As filed with the Securities and Exchange Commission on April 25, 2000
Registration No. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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WORLD OMNI AUTO RECEIVABLES TRUSTS
(Issuer of the Securities)
WORLD OMNI AUTO RECEIVABLES LLC
(Originator of the trust described herein)
(Exact name of Registrant as specified in its charter)
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Delaware Applied for
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
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120 N.W. 12th Avenue
Deerfield Beach, Florida 33442
(954) 429-2200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
A. Tucker Allen
Treasurer
120 N.W. 12th Avenue
Deerfield Beach, Florida 33442
(954) 429-2200
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Copy to:
Ray I. Shirazi
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
(212) 504-6376
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Approximate date of commencement of proposed sale to the public: From time
to time on or after the effective date of this registration statement, as
determined by market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.|X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.|_|__________
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please 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.|_|__________
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CALCULATION OF REGISTRATION FEE
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Title of Securities Amount to Be Proposed Maximum Proposed Maximum Amount of
to Be Registered Registered Offering Price Per Aggregate Offering Registration
Security* Price* Fee
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Auto Receivables Backed
Securities $1,000,000 100% $1,000,000 $264.00
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* Estimated solely for the purpose of calculating the registration fee.
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 this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until we deliver a final prospectus. This prospectus
is not an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
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INTRODUCTORY NOTE
This Registration Statement contains (i) a form of prospectus relating to
the offering of series of Auto Receivables Backed Securities by various trusts
created from time to time by World Omni Auto Receivables LLC and (ii) a form of
prospectus supplement relating to a series of Auto Receivables Backed Securities
described therein. The form of prospectus supplement for the securities follows
immediately after this introductory note, followed thereafter by the base
prospectus.
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Subject to completion, dated April 25, 2000
PROSPECTUS
AUTO RECEIVABLES BACKED NOTES AND CERTIFICATES (ISSUABLE IN SERIES)
WORLD OMNI AUTO RECEIVABLES LLC
SELLER
THE TRUSTS:
1. A new trust will be formed to issue each series of securities.
2. Each trust will consist primarily of:
o retail installment sale contracts secured by new and used automobiles
and light trucks; and
o other assets as described in this prospectus and to be specified in
the related prospectus supplement
THE SECURITIES:
1. will be asset-backed securities sold periodically in one or more series and
each series will be secured by the assets of the trust or will evidence
beneficial ownership interests in the trust;
2. will be offered in separate series;
3. if specified in the related prospectus supplement, all of the classes may
not be offered in a particular series;
4. of a series may be divided into two or more classes which may have
different interest rates and which may receive principal payments in
differing proportions and at different times;
5. will consist of:
o notes (which will be treated as indebtedness of the trust) and/or
o certificates (which will represent an undivided ownership interest in
the trust); and
6. of any series are not obligations of World Omni Auto Receivables LLC, World
Omni Financial Corp. or any of their affiliates, and neither the securities
nor the underlying receivables are insured or guaranteed by any
governmental agency.
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The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of the offered securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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No secondary market will exist for a series of securities prior its offering. We
cannot assure you that a secondary market will develop for the securities of any
series or, if it does develop, that it will continue.
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Investing in the offered securities involves risks. We refer you to "Risk
Factors" beginning on page __ of this prospectus. For each series, see "Risk
Factors" in the related prospectus supplement.
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The securities may be offered through one or more different methods, including
offerings through underwriters, as more fully described under "Plan Of
Distribution" on page __ of this prospectus and in the related prospectus
supplement. Offerings of certain classes of the securities, as specified in the
related prospectus supplement, may be made in one or more transactions exempt
from the registration requirements of the Securities Act of 1933, as amended.
Such offerings are not being made pursuant to this prospectus or the related
registration statement.
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This prospectus may not be used to consummate sales of the offered securities
unless accompanied by a prospectus supplement.
The date of this prospectus is ________, 2000
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IMPORTANT NOTICE about INFORMATION PRESENTED in this
PROSPECTUS and each ACCOMPANYING PROSPECTUS SUPPLEMENT
Information about the offered securities is contained in two separate
documents that progressively provide more detail: (a) this prospectus, which
provides general information, some of which may not apply to the offered
securities; and (b) the accompanying prospectus supplement for each series,
which describes the specific terms of the offered securities. If the terms of
the offered securities vary between this prospectus and the accompanying
prospectus supplement, you should rely on the information in the prospectus
supplement.
You should rely only on the information contained in this prospectus
and the accompanying prospectus supplement. We have not authorized anyone to
provide you with information that is different from that contained in this
prospectus and the prospectus supplement. The information in this prospectus is
accurate only as of the date of this prospectus.
Certain capitalized terms are defined and used in this prospectus to
assist you in understanding the terms of the offered securities and this
offering. The capitalized terms used in this prospectus are defined on the pages
indicated under the caption "Index of Terms" beginning on page __ in this
prospectus.
In this prospectus, the terms "seller," "we," "us" and "our" refer to
World Omni Auto Receivables LLC.
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If you require additional information, the mailing address of our
principal executive offices is World Omni Auto Receivables LLC, 120 N.W. 12th
Avenue Deerfield Beach, Florida 33442 and the telephone number is (954)
429-2200. For other means of acquiring additional information about us or a
series of securities, see "Incorporation of Certain Information By Reference"
beginning on page __ of this prospectus.
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TABLE OF CONTENTS
RISK FACTORS........................................4
PROSPECTUS SUPPLEMENT..............................11
THE ISSUERS........................................11
THE TRUST ASSETS...................................12
THE RECEIVABLES POOL...............................13
General.........................................13
Receivables Pools...............................13
Pre-Funding Accounts............................14
The Receivables.................................14
Delinquencies, Repossessions and Net Losses.....15
Maturity and Prepayment Considerations..........15
THE SELLER.........................................15
WORLD OMNI FINANCIAL CORP..........................16
General.........................................16
Certain Administrative and Legal Proceedings....16
WORLD OMNI FINANCIAL CORP.'S
AUTOMOBILE FINANCE BUSINESS.......................17
General.........................................17
Underwriting....................................18
Servicing.......................................19
Insurance.......................................21
POOL FACTORS.......................................21
USE OF PROCEEDS....................................22
THE TRUSTEE........................................22
DESCRIPTION OF THE SECURITIES......................22
General.........................................22
General Payment Terms of Securities.............23
Book-Entry Registration.........................24
Definitive Securities...........................26
Reports to Securityholders......................27
DESCRIPTION OF THE TRUST DOCUMENTS.................28
Sale and Assignment of Receivables..............28
Accounts........................................29
The Servicer....................................30
Servicing Procedures............................31
Payments on Receivables.........................31
Servicing Compensation..........................31
Distributions...................................32
Credit and Cash Flow Enhancements...............32
Evidence as to Compliance.......................33
Certain Matters Regarding the Servicers.........33
Servicer Termination Event......................34
Rights upon Servicer Termination Event..........34
Waiver of Past Defaults.........................35
Amendments......................................35
Termination.....................................35
SOME LEGAL ASPECTS OF THE RECEIVABLES..............42
General.........................................42
Interests in the Receivables....................42
Security Interests in the Financed Vehicles.....43
Repossession....................................44
Notice of Sale; Redemption Rights...............44
Deficiency Judgments and Excess Proceeds........44
Consumer Protection Laws........................45
Other Limitations...............................46
FEDERAL INCOME TAX CONSEQUENCES....................47
FASITs..........................................47
TRUST TREATED AS PARTNERSHIPS...................48
Tax Consequences to Holders of the Notes........48
Tax Consequences to Holders of the
Certificates..................................54
TRUSTS TREATED AS GRANTOR TRUSTS...................59
ERISA CONSIDERATIONS...............................65
PLAN OF DISTRIBUTION...............................65
FINANCIAL INFORMATION..............................66
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE........................................66
LEGAL MATTERS......................................67
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RISK FACTORS
You should carefully consider the following risks and the risks
described under "RISK FACTORS" in the prospectus supplement for the securities
before making an investment decision. In particular, distributions on your
securities will depend on payments received on and other recoveries with respect
to the receivables. Therefore, you should carefully consider the risk factors
relating to the receivables and the financed vehicles.
Your investment could be materially and adversely affected if any of
the following risks are realized.
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You must rely for repayment only upon the Your securities are either secured by or represent beneficial ownership
trust's assets which may not be interests solely in the assets of the related trust. Your securities
sufficient to make full payments on your will not represent an interest in or obligation of us, the trustee,
securities. World Omni Financial Corp., or any other person. We or another entity
may have a limited obligation to repurchase some receivables under some
circumstances as described in the agreements relating to a particular
series. Distributions on any class of securities will depend solely on
the amount and timing of payments and other collections in respect of
the related receivables. We cannot assure you that these amounts,
together with other payments and collections in respect of the related
receivables, will be sufficient to make full and timely distributions on
any offered securities. The offered securities and the receivables will
not be insured or guaranteed, in whole or in part, by the United States
or any governmental entity or by any provider of credit enhancement
unless specified in the related prospectus supplement.
