class B Monthly Interest equals the product of (i) the actual number of
days in the related Collection Period divided by 360, (ii) the Class B
Certificate Rate and (iii) 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 Class B Monthly Principal made to
the Class B Certificateholders on such Distribution Date) or, with respect to
the first Distribution Date, the Class B Initial Invested Amount, provided,
however, that with respect to the initial Distribution Date, Class B Monthly
Interest shall equal $_______________.
Class C Monthly Interest means, with respect to any Distribution Date,
the Class C Monthly Interest equals the product of (i) the actual number of
days in the related Collection Period divided by 360, (ii) the Class C
Certificate Rate and (iii) the outstanding principal balance of the Class C
Certificates as of the preceding Distribution Date (after subtracting therefrom
the aggregate amount of all distributions of Class C Monthly Principal made to
the Class C Certificateholders on such Distribution Date) or, with respect to
the first Distribution Date, the Class C Initial Invested Amount, provided,
however, that with respect to the initial Distribution Date, Class C Monthly
Interest shall equal $_______________.
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.
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Class C Investor Default Amount means, a portion of all Defaulted
Receivables which will be allocated to the Class C Certificateholders for
each Distribution Date in an amount equal to the product of the Class C
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.
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 Class C 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 Class C Interest on each Distribution Date (the "Class C 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
Class C 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 Class C Certificates, 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 interest amount due on the Class A Certificates),
(ii) an amount (the "Series 1992-A Unallocated Principal Collections") 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, (iii) the amount, if any, of Transfer Deposit Amounts
and Adjustment Payments with respect to such Distribution Date and allocable
to the Certificates and (iv) 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 and
the Class B Investor 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; 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.
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 $ .
---------------
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
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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)(iv) and clause (c)(iv) 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 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 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 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;
(e) an amount equal to the Class C Required Amount, if any, with respect
to such Collection Period will be used to fund the Class C Required Amount;
(f) an amount equal to the amount by which the Class C Invested Amount
has been reduced below the Class C Initial Invested Amount (for reasons other
than the payment of principal to the Class C Certificateholders) will
be distributed to the Transferor 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;
(g) an amount equal to the Subordinated Transferor Default Amount will
be distributed to the Transferor 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;
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(h) 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 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)
(i) the balance, if any, will be treated as Shared Excess Finance Charge
Collections to the extent necessary; and
(j) the balance, if any, will be treated as Shared Principal
Collections.
REALLOCATED PRINCIPAL COLLECTIONS
On each Distribution Date, the Servicer will apply or cause the Trustee
to apply Principal Collections allocable first to the Subordinated Transferor
Interest (the "Subordinated Transferor Reallocated Principal Collections")
then to the Class C Interest (the "Class C Reallocated Principal
Collections") and, then to the Class B Interest (the "Class B Reallocated
Principal Collections") with respect to the Collection Period immediately
preceding such Distribution Date in the following priority (such Collections
applied in accordance with (a) below are collectively called "Reallocated
Principal Collections"):
(a) an amount equal to the excess, if any, of (i) the Required Amount,
if any, with respect to such Collection Period over (ii) the amount of Excess
Finance Charge Collections with respect to such Collection Period will be
used to fund the Required Amount; and
(b) any such Collections not applied in the foregoing manner (and
therefore not constituting Reallocated Principal Collections) will, on
Distribution Dates with respect to the Revolving Period, be applied as Shared
Principal Collections and thereafter will be included in the funds available
to make principal payments.
With respect to any Collection Period during the Revolving Period,
Reallocated Principal Collections will be allocated to each of the
Subordinated Transferor Interest, the Class C Interest and the Class B
Interest based on the Subordinated Transferor Floating Allocation Percentage,
the Class C Floating Allocation Percentage or the Class B Floating Allocation
Percentage for such Collection Period, as applicable. With respect to any
Collection Period during the Controlled Amortization Period or any Rapid
Amortization Period, Reallocated Principal Collections will be allocated to
each of the Subordinated Transferor Interest, the Class C Interest and the
Class B Interest based on the Fixed Allocation Percentage of Principal
Collections for such Collection Period multiplied by a fraction the numerator
of which is equal to the Subordinated Transferor Amount, the Class C Invested
Amount or the Class B Invested Amount, as applicable, as of the close of
business on the last day of the prior Collection Period and the denominator
of which is equal to the Invested Amount at the close of business on such day.
