As filed with the Securities and Exchange Commission on September 3, 1996
Registration No. 333-07185
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
AMENDMENT NO. 2
to
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.)
_________________
Massachusetts 6141 13-3205598
(State of (Primary Standard Industrial (IRS Employer Identification
Incorporation) Classification Code Number) Number)
R. Douglas Donaldson
One International Place, Suite 520
Boston, Massachusetts 02110-2624
(617) 951-7690
(Address, including zip code, and telephone number,
including area code of registrant's principal executive offices)
_________________
copies to:
Saul Solomon, Esq. Reed D. Auerbach, Esq.
Bridgestone/Firestone, Inc. Stroock & Stroock & Lavan
50 Century Boulevard Seven Hanover Square
Nashville, Tennessee 37214 New York, New York 10004-2696
(615) 872-1496 (212) 806-6648
Cathy Kaplan, Esq.
Brown & Wood LLP
1 World Trade Center
New York, New York 10048
(212) 839-5531
_________________
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
========================================================================================================================
Proposed Maximum Proposed Maximum Amount of
Title of Securities Amount Being Offering Price Aggregate Offering Registration
Being Registered Registered(1) Per Unit(1) Price(1) Fee(2)
________________________________________________________________________________________________________________________
Class A Floating Rate Asset
Backed Certificates,
Series 1996-1 . . . . . . . . . $1,000,000 100% $1,000,000 $435
________________________________________________________________________________________________________________________
Class B Floating Rate Asset
Backed Certificates,
Series 1996-1 . . . . . . . . . $1,000,000 100% $1,000,000 $435
========================================================================================================================
(1) Estimated solely for purposes of determining the registration fee.
(2) Total registration fee of $870.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
the Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
=============================================================================
CROSS REFERENCE SHEET
1. Forepart of the Registration Statement and
Outside Front Page of Prospectus . . . . . . Forefront of
Registration
Statement Outside
Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages Inside Front
of Prospectus . . . . . . . . . . . . . . . . Cover, Outside
Back Cover
Page of
Prospectus
3. Summary Information, RISK FACTORS, and . . . . Summary of
Ratio of Earnings to Fixed Charges Terms; RISK
FACTORS
4. Use of Proceeds . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . *
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 . . . See Part II
16. Exhibits and Financial Schedules . . . . . . See Part II
17. Undertakings . . . . . . . . . . . . . . . . See Part II
__________________
*To be furnished by amendment.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold without
the delivery of a final Prospectus. This Prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the
securities laws of any such State.
PROSPECTUS SUBJECT TO COMPLETION, DATED ______________, 1996
- - ----------
$_______
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 (i) a
portfolio of account balances (the "Receivables") generated or to be
generated under a private label credit card program (the "Credit Card
Program") established by Credit First National Association (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, (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, (ix) all moneys on deposit in the
Collection Account and any other accounts established for the benefit of any
other Series (which other accounts will not be available to
Certificateholders) and (x) all proceeds of any of the foregoing.
Concurrently with the issuance of the Offered Certificates, the Trust
will issue $______ principal amount Class C Floating Rate Asset Backed
Certificates, Series 1996-1 (the "Class C Certificates") and the Subordinated
Transferor 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 Subordinated Transferor Certificate will be
subordinated to the extent necessary to fund 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
Subordinated Transferor 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. AN OFFERED
CERTIFICATE IS NOT A DEPOSIT AND NEITHER THE OFFERED
CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR
RECEIVABLES ARE INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTA-
TION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE (1) DISCOUNT TRANSFEROR(1)(2)
------------------ ------------ ----------------
Per Class A Certificate . . . . . . . . . . . % % %
Per Class B Certificate . . . . . . . . . . . % % %
Total . . . . . . . . . . . . . . . . . . . . $ $ $
(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 Underwriters 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.
______________________________
Citicorp Securities, Inc Chase 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 Interest Accrual 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 Interest Accrual Period. Interest
will accrue on the Class B Certificates from _____________ through __________
and with respect to each Interest Accrual 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 Interest Accrual 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. No principal will be payable to the
Class C Certificates until the final payment has been made to the Class A
Certificates and Class B Certificates. No principal will be payable to the
Subordinated Transferor Certificate until the final payment has been made to
the Class A Certificates, the Class B Certificates and Class C 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.
An application will be made to list the Offered Certificates on the
London Stock Exchange Limited.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
OFFERED CERTIFICATES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH 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. On each Distribution Date a Payment Date Statement (as defined
herein) prepared by the Servicer will be provided setting forth information
regarding the Offered Certificates. Such reports will be made available on
a monthly basis by The Depository Trust Company to Participants (as
hereinafter defined), upon request by such Participants to The Depository
Trust Company, in accordance with the rules, regulations and procedures
creating and affecting The Depository Trust Company. Certificate Owners (as
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. However, in accordance with the Exchange Act and the rules and
regulations of the Commission thereunder, the Transferor expects that the
Trust's obligation to file such reports will be terminated following the end
of 1996.
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 and electronically through the Commission's Electronic Data Gathering
Analysis and Retrieval system at the Commission's Web site
(http:\\www.sec.gov).
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. See
"Description of the Offered Certificates and the Agreement--General."
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.
See "The Transferor and Bridgestone/Firestone."
SERVICER . . . . The Receivables will be serviced by Bridgestone/Firestone,
Inc., an Ohio corporation. CFNA will perform certain sub-servicing functions
on behalf of the Servicer including, but not limited to the approval of new
account applications, the approval of all credit charge transactions
involving existing accounts and collection efforts.
TRUST ASSETS. . . The Trust Assets include (i) a portfolio of account balances
(the "Receivables") generated or to be generated by the Originator in the
ordinary course of its business and existing or arising in certain credit
card accounts (the "Accounts") established or to be established under a
private label credit card program described more fully herein (the "Credit
Card Program") established by the Originator for customers of (a)
Bridgestone/Firestone stores, which sell tires and automotive maintenance and
repair products and services, (b) dealers and marketers which have
contractual arrangements with Bridgestone/Firestone to market
Bridgestone/Firestone tires and related products as well as automotive
maintenance and repair services, and (c) certain other dealers and marketers
of automotive products, which include tires and automotive maintenance and
repair services, which dealers and marketers do not have such contractual
arrangements with Bridgestone/Firestone, (ii) a portfolio of certain
designated Receivables generated or to be generated by the Originator and
existing or arising under certain accounts to be established under other
credit card programs established or to be established by the Originator (the
"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), (ix) all moneys on deposit in the
Collection Account and any other accounts established for the benefit of any
other series (which other accounts will not be available to
Certificateholders) and (x) all proceeds of any of the foregoing.
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) all eligible additional accounts established
under Other Programs subsequent to the Cut-off Date which are designated by
the Transferor as Eligible Additional Accounts in accordance with selection
criteria relating to the addition of accounts. See "The Credit Card Program-
- - -General" and "--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 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 merchant 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.
See "Description of the Offered Certificates and the Agreement--Conveyance
of Receivables."
The Receivables consist of amounts charged by cardholders under the
Accounts for goods and services, and all late fees, returned check charges,
convenience checks and amounts charged in respect of credit-related insurance
and periodic finance charges as described herein.
A portion of the Collections (as defined below) received in any
applicable billing cycle for an Account (the monthly billing cycle periods
for the Accounts ending in the period of time commencing on the 19th calendar
day of each calendar month and ending on the 18th calendar day of the next
succeeding calendar month during the term of the Trust being collectively
referred to herein as a "Collection Period") allocable to Receivables will
be treated as "Finance Charge Collections" and a portion will be treated as
"Principal Collections." Under the Agreement, 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 eligible Accounts established under
Other Programs ("Eligible Additional Accounts") and to convey to the Trust
Receivables of such Eligible Additional Accounts, whether such Receivables
are then existing or thereafter created. On any date, the Transferor may
designate Eligible Additional Accounts and convey the Receivables arising
from such Eligible Additional Accounts. Unless the Transferor has obtained
the consent of the applicable rating agencies, as described below, any
Receivables arising from such Eligible Additional 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" and shall not be transferred
to the Trust. 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. See "Description of the Offered Certificates and the Agreement--
Addition of Accounts."
The Transferor may request written confirmation from the applicable
rating agencies to transfer to the Trust all Accounts related to a designated
Other Program and all Receivables arising from such Accounts. Upon receiving
such written confirmation from the applicable rating agencies, none of the
Receivables arising from Eligible Accounts related to the designated Other
Program will be deemed to be "Ineligible Receivables" and the Receivables
from such Accounts will no longer be subject to the 10% Maximum. The
Transferor may continue to designate Eligible 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 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. See "Description of the Offered Certificates and the
Agreement--Removal of Accounts."
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 Transferor
Amount (plus the amount available under the Transferor Letter of Credit and
the B/F Amount) shall at all times equal ___% of the aggregate invested
amount of all outstanding Series of Certificates. The initial Transferor
Amount is equal to ________.
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). For the definition and determination of LIBOR, see
"Description of the Offered Certificates and the Agreement--Determination of
LIBOR." See also "Description of the Offered Certificates and the
Agreement--General," "--Allocation Percentages," "--Reallocation of Cash
Flows," "--Distributions from the Collection Account" and "--Subordination of
the Class B Certificates."
The Class B Certificates offered hereby will evidence undivided
interests in the Trust Assets allocated to the Class B Interest and will
represent the right to receive from such Trust Assets funds up to (but not
in excess of) the amounts required to make payments of interest 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. See
"Description of the Offered Certificates and the Agreement--General," "--
Allocation Percentages," "--Reallocation of Cash Flows," "--Distributions
from the Collection Account" and "--Subordination of the Class B
Certificates."
The Class 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 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. See "Description of the
Offered Certificates and the Agreement--Allocation Percentages."
During the Revolving Period (as defined below), subject to certain
limitations, all Principal Collections allocable to the 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 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 Underwriters (as defined below) or one or more other underwriters
or placement agents, in fixed-price offerings or in negotiated transactions
or otherwise. See Annex I for a listing of all outstanding Series. The
Transferor may offer, from time to time, additional Series issued by the
Trust.
Under the Agreement and pursuant to a Supplement, an Exchange may occur
only upon delivery to the Trustee of the following: (i) a Supplement
specifying the Principal Terms (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. See "Description of the Offered Certificates and the
Agreement--Exchanges."
REGISTRATION OF THE OFFERED
CERTIFICATES . . . . The Class A Certificates will be issued in book-entry
form only in the initial principal amount of ($200,000,000) (the "Initial
Class A Invested Amount") (which will be decreased or reinstated under certain
circumstances as described herein). The Class A Certificates will initially
be represented by one or more Class A Certificates registered in the name of
Cede & Co. ("Cede") as the nominee of The Depository Trust Company ("DTC"),
in the United States, or Cedel Bank, soci t 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 The Chase Manhattan Bank ("Chase"), 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. See
"Description of the Offered Certificates and the Agreement--Book-Entry
Registration" and "--Definitive Certificates."
INTEREST ON THE CLASS A
CERTIFICATES . . . . Interest will accrue on the unpaid principal amount of
the Class A Certificates at a per annum rate equal to the Class A Certificate
Rate and, except as otherwise provided herein, be distributed to Class A
Certificateholders monthly on each Distribution Date, commencing
_____________________ in an amount equal to the product of (i) the actual
number of days in the related Interest Accrual Period (as defined herein)
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).
With respect to any Distribution Date, the Interest Accrual Period is the
period from and including the first day of the preceding calendar month to
and including the last day of such preceding calendar month, except the
initial Interest Accrual Period shall be deemed to be the period from the
Closing Date through the last day of the calendar month preceding the initial
Distribution Date. 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 Interest Accrual
Period and a 360-day year ("Actual/360 Basis"). See "Description of the
Offered Certificates and the Agreement--General" and "--Distributions from
the Interest Accrual Account."
INTEREST ON THE CLASS B
CERTIFICATES . . . . Interest will accrue on the unpaid principal amount of'
the Class B Certificates at a per annum rate equal to the Class B Certificate
Rate and, except as otherwise provided herein, be distributed to Class B
Certificateholders monthly on each Distribution Date, commencing
_____________________, in an amount equal to the product of (i) the actual
number of days in the related Interest Accrual 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 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. See
"Description of the Offered Certificates and the Agreement--General" and "--
Distributions from the Collection Account."
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 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 ______________________. See "Description of the Offered Certificates and
the Agreement--General" and "--Distributions from Collection Account."
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 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 on _________ (the "Class B Expected Final Payment Date").
See "Description of the Offered Certificates and the Agreement--General" and
"--Distributions from Collection Account."
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 on __________
(the "Class C Expected Final Payment Date").