You may experience reduced returns and There can be no assurance that the historical levels of delinquencies
delays on your securities resulting from and losses experienced by World Omni Financial Corp. on its loan
changes in delinquency levels and losses. portfolio will be indicative of the performance of the receivables
included in the trust or that the levels will continue in the future.
Delinquencies and losses could increase significantly for various
reasons, including changes in the local, regional or national economies
or due to other events.
You may experience reduced returns on You may receive payment of principal on the securities earlier than you
your securities resulting from expected for the reasons set forth below. You may not be able to
prepayments. reinvest the principal paid to you earlier than you expected at a rate
of return that is equal to or greater than the rate of return on the
securities. Prepayments on the receivables by the related obligors and
purchases of the receivables by the seller and the servicer will shorten
the life of the securities to an extent that cannot be fully predicted.
Any reinvestment risks resulting from a faster or slower incidence of
prepayment of receivables will be borne entirely by you.
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All of the receivables are prepayable at any time. The rate of
prepayments on the receivables may be influenced by a variety of
economic, social and other factors, including:
o other events which have the same effect as prepayments in full of
receivables, including liquidations due to default, as well as
receipts of proceeds from insurance policies and repurchases of
receivables;
o repurchases of receivables by World Omni Financial Corp. as a result
of breaches of representations and warranties, and/or breaches of
particular covenants;
o the application of any remaining amounts on deposit in any
pre-funding accounts not applied to the purchase of additional
receivables; and
o the purchase by the seller or the servicer of the receivables when
the aggregate principal balance thereof is 10% or less of the
initial aggregate principal balance.
The rate of prepayments of receivables cannot be predicted and
therefore, no assurance can be given as to the level of prepayments
that a trust will experience.
You may experience reduced returns on A trust may have a pre-funding account. The trust will purchase
your securities resulting from receivables from the seller (which, in turn, will acquire these
distribution of amounts in the receivables from World Omni Financial Corp.) with funds on deposit in
pre-funding account. the pre-funding account.
You will receive as a prepayment of principal to you on the date
specified in the prospectus supplement any amounts remaining in the
pre-funding account that have not been used to purchase receivables.
This prepayment of principal could have the effect of shortening the
weighted average life
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of the securities of the related series. The inability of the seller to
obtain receivables meeting the requirements for sale to the trust will
increase the likelihood of a prepayment of principal. In addition, you
will bear the risk that you may be unable to reinvest any principal
prepayment at yields at least equal to the yield on the securities.
Interests of other persons in the Many federal and state laws, including the Uniform Commercial Code,
receivables and financed vehicles could govern the transfer of the receivables by the seller to the trustee, the
be superior to the trust's interest, perfection of the security interests in the receivables and the
which may result in reduced payments on enforcement of security interests in the financed vehicles.
you securities.
Upon the origination of a receivable, World Omni Financial Corp. takes
a security interest in the financed vehicle by placing a lien on the
title to the financed vehicle. In connection with each sale of
receivables, World Omni Financial Corp. will assign its security
interests in the financed vehicles to the seller. Due to the
administrative burden and expense of retitling each of the financed
vehicles, World Omni Financial Corp. will not amend or reissue the
certificates of title to the financed vehicles to reflect the
assignment to the trust. In the absence of an amendment or reissuance,
the trust may not have a perfected security interest in the financed
vehicles securing the receivables in some states. World Omni Financial
Corp. will be obligated to repurchase any receivable sold to a trust
which did not have a perfected security interest in the name of World
Omni Financial Corp. in the financed vehicle on the closing date. World
Omni Financial Corp. will purchase any receivable sold to a trust as to
which it failed to maintain a perfected security interest in the name
of World Omni Financial Corp. in the financed vehicle securing the
receivable. All repurchases by World Omni Financial Corp. are limited
to breaches that materially and adversely affect the receivable,
subject to the expiration of the applicable cure period. If the
security interest of World Omni Financial Corp. is perfected, the trust
will have a prior claim over subsequent purchasers of the financed
vehicle and holders of subsequently perfected security interests.
Due to, among other things, liens for repairs of a financed vehicle or
for unpaid taxes of an obligor, the trust could lose the priority of
its
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security interest in a financed vehicle. Neither World Omni Financial
Corp. nor the servicer will have any obligation to purchase a
receivable if these liens result in the loss of the priority of the
security interest in the financed vehicle after the issuance of
securities by the trust. Generally, no action will be taken to perfect
the rights of the trustee in proceeds of any insurance policies
covering individual financed vehicles or obligors. Therefore, the
rights of a third party with an interest in the proceeds could prevail
against the rights of the trust prior to the time the proceeds are
deposited by the servicer into an account controlled by the trustee. We
refer you to "Some Legal Aspects of the Receivables -- Security
Interests in the Financed Vehicles."
The servicer will maintain possession of the original contracts for of
each of the receivables. If the servicer sells or pledges and delivers
the original contracts for the receivables to another party, in
violation of its obligations under the documents for the securities,
this party could acquire an interest in the receivable having a
priority over the trust's interest. Furthermore, if the servicer
becomes insolvent, competing claims to ownership or security interests
in the receivables could arise. These claims, even if unsuccessful,
could result in delays in payments on the securities. If successful,
the attempt could result in losses or delays in payment to you or an
acceleration of the repayment of the securities.
Receivables that fail to comply with Federal and state consumer protection laws impose requirements on
consumer protection laws may result in creditors in connection with extensions of credit and collections of
losses on your investment. retail installment loans. These laws may also make an assignee of a
loan (such as the trust) liable to the obligor for any violation by the
lender. To the extent specified herein and in the related prospectus
supplement, World Omni Financial Corp. will be obligated to repurchase
any receivable that fails to comply with these legal requirements from
the trust. We refer you to "Some Legal Aspects of the Receivables --
Consumer Protection Laws."
In some circumstances, the Soldiers' and Sailors' Civil Relief Act of
1940, as amended and similar state legislation may limit the interest
payable on a receivable during an obligor's active military duty. This
legislation could adversely affect the ability of the servicer to
collect full
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amounts of interest on these receivables as well as to foreclose on an
affected receivable during the obligor's period of active military
duty. This legislation may thus cause delays and losses in payments to
holders of the securities.
Bankruptcy of World Omni Financial Corp. Non-Consolidation
and World Omni Auto Receivables LLC
(seller) could result in losses or delays The seller has structured the securities with the intent that the
in payments on your securities. voluntary or involuntary application for relief by World Omni Financial
Corp., as the sole member of the seller under the United States
Bankruptcy Code or similar state laws will not result in consolidation
of the assets and liabilities of the seller with those of World Omni
Financial Corp. These steps include:
o the creation of the seller as a separate limited purpose limited
liability company, with a limited liability company agreement
restricting the seller's business; and
o restricting the seller's ability to commence a voluntary case or
proceeding under any insolvency law without the consent of the
managing member, and the unanimous approvals of all the members of
the board of directors of the seller, including, without limitation,
the affirmative vote of the two independent directors.
The seller has received advice of counsel to the effect that, subject
to particular facts, assumptions and qualifications, it would not be a
proper exercise by a court of its equitable discretion to disregard the
separate existence of the seller and World Omni Financial Corp. and to
require the consolidation of the assets and liabilities of the seller
with those of World Omni Financial Corp. in the event of the
application of the federal bankruptcy laws to World Omni Financial
Corp. Notwithstanding these steps, a court might consolidate the assets
and liabilities of the seller with those of World Omni Financial Corp.
in a proceeding under an insolvency law. Delays or reductions in
distributions on the related securities could result from a
consolidation.
True Sale
If the sale of the receivables from World Omni Financial
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Corp. to the seller is treated as a sale, the receivables would
not be part of the bankruptcy estate of World Omni Financial
Corp. and would not be available to creditors of World Omni
Financial Corp. We refer you to "World Omni Financial Corp."
World Omni Financial Corp. will warrant to the seller that its
sale of the receivables is a valid sale of the receivables. In
addition, World Omni Financial Corp. and the seller will treat
these sales as a sale of the receivables to the seller. The
seller will take all actions that are required to perfect the
seller's ownership interest in the receivables. Upon issuance of
each series of securities, the seller will receive the advice of
counsel to the effect that in the event World Omni Financial
Corp. were to become the subject of a voluntary or involuntary
case under the United States Bankruptcy Code subsequent to the
transfer of receivables to the seller, the transfer of these
receivables by World Omni Financial Corp. to the seller would be
characterized as a "true sale" of these receivables from World
Omni Financial Corp. to the seller and these receivables and the
proceeds thereof would not form part of World Omni Financial
Corp.'s bankruptcy estate pursuant to Section 541 of the United
States Bankruptcy Code. This advice of counsel will be subject to
facts, assumptions and qualifications.