ADDITIONAL AMOUNTS AVAILABLE TO CERTIFICATEHOLDERS
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 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 the Subordinated Transferor Amount is reduced to zero, the Class C
Invested Amount (after giving effect to reductions for any Class C Investor
Charge-Offs and any Class C Reallocated Principal Collections for such
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Collection Period) 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 the Class C 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) will be reduced by the amount by which the Class C 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
Class C 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 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 in excess of the Class A Investor
Default Amount for such Distribution Date (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 Class C Reallocated
Principal Collections and Subordinated Transferor Reallocated Principal
Collections with respect to any Collection Period are insufficient to fund
the remaining Class B 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, 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 Class C
Invested Amount (after giving effect to reductions for any Class C Investor
Charge-Offs, Class C 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 Class C Invested Amount is reduced to zero, the Class B Invested
Amount will be reduced by the amount by which the Class C Invested Amount
would have been reduced below zero, but not in excess of the Class B Investor
Default Amount for such Distribution Date (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 Class C 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, Reallocated
Principal Collections and any adjustments made thereto for the benefit of the
Class B and Class A Certificateholders) equal to such insufficiency (but not
in excess of the Class C Investor Default Amount for such Distribution Date)
will be allocated to the Class C Certificates to avoid a charge-off with
respect to the Class C Certificates, and the Subordinated Transferor Amount
will be reduced by such amount.
If the Subordinated Transferor Amount is reduced to zero, the Class C
Invested Amount will be reduced by the amount by which the Subordinated
Transferor Amount would have been reduced below zero, but not in
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excess of the Class C Investor Default Amount for such Distribution Date (a
"Class C Investor Charge-Off"), and the Class C Certificateholders 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 Reallocated Principal Collections and
the amount of any adjustments made thereto for the benefit of the Class A,
Class B or Class C Certificateholders) 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 Class
C 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, the
Class C Certificates, 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 "Subordinated Transferor Amount" will initially be equal to
$___________ and the "Class C Invested Amount" will initially be equal to
$___________.
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 Certificates.
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
Certificates 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 Certificates. Any Excess Finance Charge Collections remaining after
covering shortfalls with respect to all outstanding Series will be paid to
the Transferor.
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 Class A
Interest by the Transferor will be deposited in the Collection Account on the
Distribution Date on which such repurchase occurs.)
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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.
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 (___________, 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 CFNA 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 Class C Certificateholders and the Subordinated Transferor
Certificateholder. See "--Distributions from 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. The Servicer may deduct reasonable expenses in
connection with such Recoveries.
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.
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DISCOUNT OPTION
The Agreement provides that the Transferor may at any time 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". On the date of processing any
Discount Option Receivables, an amount equal to the product of (i) the
Aggregate Certificateholders' Interest with respect to Finance Charge
Receivables and (ii) the amount of each Finance Charge Receivable will be
deposited by the Transferor into a finance charge account and an amount equal
to the product of the Transferor Interest and the amount of the Discount
Option Receivables will be paid to the holder of the Exchangeable Transferor
Certificate. Simultaneously with such reassignment, the Transferor will
retransfer the Receivable to the Trust, making the representations and
warranties with respect to such Receivable as if such Receivable were a new
Receivable created in an existing Account, and the amount of the Transferor
Interest will be increased to reflect the addition of such Receivable to the
Trust. Collections with respect to such Receivable will be treated as
Principal Collections.
FINAL PAYMENT OF PRINCIPAL; TERMINATION OF TRUST
The Certificates 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 $______________ (5% of the initial
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 Certificates 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
Certificates.
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 ______________ 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
__________ Distribution Date (the "Final Class B Termination Date"). The
final payment of principal and interest with respect to the Other
Certificates will no later than ______ (the "Final Series 1996-1 Termination
Date"). In the event that the Invested Amount of the Certificates 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 Certificates, 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 Certificates 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).