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 Certificateholders, to
the Class C Certificateholders, and, following the final principal payment
to the Class C Certificateholders, to the holder of the Subordinated
Transferor Certificate. See "Description of the Offered Certificates and the
Agreement--Amortization Events."
FLOW OF FUNDS . . . . Funds on deposit in the Collection Account allocable to
the Class A, 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:
(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;
(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 Interest Accrual 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 Interest Accrual 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 Interest Accrual 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.
"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 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).
"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.
See "Description of the Offered certificates and the Agreement--
Distributions from the Collection Account."
EXCESS FINANCE
CHARGE COLLECTIONS . . . . Excess Finance Charge Collections will be applied
as follows:
(a) to fund the Class A Required Amount;
(b) 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);
(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.
See "Description of the Offered Certificates and the Agreement--Excess
Finance Charge Collections."
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.
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.
See "Description of the Offered Certificates and the Agreement--
Reallocation of Cash Flows."
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.
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 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
$___________.
See "Description of the Offered Certificates--Additional Amounts
Available to Certificateholders."
PRINCIPAL PAYMENTS; CERTAIN
ALLOCATIONS . . . . Principal Collections with respect to any Collection
Period will be allocated on the related Determination Date on the basis of the
applicable Invested Percentage. Under the Agreement, such collections will be
either paid to the Transferor, 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 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. See
"Description of the Offered Certificates and the Agreement--Shared Principal
Collections."
SHARING OF EXCESS FINANCE
CHARGE COLLECTIONS . . . . Finance Charge Collections on any business day in
excess of the amounts necessary to make required payments on such business
day with respect to the 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. See "Description of the
Offered Certificates and the Agreement--Sharing of Excess Finance Charge
Collections."
DISCOUNT OPTION . . . . The Agreement provides that the Transferor may at any
time 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. See "Description of the Offered
Certificates and the Agreement--Discount Option."
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, the Originator or the
Transferor to make any payment or deposit required by the terms of the
Agreement on or before five business days after the date such payment or
deposit is required to be made thereunder;
(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 annualized percentage equivalent of a fraction, the
numerator of which is the amount of Finance Charge Collections for the
related Collection Period, calculated on a cash basis after subtracting the
Defaulted Amount, and the denominator of which is the Aggregate Receivables
as of the end of the preceding Collection Period, (the "Portfolio Yield")
averaged over any three consecutive Collection Periods is less than the sum
of the Class A Certificate Rate plus 2.00% per annum (the "Base Rate");
(vi) the Trust shall become an "investment company" within the
meaning of the Investment Company Act of 1940, as amended;
(vii) the Transferor Amount (plus the amount available under the
Transferor Letter of Credit and the B/F Amount) is less than __% of the
aggregate invested amount of all outstanding Series of certificates issued
by the Trust as of the last day of any Collection Period;
(viii) the sum of (a) the Transferor Amount, (b) the B/F Amount,
(c) the Subordinated Transferor Amount and (d) the invested amount of any
subordinated class of certificates of any other Series which, when issued,
is retained by the Transferor and with respect to which no legal opinion is
delivered characterizing such certificates as indebtedness is less than __%
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.
See "Description of the Offered Certificates and the Agreement--
Amortization Events."
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 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 outstanding principal amount, from time to
time, of certificates issued by the Trust. See "Description of the Offered
Certificates and the Agreement--Collection and Other Servicing Procedures,"
"--Servicer Covenants," "--Servicing Compensation and Payment of Expenses,"
"--Servicer Events of Default" and "--Certain Matters Regarding the
Servicer."
The Servicer may perform any of its obligations under the Agreement
through one or more Subservicers. The Servicer will remain liable for its
servicing duties and obligations as if the Servicer alone were servicing the
Receivables. CFNA shall initially act as a Subservicer.
SERVICER LETTER OF CREDIT . . . . The Servicer has obtained an irrevocable
letter of credit (the "Servicer Letter of Credit") issued by The Sumitomo
Bank, Limited, acting through its New York Branch (the "Letter of Credit
Bank"), in favor of the Trustee on behalf of certificateholders of all Series
(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. 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 Certificateholders
or (ii) the Servicer is not Bridgestone/Firestone, the Servicer shall
deposit Collections into the Collection Account no later than the second
business day after the date of processing thereof. In addition, in the
event that a substitute Servicer Letter of Credit is not delivered to
the Trustee on or before the fifth business day prior to the expiration of
the Servicer Letter of Credit or a cash collateral account has not been
established, the Servicer shall commence depositing Collections into the
Collection Account no later than the second business day after the date of
processing thereof. See "The Letter of Credit Bank" and "Description of the
Offered Certificates and the Agreement--The Letters of Credit."
TRANSFEROR LETTER OF CREDIT . . . . The Transferor has obtained an irrevocable
letter of credit (the "Transferor Letter of Credit") issued by the Letter of
Credit Bank in favor of the Trustee, on behalf of Certificateholders, to
secure the obligation of the Transferor to make certain payments in respect
of returned merchandise and other credit adjustments on the Receivables. The
Transferor Letter of Credit was initially in the stated amount of $15,000,000
and will expire on May 30, 1997, unless extended or earlier terminated by the
Letter of Credit Bank. The Transferor Letter of Credit will be available,
up to its stated amount, to cover any shortfall in payments allocated to any
Series and required to be deposited into the Collection Account by the
Transferor. The proceeds of any drawing on the Transferor Letter of Credit
will be allocated in much the same manner as are the Collections (generally
speaking, such allocations to the 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. See "The Letter of Credit Bank" and "Description of the Offered
Certificates and the Agreement--The Letters of Credit."
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES . . . . Special tax counsel to the Transferor has advised the
Transferor that, in its opinion, (i) the Offered Certificates will be treated
for Federal income tax purposes as indebtedness and (ii) the Trust will not
be treated as either an association or a publicly traded partnership taxable
as a corporation for Federal income tax purposes. Under the Agreement, the
Transferor, the Trustee and, pursuant to the terms of the Offered
Certificates by virtue of the acceptance thereof, the Offered
Certificateholders and the Certificate Owners agree to treat the Offered
Certificates as debt for Federal and state tax purposes. If the Offered
Certificates are not characterized as debt, there may be adverse tax
consequences for Certificate Owners. See "Federal Income Tax Consequences."
ERISA CONSIDERATIONS . . . . The Offered Certificates may not be purchased by
any employee benefit plan subject to the requirements of the fiduciary
responsibility provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the provisions of Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"), including any individual
retirement account. See "ERISA Considerations" herein.
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.
RISK FACTORS
Investors should consider, among other things, the following factors in
connection with the purchase of the Offered Certificates:
NO ASSURANCE THAT SECONDARY MARKET WILL DEVELOP. There currently is no
secondary market for the Offered Certificates, and there can be no assurance
that a secondary market will develop or, if it does develop, that it will
provide Offered Certificateholders with liquidity of investment or will
continue for the life of the Offered Certificates. 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.
COMMINGLING. While Bridgestone/Firestone is the Servicer, Collections
held by Bridgestone/Firestone may, subject to certain conditions, including
the availability of the Servicer Letter of Credit, be commingled and used for
Bridgestone/Firestone's own benefit prior to the business day preceding each
Distribution Date and, in the event of the bankruptcy or insolvency of
Bridgestone/Firestone or, in certain circumstances, the lapse of certain time
periods, the Trust may not have a perfected interest in such Collections and
such Collections are subject to risk of loss, including risk of loss due to
Bridgestone/Firestone's bankruptcy or insolvency. During the period that
Bridgestone/Firestone is the Servicer, if aggregate Collections at any time
held by Bridgestone/Firestone exceed the amount available under the Servicer
Letter of Credit, the Servicer shall deposit all such Collections in excess
of the amount available under the Servicer Letter of Credit into the
Collection Account no later than the second business day after the date of
processing thereof. In the event that either (x) the unsecured short-term
debt rating of the Letter of Credit Bank is reduced below A-1+, P-1 or F-1+
by the applicable Rating Agency (the "Required Ratings"), within 35 days of
notice thereof to the Servicer or (y) in the event that the Servicer Letter
of Credit is scheduled to expire within five business days, either (i)
Bridgestone/Firestone will begin depositing Collections received within two
business days of the date of processing thereof directly into the Collection
Account, (ii) Bridgestone/Firestone will provide the Trustee with a
substitute letter of credit substantially similar to the Servicer Letter of
Credit issued by a financial institution whose unsecured short-term debt
rating is A-1+, P-1 or F-1+ by the applicable Rating Agency or (iii) the
Trustee will, but only with respect to clause (x) hereof, make a demand under
the Servicer Letter of Credit for the full amount available thereunder and
deposit the proceeds of such demand into a segregated trust account to be
available to the Trustee in the event Bridgestone/Firestone fails to timely
remit Collections to the Collection Account. The Letter of Credit Bank's
unsecured short-term debt rating has been reduced to 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
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 OR BANKRUPTCY OF ORIGINATOR. The Originator and the
Transferor have treated and will treat the transfer of Receivables under the
Purchase and Sale Agreement as a sale. A court could treat such transactions
as assignments of collateral as security. To the extent that the Originator
has granted or will grant a security interest in the Receivables to the
Transferor and that security interest was validly perfected before any
insolvency of the Originator and was not granted or taken in or will not be
granted or taken in contemplation of insolvency or with the intent to hinder,
delay or defraud the Originator or its creditors, that security interest
should not be subject to avoidance in the event of the insolvency and
receivership of the Originator, and payments to the Transferor with respect
to the Receivables should not be subject to recovery by a conservator or
receiver for the Originator. If, however, the conservator or receiver were
to assert a contrary position, or were to require the Transferor to establish
its rights to those payments by submitting to and completing the
administrative claims procedure established under the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), or the conservator
or receiver were to request a stay of proceedings with respect to the
Originator as provided under FIRREA, delays in payments on the Offered
Certificates and possible reductions in the amount of such payments could
occur. If a conservator or receiver is appointed for the Originator,
pursuant to the Purchase and Sale Agreement, new Receivables would not be
sold to the Transferor and an Amortization Event would occur. Upon the
occurrence of an Amortization Event, if a conservator or receiver is
appointed for the Originator and no other Amortization Event other than such
conservatorship, receivership or insolvency of the Originator exists, the
conservator or receiver may have the power to prevent the commencement of the
Rapid Amortization Period. See "Certain Legal Aspects of the Receivables--
Certain Matters Relating to Bankruptcy."
SOLE REMEDY FOR BREACHES OF REPRESENTATIONS AND WARRANTIES RELATING TO
THE RECEIVABLES. The Transferor will make certain representations and
warranties relating to the validity and enforceability of the Accounts and
the Receivables. However, it is not anticipated that the Trustee will make
any examination of the Receivables or the records relating thereto for the
purpose of establishing the presence or absence of defects, compliance with
such representations and warranties, or for any other purpose. Pursuant to
the Agreement, in the event of a material breach of such representations and
warranties with respect to any Receivables, the Transferor will be obligated
to accept the transfer of such Receivables, whereupon such Receivables will
no longer be included in the Trust. With certain exceptions, such obligation
will constitute the sole remedy in the event of any such breach. Pursuant
to the agreement by which Bridgestone/Firestone purchased a participation
interest in the Exchangeable Transferor Certificate and will purchase a
participation interest in the Subordinated Transferor Certificate (the
"Participation Agreement"), Bridgestone/Firestone will agree, for the benefit
of the Trustee, to purchase from the Transferor any Ineligible Receivable
required to be repurchased by the Transferor from the Trust and certificates
purchased by the Transferor as described above. See "Description of the
Offered Certificates and the Agreement--Covenants, Representations and
Warranties."
EFFECTS OF CONSUMER PROTECTION AND BANKING LAWS. The Accounts and the
Receivables are subject to numerous Federal and state consumer protection
laws which impose requirements on the extension of consumer credit and
collections of such obligations. In addition, the extension of credit, and
the interest charged thereon, by national banks such as the Originator, is
subject to regulation under Federal law. Such laws, as well as any new laws,
rulings or decisions construing such laws or rulings which may be adopted,
whether Federal or state, may adversely affect the ability of the Servicer
to collect on the Receivables or maintain previous levels of monthly finance
charges and other charges. One effect of any legislation which regulates the
amount of interest and other charges that may be assessed on credit card
account balances would be to reduce the Portfolio Yield on Accounts. If a
significant reduction in Portfolio Yield occurred, an Amortization Event
could occur, in which case the Rapid Amortization Period would commence.
See "Certain Legal Aspects of the Receivables--Consumer Protection and
Banking Laws."