Notwithstanding the foregoing, if World Omni Financial Corp. were to
become a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of World Omni Financial Corp. or World Omni
Financial Corp. took the position that the sale of receivables to the
seller should be recharacterized as a pledge of the receivables to
secure a borrowing of the seller, then you could be adversely affected
by delays or reductions in payments of collections of receivables.
In 1993, the U.S. Court of Appeals for the Tenth Circuit concluded that
accounts sold by a debtor prior to the filing for bankruptcy remain
property of the debtor's bankruptcy estate. Although the receivables
are likely "chattel paper", as defined under the Uniform Commercial Code
rather than accounts, the rationale behind the decision is equally
applicable to chattel paper. Considerable legal uncertainty exists
concerning this decision. While World Omni Financial Corp. is not
located in the Tenth Circuit, it is impossible to predict whether other
courts will follow this
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decision. If a court applied the rule in this decision in a bankruptcy
of World Omni Financial Corp., notwithstanding that the transfer of
receivables to the seller was treated as a sale, the receivables would
be part of World Omni Financial Corp.'s bankruptcy estate. This could
result in delays and reductions in payments to you.
A Rating of the securities is not a On the date of the issuance of the securities the rating agencies will
recommendation to purchase, hold or sell rate the securities. A rating is not a recommendation to purchase, hold
securities. or sell securities, and it does not comment as to market price or
suitability for a particular investor. The ratings of the securities
address the likelihood of the payment of principal and interest on the
securities pursuant to their terms. There is no assurance that a rating
will remain for any given period of time or that a rating agency rating
the securities will not lower or withdraw its rating if in its judgment
circumstances in the future so warrant.
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PROSPECTUS SUPPLEMENT
The prospectus supplement for each series of securities to be offered, will
describe, among other things, with respect to the series of securities:
o a description of structural features of each class of securities;
o the identity of each class within the series;
o the initial aggregate principal amount, the interest rate (or the
method for determining the rate) and the authorized denominations of
each class of offered securities;
o certain information concerning the receivables relating to the series,
including the principal amount, type and characteristics of the
receivables on the cutoff date;
o the existence of any pre-funding account for the purchase of
additional receivables and its material terms;
o additional information with respect to any credit enhancement and, if
the holder of the securities will be materially dependent upon any
provider of credit enhancement for timely payment of interest and/or
principal, information regarding the provider or counterparty;
o the order of the application of principal and interest payments to
each class of offered securities and the allocation of principal to be
so applied;
o the extent of subordination of any subordinate securities;
o the payment date for the securities;
o information regarding the servicer for the receivables;
o the circumstances, if any, under which the offered securities are
subject to redemption prior to maturity;
o the trustee for the securities;
o information regarding tax considerations; and
o additional information with respect to the method of distribution of
the securities.
THE ISSUERS
With respect to each series of securities, the seller will establish a
separate trust that will issue the securities.
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THE TRUST ASSETS
To the extent specified in the prospectus supplement for a trust, the
assets of a trust will include:
o a pool of retail installment sale contracts secured by new and used
automobiles and light trucks;
o moneys received under the receivables after the applicable cutoff
date;
o amounts as from time to time may be held in one or more trust accounts
established and maintained on behalf of the trust by a trustee;
o the rights of the seller under the sale and servicing agreement or
pooling and servicing agreement pursuant to which seller sold the
receivables to the trust and the servicer services the receivables on
behalf of the trust;
o security interests in the financed vehicles;
o the rights of the seller to receive any proceeds with respect to the
receivables from claims on physical damage and other insurance
policies covering the financed vehicles or the obligors;
o any credit enhancement (including any interest rate and currency
protection agreements) provided for the benefit of holders of the
securities of the trust;
o any pre-funding account; and
o any and all proceeds of the foregoing.
If so provided in the related prospectus supplement, the property of a
trust may also include a pre-funding account, into which the seller will deposit
to a trust cash and which will be used by the trust to purchase receivables from
the seller during a specified period. Any receivables so conveyed to a trust
will also be assets of the trust.
The receivables comprising the trust assets will be, as specifically
described in the related prospectus supplement:
o originated by various dealers and acquired by World Omni Financial
Corp.,
o acquired by World Omni Financial Corp. from other originators or
owners of receivables, or
o originated by World Omni Financial Corp.
The underwriting criteria applicable to the receivables included in any
trust is described under "World Omni Financial Corp.'s Automobile Finance
Business -- Underwriting", or to the extent different, in the related prospectus
supplement.
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THE RECEIVABLES POOL
General.
Information with respect to the pool of receivables (the receivables
pool) will be described in the related prospectus supplement.
Receivables Pools.
On or prior to each closing date, World Omni Financial Corp. will sell
and assign to the seller, without recourse its entire interest in the
receivables pool, together with its security interests in the financed vehicles,
pursuant to a purchase agreement between World Omni Financial Corp. and the
seller.
In each purchase agreement, World Omni Financial Corp. will represent and
warrant to the seller, among other things, that:
o the information provided with respect to the receivables is correct in
all material respects;
o at the origination date of the receivable, physical damage insurance
covering each financed vehicle is in effect in accordance with World
Omni Financial Corp.'s normal requirements;
o at the closing date each of the related receivables are free and clear
of all security interests, liens, charges, and encumbrances and no
offsets, defenses, or counterclaims against dealers have been asserted
or threatened;
o at the closing date each of the receivables is secured by a
first-priority perfected security interest in the financed vehicle in
favor of World Omni Financial Corp.; and
o each receivable, at origination and, at the closing date, complies in
all material respects with applicable federal and state laws,
including consumer credit, truth in lending, equal credit opportunity
and disclosure laws.
As of the last day of the second (or, if World Omni Financial Corp.
elects, the first) month following the discovery by or notice to the seller and
World Omni Financial Corp. of a breach of any representation or warranty that
materially and adversely affects a receivable, unless the breach is cured, World
Omni Financial Corp. will purchase the receivable from the trust for a purchase
amount equal to the unpaid principal balance owed by the obligor plus interest
thereon at the respective annual percentage rate to the last day of the month of
repurchase. The repurchase obligation will constitute the sole remedy against
the seller for any uncured breach.
To the extent indicated in the related prospectus supplement, the
seller or the trust may purchase the receivables from warehouse facilities or
structured commercial paper issuers.
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Pre-Funding Accounts.
If the related prospectus supplement indicates, the property of a trust
will include cash in an amount not to exceed 25% of the initial aggregate
principal balance of the securities. The seller will deposit this amount into a
pre-funding account. For a maximum of 90 days after the closing date, the trust
will use this cash to purchase additional receivables; the seller will be
obligated to sell additional receivables to the related trust, subject only to
the availability of additional receivables. It is expected that the additional
receivables will have an aggregate principal balance approximately equal to the
amount deposited to the pre-funding account on the closing date (the "Pre-Funded
Amount"). The trust will purchase the additional receivables (subject to the
satisfaction of conditions specified in the prospectus supplement) from time to
time during the funding period specified in the prospectus supplement. The
funding period will not exceed three months. Any funds on deposit in the
pre-funding account and not yet invested in additional receivables will be
invested in eligible investments. If the Pre-Funded Amount is not fully utilized
by the end of the funding period, the remaining Pre-Funded Amount will be
applied to prepay securities.
We refer you to "Description of the Trust Documents -- Sale and
Assignment of Receivables."
Any conveyance of additional receivables to a trust is subject to the
satisfaction of the conditions precedent and conditions subsequent specified in
the related prospectus supplement. If any of these conditions are not met with
respect to any additional receivables within the time period specified in the
related prospectus supplement, World Omni Financial Corp. will be required to
repurchase the additional receivables from the related trust, at the purchase
amounts therefor.
The characteristics of the entire receivables pool included in any
trust may vary from those described in the related prospectus supplement as
additional receivables are conveyed to the trust from time to time during the
funding period. Unless the prospectus supplement indicates otherwise, the
characteristics of the additional receivables are not expected to be materially
different from the receivables included in the trust as of the closing date. The
related prospectus supplement will indicate any restrictions on the
characteristics of the additional receivables.
The Receivables.