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AMORTIZATION EVENTS
The Revolving Period will continue through the end of the Collection
Period related to the _______________ 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 deemed to occur. An "Amortization Event"
with respect to the Certificates 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 (see below) 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 __% 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 Class B Invested Amount (plus the invested amount of the Series 1992-B
Certificates and 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 __% of the Aggregate Receivables as of the last
day of any Collection Period; or
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(ix) any Servicer Event of Default shall occur which would have a
material adverse effect on the Certificateholders;
then, (a) in the case of any event described in subparagraphs (i), (ii),
(iii) or (ix), after the applicable grace period, if any, either the Trustee
or the Certificateholders evidencing interests aggregating not less than 50%
of the Invested Amount by written notice to the Transferor (and to the
Trustee if given by the Certificateholders) may declare that an Amortization
Event has occurred with respect to the Certificates as of the date of such
notice, or (b) in the case of any event described in subparagraphs (iv) or
(vi) an Amortization Event with respect to all series of certificates,
including the Certificates, or (c) in the case of subparagraphs (v), (vii) or
(viii), an Amortization Event with respect to the Certificates, shall occur
immediately upon the occurrence of such event, without any notice or other
action on the part of the Trustee or 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) 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.
The term "Portfolio Yield" means, with respect to any Collection Period,
the annualized percentage equivalent of a fraction the numerator of which is
the amount of the Finance Charge Collections for such Collection Period
(including merchant fees collected or accrued), calculated on a cash basis
after subtracting Defaulted Receivables during such period, and the
denominator of which is Aggregate Receivables.
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.
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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 as a result of defaults on the
Receivables) 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 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
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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 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") and to the Class C Interest on each Distribution Date (the
"Class C 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 or the Class C 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 or the Class C Certificates, 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 and the Class C 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.
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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 Certificates 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 Certificates.
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 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
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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 Certificates, 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 and the
Class C 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 and the Class C
Investor Default Amount for such Distribution Date; (e) the amount of Class
A Investor Charge-Offs, Class B Investor Charge-Offs and Class C 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 and Class C 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 and the Class C Invested Amount at the close of business
on the last day of the Collection Period immediately preceding such
Distribution Date; and (j) the amount of 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
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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 "Certain
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.
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 Certificates as
debt for Federal
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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.
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 662/3% 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
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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.
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. The Receivables originated under the Additional Accounts will
also be purchased by the Transferor from the Originator pursuant to the
Purchase and Sale Agreement. (A copy of the Purchase and Sale Agreement
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is filed as an exhibit to the Registration Statement of which this Prospectus
is a part.) 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.
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 "Special Considerations--Certain Legal Aspects" 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.
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.
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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.
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.
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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 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 Other 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 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 Class C 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.
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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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Set forth below is a discussion of certain Federal 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 OF THE PURCHASE,
OWNERSHIP OR DISPOSITION OF INTERESTS IN THE CLASS A 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
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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, special tax counsel to the Transferor ("Tax Counsel"), has advised
the Transferor that the Offered Certificates will be treated for Federal
income tax purposes as indebtedness. 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.
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.
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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, 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, 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 periodic interest payments" because, for example, the
initial interest period was longer than subsequent interest periods. 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 periodic 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 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 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
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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
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 AND 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.
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
(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
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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 Class A 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 Underwriter (defined
below) expects (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. (It is not anticipated that the Class B
Certificates will meet such requirements.)
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 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 Professional 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 Class A Certificates may be a prohibited
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 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
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Plan, taking into account the overall investment policy of the Benefit Plan
and the composition of the Benefit Plan's investment portfolio.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Transferor has agreed to sell to Citicorp Securities, Inc.
(the "Underwriter") and the Underwriter has agreed to purchase the Offered
Certificates.
Under the terms and conditions of the Underwriting Agreement, the
Underwriter is committed to take and pay for all the Offered Certificates, if
any are taken. Pursuant to the Underwriting Agreement, it is a condition to
the issuance of the Offered Certificates that Class C Certificates and the
Subordinated Transferor Certificate be issued simultaneously therewith.
The Transferor has been advised by the Underwriter that it proposes
initially to offer the Offered Certificates to the public at the price set
forth on the cover page hereof and to certain dealers at such price less a
concession not in excess of ______ % of the Class A Certificate denomination
and not in excess of_____ % of the Class B Certificate denomination. The
Underwriter may allow and such dealers may reallow a concession not in excess
of _____% of the Class A Certificate denomination and not in excess of _____%
of the Class B Certificate denomination to certain other dealers. After the
initial public offering, the public offering price and such concessions may
be changed.
Bridgestone/Firestone and the Transferor have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
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 Underwriter will be passed upon by Brown & Wood, 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, New York, New York.