Application of Federal and state bankruptcy, debtor relief or consumer
protection laws would affect the interest of the Certificateholders in the
Receivables, if such laws result in any Receivables being written off as
uncollectible when there are no funds available from other sources to cover
any resulting shortfalls in amounts payable to Certificateholders. See
"Description of the Offered Certificates--Defaulted Receivables; Recoveries,
Rebates and Fraudulent Charges."
EFFECTS OF NEW LEGISLATION. From time to time, there are proposed in
the Congress and certain state legislatures new laws and amendments to
existing laws to regulate further the consumer credit industry. The
Transferor is unable to determine and has no basis on which to predict
whether or to what extent changes in laws or regulations will affect charge
use, payment patterns or revenues.
DEPENDENCE ON BRIDGESTONE/FIRESTONE. Because the credit cards issued
under the Credit Card Program are primarily used by customers of Bridgestone/
Firestone stores and dealers and marketers of Bridgestone/Firestone products,
the Trust is largely dependent upon Bridgestone/Firestone and such dealers
and marketers for the generation of Receivables. 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. If consumers choose
to use competing sources of payment or credit, the rate at which new
Receivables are generated in Accounts may be reduced and certain purchase and
payment patterns with respect to Receivables may be affected. 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 Transferor is unable to
determine, and has no means of predicting, whether or to what extent legal
or economic factors will affect future credit purchases or repayment
patterns.
TIMING OF PAYMENTS AND MATURITY. A number of legal and economic factors
may affect payment patterns and there is no accurate means of predicting the
effect of such factors. The Receivables may be paid at any time and there
is no assurance that any particular pattern of cardholder repayments will
occur or that sufficient eligible Receivables will be generated to maintain
required levels of collateralization. A significant decline in the amount
of Receivables generated or the failure of the Transferor to maintain the
Aggregate Receivables as of the last day of each Collection Period at a level
sufficient to result in (i) the Transferor Amount (plus the amount available
to be drawn under the Transferor Letter of Credit and the B/F Amount) being
not less than __% 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. 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 RECEIVABLES OR POLICIES
RELATING TO THE ACCOUNTS. Subject to applicable law and with the consent of
Bridgestone/Firestone, the Originator reserves the right to amend the terms
or policies applicable to the Accounts, including, without limitation, the
level of finance charges and other fees applicable from time to time to the
Accounts and the minimum monthly payments required on the Accounts. Except
as specified in the next succeeding sentence, there are no restrictions on
the Originator's ability to change the terms or policies of the Accounts or
other credit card guidelines or policies, including policies on credit
approval. Under the Purchase and Sale Agreement, the Originator will agree
that, except as otherwise required by law or as is deemed by the Originator,
in its sole discretion, based upon a good faith assessment by it of the
nature of its competition, to be necessary or advisable, it will not reduce
the annual percentage rate of the monthly finance charge assessed on the
Receivables, if as a result of such reduction, its reasonable expectation is
that the Portfolio Yield (defined below) (see "Description of the Offered
Certificates and the Agreement--Amortization Events") would be a rate less
than the 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 marketplace or prudent business
practice might not result in a determination by the Originator and
Bridgestone/Firestone to make or to consent to such a change.
MASTER TRUST CONSIDERATIONS AND THE EFFECT OF THE ISSUANCE OF ADDITIONAL
SERIES. The Trust, as a master trust, may issue additional Series from time
to time. While the Principal Terms of any Series will be specified in a
Supplement, the provisions of a Supplement and, therefore, the terms of any
additional Series, will not be subject to the prior review or consent of
holders of the certificates of any previously issued Series. Such Principal
Terms may include methods for determining applicable investor percentages and
allocating Collections, provisions creating different or additional security
or other credit enhancement, provisions subordinating such Series to another
Series or other Series (if the Supplement relating to such Series so permits)
to such Series, and any other amendment or supplement to the Agreement which
is made applicable only to such Series. As long as the Offered Certificates
are outstanding, a condition to the execution of any Supplement will be that
each applicable Rating Agency shall have advised the Trustee that the
issuance of such Series will not result in the reduction or withdrawal of
their rating of any prior outstanding Series (including the Offered
Certificates). See "Description of the Offered Certificates and the
Agreement--Exchanges." Any such determination by any such Rating Agency
would not, however, provide any assurance that the issuance of any such
Series would not, in fact, have a materially adverse effect on the Offered
Certificates. In addition, certain remedies require the consent of a
majority of the holders of all outstanding Series of certificates, and the
interest of the holders of one Series of certificates may conflict with
the interest of another Series of certificates. See "Description of the
Offered Certificates and the Agreement--Exchanges."
SCOPE OF CERTIFICATE RATING. It is a condition to the issuance of the
Class A Certificates that they be rated 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."
EFFECTS OF BOOK-ENTRY REGISTRATION. The Offered Certificates initially
will be represented by Certificates registered in the name of Cede, the
nominee for DTC, and will not be registered in the names of the Certificate
Owners or their nominees. As a result, unless and until Definitive
Certificates are issued, Certificate Owners will not be recognized by the
Trustee as Certificateholders, as that term is used in the Agreement. Until
such time, Certificate Owners will only be able to receive payments from, and
exercise the rights of Certificateholders indirectly, through DTC, CEDEL or
Euroclear and their participating organizations, and, unless a Certificate
Owner requests a copy of any such report from the Trustee, Certificate Owners
will receive reports and other information provided for under the Agreement
only if, when and to the extent provided to Certificate Owners at such
Certificate Owners' request through DTC and its participating organizations.
In addition, the ability of Certificate Owners to pledge Offered Certificates
to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such Certificates, may be limited due
to the lack of physical certificates for such Certificates. See "Description
of the Offered Certificates and the Agreement--Book-Entry Registration" and
"--Definitive Certificates."
EFFECT OF THE ISSUANCE OF NEW SERIES. The Trust, as a master trust, is
expected to issue new Series from time to time. While the terms of any
Series will be specified in a Supplement, the provisions of a Supplement and,
therefore, the terms of any new Series, will not be subject to the prior
review or consent of holders of the Certificates of any previously issued
Series. Such terms may include methods for determining applicable investor
percentages and allocating collections, provisions creating different or
additional security or other enhancements, provisions subordinating such
Series to other Series or subordinating other Series (if the Supplement
relating to such Series so permits) to such Series, and any other amendment
or supplement to the Pooling and Servicing Agreement which is made only to
such Series. The obligation of the Trustee to issue any new Series is subject
to the condition that the Trustee shall have received the following: (a) a
Supplement in form satisfactory to the Trustee executed by the Transferor and
specifying the principal terms of such Series, (b) the applicable Enhancement,
if any, (c) an opinion of counsel to the effect that the newly issued Series
of Securities 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 the newly issued Series of Securities will not have any material
adverse impact on the Federal income tax characterization of any outstanding
Series that have been the subject of a previous opinion of tax counsel, (d)
an agreement, if any, to provide Enhancement, (e) written confirmation from
each Rating Agency that such issuance will not result in the Rating Agency's
reducing or withdrawing its rating or otherwise adversely affect any rating
on any then outstanding Series rated by it and (f) the existing Exchangeable
Transferor Certificate or applicable Series, as the case may be. There can
be no assurance, however, that the issuance of any other Series, including
any Series issued from time to time hereafter, might not have an impact on
the timing or amount of payments received by a Certificateholder.
USE OF PROCEEDS
The net proceeds from the sale of the Series 1996-1 Asset Backed
Certificates will be used first to repay an outstanding Series of Investor
Certificates, the Series 1995-A Asset-Backed Certificates. The remaining
balance will be paid to the Transferor. The proceeds will be used for
general corporate purposes.
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 JH Management Corporation, One International Place,
Suite 520, Boston, Massachusetts 02110, telephone (617) 951-7690.
Bridgestone/Firestone, formerly named The Firestone Tire & Rubber
Company, was incorporated in Ohio on March 4, 1910 and is the successor to
the business founded by Harvey S. Firestone in 1900. Pursuant to a merger
which became effective on May 5, 1988, Bridgestone/Firestone became a direct
wholly owned subsidiary of Bridgestone Corporation, a corporation organized
under the laws of Japan. On August 1, 1989, Bridgestone/Firestone adopted
its current name.
Bridgestone/Firestone is a multinational organization whose principal
business is the development, manufacture and sale of a broad line of tires
for passenger, truck and agricultural vehicles, in both the original
equipment and replacement markets. It sells tires under Firestone,
Bridgestone, Dayton and other brand names through a large network of
independent dealers. Bridgestone/Firestone also provides a wide range of
automotive maintenance and repair services and sells tires and automotive
replacement parts and supplies through Bridgestone/Firestone operated retail
stores. Other products sold by Bridgestone/Firestone include single-ply
rubber roofing systems, synthetic rubber, air springs, and synthetic fibers
and textiles.
THE CREDIT CARD PROGRAM
GENERAL
The Receivables that the Originator has sold and will sell to the
Transferor pursuant to the Purchase and Sale Agreement and which the
Transferor has or will in turn transfer to the Trust pursuant to the
Agreement have been and will be generated primarily from purchases charged
under credit cards issued by the Originator pursuant to a private label
credit card program (the "Credit Card Program") established for customers of
(a) Bridgestone/Firestone stores, which sell tires and automotive maintenance
and repair products and services, (b) dealers and marketers which have
contractual arrangements with Bridgestone/Firestone to market
Bridgestone/Firestone tires and related products as well as automotive
maintenance and repair services and (c) certain other dealers and marketers
of automotive products, which include tires and automotive maintenance and
repair services, which dealers and marketers do not have such contractual
arrangements with Bridgestone/Firestone (collectively, the "Retail
Establishments"). The Receivables will also include a portfolio of certain
designated Receivables generated or to be generated by the Originator and
existing or arising under certain accounts to be established under other
credit card programs established or to be established by the Originator
(the "Other Programs"). See "Description of the Offered Certificates and the
Agreement--Addition of Accounts" herein.
The initial purpose of a credit card program was to support the
merchandising efforts of The Firestone Tire & Rubber Company, now known as
Bridgestone/Firestone, Inc. ("Bridgestone/Firestone"). Credit cards were
first issued in 1978 to revolving account holders at company operated stores.
In early 1979, the credit card program was extended to include customers of
independent authorized Firestone dealers. In 1983, the program was extended
again to include independent authorized dealers of Dayton and Road King
tires, which are associate brands manufactured by Bridgestone/Firestone.
Such credit card program was replaced in 1985 by the Credit Card Program
described herein.
In July 1989, the Credit Card Program was extended to customers of
Bridgestone dealers. In 1990, the Credit Card Program was extended to
unaffiliated third-parties including Merchants, Inc., and American Car Care
Centers, Inc. In 1992, the program was extended to certain customers of
independent dealers selling Bridgestone/Firestone manufactured private brand
tires. Prior to 1993, Society National Bank ("SNB") acted as originator of
the Credit Card Program. In 1993, Credit First National Association ("CFNA"
or the "Originator"), a wholly owned subsidiary of Bridgestone/Firestone, was
organized for the purpose of making credit card loans and activities
incidental to such purpose and replaced SNB. In 1994, the Credit Card
Program with American Car Care Center, Inc. terminated. Also, in 1994,
Bridgestone/Firestone introduced convenience checks drawn on the Originator
for use by existing Credit Card Program cardholders to purchase consumer
merchandise. Such cash advances made via convenience checks are estimated
to be less than 3% of total card sales. In 1995, the Credit Card Program was
further extended to Meineke Discount Muffler Shops, Inc., an unaffiliated
third-party.
As originator of the credit cards, the Originator is responsible for all
aspects of the Credit Card Program, including underwriting and granting of
credit, issuance of cards and direct customer service. BFS Credit Services
("Credit Services"), a stand-alone profit center of Bridgestone/Firestone
based in Brook Park, Ohio, provides certain administration and servicing
functions on behalf of the Originator. The Originator earns certain merchant
fees attributed to cardholder charges giving rise to Receivables. 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.
CREDIT CARD PROGRAM SALES AT
BRIDGESTONE/FIRESTONE COMPANY OPERATED STORES
CREDIT CARD SALES AT PERCENT OF CREDIT CARD
BRIDGESTONE/FIRESTONE- SALES
OPERATED AT BRIDGESTONE/FIRESTONE-
YEAR STORES TOTAL CREDIT CARD SALES OPERATED STORES
- - ---- ----------------------- ----------------------- -------------------------
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%
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.
Initial credit limits, which are based on an applicant's risk, score
and, in certain cases, income, range from $300 to $2,500. Credit limits for
individual accounts may be adjusted periodically based upon an evaluation of
the cardholder's payment performance. Credit limits may be increased
annually for accounts that exceed a pre-determined score. Credit limits on
delinquent accounts may be reduced at any time if warranted by the risk
score. Decisions to adjust credit limits are based upon a customer's payment
history and/or credit bureau status.