As specified in the related prospectus supplement, the receivables
consist of simple interest receivables. "Simple Interest Receivables" provide
for the amortization of the amount financed under the receivable over a series
of fixed level monthly payments. Each monthly payment consists of an installment
of interest which is calculated on the basis of the outstanding principal
balance of the receivable multiplied by the stated annual percentage rate and
further multiplied by the period elapsed (as a fraction of a calendar year)
since the preceding payment of interest was made. As payments are received under
a Simple Interest Receivable, the amount received is applied first to interest
accrued to the date of payment and the balance is applied to reduce the unpaid
principal balance. Accordingly, if an obligor pays a fixed monthly installment
before its scheduled due date, the portion of the payment allocable to
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interest for the period since the preceding payment was made will be less than
it would have been had the payment been made as scheduled, and the portion of
the payment applied to reduce the unpaid principal balance will be
correspondingly greater. Conversely, if an obligor pays a fixed monthly
installment after its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be greater
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly less. In either case, the obligor pays a fixed monthly
installment until the final scheduled payment date, at which time the amount of
the final installment is increased or decreased as necessary to repay the then
outstanding principal balance.
Delinquencies, Repossessions and Net Losses.
Certain information relating to World Omni Financial Corp.'s
delinquency, repossession and net loss experience with respect to receivables it
has originated or acquired will be described in each prospectus supplement. This
information may include, among other things, the experience with respect to all
receivables in World Omni Financial Corp.'s portfolio during some specified
periods. There can be no assurance that the delinquency, repossession and net
loss experience with respect to any trust will be comparable to World Omni
Financial Corp.'s prior experience.
Maturity and Prepayment Considerations.
Prepayment of receivables, together with accelerated payments resulting
from defaults or required repurchases of receivables will shorten the weighted
average life of the related pool of receivables and the weighted average life of
the related securities. A variety of economic, financial and other factors may
influence the rate of prepayments on the receivables. Any reinvestment risks
resulting from a faster or slower amortization of the related securities which
results from prepayments will be borne entirely by you.
The related prospectus supplement may describe some additional
information with respect to the maturity and prepayment considerations
applicable to a particular pool of receivables and the related series of
securities.
THE SELLER
World Omni Auto Receivables LLC was formed as a Delaware limited
liability company on April 13, 1999 and is a wholly-owned subsidiary of World
Omni Financial Corp. The principal executive offices of the seller are located
at 120 N.W. 12th Avenue, Deerfield Beach, Florida 33442, and its telephone
number is (305) 429-2200. The Managing Member is located at 120 N.W. 12th
Avenue, Deerfield Beach, Florida 33442.
The seller was organized solely for the purpose of acquiring
receivables and associated rights, issuing securities and engaging in related
transactions. The seller's limited liability company agreement limits the
activities of the seller to the foregoing purposes and to any activities
incidental to and necessary for these purposes.
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WORLD OMNI FINANCIAL CORP.
General.
World Omni Financial Corp. is a Florida corporation and a wholly owned
subsidiary of JM Family Enterprises, Inc. ("JMFE"), a Delaware corporation. JMFE
is primarily engaged, through its subsidiaries, in providing Toyota dealerships
in the Alabama, Florida, Georgia, North Carolina and South Carolina area ("five
state area"), with a full range of distribution and financial services.
World Omni Financial Corp. provides installment contract and lease
contract financing to retail customers of some automotive dealers within and
outside the five state area. World Omni Financial Corp. also provides wholesale
floorplan financing and capital and mortgage loans to some dealers of Southeast
Toyota Distributors, Inc. ("SET"), World Omni Financial Corp.'s sister
corporation, as well as to other automotive dealers within and outside the five
state area.
SET is the exclusive distributor of Toyota cars and light duty trucks,
parts and accessories in the five state area. As such, SET is the sole provider
of Toyotas to dealers in the five state area. SET distributes Toyota vehicles
pursuant to a distributor agreement, which first was entered into in 1968 and
has been renewed through October 2004, with Toyota Motor Sales, USA, Inc. a
California corporation.
World Omni Financial Corp. initiated operations in 1982, and as of
December 31, 1999, December 31, 1998, December 31, 1997 and December 31, 1996,
World Omni Financial Corp. and its affiliates had approximately 106,337, 76,883,
56,442 and 46,897 retail installment sale contracts outstanding, respectively.
The aggregate outstanding principal balances of retail installment sale
contracts at the above dates (including retail installment contracts that were
sold but are still being serviced by World Omni Financial Corp.), were
approximately $1,235 million, $818 million, $608 million and $475 million,
respectively.
Certain Administrative and Legal Proceedings
As part of its regular examination process of the consolidated federal
income tax returns of JMFE and its subsidiaries (including World Omni Financial
Corp.) for certain prior years, the Internal Revenue Service (the "IRS") is
reviewing, among other things, some transactions that were consummated in prior
years relating to retail lease contracts. The IRS has proposed treating these
transactions as sales rather than financings for federal income tax purposes,
which would affect World Omni Financial Corp.'s depreciation deductions. It has
also proposed treating the origination trust and each securitization trust
created for those transactions as an association taxable as a corporation rather
than a trust for federal income tax purposes. In connection with each
transaction, World Omni Financial Corp. received an opinion of tax counsel to
the effect that these transactions were properly treated as financings for
federal income tax purposes and that neither the origination trust nor the
relevant securitization trusts would be treated as an association taxable as a
corporation for federal income tax purposes. While management believes that a
challenge by the IRS would be unsuccessful, we cannot assure you of this result.
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The IRS has also proposed changes to other positions that were taken on the tax
returns it is examining.
Management is vigorously defending its positions and believes that the
ultimate resolution of all of the issues will not have a material adverse effect
on securityholders, JMFE's or World Omni Financial Corp.'s operations and
financial condition. However, if the IRS were to prevail on certain of these
issues, it could have a material adverse effect on JMFE's or World Omni
Financial Corp.'s operations and financial condition. Nevertheless, management
believes that, even if the IRS were to prevail on all of these issues it would
not result in any material impairment of World Omni Financial Corp.'s ability to
perform its obligations and its duties as servicer under the trust documents. We
cannot however, assure you of this result.
WORLD OMNI FINANCIAL CORP.'S AUTOMOBILE FINANCE BUSINESS
General.
World Omni Financial Corp. primarily purchases retail installment sale
contracts in the five state area (and currently to a limited extent other states
in which it conducts business) from dealers pursuant to existing dealer
agreements in the ordinary course of business. We refer you to "World Omni
Financial Corp." The contracts were originated by participating dealers in
accordance with World Omni Financial Corp.'s requirements and were purchased in
accordance with World Omni Financial Corp.'s underwriting standards, which
emphasize among other things, the prospective purchaser's ability to make timely
payments and creditworthiness.
World Omni Financial Corp. purchases retail installment sale contracts
from over 600 dealers. Pursuant to written agreements with World Omni Financial
Corp., each dealer offers automobile and light duty truck financing pursuant to
World Omni Financial Corp. approved terms and a World Omni Financial Corp.
supplied or approved form of retail motor vehicle installment sale contract and
disclosure statement. Each dealer is responsible for obtaining credit-related
information about a prospective purchaser and for forwarding the information for
review and credit evaluation to either World Omni Financial Corp.'s offices,
located in St. Louis, Missouri ("St. Louis center") or to offices at Deerfield
Beach, Florida ("Deerfield office"), as applicable. At the St. Louis center or
the Deerfield office, each application is reviewed, evaluated and "scored" as
described under "World Omni Financial Corp.'s Automobile Finance
Business-Underwriting." The results of this computer-based evaluation are sent
to the purchase office located in the St. Louis center or Deerfield office, as
applicable for final review and credit evaluation. The purchase office then
advises the dealer if the applicant is acceptable to World Omni Financial Corp.
If a prospective buyer is accepted, the dealer will prepare all necessary
paperwork to sell the vehicle from its inventory to the customer, including
entering into a retail installment sale contract with its customer. The dealer
then verifies the existence of insurance and thereafter sells the contract to
World Omni Financial Corp. The St. Louis center and the Deerfield office verify
that all documents supplied by a dealer with respect to a retail installment
sale contract conform with World Omni Financial Corp.'s requirements. For
further information regarding the underwriting of retail
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installment sale contracts, see "World Omni Financial Corp.'s Automobile Finance
Business-Underwriting" below.
The St. Louis center and a center located in Mobile, Alabama ("Mobile
center"), service World Omni Financial Corp.'s retail installment sale
contracts. The Mobile center and St. Louis center handle collection activities,
operational accounting, insurance verification and dealer and customer inquiries
for World Omni Financial Corp.
The principal executive offices of World Omni Financial Corp. are located
at 120 N.W. 12th Avenue, Deerfield Beach, Florida 33442 and its telephone number
is (954) 429-2200.
Underwriting.
World Omni Financial Corp. has underwritten retail installment contracts
since 1987. As of December 31, 1999, World Omni Financial Corp. was servicing
approximately $1,235 million of these contracts, including contracts which were
previously sold but are still being serviced by World Omni Financial Corp.