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INDEX OF TERMS
PAGE
----
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,31
Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,53
Additional Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 4,52
Adjustment Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Aggregate Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 4,33
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,30
Amortization Event . . . . . . . . . . . . . . . . . . . . . . . . . . 5,31
Amortization Period . . . . . . . . . . . . . . . . . . . . . . . . . . 8,33
Available Subordinated Amount . . . . . . . . . . . . . . . . . . . . . . . .
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Base Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
B/F Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,33
B/F Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,57
B/F Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,57
Bridgestone/Firestone . . . . . . . . . . . . . . . . . . . . . . . . . 1,30
Bridgestone/Firestone Certificate . . . . . . . . . . . . . . . . . . . 5,47
Cede . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,35
Cedel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,35
Cedel Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . 5,30
Certificateholders' Interest . . . . . . . . . . . . . . . . . . . . . 5,30
Certificate Owners . . . . . . . . . . . . . . . . . . . . . . . . . . 10,35
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,31
Class A Certificateholders . . . . . . . . . . . . . . . . . . . . . . 5,45
Class A Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . 5,33
Class A Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 1,33
Class A REMARCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Class A Floating Allocation Percentage . . . . . . . . . . . . . . . . 7,57
Class A Initial Invested Amount . . . . . . . . . . . . . . . . . . . . 15,65
Class A Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,57
Class A Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . 6,33
Class A Investor Charge-Off . . . . . . . . . . . . . . . . . . . . . . 21,69
Class A Investor Default Amount . . . . . . . . . . . . . . . . . . . . 13,58
Class A Monthly Interest . . . . . . . . . . . . . . . . . . . . . . . 13,60
Class A Monthly Principal . . . . . . . . . . . . . . . . . . . . . . 15,48
Class A Monthly Servicing Fee . . . . . . . . . . . . . . . . . . . . 13,60
Class A Pool Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Class B Certificateholders . . . . . . . . . . . . . . . . . . . . . . 5,33
Class B Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 1,32
Class B REMARCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I
Class B Floating Allocation Percentage . . . . . . . . . . . . . . . . 7,57
Class B Initial Invested Amount . . . . . . . . . . . . . . . . . . . . 16,66
Class B Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,57
Class B Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . 6,33
Class B Investor Charge-Off . . . . . . . . . . . . . . . . . . . . . . 21,69
Class B Investor Default Amount . . . . . . . . . . . . . . . . . . . . 14,58
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Class B Monthly Servicing Fee . . . . . . . . . . . . . . . . . . . . . 14,60
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,47
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . . 13,30
Collection Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,33
Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,30
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controlled Amortization Amount . . . . . . . . . . . . . . . . . . . . 12,45
Controlled Amortization Date . . . . . . . . . . . . . . . . . . . . . 11,45
Controlled Amortization Period . . . . . . . . . . . . . . . . . . . . 8,33
Controlled Distribution Amount . . . . . . . . . . . . . . . . . . . . . 67
Credit Card Program . . . . . . . . . . . . . . . . . . . . . . . . . . 2,33
Credit Card Services . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cut-Off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,35
Defaulted Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 2,57
Deficit Controlled Amortization Amount . . . . . . . . . . . . . . . . . 67
Definitive Certificates . . . . . . . . . . . . . . . . . . . . . . . . 10,35
Depository . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . 23,34
Disclosure Document . . . . . . . . . . . . . . . . . . . . . . . . . . 8,53
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,30
DOL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,36
Eligible Additional Account . . . . . . . . . . . . . . . . . . . . . . . 55
Enhancement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,34
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,89
Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,35
Euroclear Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Euroclear Participants . . . . . . . . . . . . . . . . . . . . . . . . . 49
Euroclear System . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,50
Excess Finance Charge Collections . . . . . . . . . . . . . . . . . . . 13,48
Excess Spread Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Exchangeable Transferor Certificate . . . . . . . . . . . . . . . . . . 5,31
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Final Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Final Series 1992-A Termination Date . . . . . . . . . . . . . . . . . . . .
Final Trust Termination Date . . . . . . . . . . . . . . . . . . . . . . 73
Finance Charge Collections . . . . . . . . . . . . . . . . . . . . . . 4,33
FIRREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Fitch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Fixed Allocation Percentage . . . . . . . . . . . . . . . . . . . . . . 8,45
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Indirect Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ineligible Receivable . . . . . . . . . . . . . . . . . . . . . . . . . 4,31
Instant Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Invested Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . 12,59
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Letter of Credit Bank . . . . . . . . . . . . . . . . . . . . . . . . . 27,30
Monthly Servicer's Certificate . . . . . . . . . . . . . . . . . . . . . 79
91
<PAGE>
OID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Originator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,30
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Participation Agreement . . . . . . . . . . . . . . . . . . . . . . . . 2,31
Parties-in-Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Payment Date Statement . . . . . . . . . . . . . . . . . . . . . . . . . . .