BILLING AND PAYMENT
The accounts are grouped into billing cycles. Each billing cycle has
a separate monthly billing date on which the activity in the related accounts
during the month ended on such billing date is processed and billed to
cardholders. New accounts are assigned to billing cycles in a manner
generally intended, for purposes of administrative convenience, to equalize
the number of accounts in the billing cycles.
In connection with the servicing of the Credit Card Program, Credit
Services generates and mails to each cardholder at the end of each
cardholder's monthly billing cycle a statement summarizing account activity,
unless there is no balance, no payment due (as occurs in the "No Payment for
90 Days" payment plan described below) or no account activity. Accordingly,
cardholders must make a minimum monthly payment by the date shown on the
monthly statement. The minimum monthly payment is calculated by taking 5%
of the new balance resulting after a purchase of products and services that
are charged to the account and rounding that amount to an even $5.00
increment. To that amount Credit Services adds any past due to establish the
total minimum payment due. The minimum payment due will not be less than
$10.00 except where the remaining balance plus unpaid finance charges and
other fees is less than $10.00.
A monthly finance charge is assessed on the account when the account is
not paid in full. The periodic rate now ranges between 1.587% and 1.82%
monthly (or between 19.04% and 21.84% per annum). The finance charge is a
flat rate, based on competitive conditions. No finance charge is assessed
on unpaid finance charges. The monthly finance charge is calculated by
multiplying the periodic rate times the average daily balance. The average
daily balance is determined, where permitted by applicable state law, by
taking the beginning balance each day, subtracting any payments or credits
and adding any new purchases each day. All the daily balances are added for
the billing cycle and divided by the number of days in the billing cycle.
The Originator currently has a "No Payment for 90 Days" payment plan
where if the full amount of any qualifying purchase made under such plans is
not paid within the specified time (i.e., within 90 days from the initial
billing date), finance charges associated with the purchase will be imposed
from the date of purchase. A minimum monthly payment is not required under
this plan during the 90-day period. A pay-ahead option is also available for
cardholders who are not past due and who make a payment of at least twice the
amount of the minimum payment due. A minimum monthly payment will not be due
in the following month. There are also special promotions, in which certain
rights under the credit card agreement may be waived from time to time for
limited periods for qualifying purchases.
LOSS AND DELINQUENCY EXPERIENCE
CFNA performs certain collection activity on behalf of Credit Services.
Collection methods with regard to delinquent credit card receivables include
collection activity by company personnel, collection agencies and attorneys
in private practice.
Delinquent cardholders who do not make scheduled payments by the payment
due date may be subject to several actions. These actions include billing
statement notices, collection letters, automated telephone reminders,
telephone contact with collectors for accounts delinquent from 30-150 days
and placement with third-party collection agencies or collection attorneys
for accounts delinquent beyond 150 days. The specific action or actions
depend on the number of missed payments, the dollar amount of the outstanding
balance and a statistical probability of further delinquency which is
developed using a customized statistical scoring model.
An account generally is closed to further purchases when two payments
are past due. Current policy is to recognize charge-offs immediately
following notification and to recognize other contractual losses at 390 days
from the account billing date ("Losses"). Pursuant to the Agreement,
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 or earlier upon the Servicer's receipt of notice
of bankruptcy.
Cardholders requesting financial relief may be given a reduction in
their minimum monthly payment if certain conditions are met and upon receipt
of the new monthly payment amount. If qualified, the account is re-aged to
current. Credit Card Program credit evaluation, servicing and charge-off
policies and collection practices may change at any time in accordance with
the Agreement, the Purchase and Sale Agreement and applicable law and the
business judgment of the Originator and the Servicer.
Losses and delinquencies are affected by a number of factors such as
competitive behavior and general economic conditions, including consumer debt
levels. Bridgestone/Firestone has informed the Transferor that it is unable
to determine the extent to which, if any, loss and delinquency experience
described herein reflects the influence of these or other factors.
The following tables set forth the historical 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
Year Ended December 31,
-------------------------------------------------------
1995 1994 1993 1992
--------- ---------- --------- ---------
Average Receivables Outstanding/1/ . . $444,867 $432,518 $425,140 $448,548
Losses/2/ . . . . . . . . . . . . . . . 31,612 26,940 28,877 36,088
Less Recoveries/3/ . . . . . . . . . (2,898) (2,726) (2,842) (2,874)
--------- ---------- --------- ---------
Net Losses . . . . . . . . . . . . . . $ 28,715 $ 24,214 $26,035 $33,214
Net Losses as a Percentage of Average
Receivables Outstanding . . . . . . . . 6.45% 5.60% 6.12% 7.40%
________________________________
1 Average Receivables Outstanding is a thirteen-point average. It
averages the January 1 balance of the Receivables with the balance of the
Receivables as of the last day of the month for each month in the year shown.
2 Losses include bankruptcy charge-offs immediately following notification
and other contractual losses at 390 days from the account billing date. The
amounts reflected are before recoveries. Losses do not include charge-offs
due to fraud, returned goods or customer disputes.
3 Recoveries are gross account receivables recoveries. They are not net
of collection costs and commission.
AVERAGE DELINQUENCIES
($ IN THOUSANDS)
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)
---------- ------------- ---------- ------------- ---------- ------------- ---------- -------------
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%
- - ----------------------
(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.
REVENUE EXPERIENCE
($ IN THOUSANDS)
Year Ended December 31,
----------------------------------------------------------
1995 1994 1993 1992
------------ ----------- ------------ -----------
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 . . % % % %
_______________
(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 features a "No Payment for 90 Days" payment plan
which is intended to increase sales to existing cardholders and to generate
new accounts. Under this program, if customers pay the full purchase price
of merchandise or services within 90 days from the initial billing date, the
finance charges associated with the initial purchase will not be imposed on
the account. If the customer does not pay the full purchase price within the
specified 90-day period, finance charges associated with the purchase will
be imposed from the date of purchase.
Special financing programs are offered to customers from time to time
to promote merchandise and service sales and the greater utilization of the
Credit Card Program. The most frequently offered program is a deferred
payment program in which customers may be allowed to defer their payment
obligations for a period generally ranging from two to six months.
Typically, finance charges accrue during the deferral period.
THE ACCOUNTS
The following tables summarize the portfolio of Active and Creditworthy
Accounts in the Credit Card Program by various criteria as of 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.
COMPOSITION OF ACTIVE AND CREDITWORTHY
ACCOUNTS BY TYPE OF RETAILER
AS OF MAY 31, 1996
Percentage Percentage
of Total of Total
Number of Number Receivables Receivables
Card Program Participants Accounts of Accounts Outstanding Outstanding
- - ----------------------------------------- --------- ----------- ------------ -----------
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%
COMPOSITION OF ACTIVE AND CREDITWORTHY
ACCOUNTS BY CREDIT LIMIT
AS OF MAY 31, 1996
Percentage Percentage
of Total of Total
Number of Number Receivables Receivables
Credit Limit(1) Accounts of Accounts Outstanding Outstanding
- - --------------------------- ------------ ------------- -------------- ---------------
$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%
- - --------------------
(1) Credit limits are in increments of $100.
(2) Credit policy sets credit limit to $0 for any cardholder 90 days or more
delinquent.
COMPOSITION OF ACTIVE AND CREDITWORTHY
ACCOUNTS BY ACCOUNT BALANCE
AS OF MAY 31, 1996
Percentage Percentage
of Total of Total
Number of Number Receivables Receivables
Account Balance Accounts of Accounts Outstanding Outstanding
- - --------------------------------- ------------ ------------- ------------- --------------
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 . . . . . . . . . . . . . 4,329,856 100.0% $431,692,730 100.0%
(1) Credit balances are a result of cardholder payments and credit
adjustments applied in excess of an Account's unpaid balance. Accounts
currently with a credit balance are included, as Receivables may be generated
with respect thereto in the future.
(2) Accounts currently with no balance are included, as Receivables may be
generated with respect thereto in the future.
COMPOSITION OF ACTIVE AND CREDITWORTHY
ACCOUNTS BY AGE
AS OF MAY 31, 1996
Percentage Percentage
of Total of Total
Number of Number Receivables Receivables
Age(1) Accounts of Accounts Outstanding Outstanding
- - ------------------------------------- ------------ ------------- ------------- --------------
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 . . . . . . . . . . . . . . . 4,329,856 100.0% $431,692,730 100.0%
__________________
(1) Age is calculated based on the initial opening of the account.
COMPOSITION OF ACTIVE AND CREDITWORTHY ACCOUNTS
BY GEOGRAPHIC DISTRIBUTION(1)
AS OF MAY 31, 1996
Percentage Percentage
of Total of Total
Number of Number Receivables Receivables
State Accounts of Accounts Outstanding Outstanding
- - ----------------------------------- ------------ ------------- ------------- -------------
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 . . . . . . . . . . . . . 4,329,856 100.0% $431,692,730 100.0%
(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 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
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
PAYMENT RATE 1995 1994 1993 1992
------------ ------------- -------------- ------------- -------------
Low . . . . . . . . . . . . . .
High . . . . . . . . . . . . .
Average . . . . . . . . . . . .
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.)
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 Interest Accrual 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 Interest
Accrual 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). With respect to any Distribution Date, the Interest
Accrual Period is the period from and including the first day of the
preceding calendar month to and including the last day of such preceding
calendar month, except the initial Interest Accrual Period shall be deemed
to be the period from the Closing Date through the last day of the calendar
month preceding the initial Distribution Date. 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
Certificates") may hold through DTC (in the United States) or, solely in the
case of the Offered Certificates, CEDEL or Euroclear (in Europe) if they are
participants of such systems, or indirectly through organizations that are
participants in such systems. The Certificates may not be held, directly or
indirectly, through CEDEL or Euroclear.
Cede, as nominee for DTC, will hold the Offered Certificates. CEDEL and
Euroclear will hold omnibus positions in the Offered Certificates on behalf
of the CEDEL Participants and the Euroclear Participants, respectively,
through customers' securities accounts in CEDEL's and Euroclear's names on
the books of their respective depositaries (collectively, the
"Depositaries"), which in turn will hold such positions in customers'
securities accounts in the Depositaries' names on the books of DTC.
Transfers between DTC's participating organizations (the "Participants")
will occur in accordance with DTC rules. Transfers between CEDEL
Participants and Euroclear Participants will occur in the ordinary way in
accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC
in accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions
will require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time).
The relevant European international clearing system will, if the transaction
meets its settlement requirements, deliver instructions to its Depositary to
take action to effect final settlement on its behalf by delivering or
receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
CEDEL Participants and Euroclear Participants may not deliver instructions
directly to the Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a Participant will be made during
the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing will be reported to the
relevant CEDEL Participant or Euroclear Participant on such business day.
Cash received in CEDEL or Euroclear as a result of sales of securities by or
through a CEDEL Participant or a Euroclear Participant to a Participant will
be received with value on the DTC settlement date but will be available in
the relevant CEDEL or Euroclear cash account only as of the business day
following settlement in DTC.
For a description of transfers between persons holding directly or
indirectly through DTC, see also "Global Clearance, Settlement and Tax
Documentation Procedures" in Annex II to this Prospectus.
Cedel Bank, societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. CEDEL holds securities for its
participating organizations ("CEDEL Participants") and facilitates the
clearance and settlement of securities transactions between CEDEL
Participants through electronic book-entry changes in accounts of CEDEL
Participants, thereby eliminating the need for physical movement of 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 and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in
Euroclear in any of 32 currencies, including United States dollars. The
Euroclear System includes various other services, including securities
lending and borrowing, and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers
with DTC described in "Global Clearance, Settlement and Tax Documentation
Procedures" in Annex II of the Prospectus. The Euroclear System is operated
by Morgan Guaranty Trust Company of New York, Brussels, Belgium office (the
"Euroclear Operator" or "Euroclear"), under contract with Euroclear Clearance
System, S.C., a Belgian cooperative corporation (the "Cooperative"). All
operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with
the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants.
Euroclear Participants include banks (including central banks), securities
brokers and dealers and other professional financial intermediaries and may
include the Underwriters. Indirect access to the Euroclear System is also
available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such,
it is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System and applicable
Belgian law (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within the Euroclear
System, withdrawal of securities and cash from the Euroclear System, and
receipts of payments with respect to securities in the Euroclear System. All
securities in the Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities clearance
accounts. The Euroclear Operator acts under the Terms and Conditions only
on behalf of Euroclear Participants and has no record of or relationship with
persons holding through Euroclear Participants.