The World Omni Financial Corp. underwriting standards are intended to
evaluate a prospective buyer's credit standing and repayment ability. Generally,
a prospective buyer is required by the dealer to complete a credit application
on a form prepared or approved by World Omni Financial Corp. As part of the
description of the applicant's financial condition, the applicant is required to
provide current information enumerating, among other things, employment history,
residential status and annual income. Upon receipt by the applicable office, all
application data is entered into a centralized computer network that
automatically obtains an independent credit bureau report and then "scores" the
application with the use of a scorecard. The scorecard enables World Omni
Financial Corp. to review an application and establish the probability that the
proposed installment contract will be paid in accordance with its terms. The
credit scores rank-order applications according to credit risk, which is the
likelihood that the account will be delinquent or repossessed. The application
also is evaluated against a "cutoff score" established by World Omni Financial
Corp. as the minimum acceptable score to purchase an installment contract, which
is revised from time to time as changes occur in economic conditions and World
Omni Financial Corp.'s installment contract portfolio.
Generally, the score card provides a means of analysis to assist in
decision making, but the final decision generally rests with World Omni
Financial Corp.'s credit specialists. Under World Omni Financial Corp.'s
guidelines, a credit specialist generally may not override the scorecard
analysis of applications above or below the cutoff score by more than a limited
percentage of the applications. Both the number of overrides granted by each
credit specialist and the aggregate number of overrides granted by all credit
specialists are tracked by World Omni Financial Corp. in order to insure the
statistical validity of the scoring models. Detailed reporting on aspects of the
numerical scoring model is utilized to track performance of World Omni Financial
Corp.'s retail automobile and light duty truck installments sales contract
portfolio and to enable World Omni Financial Corp. to fine tune the scoring
model according to statistical indications to continually assure the statistical
validity of the scoring models. In certain circumstances, World Omni Financial
Corp. may pre-approve applicants with
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established World Omni Financial Corp. credit histories based on a credit bureau
score and other credit criteria without the use of a custom scorecard. World
Omni may also automatically approve or deny applicants based on a credit bureau
score, custom score and other credit criteria. Applicants not automatically
approved will be reviewed by a credit specialist and may be subsequently
approved.
World Omni Financial Corp. originates retail installment sale contracts
under a program where World Omni Financial Corp. offers to obligors which lease
financed vehicles from its affiliates the option of financing the purchase of
the leased vehicle when the related lease expires. These loans are originated
through the Mobile center. The "lease to retail" loan origination process
relies, in large part, on the applicants' past payment history, credit bureau
scores and potential residual value exposure under the lease. To the extent a
receivable pool contains a material amount of these receivables, the related
prospectus supplement will provide information concerning the related
underwriting procedures.
Risk Based Pricing.
World Omni Financial Corp. has used risk based pricing since 1997. This
includes a tier-based system of interest rates and loan to value ratios
representing the varying degrees of credit risk assigned to different ranges of
credit scores. The amount of a retail installment sale contract secured by a new
vehicle or used vehicle generally will not exceed 120% of the dealer invoice
cost of the related vehicle or 120% of clean black book value, respectively,
plus select accessories at the dealer cost (for new only), sales tax, title and
registration fees, any insurance premiums for credit life and credit disability
insurance, and certain fees for extended service contracts. However, the amount
advanced may be less, or in limited circumstances more, than the maximum
permissible amount due to a number of factors, including, but not limited to,
down payment and trade-in equity.
Servicing.
Collection efforts are primarily performed through the Mobile center
and St. Louis center. These efforts are enhanced by the use of automated dialing
and collections systems. Independent contractors are employed in connection with
repossessions. General guidelines for retail installment sale contract
collection and repossession of the related financed vehicles include the
following:
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<TABLE>
<CAPTION>
Number of
Days Delinquent Action
--------------- ------
<S> <C>
10................... The obligor automatically is mailed a past due notice
12-22................ Telephone contact with the obligor is initiated
23-120............... Additional personal contact regarding collection is made
75................... The vehicle is normally repossessed
</TABLE>
Generally, after a contract is 75 days delinquent, the related financed
vehicle is repossessed, although under some circumstances repossession may occur
prior or later than this time. Repossessions are conducted by independent
contractors who are engaged in the business of repossessing vehicles. Generally,
repossessed vehicles are disposed of by auction. Upon repossession and
disposition of the financed vehicle, to the extent permitted by state law, any
remaining deficiency is pursued by World Omni Financial Corp. to the extent the
obligor is deemed to have sufficient assets to cover the deficiency. We refer
you to "Some Legal Aspects of the Receivables -- Deficiency Judgments and Excess
Proceeds".
World Omni Financial Corp. follows detailed procedures with respect to
rescheduling of delinquent accounts and extensions of contracts. Generally a
rescheduling or an extension requires the demonstration of financial
difficulties, an ability to repay and approval by management. The legal
documents for the securities will permit the servicer to reschedule or extend a
receivable, or grant a rebate or other adjustment, only in accordance with the
customary procedures of the servicer and otherwise in accordance with these
agreements. We refer you to "The Description of the Trust Documents -- Servicing
Procedures".
World Omni Financial Corp. from time to time implements a program
whereby obligors meeting the eligibility criteria specified below may be
permitted, at the option of the related obligor, to defer one month's payment of
principal during the December/January holiday period or July/August summer
period (the "Payment Extension Program"). In connection with the Payment
Extension Program, the obligor must pay an extension fee calculated generally at
the APR of the related retail installment sale contract for the month in which
the contract is extended. As a result, the obligor would pay the equivalent of
an additional interest payment in exchange for receiving a non-credit related
extension.
The criteria for making an extension pursuant to the Payment Extension
Program generally include the following:
o the obligor is not currently 20 days or more delinquent and never has
been more than 60 days past due;
o the obligor has made six or more scheduled monthly payments and has
more than six remaining scheduled monthly payments;
o fewer than ten percent (in number) of the obligor's payments have been
greater than 30 days past due;
o the obligor cannot have extended the contract during the previous 90
days;
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o the receivable must have a certain APR; and
o the obligor must not currently be in bankruptcy or litigation status.
The agreement will provide that no receivable can be extended more than
six times during the life of the receivable (excluding Payment Extension
Programs) or extended beyond the month immediately preceding the month in which
the final scheduled payment date occurs and that all related extension fees must
be deposited into the collection account within two business days of receipt by
the servicer.
Insurance.
World Omni Financial Corp. requires each obligor under a receivable to
obtain comprehensive and collision insurance with respect to the related
financed vehicle and requires the selling dealer to verify the existence of the
insurance before it will purchase the contract from the related dealer.
Following the purchase, World Omni Financial Corp. performs no ongoing
verification of insurance coverage. Commencing in August, 1998, World Omni
Financial Corp. stopped maintaining vendor's single interest physical damage
insurance with respect to newly originated retail installment sale contracts.
World Omni Financial Corp. does not require obligors to maintain credit
disability or life or credit health insurance or other similar insurance
coverage which provides for payments to be made on the automobile and light duty
truck retail installment sale contracts which it purchases on behalf of the
obligors in the event of disability or death. To the extent that any insurance
coverage is obtained on behalf of an obligor, payments received in respect of
coverage may be applied to payments on the related receivable to the extent that
the obligor's beneficiary chooses to do so.
POOL FACTORS
The pool factor for each class of securities will be a seven-digit
decimal, which the servicer will compute prior to each distribution with respect
to the class of securities, indicating the remaining outstanding principal
balance of the class of securities as of the applicable payment date, as a
fraction of the initial outstanding principal balance of the class of
securities. Each pool factor will be initially 1.0000000, and thereafter will
decline to reflect reductions in the outstanding principal balance of the
applicable class of securities. A securityholder's portion of the aggregate
outstanding principal balance of the related class of securities is the product
of (i) the original aggregate purchase price of the securityholder's securities
and (ii) the applicable pool factor.
As more specifically described in the related prospectus supplement
securityholders will receive reports on or about each payment date concerning
the payments received on the receivables, the principal balance of the
receivables pool, each pool factor and various other items of information. In
addition, securityholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date permitted
by law.
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USE OF PROCEEDS
Unless otherwise provided in the related prospectus supplement, the
trust will use the net proceeds from the sale of the securities of a series to
purchase the receivables from the seller and to make the deposit of any
pre-funded amount to the pre-funding account and make any other required
deposits to trust accounts. The seller will in turn use its net proceeds to
purchase the receivables pool from World Omni Financial Corp. World Omni
Financial Corp. may use all or a portion of the proceeds to reacquire the
receivables from affiliates of World Omni Financial Corp. or from warehouse
facilities or structured commercial paper issuers who in turn will repay
indebtedness secured by the receivables. World Omni Financial Corp. will use any
remainder of the proceeds for general corporate purposes.
THE TRUSTEE
The trustee or trustees for each series of securities will be specified
in the related prospectus supplement. The trustee's liability in connection with
the issuance and sale of the related securities is limited solely to the express
obligations of the trustee described in the agreement related to the securities.
With respect to each series of securities, the procedures for the
resignation or removal of the trustee and the appointment of a successor trustee
shall be specified in the related prospectus supplement.