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Portfolio Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,32
Principal Collections . . . . . . . . . . . . . . . . . . . . . . . . . 4,33
Principal Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,34
OID Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Purchase and Sale Agreement . . . . . . . . . . . . . . . . . . . . . . 2,30
Rapid Amortization Period . . . . . . . . . . . . . . . . . . . . . . . 8,31
Rating Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,30
Reallocated Principal Collections . . . . . . . . . . . . . . . . . . . 6,33
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,30
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,46
REMARCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I
Removed Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Required Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,33
Required Reserve Account Amount . . . . . . . . . . . . . . . . . . . . . . .
Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retail Establishments . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Revolving Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,48
S&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,33
Series 1992-A Unallocated Principal Collections . . . . . . . . . . . . . . .
Service Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Servicer Event of Default . . . . . . . . . . . . . . . . . . . . . . . 3,45
Servicer Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . 2,30
Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Substitute Servicer Letter of Credit . . . . . . . . . . . . . . . . . . 61
Substitute Transferor Letter of Credit . . . . . . . . . . . . . . . . . 61
Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Tax Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Termination Payment Date . . . . . . . . . . . . . . . . . . . . . . . . 67
Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,56
Transfer Deposit Amount . . . . . . . . . . . . . . . . . . . . . . . . . 54
Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,30
Transferor Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,33
Transferor Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 5,47
Transferor Letter of Credit . . . . . . . . . . . . . . . . . . . . . . 2,33
Transferor Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,30
UCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Unallocated Principal Collections . . . . . . . . . . . . . . . . . . . . 60
Underwriter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,49
90 Days Same-as-Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 38
92
<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 April
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 REMARC . . . . . . . . . . . . . . . . . . $152,746,000
Class B REMARC . . . . . . . . . . . . . . . . . . $ 29,377,581
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.
A-1
<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.
A-2
<PAGE>
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 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-3
<PAGE>
(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;
(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.
A-4
<PAGE>
<TABLE>
<S> <C>
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 Bridgestone/Firestone
given or made, such information or representations must not be Master Trust
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 $_____ Class A Floating Rate Asset Backed
hereunder shall under any circumstance create an implication that Certificates, Series 1996-1
there has been no change in the affairs of Bridgestone/Firestone,
Inc., Firestone Retail Credit Corporation, or the Receivables $_____ Class B Floating Rate Asset Backed
since the date thereof. This Prospectus does not constitute an Certificates, Series 1996-1
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 Firestone Retail Credit
to whom it is unlawful to make such offer or solicitation. Corporation
Transferor
TABLE OF CONTENTS
Page
----
Reports to Certificateholders . . . . . . . . . . .
Available Information . . . . . . . . . . . . . .
Summary of Terms . . . . . . . . . . . . . . . . . 1
Risk Factors . . . . . . . . . . . . . . . . . . . 29
The Transferor and Bridgestone/Firestone . . . . . 34
The Credit Card Program . . . . . . . . . . . . . . 34
Maturity Assumptions . . . . . . . . . . . . . . . 44 Bridgestone/Firestone, Inc.
The Letter of Credit Bank . . . . . . . . . . . . . 45 Servicer
Description of the Offered Certificates and
the Agreement . . . . . . . . . . . . . . . . . . 46
Description of the Purchase and Sale _____________________
Agreement . . . . . . . . . . . . . . . . . . . . 80
Certain Legal Aspects of the Receivables . . . . . 82 P R O S P E C T U S
Certain Federal Income Tax Consequences . . . . . . 84
ERISA Considerations . . . . . . . . . . . . . . . 87 _____________________
Underwriting . . . . . . . . . . . . . . . . . . . 89
Legal Matters . . . . . . . . . . . . . . . . . . . 89
Index of Terms . . . . . . . . . . . . . . . . . . 90
Annex I Outstanding Series . . . . . . . . . . . . A-1
Annex II Global Clearance, Settlement and Tax
Documentation Procedures . . . . . . . . . . . . A-2
Until _____ (90 days after the date of this Prospectus), all
dealers effecting transactions in the Offered Certificates, CITICORP SECURITIES, INC.