Distributions with respect to Offered Certificates held through CEDEL
or Euroclear will be credited to the cash accounts of CEDEL Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions
will be subject to tax reporting in accordance with relevant United States
tax laws and regulations. See "Federal Income Tax Consequences" herein and
"Global Clearance, Settlement and Tax Documentation Procedures" in Annex II
to this Prospectus. CEDEL or the Euroclear Operator, as the case may be,
will take any other action permitted to be taken by a Certificateholder under
the Indenture on behalf of a CEDEL Participant or Euroclear Participant only
in accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Offered Certificates among
participants of DTC, CEDEL and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
In the event that any of DTC, CEDEL or Euroclear should discontinue its
services, the Administrator would seek an alternative depository (if
available) or cause the issuance of Definitive Securities to the owners
thereof or their nominees in the manner described in "Global Clearance,
Settlement and Tax Document Procedures" in Annex II to this Prospectus.
DEFINITIVE CERTIFICATES
The Offered Certificates will be issued in fully registered,
certificated form to Certificate Owners or their nominees (the "Definitive
Certificates"), rather than to DTC or its nominee, only if (i) the Transferor
advises the Trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as Depository with respect to the
Offered Certificates, and the Trustee or the Transferor is unable to locate
a qualified successor, (ii) the Transferor, at its option, elects to
terminate the book-entry system through DTC, or (iii) after the occurrence
of a Servicer Event of Default, Certificate Owners representing in the
aggregate not less than a majority of the aggregate invested amount of all
Series then issued and outstanding advise the Trustee and DTC through
Participants in writing that the continuation of a book-entry system through
any Depository is no longer in the best interest of the Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee, through DTC, is required to notify all
Participants of the availability through DTC of Definitive Certificates.
Upon surrender by DTC to the Trustee of the Definitive Certificates
representing the Offered Certificates and instructions for re-registration,
the Trustee will issue the Offered Certificates as Definitive Certificates,
and thereafter the Trustee will recognize the holders of such Definitive
Certificates as holders under the Agreement ("Holders").
Distributions of principal and interest on the Offered Certificates will
be made by the Paying Agent directly to Holders of Definitive Certificates
in accordance with the procedures set forth herein and in the Agreement.
Interest and principal payments on each Distribution Date will be made to
Holders in whose names the Definitive Certificates were registered at the
close of business on the related Record Date. Distributions will be made by
check mailed to the address of such Holder as it appears on the certificate
register. The final payment on any Offered Certificate (whether Definitive
Certificates or the Offered Certificates registered in the name of Cede
representing the Offered Certificates), however, will be made only upon
presentation and surrender of such Offered Certificate at the office or
agency specified in the notice of final distribution to Certificateholders.
The Trustee will provide such notice to registered Certificateholders not
later than the day of such final distribution.
Definitive Certificates will be transferable and exchangeable at the
offices of the transfer agent and registrar, which shall initially be the
Trustee. No service charge will be imposed for any registration of transfer
or exchange, but the transfer agent and registrar may require payment of a
sum sufficient to cover any tax or other governmental charge imposed in
connection therewith.
CONVEYANCE OF RECEIVABLES
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
Underwriters against payment of the net proceeds of the sale of the Offered
Certificates. The Trustee will also deliver a newly issued Exchangeable
Transferor Certificate and the Subordinated Transferor Certificate to the
Transferor, 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 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 eligible Accounts
established under Other Programs ("Eligible Additional Accounts") and to
convey to the Trust Receivables in such Eligible Additional Accounts, whether
such Receivables are then existing or thereafter created. On any date, the
Transferor may designate Eligible Additional Accounts and convey the
Receivables arising from such Eligible 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 Eligible Additional
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" and shall not be transferred to the Trust. 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.
The Transferor may request written confirmation from the applicable
rating agencies to transfer to the Trust all Accounts related to a designated
Other Program and all Receivables arising from such Accounts. Upon receiving
such written confirmation, none of the Receivables arising from Accounts
related to the designated Other Program will be deemed to be "Ineligible
Receivables" and the Receivables from such 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.
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
Underwriters or one or more other underwriters or placement agents, in
fixed-price offerings or in negotiated transactions or otherwise. Any such
Series may be issued in fully registered or book-entry form in minimum
denominations determined by the Transferor. See Annex I for a listing of
Outstanding Series. The Transferor may offer, from time to time, additional
Series.
The Agreement provides that the Transferor may perform Exchanges and
define Principal Terms such that each Series has a period during which
amortization of the principal amount thereof is intended to occur which may
have a different length and begin on a different date than such period for
any other Series. Further, one or more Series may be in their amortization
periods while other Series are not. Thus, certain Series may be in their
revolving periods, while other Series are amortizing. Moreover, each Series
may have the benefits of a form of Enhancement issued by issuers different
from the issuers of the form of Enhancement with respect to any other Series.
Under the Agreement, the Trustee shall hold any such Enhancement only on
behalf of the Series with respect to which each relates. Likewise, with
respect to each such Enhancement, the Transferor may deliver a different form
of Enhancement agreement. The Agreement also provides that the Transferor
may specify different coupon rates and monthly servicing fees with respect
to each Series. Finance Charge Collections not used to pay interest on the
certificates, the monthly servicing fee, the investor default amount or
investor charge-offs with respect to any Series will be allocated as provided
in such form of Enhancement agreement, if applicable. The Transferor also
has the option under the Agreement to vary between Series the terms upon
which a Series may be repurchased by the Transferor or remarketed to other
investors. Additionally, certain Series may be subordinated to other Series,
or classes within a Series may have different priorities. No Series of
certificates may be senior to this Series 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
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 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 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
"Risk Factors--Effect of Subordination" and "--Allocation Percentages," "--
Reallocated Principal Collections" and "--Additional Amounts Available to
Certificateholders."
ALLOCATION PERCENTAGES
Pursuant to the Agreement, for each Collection Period the Servicer will
allocate Finance Charge Collections (including Recoveries on Defaulted
Receivables and merchant fees), all Principal Collections and the amount of
all Defaulted Receivables (defined below) (see "--Defaulted Receivables;
Recoveries; Rebates and Fraudulent Charges") among the Class A Interest, the
Class B Interest, the 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 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.
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 "Risk Factors--Commingling." Under
the Agreement, the Collections on the Receivables for any Collection Period
will be allocated such that all finance charges billed or accrued in respect
of Receivables in the prior Collection Period (less the aggregate amount of
finance charges billed or accrued on Accounts in prior periods which are
rebated to cardholders during such Collection Period) will be deemed Finance
Charge Collections and the remaining amount of such Collections will be
deemed Principal Collections. Notwithstanding the foregoing, Recoveries
received in any Collection Period shall be treated as Finance Charge
Collections for such Collection Period for all purposes. In addition,
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, 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 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.
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.
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 B 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 B Monthly Servicing Fee for
such Distribution Date will be distributed to the Servicer (unless such
amount has been previously netted against deposits to the Collection Account)
(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 C 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:
(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.
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) the amount of Shared Principal Collections allocated to the Class A
Certificates with respect to the preceding Collection Period equal to the
product of (a) a fraction, the numerator of which is the Invested Amount and
the denominator of which is the aggregate invested amounts of all Series then
accumulating or amortizing principal and (b) the amount, if any, of
Unallocated Principal Collections on deposit in the Collection Account on
such Distribution Date, (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.
Class B Monthly Principal with respect to any Distribution Date,
beginning with the Distribution Date on which the Class A Invested Amount is
paid in full, shall equal (a) 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 (or portion thereof, in
the case of an Amortization Event which occurs during such Collection
Period), (ii) the amount of Shared Principal Collections allocated to the
Class B Certificates with respect to the preceding Collection Period, and
(iii) the amount, if any, of Excess Finance Charge Collections to be
distributed to the Class B Certificates with respect to such Distribution
Date, minus (b) the Class A Monthly Principal, if any, with respect to such
Distribution Date.
Class C Monthly Principal with respect to any Distribution Date,
beginning with the Distribution Date on which the Class B Invested Amount is
paid in full, shall equal (a) 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 (or portion thereof, in
the case of an Amortization Event which occurs during such Collection
Period), (ii) the amount of Shared Principal Collections allocated to the
Class C Certificates with respect to the preceding Collection Period, and
(iii) the amount, if any, of Excess Finance Charge Collections to be
distributed to the Class C Certificates with respect to such Distribution
Date, minus (b) the Class B Monthly Principal, if any, with respect to such
Distribution Date.
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 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.
DETERMINATION OF LIBOR
The Servicer will determine LIBOR for each applicable Interest Accrual
Period on the second business day prior to commencement of such Interest
Accrual Period (or in the case of the initial Interest Accrual Period, the
second business day prior to the Closing Date) on which such Interest Period
commences (each a "LIBOR Determination Date"). For purposes of calculating
LIBOR, a business day is any day on which dealings in deposits in U.S.
Dollars are transacted in the London interbank market.
LIBOR means, as of any LIBOR Determination Date, the rate for deposits
in U.S. Dollars for a period of the Designated Maturity (commencing on the
first day of the relevant Interest Accrual Period) which appears on the
Telerate Page 3750 as of 11:00 a.m., London Time, on such date. If such rate
does not appear on Telerate Page 3750, the rate for that day will be
determined on the basis of the rates at which deposits in U.S. Dollars are
offered by the Reference Banks at approximately 11:00 a.m., London time, on
that day to prime banks in the London interbank market for a period of the
Designated Maturity (commencing on the first day of the relevant
Interest Period.) The Servicer will request the principal London office of
each of the Reference Banks to provide a quotation of its rate. If at least
two such quotations are provided, the rate for that day will be the
arithmetic mean of the quotations. If fewer than two quotations are provided
as requested, the rate for that day will be the arithmetic mean of the rates
quoted by major banks in New York City, selected by the Servicer, at
approximately 11:00 a.m., New York City time, on that day for loans in U.S.
Dollars to leading European banks for a period of the Designated Maturity
(commencing on the first day of the relevant Interest Accrual Period).
Designated Maturity shall mean, for any LIBOR Determination Date, (a)
with respect to the Class A Certificates, prior to the occurrence of an
Amortization Event, (three months), and after the occurrence of an
Amortization Event, (one month) and (b) with respect to the Class B
Certificates, (one month).
Telerate Page 3750 means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on
that service for the purpose of displaying comparable rates or prices).
Reference Banks means four major banks in the London interbank market
selected by the Servicer.
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;
(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
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 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.)
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 the Collection Account."
The term "Recoveries", with respect to any Collection Period, shall mean
all amounts or payments received by the Servicer with respect to Receivables
which have previously become Defaulted Receivables in a prior Collection
Period, net of reasonable expenses of the Servicer incurred and deducted from
such amounts or payments. 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.
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).
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 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
(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.
In addition to the consequences of an Amortization Event discussed
above, if the Transferor or Bridgestone/Firestone voluntarily files a
bankruptcy petition or goes into liquidation or any person is appointed a
receiver or bankruptcy trustee of the Transferor or Bridgestone/Firestone,
on the day of such appointment the Transferor will immediately cease
transferring Receivables to the Trust and promptly give notice to the Trustee
of such appointment. Within 15 days, the Trustee will publish a notice of
the liquidation or the appointment stating that the Trustee intends to sell,
dispose of or otherwise liquidate the Receivables in a commercially
reasonable manner and to the best of its ability. Unless otherwise
instructed within a specified period by the certificateholders representing
undivided interests aggregating more than 50% of the aggregate principal
amount of each Series (or in the case of a series having more than one class
of investor certificates, each class of such Series), the Trustee will sell,
dispose of or otherwise liquidate the Receivables in a commercially
reasonable manner and on commercially reasonable terms. The proceeds from
the sale, disposition or liquidation of the Receivables will be treated as
Collections and such proceeds will be distributed to certificateholders.
If the portion of such proceeds allocable to the Certificateholders' Interest
and the proceeds of any Collections in the Collection Account are not
sufficient to pay in full the remaining amount due on the Class A and
Class B Certificates, the Class A and Class B Certificateholders will
suffer a corresponding loss. See "Certain Legal Aspects of the
Receivables--Certain Matters Relating to Bankruptcy."
INDEMNIFICATION
The Agreement will provide that, subject to certain exceptions specified
therein, the Servicer will indemnify the Trust, for the benefit of
certificateholders, and the Trustee, including its officers, directors and
employees, from and against any loss (excluding any investment loss),
liability, expense, damage or injury suffered or sustained and arising out
of activities of the Trust or the Trustee (or such other Person) pursuant to
the Agreement on any supplement, including those arising out of the
Servicer's actions or omissions with respect to the Trust pursuant to the
Agreement or any Supplement.