DESCRIPTION OF THE SECURITIES
General.
The securities will be issued in series. The trust may issue securities
in one or more classes. Each class of securities will either evidence beneficial
interests in a segregated pool of assets or will represent debt of the trust
secured by the trust assets. The following summaries (together with additional
summaries under "Description of the Trust Documents" below) describe all
material terms and provisions common to all securities. The summaries do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the documentation for the related
securities and the related prospectus supplement.
All of the securities offered pursuant to this prospectus and the
related prospectus supplement will be rated in one of the four highest rating
categories by one or more nationally recognized statistical rating agencies (the
"Rating Agencies").
Each series or class of securities offered pursuant to this prospectus
may have a different interest rate, which may be a fixed or adjustable interest
rate. The related prospectus supplement will specify the interest rate for each
series or class of securities described in the related prospectus supplement, or
the initial interest rate and the method for determining subsequent changes to
the interest rate.
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A series may include one or more classes of "strip securities" which
are securities that are entitled (i) to principal distributions, with
disproportionate, nominal or no interest distributions, or (ii) to interest
distributions, with disproportionate, nominal or no principal distributions. In
addition, a series of securities may include two or more classes of securities
that differ as to timing, sequential order, priority of payment, interest rate
or amount of distribution of principal or interest or both. Distributions of
principal or interest or both on any class also may be made upon the occurrence
of specified events, in accordance with a schedule or formula, or on the basis
of collections from designated portions of the receivables pool. Any series may
include one or more classes of "accrual securities," which are securities for
which all or some of the interest is added to the principal balance instead of
currently distributed.
If so provided in the related prospectus supplement, a series may
include one or more other classes of securities that are senior to one or more
other classes of subordinate securities in respect of distributions of principal
and interest and allocations of losses on receivables.
In addition, some classes of senior (or subordinate) securities may be
senior to other classes of senior (or subordinate) securities in respect of
distributions or losses.
General Payment Terms of Securities.
As described in the related prospectus supplement, the trust will make
payments to holders of the securities on specified payment dates. Payment dates
with respect to the securities will occur monthly, quarterly or semi-annually,
as described in the related prospectus supplement. For example, in the case of
quarterly-pay securities, the payment date would be a specified day of every
third month. The related prospectus supplement will describe the record date
preceding the payment date, as of which the trustee or its paying agent will fix
the identity of the securityholders for the purpose of receiving payments on the
next succeeding payment date.
The prospectus supplement will specify a collection period preceding
each payment date. For example, in the case of monthly-pay securities, the
collection period would be the calendar month preceding the month of the
relevant payment date. The servicer will remit collections received on or with
respect to the related receivables held by a trust during a collection period to
the related trustee prior to the related payment date. These amounts will fund
payments to securityholders on the payment date. As may be described in the
related prospectus supplement, the trustee may apply all or a portion of the
payments collected on or with respect to the related receivables to acquire
additional receivables during a specified period (rather than be used to fund
payments of principal to securityholders during the period). In this case, the
related securities will possess an interest-only period, also commonly referred
to as a revolving period, which will be followed by an amortization period.
These interest only or revolving periods may terminate prior to the scheduled
date and result in an early amortization of the related securities. The
retention and temporary investment by the trustee of the collected payments:
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<PAGE>
o slows the amortization rate of the related securities relative to the
installment payment schedule of the related receivables, or
o attempts to match the amortization rate of the related securities to
an amortization schedule established at the time the securities are
issued.
Any of these features may terminate prior to the scheduled date and
result in distributions to the securityholders and an acceleration of the
amortization of the securities.
If specified in the related prospectus supplement, the trustee may
retain all or a portion of the collected payments (and held in some eligible
investments, including receivables) for a specified period prior to being used
to fund payments of principal to securityholders. In addition, the related
prospectus supplement may provide that for purposes of determining payments on
the securities, specified portions of principal payments on indicated
receivables will be deemed interest payments on those receivables.
Eligible investments are generally limited to investments acceptable to
the Rating Agencies rating the securities as being consistent with the rating of
the securities. We refer you to "Description of the Trust Documents --
Accounts."
Neither the securities nor the underlying receivables will be
guaranteed or insured by any governmental agency or instrumentality or any other
person unless specifically described in the related prospectus supplement.
Book-Entry Registration.
Holders of securities may hold their securities through DTC (in the
United States) or Clearstream Banking, societe anonyme ("Clearstream") or
Euroclear (in Europe) if they are participants of the system, or indirectly
through organizations that are participants in the systems. Clearstream and
Euroclear will hold omnibus positions on behalf of the Clearstream participants
and the Euroclear participants, respectively, through customers' securities
accounts in Clearstream's and Euroclear's names on the books of their respective
depositories (collectively, the "Depositories") which in turn will hold the
positions in customers' securities accounts in the Depositories' names on the
books of DTC. DTC is a limited purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold securities for its participants and to
facilitate the clearance and settlement of securities transactions between
participants through electronic computerized book-entries, thereby eliminating
the need for physical movement of securities. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly (indirect
participants).
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<PAGE>
Transfers between DTC participants will occur in accordance with DTC
rules. Transfers between Clearstream participants and Euroclear participants
will occur 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 through Clearstream 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 Depository; however, the cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in the system in accordance with its rules and procedures. If the
transaction complies with all relevant requirements, Euroclear or Clearstream,
as the case may be, will then deliver instructions to the Depository to take
action to effect final settlement on its behalf.
Because of time-zone differences, credits of securities in Clearstream
or Euroclear as a result of a transaction with a DTC participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and the credits or any transactions in the
securities settled during the processing will be reported to the relevant
Clearstream participant or Euroclear participant on the same business day. Cash
received in Clearstream or Euroclear as a result of sales of securities by or
through a Clearstream participant or a Euroclear participant to a DTC
participant will be received with value on the DTC settlement date but will be
available in the relevant Clearstream or Euroclear cash account only as of the
business day following settlement in DTC.
The holders of securities that are not participants or indirect
participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, securities may do so only through participants and indirect
participants. In addition, holders of securities will receive all distributions
of principal and interest from the trustee through the participants who in turn
will receive them from DTC. Under a book-entry format, holders of securities may
experience some delay in their receipt of payments, since the payments will be
forwarded by the trustee to Cede & Co., as nominee for DTC. DTC will forward the
payments to its participants, which thereafter will forward them to indirect
participants or beneficial owners of securities.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
of securities among participants on whose behalf it acts with respect to the
securities and to receive and transmit distributions of principal of, and
interest on, the securities. Participants and indirect participants with which
the holders of securities have accounts with respect to the securities similarly
are required to make book-entry transfers and receive and transmit the payments
on behalf of their respective holders of securities. Accordingly, although the
holders of securities will not possess the securities, the Rules provide a
mechanism by which participants will receive payments on securities and will be
able to transfer their interest.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and some banks, the ability of a holder of
securities to pledge the
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securities to persons or entities that do not participate in the DTC system, or
to otherwise act with respect to the securities, may be limited due to the lack
of a physical certificate for the securities.
DTC has advised the seller that it will take any action permitted to be
taken by a holder of a security only at the direction of one or more
participants to whose accounts with DTC the securities are credited. DTC may
take conflicting actions with respect to other undivided interests to the extent
that the actions are taken on behalf of participants whose holdings include
undivided interests.
Clearstream is incorporated under the laws of Luxembourg as a
professional depository. Clearstream holds securities for its participating
organizations and facilitates the clearance and settlement of securities
transactions between Clearstream participants through electronic book-entry
changes in accounts of Clearstream participants, thereby eliminating the need
for physical movement of securities.
Euroclear was created in 1968 to hold securities for participants of
the Euroclear system and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment.
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.
Although DTC, Euroclear and Clearstream have implemented the foregoing
procedures in order to facilitate transfers of interests in book-entry
securities among participants of DTC, Euroclear and Clearstream, they are under
no obligation to perform or to continue to comply with the procedures, and the
procedures may be discontinued at any time. None of the seller nor any other
person will have any responsibility for the performance by DTC, Euroclear or
Clearstream or their respective direct or indirect participants of their
respective obligations under the rules and procedures governing their
operations. The information herein concerning DTC, Clearstream and Euroclear and
their book-entry systems has been obtained from sources believed to be reliable,
but the seller takes no responsibility for the accuracy or completeness of the
information.
Definitive Securities.