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 ____________, 1996
allotments or subscriptions.
</TABLE>
<PAGE>
PART II
INFORMATION
NOT REQUIRED
IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection with
the offering of the Securities being registered under this Registration
Statement, other than underwriting discounts and commissions:
Registration Fee $ 870
Printing and Engraving *
Trustee's Fees *
Legal Fees and Expenses *
Blue Sky Fees and Expenses *
Accountants' Fees and Expenses *
Rating Agency Fees *
Miscellaneous Fees *
--------
Total $ *
_____________
*To be furnished by Amendment
ITEM 14. Indemnification of Directors and Officers.
Chapter 156B Section 67 of the Business Corporations Law of
Massachusetts provides that:
"Indemnification of directors, officers, employees and other agents of
a corporation, and persons who serve at its request as directors, officers,
employees or other agents of another organization, or who serve at its
request in any capacity with respect to any employee benefit plan, may be
provided by it to whatever extent shall be specified in or authorized by (i)
the articles of organization or (ii) a by-law adopted by the stockholders or
(iii) a vote adopted by the holders of a majority of the shares of stock
entitled to vote on the election of directors. Except as the articles of
organization or by-laws otherwise require, indemnification of any persons
referred to in the preceding sentence who are not directors of the
corporation may be provided by it to the extent authorized by the directors.
Such indemnification may include payment by the corporation of expenses
incurred in defending a civil or criminal action or proceeding in advance of
the final disposition of such action or proceeding, upon receipt of an
undertaking by the person indemnified to repay such payment if he shall be
adjudicated to be not entitled to indemnification under this section which
undertaking may be accepted without reference to the financial ability of
such person to make repayment. Any such indemnification may be provided
although the person to be indemnified is no longer an officer, director,
employee or agent of the corporation or of such other organization or no
longer serves with respect to any such employee benefit plan.
II-1
<PAGE>
No indemnification shall be provided for any person with respect to any
matter as to which he shall have been adjudicated in any proceeding not to
have acted in good faith in the reasonable belief that his action was in the
best interest of the corporation or to the extent that such matter relates
to service with respect to any employee benefit plan, in the best interests
of the participants or beneficiaries of such employee benefit plan.
The absence of any express provision for indemnification shall not limit
any right of indemnification existing independently of this section.
A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or other
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or other agent of another
organization or with respect to any employee benefit plan, against any
liability incurred by him in any such capacity, or arising out of his status
as such, whether or not the corporation would have the power to indemnify him
against such liability."
Section 8a of the Amended and Restated By-Laws of the Registrant
provides that:
"The corporation shall, to the extent legally possible, indemnify
each of its directors and officers (including persons who serve at its
request as directors, officers or trustees of another organization, or in any
capacity with respect to any employee benefit plan) against all liabilities
and expenses, including amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees, reasonably incurred
by him in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which he may be involved or
with which he may be threatened, while in office or thereafter, by reason of
his being or having been such a director or officer, except with respect to
any matter as to which he shall have been adjudicated in any proceeding not
to have acted in good faith in the reasonable belief that his action was in
the best interest of the corporation (any person serving another organization
in one or more of the indicated capacities at the request of the corporation
who shall have acted in good faith in the reasonable belief that his action
was in the best interest of such organization to be deemed as having acted
in such manner with respect to the organization) or, to the extent that such
matter relates to service with respect to any employee benefit plan, in the
best interest of the participants or beneficiaries of such employee benefit
plan; provided, however, that as to any matter disposed of by a compromise
payment by such director or officer, pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless such compromise shall be approved as in the
best interest of the corporation, after notice that it involves such
indemnification: (a) by a disinterested majority of the directors then in
office; or (b) by a majority of the disinterested directors then in office,
provided that there has been obtained an opinion in writing of independent
legal counsel to the effect that such director or officer appears to have
acted in good faith in the reasonable belief that his action was in the best
interest of the corporation; or (c) by the holders of a majority of the
outstanding stock at the time entitled to vote for directors, voting as a
single class, exclusive of any stock owned by any interested director
or officer. Expenses, including counsel fees, reasonably incurred by any
director or officer in connection with the defense or disposition of any
such action, suit or other proceeding may be paid from time to time by the
corporation in advance of the final disposition thereof upon receipt of an
undertaking by such director or officer to repay the amounts so paid to the
corporation if it is ultimately determined that indemnification for such
expenses is not authorized under this section. The right of
indemnification hereby provided shall not be exclusive of or affect any
other rights to which any director or officer may be entitled. As used in
this section, the terms "director" and "officer" include the relevant
individual's heirs, executors and administrators, and an "interested"
director or officer is one against whom in such capacity the proceedings
in question or another proceeding on the same or similar grounds is then
pending. Nothing contained in this section shall affect any rights to
indemnification to which corporate personnel other than directors and
officers may be entitled by contract or otherwise under law."