Under the Agreement, the Transferor and Bridgestone/Firestone will
indemnify an injured party for the entire amount of any losses, claims,
damages or liabilities arising out of or based on the Agreement or the
actions of the Servicer taken pursuant to the Agreement as though the
Agreement created a partnership under the Uniform Partnership Act. The
Transferor and Bridgestone/Firestone will also indemnify each
certificateholder for any such losses, claims, damages or liabilities (other
than those incurred by a certificateholder 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 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 Monthly Servicing Fee will be
paid with respect to each Collection Period from the Collection Account
(unless such amount has been netted against deposits to the Collection
Account) as described under "Distributions from the Collection Account"
above.
The Servicer may perform any of its obligations under the Agreement
through one or more subservicers. The Servicer shall remain liable for its
servicing duties and obligations as if the Servicer alone were servicing the
Receivables. The Servicer shall be responsible for the fees and expenses of
any such subservicer.
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Accounts and the Receivables
including, without limitation, expenses related to enforcement of the
Receivables, payment of fees and disbursements of the Trustee and independent
accountants, payment of fees and expenses of any subservicer and all other
fees and expenses which are not expressly stated in the Agreement to be
payable by the Trust or the Certificateholders other than Federal, state and
local income and franchise taxes, if any, of the Trust.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under the
Agreement, except upon determination that such duties are no longer
permissible under applicable law or upon the appointment of a successor
Servicer in the business of servicing credit card receivables with a net
worth of at least $100,000,000 and delivery of written confirmation that the
ratings of the 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 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 B
Certificates exceed the Class B Invested Amount as of the Record Date with
respect to such Distribution Date, as the case may be; and (e) the "Class A
Pool Factor" and "Class B Pool Factor" as of the end of the Record Date with
respect to such Distribution Date (consisting of an eight-digit decimal
expressing the Class A Invested Amount or Class B Invested Amount, as
applicable, as of such Record Date (determined after taking into account any
increase or decrease in the Class A Invested Amount or Class B Invested
Amount, as applicable, which will occur on the following Distribution Date)
as a proportion of the Class A Initial Invested Amount or Class B Initial
Invested Amount). The Payment Date Statement and the Monthly Servicer's
Certificate will be available to Certificate Owners, as described under
"Special Considerations--Book Entry Registration" and "Available Information."
On or before January 31 of each calendar year, the Paying Agent, on
behalf of the Trustee, will furnish or cause to be furnished to each person
who at any time during the preceding calendar year was a Certificateholder
of record (or, if so provided in applicable Treasury regulations, made
available to Certificate Owners) a statement prepared by the Trustee
containing the information required to be provided by an issuer of
indebtedness under the Code for such calendar year or the applicable portion
thereof during which such person was a Certificateholder, together with such
other customary information as the Servicer deems necessary or desirable to
enable the Certificateholders to prepare their tax returns. See "Federal
Income Tax Consequences."
EVIDENCE AS TO COMPLIANCE
The Agreement provides that on or before March 31 of each calendar year,
the Servicer will cause a firm of independent public accountants to furnish
a report to the effect that such firm has applied certain agreed-upon
procedures to certain documents and records relating to the servicing of the
Receivables and that, based upon such agreed-upon procedures, no matters came
to their attention that caused them to believe that such servicing was not
conducted in compliance with certain applicable terms and conditions set
forth in the Agreement except for such exceptions or errors as such firm
shall believe to be immaterial and such other exceptions as shall be set
forth in such statement. In addition, on or before March 31 of each calendar
year such accountants will compare the mathematical calculations of the
amounts contained in the Monthly Servicer's Certificates and other
certificates delivered during such year with the computer reports of the
Servicer and statements of any agents engaged by the Servicer to perform
servicing activities which were the source of such amounts and deliver a
certificate to the Trustee confirming that such amounts are in agreement
except for such exceptions as they believe to be immaterial and such other
exceptions which shall be set forth in such report.
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 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 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. Receivables originated under Eligible 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 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 "Risk Factors--Potential Priority of Certain Liens" and
"Certain Legal Aspects of the Receivables."
REPRESENTATIONS AND WARRANTIES
The Originator represents and warrants to the Transferor to the effect,
among other things, that as of the Closing Date: (a) the Originator is duly
organized and validly existing in good standing under the laws of the United
States as a national banking association, (b) the Purchase and Sale Agreement
constitutes a legal, valid and binding obligation of the Originator and (c)
the sale by the Originator of Receivables pursuant to the Purchase and Sale
Agreement and the performance of its obligations has been duly authorized by
all requisite corporate action.
The Originator has also agreed to indemnify the Transferor and to hold
the Transferor harmless from and against any and all losses, damages and
expenses (including reasonable attorneys' fees) suffered or incurred by the
Transferor as a result of the breach by the Originator of any representation,
warranty, covenant or agreement set forth in the Purchase and Sale Agreement.
In addition, the Originator expressly acknowledges and consents to the
Transferor's assignment of its rights relating to the interests sold by the
Originator under the Purchase and Sale Agreement to the Trustee for the
benefit of the Certificateholders.
TERMINATION
If pursuant to certain provisions of Federal law, the Originator becomes
party to any insolvency or similar proceeding (other than as a claimant) and,
if such proceeding is not voluntary and it is not dismissed within 90 days
of its institution, or if a receiver is appointed for the Originator, the
Originator will immediately cease selling Receivables to the Transferor.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
At the time of the formation of the Trust, pursuant to the Purchase and
Sale Agreement, the Originator sold to the Transferor all its right, title
and interest in and to those Receivables existing under the Eligible Accounts
as of the Cut-off Date and, provided that the Transferor is not in default
thereunder and no Servicer Event of Default shall have occurred, its right,
title and interest to those Receivables arising under the Eligible Accounts
from time to time thereafter. The Transferor conveyed to the Trust, without
recourse, all Receivables existing under the Eligible Accounts, as of the
Cut-off Date and thereafter created. The Transferor has covenanted and
warranted that such transfer constitutes either a valid transfer and
assignment to the Trust of all right, title and interest of the Transferor
in and to the Receivables, except for the interest of the Transferor as
holder of the Exchangeable Transferor Certificate, or a grant of a security
interest to the Trust in and to the Receivables. The Transferor also
covenanted and warranted to the Trust in the Agreement that, in the event the
transfer of Receivables by the Transferor to the Trust is deemed to create
a security interest under the UCC and assuming that the Transferor is not at
the time the subject of any insolvency proceedings, there exists a valid,
subsisting and enforceable first priority perfected security interest in the
Receivables in existence since the time of the formation of the Trust in
favor of the Trust and a valid, subsisting and enforceable first priority
perfected security interest in the Receivables created thereafter and, with
certain exceptions, and for certain limited time periods, the proceeds
thereof, in favor of the Trust on and after their creation. For a discussion
of the Trust's rights arising from these covenants and warranties not being
satisfied, see "Description of the Offered Certificates and the Agreement--
Covenants, Representations and Warranties."
The Receivables are "accounts" or "general intangibles" as defined in
Article 9 of the UCC. To the extent the Receivables constitute accounts,
both the absolute transfer of such Receivables and the transfer of such
Receivables as security for an obligation are treated under Article 9 of the
UCC as creating a security interest therein and are subject to its
provisions, including the filing of financing statements to perfect the
Trust's security interest. To the extent Receivables constitute general
intangibles and the transfer of such Receivables is deemed
to be a transfer as security for an obligation, Article 9 of the UCC is
applicable to the same extent as it is applicable to Receivables constituting
accounts. Financing statements covering the Receivables will be filed under
the UCC as in effect in Massachusetts to protect the Transferor and the
Trust. In the event the transfer by the Transferor to the Trust of any
general intangibles is deemed to be an absolute transfer, then the UCC is not
applicable, and no further action is required to perfect the Trustee's
interest in such Receivables from third-party claims.
There are certain limited circumstances under the UCC in which prior or
subsequent transferees of Receivables coming into existence after the Closing
Date could have an interest in such Receivables with priority over the
Trust's interest. A tax or other government lien on property of the
Transferor arising prior to the time a Receivable comes into existence may
also have priority over the interest of the Trust in such Receivables. In
addition, under the Agreement, the Transferor will covenant to accept the
reassignment of the Receivables in any Account containing a Receivable
transferred to the Trust that is not free and clear of the lien of any third-
party, except certain permitted tax liens. Furthermore, the Transferor
covenants that it will not sell, pledge, assign, transfer or grant any lien
on any Receivable (or any interest therein) other than to the Trust.
Unless continuation statements are filed within five years of the
original filings the time specified in the UCC in respect of the security
interest of either the Transferor or the Trust in the Receivables, the
perfection of such security interest will lapse. Pursuant to the Agreement,
the Servicer will be required to cause such statements to be filed.
Because the Trust's interest in certain of the Receivables is dependent
upon the Transferor's interest in such Receivables, any adverse change in the
priority or perfection of the Transferor's security interest would
correspondingly affect the Trust's interest in the affected Receivables.
Collections of Receivables will, except in certain circumstances, be
available for use by the Servicer until deposited into the Collection Account
on the business day preceding each Distribution Date. In the event of
insolvency or receivership of the Servicer or, in certain circumstances, the
lapse of certain time periods, the Trust may not have a perfected interest
in such cash Collections.
CERTAIN MATTERS RELATING TO BANKRUPTCY
The 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.
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.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Set forth below is a discussion of material income tax consequences to
Certificate Owners who are original owners of the Offered Certificates and
hold the Offered Certificates as capital assets under the Internal Revenue
Code of 1986, as amended (the "Code"). This discussion does not purport to
be complete or to deal with all aspects of Federal income taxation that may
be relevant to Certificate Owners in light of their particular circumstances,
nor to certain types of Certificate Owners subject to special treatment under
the Federal income tax laws (for example, banks and life insurance
companies). This discussion is based upon present provisions of the Code,
the regulations promulgated thereunder and judicial and ruling authorities,
all of which are subject to change, which change may be retroactive.
PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH
REGARD TO THE FEDERAL TAX CONSEQUENCES TO SPECIAL CATEGORIES OF INVESTORS IN
THE OFFERED CERTIFICATES WITH RESPECT TO THE PURCHASE, OWNERSHIP OR
DISPOSITION OF INTERESTS IN THE OFFERED CERTIFICATES, AS WELL AS THE TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, FOREIGN COUNTRY OR OTHER
TAXING JURISDICTION.
Characterization of the Offered Certificates as Indebtedness. The
Transferor, the Trustee, the Class A Certificateholders and the Class B
Certificateholders express in the Agreement their intent that, for tax
purposes the Offered Certificates will be indebtedness secured by the
Receivables. The Transferor, the Class A Certificateholders and the Class
B Certificateholders, by acquiring an interest in an Offered Certificate,
agree to treat the Offered Certificates as indebtedness for Federal, state
and local tax purposes. However, because different criteria are used to
determine the non-tax accounting characterization of the transaction, the
Transferor will treat the transaction, for financial accounting purposes, as
a sale of an ownership interest in the Receivables and not as the issuance
of a debt obligation.
Based upon the application of existing law to the facts of the
transaction as set forth in the Agreement and other relevant documents, Brown
& Wood LLP, special tax counsel to the Transferor ("Tax Counsel"), has
advised the Transferor that, in its opinion, (i) the Offered Certificates
will be treated for Federal income tax purposes as indebtedness and (ii) the
Trust will not be treated as either an association or a publicly traded
partnership taxable as a corporation for Federal income tax purposes.
However, opinions of counsel are not binding on the Internal Revenue Service
(the "IRS"), and there can be no assurance that the IRS could not
successfully challenge this conclusion.
In general, the characterization of a transaction for Federal income tax
purposes is based upon economic substance, and the substance of the
transaction in which the Offered Certificates are issued is consistent with
the treatment of the Offered Certificates as debt for Federal income tax
purposes. Although there are certain judicial precedents holding that under
appropriate circumstances a taxpayer should be required to treat a
transaction in accordance with the form chosen by the taxpayer, regardless
of the transaction's substance, the operative provisions of the transaction
and the Agreement are not inconsistent with treating the Offered Certificates
as debt and, accordingly, these authorities would not be applied to require
sale characterization.
Based on the foregoing, Tax Counsel has concluded that the
characterization of the Offered Certificates, for Federal income tax
purposes, would be governed by the substance of the transaction, which is the
issuance of debt.
Other Characterizations of the Offered Certificates. If the Agreement
does not create a debt obligation for Federal income tax purposes, the
arrangement among the Transferor, the Class A Certificateholders and the
Class B Certificateholders could be classified, for Federal income tax
purposes, alternatively as a partnership, a publicly traded partnership
taxable as a corporation, or as an association taxable as a corporation.