Unless the related prospectus supplement provides otherwise, the
securities will be issued in fully registered, certificated form (definitive
securities) to the securityholders of a given series or their nominees, only if:
o the trustee in respect of the related series advises in writing that
DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to the securities and the
trustee is unable to locate a qualified successor,
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o the trustee, at its option, elects to terminate the book-entry-system
through DTC, or
o after the occurrence of an event of default under the related
indenture or a default by the servicer under the related sale and
servicing agreement or pooling and servicing agreement,
securityholders representing at least a majority of the outstanding
principal amount of the securities advise the applicable trustee
through DTC in writing that the continuation of a book-entry system
through DTC (or its successor) is no longer in the securityholders'
best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the applicable trustee will be required to notify all the
securityholders through participants of the availability of definitive
securities. Upon surrender by DTC of the definitive securities representing the
securities and receipt of instructions for re-registration, the applicable
trustee will reissue the securities as definitive securities to the
securityholders.
Distributions of principal of, and interest on, the securities will
thereafter be made by the applicable trustee in accordance with the procedures
described in the related indenture, pooling and servicing agreement or trust
agreement directly to holders of definitive securities in whose names the
definitive securities were registered at the close of business on the applicable
record date.
The distributions will be made by check mailed to the address of the
holder as it appears on the register maintained by the applicable trustee. The
final payment on any the security, however, will be made only upon presentation
and surrender of the security at the office or agency specified in the notice of
final distribution to the applicable securityholders.
Definitive securities in respect of a given series of securities will
be transferable and exchangeable at the offices of the applicable trustee or of
a certificate registrar named in a notice delivered to holders of the definitive
securities. No service charge will be imposed for any registration of transfer
or exchange, but the applicable trustee may require payment of a sum sufficient
to cover any tax or other governmental charge imposed.
Reports to Securityholders.
On each payment date, the applicable trustee will include with each
distribution to each securityholder as of the related record date a statement
generally setting forth the following:
(i) the amount of the distribution allocable to principal of
each class of securities;
(ii) the amount of the distribution allocable to interest on
each class of securities;
(iii) the principal balance of the receivables pool and the
pool factor for each class of securities as of the last day of the preceding
collection period;
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(iv) the aggregate principal balance of each class of
securities as of the last day of the preceding collection period, after giving
effect to payments of principal under (i) above;
(v) the amount of the servicing fee paid to the servicer with
respect to the related collection period, the amount of any unpaid servicing
fees and the change in the amount from that of the prior payment date;
(vi) the amount of any interest and principal carryover
shortfall, on the payment date and any change from the prior payment date;
(vii) the amount paid to the securityholders from the reserve
account for the payment date, its balance and any change from the prior payment
date; and
(viii) the number and the aggregate purchase amount of
receivables repurchased by World Omni Financial Corp. or purchased by the
servicer.
The report will also indicate each amount described under subclauses
(i), (ii), (v), (vi), (vii) and (viii) above in the aggregate and as a dollar
amount per $1,000 of original principal balance of a security.
After the end of each calendar year, the applicable trustee will mail
to each person who was a securityholder during the year, a statement (prepared
by the servicer) containing the sum of the amounts described in (i), (ii) and
(v) above for the purposes of the securityholder's preparation of federal income
tax returns.
DESCRIPTION OF THE TRUST DOCUMENTS
The following summary describes the material terms of the documents
used to create a trust and issue the related securities. The trust documents for
notes will generally consist of a purchase agreement, generally between World
Omni Financial Corp., as seller and World Omni Auto Receivables LLC, as
purchaser, a sale and servicing agreement, generally between the trust, as
issuer and the seller, as seller and World Omni Financial Corp., as servicer, an
indenture, generally between the trust and the applicable trustee, and a trust
agreement, generally between the seller and the applicable trustee. The trust
documents for certificates will generally consist of a purchase agreement,
generally between World Omni Financial Corp., as seller and World Omni Auto
Receivables LLC, as purchaser and a pooling and servicing agreement or a trust
agreement between the seller and the trustee. The prospectus supplement for a
given series will specify the trust documents utilized for that series of
securities. We have filed forms of the trust documents as an exhibit to the
registration statement of which this prospectus forms a part. This summary does
not purport to be complete.
Sale and Assignment of Receivables.
On or prior to the closing date for each series of securities, World
Omni Financial Corp. will sell and assign to the seller, without recourse,
except for representations and warranties, its entire interest in the
receivables to be included in the trust, together with its
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security interests in the financed vehicles. At the time of issuance of the
securities, the seller will transfer the receivables to a trust pursuant to a
sale and servicing agreement or a pooling and servicing agreement.
As more fully described in the related prospectus supplement, World
Omni Financial Corp. will purchase from the related trust any receivable
transferred to a trust if the interest of the securityholders in that receivable
is materially adversely affected by a breach of any representation or warranty
made by World Omni Financial Corp. with respect to that receivable, which breach
has not been cured following the discovery by or notice to World Omni Financial
Corp. of the breach. In addition, if so specified in the related prospectus
supplement, World Omni Financial Corp. may from time to time reacquire
receivables or substitute other receivables for the defective receivables.
Pending sale to the seller, World Omni Financial Corp. may finance the
receivables in warehouse facilities provided to affiliates of World Omni
Financial Corp. On or prior to the closing date, for each series of securities,
these affiliates will transfer the receivables to World Omni Financial Corp. for
sale to the seller. To the extent indicated in a prospectus supplement for a
series, these World Omni Financial Corp. affiliates may sell the receivables
directly to the seller. In all cases, World Omni Financial Corp. will make the
representations and warranties on the receivables as described in "Description
of the Trust Documents- The Servicer" in this prospectus.
Accounts.
With respect to each series of securities, the servicer will establish
and maintain with the applicable trustee one or more accounts, in the name of
the trustee on behalf of the related securityholders. The servicer will deposit
all payments made on or with respect to the related receivables into a
collection account. The trustee will deposit amounts released from the
collection account and any reserve account or other credit enhancement for
distribution to the securityholders into a distribution account. The trustee
will make distributions to the securityholders from the distribution account.
If the related prospectus supplement so provides, the trustee will
maintain a pre-funding account solely to hold funds to pay to the seller for
additional receivables during the funding period. Monies on deposit in the
pre-funding account will not be available to cover losses on or in respect of
the receivables. On the closing date, the seller will deposit the initial
pre-funded amount from the sale proceeds of the securities.
If the related prospectus supplement so provides, the seller will
establish and maintain the interest reserve account in the name of the
applicable trustee on behalf of the securityholders. On the closing date, the
seller will deposit cash in the interest reserve account. On payment dates
specified in the related prospectus supplement, the trustee will withdraw funds
on deposit in the interest reserve account in excess of the required amount and
will deposit such funds in the distribution account for distribution.
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The related prospectus supplement will describe any other accounts to
be established with respect to a trust, including any other reserve account,
yield supplement account or interest reserve account.
Funds in the collection account, the distribution account, any
pre-funding account, any reserve account and other accounts identified in the
related prospectus supplement (collectively, the "Trust Accounts") will be
invested in eligible investments. Eligible investments are generally limited to
investments acceptable to the Rating Agencies rating the securities as being
consistent with the rating of the securities. Subject to certain conditions,
eligible investments may include securities issued by the servicer or its
affiliates or other trusts created by World Omni Financial Corp. or its
affiliates. Eligible investments must generally mature not later than the
business day immediately preceding the related payment date. However, funds in
the reserve account may be invested in securities that will mature after the
next payment date and will not be sold to meet any shortfalls. Thus, the amount
of cash in any reserve account at any time may be less than the balance of the
reserve account. If required withdrawals from any reserve account exceeds the
amount of cash in the reserve account a temporary shortfall in the amounts
distributed to the related securityholders could result. The average life of the
securities could then increase. Except as otherwise specified in the related
prospectus supplement, the trustee will deposit investment earnings on funds in
the Trust Accounts, net of losses and investment expenses, in the collection
account on each payment date.
If so provided in the prospectus supplement, on or before the business
day prior to each applicable payment date, the servicer will deposit into the
related collection account as an advance an amount equal to the amount of
interest that would have been due on the receivables related to a series at
their respective APRs for the related collection period minus the amount of
interest actually received on the receivables during the related collection
period. The servicer will not be required to make any advances to the extent
that it does not expect to recoup the advance from subsequent collections or
recoveries. If the servicer makes an advance that becomes a non-recoverable
advance, the trust will pay the servicer an amount equal to the non-recoverable
advance prior to paying the holders of securities. Unless otherwise specified in
the prospectus supplement, the servicer will make no advances of principal on
the receivables.
The applicable trustee will maintain the Trust Accounts so long as
either:
o the short-term unsecured debt obligations of the applicable
trustee meet the criteria of each Rating Agency; or
o the applicable trustee is a depository institution or trust
company having a minimum long-term unsecured debt rating
specified in the related prospectus supplement and corporate
trust powers and the related Trust Account is maintained in a
segregated trust account in the corporate trust department of the
applicable trustee.
If the applicable trustee at any time does not qualify under either of these
criteria, the servicer will move the Trust Accounts to a depository institution
meeting these requirements.
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The Servicer.