Bridgestone/Firestone, Inc. has agreed to indemnity the officers and
directors of the Registrant with respect to certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
The Underwriter has agreed to indemnify the Registrant and its officers
and directors against liabilities under the Securities Act of 1933, as
amended, in respect of written material provided by the Underwriter to the
Registrant specifically for use in the prospectus filed as part of this
Registration Statement.
ITEM 15. Recent Sales of Unregistered Securities.
Series 1995-A Asset Backed Certificates
- Series Issuance Date: June 5, 1995
- Class A Invested Amount: $199,200,000
- Class B Invested Amount: $38,095,238
- Proceeds from issuance of Series 1996-1 Asset Backed
Certificates will be used to retire Series 1995-A Asset
Backed Certificates.
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ITEM 16. Exhibits and Financial Statements.
(a) Exhibits
*1.1 - Form of Underwriting Agreement.
*3.1 - Certificate of Incorporation of Firestone Retail Credit
Corporation, as currently in effect.
*3.2 - Amended and Restated By-Laws, as currently in effect.
*4.1 - Form of Pooling and Servicing Agreement and certain other
related agreements as Exhibits thereto.
*4.2 - Form of Supplement, including form of Series 1996-1
Certificates and certain other related agreements as
Exhibits thereto.
*4.3 - Form of Amended Purchase and Sale Agreement and certain other
related agreements as Exhibits thereto.
*4.4 - Form of Servicer Letter of Credit.
*4.5 - Form of Transferor Letter of Credit.
*5.1 - Opinion of Brown & Wood with respect to legality.
*8.1 - Opinion of Brown & Wood with respect to tax matters.
*23.1 - Consent of Brown & Wood (included in its opinion filed
as Exhibit 5.1).
*23.3 - Consent of Brown & Wood (included in its opinion filed
as Exhibit 8.1).
_____________________
*To be furnished by Amendment.
(b) Financial Statements Inapplicable.
ITEM 17. Undertakings.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions
or otherwise, the Registrant has been advised in the opinion of the
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the questions
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
(4) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Firestone Retail Credit Corporation has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston, the Commonwealth of Massachusetts on June
27, 1996.
FIRESTONE RETAIL CREDIT CORPORATION
/s/ Nancy D. Smith
------------------------------
Nancy D. Smith, President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities indicated on June 27, 1996.
/s/ Nancy D. Smith President and Director June 27, 1996
- -----------------------------------
Nancy D. Smith (principal executive
officer)
/s/ R. Douglas Donaldson Treasurer June 27, 1996
- -----------------------------------
R. Douglas Donaldson (principal financial
officer and principal
accounting officer)
/s/ Louise E. Colby Director and Secretary June 27, 1996
- -----------------------------------
Louise E. Colby
<PAGE>
INDEX TO EXHIBITS
EXHIBITS
- --------
1.1 - Form of Underwriting Agreement.
3.1 - Certificate of Incorporation.
3.2 - Amended and Restated By-Laws.
4.1 - Form of Pooling and Servicing Agreement and certain other
related agreements as Exhibits thereto.
4.2 - Form of Supplement, including form of Series 1996-1
Certificates, and certain other related agreements
as Exhibits thereto.
4.3 - Form of Purchase and Sale Agreement and certain other related
agreements as Exhibits thereto.
4.4 - Form of Servicer Letter of Credit.
5.1 - Opinion of Brown & Wood with respect to legality.
8.1 - Opinion of Brown & Wood with respect to tax matters.
23.1 - Consent of Brown & Wood (included in its opinion filed as
Exhibit 5.1).
23.3 - Consent of Brown & Wood (included in its opinion filed as
Exhibit 8.1).
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