Because, in the opinion of Tax Counsel, the Offered Certificates will be
characterized as debt for Federal income tax purposes, no attempt will be
made to comply with any reporting or tax payment requirements which might be
applicable if the arrangement between the Transferor and the Certificate
Owners were treated as creating a partnership or a corporation. No IRS
ruling on the Federal income tax characterization of the arrangement among
the Transferor, the Class A Certificateholders and the Class B
Certificateholders will be sought.
If the arrangement created by the Agreement were characterized as a
partnership among the Transferor and the Certificate Owners, such a
partnership would not be subject to Federal income tax, but each item of
income, gain, loss, deduction and credit generated through the ownership of
the Receivables by such a partnership would generally be passed through to
the Transferor and the Certificate Owners as partners in such a partnership
according to their respective interests therein. The amount, timing, and
character of income reportable by the Certificate Owners as partners could
differ materially from the income reportable by the Certificate Owners if the
Offered Certificates are characterized as debt.
If the arrangement were treated as a publicly traded partnership taxable
as a corporation or as an association taxable as a corporation, it would be
subject to Federal income tax at corporate tax rates on its taxable income
generated by ownership of the Receivables. Such a tax could result in
reduced distributions to Certificate Owners. Distributions to the Transferor
and, unless the Offered Certificates were treated as debt of the corporation
if the arrangement were treated as an association taxable as a corporation,
to the Certificate Owners, would not be deductible in computing the taxable
income of the corporation. In addition, if the Offered Certificates were not
treated as debt of the corporation, all or a portion of any such
distributions would, to the extent of the current and accumulated earnings
and profits of such corporation, be treated as dividend income to the
Certificate Owners.
In addition, if the arrangement were treated as a publicly traded
partnership, any income allocated to a Certificate Owner that is a tax-exempt
entity will constitute "unrelated business taxable income", at least where
the publicly traded partnership is taxed as a partnership.
TAXATION OF INTEREST AND DISCOUNT INCOME OF CERTIFICATE OWNERS
Assuming that the Certificate Owners are owners of debt obligations for
Federal income tax purposes, in the opinion of Tax Counsel, interest
generally will be taxable as ordinary income for Federal income tax purposes
when received by the Certificate Owners utilizing the cash method of
accounting and when accrued by Certificate Owners utilizing the accrual
method of accounting. Interest received on the Offered Certificates may also
constitute "investment income" for purposes of certain limitations of the
Code concerning the deductibility of investment interest expense.
While it is not anticipated that the Offered Certificates will be issued
at a greater than de minimis discount, in the opinion of Tax Counsel, under
the Treasury regulations (the "OID Regulations"), it is possible that the
Offered Certificates could nevertheless be deemed to have been issued with
original issue discount ("OID"). This could be the case, for example, if
interest payments were not deemed to be "qualified stated interest payments"
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 stated interest payments" payable prior to or at
maturity) over the applicable original issue price (in this case, the initial
offering price at which a substantial amount of the Class A or Class B
Certificates, as applicable, are sold to the public) will constitute OID.
A Certificate Owner must include OID in income over the term of the Offered
Certificates under a constant yield method. In general, OID must be included
in income in advance of the receipt of cash representing that income. In the
case of a debt instrument as to which the repayment of principal may be
accelerated as a result of the prepayment of other obligations securing the
debt instrument, the periodic accrual of OID is determined by taking into
account both the prepayment assumptions used in pricing the debt instrument
and the prepayment experience. If this provision applies to the Offered
Certificates, the amount of OID which will accrue in any given "accrual
period" may either increase or decrease depending upon the actual prepayment
rate.
Certificate Owners should be aware that the resale of an Offered
Certificate may be affected by the market discount rules of the Code. These
rules generally provide that, subject to a de minimis exception, if a holder
of a 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 the opinion of Tax Counsel, in general, a Certificate Owner will
recognize gain or loss upon the sale, exchange, redemption or other taxable
disposition of an Offered Certificate measured by the difference between (i)
the amount of cash and the fair market value of any property received (other
than amounts attributable to, and taxable as, accrued stated interest) and
(ii) the owner's tax basis in the Class A Certificate or Class B Certificate,
as applicable (as increased by any OID or market discount previously included
in income by the holder and decreased by any deductions previously allowed
for amortizable bond premium and by any payments reflecting principal or OID
received with respect to such Class A Certificate or Class B Certificate, as
applicable). Subject to the market discount rules discussed above and to the
one-year holding requirement for long-term capital gain treatment, any such
gain or loss generally will be long-term capital gain or loss, provided that
the Class A Certificate or Class B Certificate, as applicable was held as a
capital asset. The Federal income tax rates applicable to capital gains for
taxpayers other than individuals, estates and trusts are currently the same
as those applicable to ordinary income; however, the maximum ordinary income
rate for individuals, estates and trusts has increased to 39.6%, whereas the
maximum long-term capital gains rate for such taxpayers remains at 28%.
Moreover, capital losses generally may be used only to offset capital gains.
BACKUP WITHHOLDING
In the opinion of Tax Counsel, a Certificate Owner may be subject to
backup withholding at the rate of 31% with respect to interest paid on the
Offered Certificates if the Certificate Owner, upon issuance, fails to supply
the Trustee or his broker with his taxpayer identification number, fails to
report interest, dividends, or other "reportable payments" (as defined in the
Code) properly, or under certain circumstances, fails to provide the Trustee
or his broker with a certified statement, under penalty of perjury, that he
is not subject to backup withholding. Information returns will be sent
annually to the IRS and to each Class A and Class B Certificateholder setting
forth the amount of interest paid on the Offered Certificates and the amount
of tax withheld thereon.
STATE 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
ERISA imposes certain restrictions on employee benefit plans subject to
ERISA ("Plans") and on persons who are parties in interest or disqualified
persons (collectively, "parties in interest") with respect to such Plans.
Section 406 of ERISA prohibits parties in interest with respect to a Plan
from engaging in certain transactions involving a Plan and its assets unless
a statutory or administrative exemption applies to the transaction, and
Section 4975 of the Code (or, in some cases, Section 502(1) of ERISA) imposes
excise taxes (or civil fines) on parties in interest with respect to Plans,
individual retirement accounts or Keogh plans covering no common law
employees (collectively, "Benefit Plans") which engage in non-exempt
prohibited transactions.
The Offered Certificates may not be acquired by or on behalf of a
Benefit Plan including any purchase taking assets of a Benefit Plan held in
an insurance company's general account. By purchasing, holding or acquiring
any interest in an Offered Certificate, the Offered Certificateholder, or the
Beneficial owner thereof, shall be deemed to have represented and warranted
that it is not a Benefit Plan and is not purchasing the Offered Certificate,
or the interest therein, on behalf of a Benefit Plan.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Transferor has agreed to sell to Citicorp Securities, Inc. and
Chase Securities, Inc. (the "Underwriters") and the Underwriters have agreed
to purchase the Offered Certificates.
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are 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 the Class C Certificates and
the Subordinated Transferor Certificate be issued simultaneously therewith.
The Transferor has been advised by the Underwriters 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
Underwriters 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
Underwriters 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 Underwriters will be passed upon by Brown & Wood LLP, New York, New
York. Certain legal matters relating to the Federal income tax consequences
of the issuance of the Certificates will be passed upon for the Transferor by
Brown & Wood LLP, New York, New York.
INDEX OF TERMS
PAGE
----
10% Maximum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,47
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,31
Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,8,53
Active Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Actual/360 Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Additional Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 4,47
Adjustment Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Aggregate Certificateholders' Interest . . . . . . . . . . . . . . . . . . 4
Aggregate Receivables . . . . . . . . . . . . . . . . . . . . . . . . 11,33
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,30
Amortization Event . . . . . . . . . . . . . . . . . . . . . . . . . . 22,66
Amortization Period . . . . . . . . . . . . . . . . . . . . . . . . . 30,33
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Base Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
B/F Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,33
B/F Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,57
B/F Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Bridgestone/Firestone . . . . . . . . . . . . . . . . . . . . . . . . . 1,33
Bridgestone/Firestone Certificate . . . . . . . . . . . . . . . . . . 2,5,47
Cede . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,8,35
CEDEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,45
Cedel Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Certificateholders' Interest . . . . . . . . . . . . . . . . . . . . . 4,30
Certificate Owners . . . . . . . . . . . . . . . . . . . . . . . . . 2,9,35
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,31
CFNA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,33
Chase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Citibank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,33
Class A Base Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Class A Certificateholders . . . . . . . . . . . . . . . . . . . . . . 8,45
Class A Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . 5,33
Class A Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 1,33
Class A Floating Allocation Percentage . . . . . . . . . . . . . . . . 6,52
Class A Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,57
Class A Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . 15,53
Class A Investor Charge-Off . . . . . . . . . . . . . . . . . . . . . . 19,63
Class A Investor Default Amount . . . . . . . . . . . . . . . . . . . . 14,58
Class A Monthly Interest . . . . . . . . . . . . . . . . . . . . . . . 14,60
Class A Monthly Servicing Fee . . . . . . . . . . . . . . . . . . . . 15,60
Class A Pool Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Class A Required Amount . . . . . . . . . . . . . . . . . . . . . . . . 17,56
Class B Base Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Class B Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class B Certificateholders . . . . . . . . . . . . . . . . . . . . . . 8,33
Class B Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 1,32
Class B Expected Final Payment Date . . . . . . . . . . . . . . . . . . . 11
Class B Floating Allocation Percentage . . . . . . . . . . . . . . . . 6,52
Class B Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,57
Class B Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . 15,53
Class B Investor Charge-Off . . . . . . . . . . . . . . . . . . . . . . 20,63
Class B Investor Default Amount . . . . . . . . . . . . . . . . . . . . 14,58
Class B Monthly Interest . . . . . . . . . . . . . . . . . . . . . . . . 14
Class B Monthly Servicing Fee . . . . . . . . . . . . . . . . . . . . . 15,69
Class B Pool Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Class B Reallocated Principal Collections . . . . . . . . . . . . . . . 18,62
Class C Certificate Rate . . . . . . . . . . . . . . . . . . . . . . . . . 5
Class C Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . 8
Class C Expected Final Payment Date . . . . . . . . . . . . . . . . . . . 11
Class C Floating Allocation Percentage . . . . . . . . . . . . . . . . 7,52
Class C Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Class C Investor Default Amount . . . . . . . . . . . . . . . . . . . . . 14
Class C Invested Amount . . . . . . . . . . . . . . . . . . . . . . 16,20,53
Class C Investor Charge-Off . . . . . . . . . . . . . . . . . . . . . . 20,63
Class C Monthly Interest . . . . . . . . . . . . . . . . . . . . . . . . 14
Class C Monthly Servicing Fee . . . . . . . . . . . . . . . . . . . 15,60,69
Class C Reallocated Principal Collections . . . . . . . . . . . . . . . 18,62
Class C Required Amount . . . . . . . . . . . . . . . . . . . . . . . . 17,56
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Collection Account . . . . . . . . . . . . . . . . . . . . . . . . . . 24,50
Collection Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,33
Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,30
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Controlled Amortization Amount . . . . . . . . . . . . . . . . . . . . 10,45
Controlled Amortization Date . . . . . . . . . . . . . . . . . . . . . 10,45
Controlled Amortization Period . . . . . . . . . . . . . . . . . . . . 10,33
Cooperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Credit Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Credit Card Program . . . . . . . . . . . . . . . . . . . . . . . . . 1,2,33
Credit Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Creditworthy account . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Cut-off Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,87
DTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,44
Defaulted Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 2,65
Definitive Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 47
Depository . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . 24,34
Disclosure Document . . . . . . . . . . . . . . . . . . . . . . . . . . 7,53
Discount Option Receivables . . . . . . . . . . . . . . . . . . . . . . . 22
Discount Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . 22,65
Distribution Date . . . . . . . . . . . . . . . . . . . . . . . . . . 2,5,30
DOL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,51
Eligible Account . . . . . . . . . . . . . . . . . . . . . . . . . . 2,50,33
Eligible Additional Account . . . . . . . . . . . . . . . . . . . . . . . 50
Enhancement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,43
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,80
Euroclear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,45
Euroclear Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Euroclear Participants . . . . . . . . . . . . . . . . . . . . . . . . . 45
European Depositories . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Excess Finance Charge Collections . . . . . . . . . . . . . . . . . . . 16,48
Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,90
Exchangeable Transferor Certificate . . . . . . . . . . . . . . . . . . 5,31
Final Class A Termination Date . . . . . . . . . . . . . . . . . . . . 23,66
Final Class B Termination Date . . . . . . . . . . . . . . . . . . . . 23,66
Final Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Final Series 1996-1 Termination Date . . . . . . . . . . . . . . . . . 23,66
Final Trust Termination Date . . . . . . . . . . . . . . . . . . . . . . 67
Finance Charge Collections . . . . . . . . . . . . . . . . . . . . . . 3,33
Finance Charge Receivables . . . . . . . . . . . . . . . . . . . . . . 22,65
FIRREA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Fitch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Fixed Allocation Percentage . . . . . . . . . . . . . . . . . . . . . . 11,53
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Ineligible Receivable . . . . . . . . . . . . . . . . . . . . . . . . . 4,50
Initial Class A Invested Amount . . . . . . . . . . . . . . . . . . . . . . 8
Initial Class B Invested Amount . . . . . . . . . . . . . . . . . . . . . . 8
Interest Accrual Period . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Invested Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Invested Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . 7,59
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Letter of Credit Bank . . . . . . . . . . . . . . . . . . . . . . . . . 24,42
LIBOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,62
LIBOR Determination Date . . . . . . . . . . . . . . . . . . . . . . . . 62
Merchant Fee Transfer Agreement . . . . . . . . . . . . . . . . . . . . . . 3
Monthly Servicer's Certificate . . . . . . . . . . . . . . . . . . . . . 71
Monthly Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . 15,54
Moody's . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Morgan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
No Payment for 90 Days . . . . . . . . . . . . . . . . . . . . . . . . . 35
Offered Certificateholders . . . . . . . . . . . . . . . . . . . . . . . 2,8
Offered Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 1,44
OID . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
OID Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Originator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,33
Other Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Other Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,33
Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Participation Agreement . . . . . . . . . . . . . . . . . . . . . . . 7,28,48
Parties-in-Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Payment Date Statement . . . . . . . . . . . . . . . . . . . . . . . . . 71
Permitted Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Principal Collections . . . . . . . . . . . . . . . . . . . . . . . . . 3,33
Principal Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 22,65
Principal Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Purchase and Sale Agreement . . . . . . . . . . . . . . . . . . . . . . 3,30
Rapid Amortization Period . . . . . . . . . . . . . . . . . . . . . . . 11,31
Rating Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,31
Reallocated Principal Collections . . . . . . . . . . . . . . . . . . . . 62
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,2,50
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,65
Removed Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Required Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,56
Required Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Retail Establishments . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Revolving Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,48
S&P . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,33
Series 1992 Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 6
Shared Principal Collections . . . . . . . . . . . . . . . . . . . . . . 60
Service Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,24
Servicer Event of Default . . . . . . . . . . . . . . . . . . . . . . . . 70
Servicer Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . 24,30
Shared Principal Collections . . . . . . . . . . . . . . . . . . . . . 21,64
Servicing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SFB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Shared Principal Collections . . . . . . . . . . . . . . . . . . . . . 21,64
Subordinated Transferor Certificate . . . . . . . . . . . . . . . . . . . . 1
Subordinated Transferor Interest . . . . . . . . . . . . . . . . . . . . . 4
Allocation Percentage . . . . . . . . . . . . . . . . . . . . . . . . . 7,52
Subordinated Transferor Floating Allocation Percentage . . . . . . . . . 53
Subordinated Transferor Default Amount . . . . . . . . . . . . . . . . . 15
Subordinated Transferor Monthly Servicing Fee . . . . . . . . . . . . . 15,66
Subordinated Transferor Amount . . . . . . . . . . . . . . . . . 16,20,53,64
Subordinated Transferor Reallocated Principal Collections . . . . . . . 18,62
Subordinated Transferor Charge-Off . . . . . . . . . . . . . . . . . . 20,64
Subservicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Substitute Servicer Letter of Credit . . . . . . . . . . . . . . . . . . 55
Substitute Transferor Letter of Credit . . . . . . . . . . . . . . . . . 56
Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Tax Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Transfer Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,56
Transfer Deposit Amount . . . . . . . . . . . . . . . . . . . . . . . . . 50
Transferor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,30
Transferor Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,53
Transferor Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 5,43
Transferor Letter of Credit . . . . . . . . . . . . . . . . . . . . . . 25,33
Transferor Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trust Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,30
UCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Unallocated Principal Collections . . . . . . . . . . . . . . . . . . . . 55
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
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.
1. Series 1995-A Asset Backed Certificates*
Class A Invested Amount . . . . . . . . . . . . . . . $199,200,000
Class B Invested Amount** . . . . . . . . . . . . . . . $38,095,238
Servicing Fee Percentage . . . . . . . . . . . . . . . . . . 2.00%
Series Issuance Date . . . . . . . . . . . . . . . . June 5, 1995
2. Series 1992-B Certificates
Class A REMARCS . . . . . . . . . . . . . . . . . . . $152,746,000
Class B REMARCS . . . . . . . . . . . . . . . . . . . $ 29,377,581
Servicing Fee Percentage . . . . . . . . . . . . . . . . . 2.00%
Series Issuance Date . . . . . . . . . . . . . . . January 4, 1993
* 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.
ANNEX II
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally Offered
Certificates (the "Global Securities") will be available only in book-entry
form. Investors in the Global Securities may hold such Global Securities
through any of DTC, CEDEL or Euroclear. The Global Securities will be
traceable as home market instruments in both the European and U.S. domestic
markets. Initial settlement and all secondary trades will settle in same-day
funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures
applicable to U.S. corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
Participants holding Offered Certificates will be effected on a
delivery-against-payment basis through the respective Depositaries of CEDEL
and Euroclear (in such capacity) and DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be
subject to U.S. withholding taxes unless such holders meet certain
requirements and deliver appropriate U.S. tax documents to the securities
clearing organizations or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name
of Cede & Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect Participants in DTC. As a result, CEDEL and
Euroclear will hold positions on behalf of their participants through their
respective Depositaries, which in turn will hold such positions in accounts
as DTC Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to prior debt issues. Investors
securities custody accounts will be credited with their holdings against
payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global
security and no "lock-up" or restricted period. Global Securities will be
credited to the securities custody accounts on the settlement date against
payments in same-day funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to book-entry
securities in same-day funds.
Trading between CEDEL and/or Euroclear Participants. Secondary market
trading between CEDEL Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and CEDEL or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC Participant
to the account of a CEDEL Participant or a Euroclear Participant, the
purchaser will send instructions to CEDEL or Euroclear through a CEDEL
Participant or Euroclear Participant at least one business day prior to
settlement. CEDEL or Euroclear, as applicable, will instruct its Depositary
to receive the Global Securities against payment. Payment will include
interest accrued on the Global Securities from and including the last coupon
payment date to and excluding the settlement date. Payment will then be made
by such Depositary to the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the applicable clearing system and by the clearing system,
in accordance with its usual procedures, to the CEDEL Participant's or
Euroclear Participant's account. The Global Securities credit will appear
the next day (European time) and the cash debit will be back-valued to, and
the interest on the Global Securities will accrue from, the value date (which
would be the preceding day when settlement occurred in New York). If settlement
is not completed on the intended value date (i.e., the trade fails), the CEDEL
or Euroclear cash debit will be valued instead as of the actual settlement
date.
CEDEL Participants and Euroclear Participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to
pre-position funds for settlement, either from cash on hand or existing lines
of credit, as they would for any settlement occurring within CEDEL or
Euroclear. Under this approach, they may take on credit exposure to CEDEL
or Euroclear until the Global Securities are credited to their accounts one
day later.
As an alternative, if CEDEL or Euroclear has extended a line of credit
to them, CEDEL Participants or Euroclear Participants can elect not to
pre-position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, CEDEL Participants or Euroclear
Participants purchasing Global Securities would incur overdraft charges for
one day, assuming they cleared the overdraft when the Global Securities were
credited to their accounts. However, interest on the Global Securities would
accrue from the value date. Therefore, in many cases the investment income
on the Global Securities earned during that one-day period may substantially
reduce or offset the amount of such overdraft charges, although this result
will depend on each CEDEL Participant's or Euroclear Participant's particular
cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities
to the respective Depositary for the benefit of CEDEL Participants or
Euroclear Participants. The sale proceeds will be available to the DTC
seller on the settlement date. Thus, to the DTC Participant a cross-market
transaction will settle no differently than a trade between two DTC
Participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, CEDEL Participants and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing systems,
through their respective Depositaries, to a DTC Participant. The seller will
send instructions to CEDEL or Euroclear through a CEDEL Participant or
Euroclear Participant at least one business day prior to settlement. In
these cases, CEDEL or Euroclear will instruct their respective Depositaries,
as appropriate, to deliver the bonds to the DTC Participant's account against
payment. Payment will include interest accrued on the Global Securities from
and including the last coupon payment date to and excluding the settlement
date. The payment will then be reflected in the account of the CEDEL
Participant or Euroclear Participant the following day, and receipt of the
cash proceeds in the CEDEL Participant's or Euroclear Participant's account
would be back-valued to the value date (which would be the preceding day,
when settlement occurred in New York). Should the CEDEL Participant or
Euroclear Participant have a line of credit with its clearing system and
elect to be in debit in anticipation of receipt of the sale proceeds in its
account, the back-valuation will extinguish any overdraft charges incurred
over that one-day period. If settlement is not completed on the intended
value date (i.e., the trade fails), receipt of the cash proceeds in the CEDEL
Participant's or Euroclear Participant's account would instead be valued as
of the actual settlement date. Finally, day traders that use CEDEL or
Euroclear and that purchase Global Securities from DTC Participants for
delivery to CEDEL Participants or Euroclear Participants should note that
these trades would automatically fail on the sale side unless affirmative
action were taken. At least three techniques should be readily available to
eliminate this potential problem:
(a) borrowing through CEDEL or Euroclear for one day (until the purchase
side of the day trade is reflected in their CEDEL or Euroclear accounts) in
accordance with the clearing system's customary procedures;
(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.
======================================== ==================================
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 Bridgestone/Firestone
this Prospectus and, if given or Master Trust
made, such information or
representations must not be relied
upon as having been authorized by
Bridgestone/Firestone, Inc., $_____ Class A Floating Rate Asset
Firestone Retail Credit Corporation Backed Certificates, Series 1996-1
or the Underwriter. Neither the
delivery of this Prospectus nor any
sale made hereunder shall under any $____ Class B Floating Rate Asset
circumstance create an implication Backed Certificates, Series 1996-1
that there has been no change in the
affairs of Bridgestone/Firestone,
Inc., Firestone Retail Credit
Corporation, or the Receivables since
the date thereof. This Prospectus
does not constitute an offer or
solicitation by anyone in any state
in which such offer or solicitation
is not authorized or in which the
person making such offer or
solicitation is not qualified to do
so or to anyone to whom it is
unlawful to make such offer or
solicitation.
TABLE OF CONTENTS Firestone Retail Credit
Page Corporation
Reports to Certificateholders . . . . Transferor
Available Information . . . . . . . .
Summary of Terms . . . . . . . . . 1
Risk Factors . . . . . . . . . . . 27
Use of Proceeds . . . . . . . . . . .
The Transferor and Bridgestone/Firestone, Inc.
Bridgestone/Firestone . . . . . . 32 Servicer
The Credit Card Program . . . . . . 32
Maturity Assumptions . . . . . . . 41
The Letter of Credit Bank . . . . . 42 _____________________
Description of the Offered
Certificates and P R O S P E C T U S
the Agreement . . . . . . . . . . 42
Description of the Purchase and Sale _____________________
Agreement . . . . . . . . . . . . 74
Certain Legal Aspects of the
Receivables . . . . . . . . . . . 75
Federal Income Tax Consequences . . 78
ERISA Considerations . . . . . . . 80
Underwriting . . . . . . . . . . . 82
Legal Matters . . . . . . . . . . . 82
Index of Terms . . . . . . . . . . 83
Annex I Outstanding Series . . . . A-1
Annex II Global Clearance, Settlement
and Tax Documentation Procedures. A-2
Until _____ (90 days after the date CITICORP SECURITIES, INC.
of this Prospectus), all dealers
effecting transactions in the Offered CHASE SECURITIES INC.
Certificates, whether or not
participating in this distribution,
may be required to deliver a _______________, 1996
Prospectus. This delivery
requirement is in addition to the
obligation of dealers to deliver a
Prospectus when acting as an
underwriter and with respect to their
unsold allotments or subscriptions.
======================================== ==================================
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.
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.
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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Firestone Retail Credit Corporation has duly caused this Amendment No. 2 to
be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Boston, the Commonwealth of Massachusetts on
September 3, 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
Amendment No. 2 has been signed below by the following persons in the
capacities indicated on September 3, 1996.
/s/ Nancy D. Smith President and Director September 3, 1996
- - ----------------------------
Nancy D. Smith (principal executive
officer)
/s/ R. Douglas Donaldson Treasurer September 3, 1996
- - ----------------------------
R. Douglas Donaldson (principal financial
officer and principal
accounting officer)
/s/ Louise E. Colby Director and Secretary September 3, 1996
- - -----------------------------
Louise E. Colby
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).