World Omni Financial Corp. will be the servicer under each sale and
servicing agreement or pooling and servicing agreement. Any servicer may
delegate its servicing responsibilities to one or more subservicers, but will
not be relieved of its liabilities with respect thereto.
The servicer will make representations and warranties regarding its
authority to enter into, and its ability to perform its obligations under, the
related sale and servicing agreement or pooling and servicing agreement. An
uncured breach of a representation or warranty that in any respect materially
and adversely affects the interests of the securityholders will constitute a
default by the servicer under the related sale and servicing agreement or
pooling and servicing agreement.
Servicing Procedures.
The servicer will service, administer and make reasonable efforts to
collect all amounts due on or in respect of the receivables. The servicer will
make reasonable efforts to collect all the amounts and, in a manner consistent
with the trust documents, will service the receivables generally in accordance
with customary and usual procedures of institutions which service retail
installment sale contracts secured by new and used automobiles and light trucks
and, to the extent more exacting, the procedures used by the servicer in respect
of retail installment sale contracts secured by new and used automobiles and
light trucks serviced for its own account. Consistent with its normal
procedures, the servicer may, in its sole discretion, arrange with the obligor
on a receivable to extend the payment schedule. The sale and servicing agreement
or pooling and servicing agreement will provide that no more than six extensions
may be granted and will provide for the timing of the extensions. The servicer
may not modify the original due dates or the amount of the scheduled payments,
or extend the final payment date on any receivable beyond the last day of the
collection period before the final scheduled payment date occurs. If the
servicer grants an extension with respect to a receivable other than in
accordance with the aforementioned limitations, the servicer must purchase the
receivable. Following any purchase of a receivable by the servicer, the
receivable will be released from the trust and conveyed to the servicer. The
servicer may sell the financed vehicle securing a defaulted receivable, if any,
at a public or private sale, or take any other action permitted by applicable
law. We refer you to "Some Legal Aspects of the Receivables."
Payments on Receivables.
Obligors will generally make payments on the receivables by mail for
deposit into a lock box and account maintained by the servicer. The servicer
will deposit in the collection account amounts attributable to the receivables
within two business days after receipt. The servicer will deposit all other
payments it receives on or in respect of the receivables into the collection
account not later than two business days after receipt.
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Servicing Compensation.
The trust will pay to the servicer a servicing fee on each payment date
equal to the product of one-twelfth of the specified percentage per annum and
the principal balance of the receivables pool as of the close of business on the
first day of the related collection period. With respect to the first payment
date, the servicing fee will be based on the original principal balance of the
receivables pool. The related prospectus supplement will describe the servicing
fee. The servicer will also collect and retain, as additional servicing
compensation, any late fees, prepayment charges, and other administrative fees
or similar charges allowed by applicable law with respect to the receivables
that are part of the trust, and will be entitled to reimbursement from the trust
for certain liabilities. The servicer will allocate the payments by or on behalf
of obligors to scheduled payments, late fees and other charges and principal and
interest in accordance with the servicer's normal practices and procedures. The
trust will pay the servicing fee out of collections from the receivables, prior
to distributions to securityholders.
The servicing fee and additional servicing compensation will compensate
the servicer for performing the functions of a third party servicer of
automotive receivables as an agent for the trust. Servicing duties include
collecting and posting all payments, responding to inquiries of obligors on the
receivables, investigating delinquencies, sending payment coupons to obligors,
reporting tax information to obligors, paying costs of disposition of defaults
and policing the collateral. The servicing fee also compensates the servicer for
administering the receivables, including accounting for collections and
furnishing monthly and annual statements as required with respect to a series of
securities regarding distributions and generating federal income tax
information.
As long as World Omni Financial Corp. believes that sufficient
collections will be available from interest collections on one or more future
payment dates to pay the servicing fee, World Omni Financial Corp. may, as
servicer, by notice to the applicable trustee on or before a payment date, elect
to waive the servicing fee with respect to the related collection period,
without interest. The servicing fee for the related collection period will be
deemed to equal zero for all purposes of the trust documents.
Distributions.
Beginning on the payment date specified in the related prospectus
supplement, the trust will make distributions of principal and interest (or,
where applicable, of principal or interest only) on each class of securities to
the holders of notes and certificates of the series. The prospectus supplement
will describe the timing, amount, priorities and other specifics of
distributions to each class of noteholders and certificateholders of each
series.
On each payment date the trustee will transfer collections on the
related receivables from the collection account to the distribution account for
distribution to securityholders. To the extent described in the related
prospectus supplement, distributions in respect of principal of a class of
securities of a given series may be subordinate to distributions in respect of
interest on the class, and distributions in respect of the certificates of the
series may be subordinate to payments in respect of the notes of the series.
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Credit and Cash Flow Enhancements.
The related prospectus supplement will describe the amounts and types
of credit enhancement arrangements and any provider of credit enhancement with
respect to each class of securities of a given series. This credit enhancement
may consist of:
(i) financial guaranty insurance policies or surety bonds;
(ii) subordination of one or more classes of securities or
overcollateralization, letters of credit, credit or liquidity
facilities;
(iii) reserve funds, third party payments, guaranteed cash deposits;
or
(iv) other arrangements as may be described in the related prospectus
supplement or any combination of two or more of the foregoing.
Credit enhancement for a class of securities may cover one or more
other classes of securities of the same series. Credit enhancement for a series
of securities may cover one or more other series of securities.
Credit enhancement increases the likelihood of receipt by the relevant
securityholders of their full amount of principal and interest and decreases the
likelihood that these securityholders will experience losses. Credit enhancement
may not provide protection against all risks of loss and may not guarantee
repayment of the entire principal balance and interest thereon. If losses exceed
the amount covered by any credit enhancement or are not covered by any credit
enhancement, the relevant securityholders will bear their allocable share of
deficiencies, as described in the related prospectus supplement. If credit
enhancement covers more than one series of securities, securityholders of any
series will be subject to the risk that the credit enhancement will be exhausted
by the claims of securityholders of other series.
To the extent provided in the related prospectus supplement, cash flow
enhancement may be in the form of swaps (including without limitation currency
swaps) and other interest rate protection agreements, repurchase obligations
(including without limitation put options), yield supplement agreements, other
agreements with respect to third party payments or other support or other
arrangements as the related prospectus supplement may describe.
Evidence as to Compliance.
Annually, the servicer will furnish to the related trust and trustee a
statement from a firm of independent public accountants as to the compliance by
the servicer during the preceding twelve months with standards relating to the
servicing of receivables.
The servicer will also deliver to the related trust and the trustee an
officer's certificate stating that the servicer has fulfilled its obligations
under the sale and servicing agreement or pooling and servicing agreement in all
material respects throughout the preceding 12 months. If there has been a
default in the fulfillment of any of these obligations in any material respect,
the officer's certificate will describe the default. The servicer also will
agree to give the
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trustee notice of defaults by the servicer under the related sale and servicing
agreement or pooling and servicing agreement.
Securityholders may obtain copies of the statements and certificates by
written request addressed to the trustee.
Certain Matters Regarding the Servicers.
The servicer may not resign from its obligations and duties under any
sale and servicing agreement or pooling and servicing agreement unless it
determines that its duties are no longer permissible by reason of a change in
applicable law or regulations. No resignation will become effective until a
successor servicer has assumed the servicer's obligations and duties under the
applicable sale and servicing agreement or pooling and servicing agreement. The
servicer may not assign the sale and servicing agreement or pooling and
servicing agreement or any of its rights, powers, duties or obligations under
the applicable sale and servicing agreement or pooling and servicing agreement
except as otherwise provided or except in connection with a permitted
consolidation, merger, conveyance, transfer or lease.
Neither the servicer nor any of its directors, officer, employees, and
agents will be liable to the trust or the securityholders for taking any action
or for refraining from taking any action pursuant to the sale and servicing
agreement or pooling and servicing agreement, or for errors in judgment. This
provision will not protect the servicer nor any of these persons against any
liability imposed by reason of negligence, willful misfeasance or bad faith. The
servicer is under no obligation to appear in, prosecute, or defend any legal
action that is not incidental to its servicing responsibilities under the
applicable sale and servicing agreement or pooling and servicing agreement and
that, in its opinion, may cause it to incur any expense or liability.
Any entity into which the servicer may be merged or consolidated, or
any entity resulting from merger or consolidation or any entity succeeding to
the business of the servicer will succeed the servicer under the applicable sale
and servicing agreement or pooling and servicing agreement.
Servicer Termination Event.
Except as otherwise provided in the related prospectus supplement, a
servicer termination event under the related trust documents will include, among
others:
o any failure by the servicer to deliver to the applicable trustee
for deposit in any of the related Trust Accounts any required
payment or to direct the trustee to make any required distributions
therefrom, which failure continues unremedied for more than five
(5) business days after written notice from the trustee is received
by the servicer or after discovery by the servicer;
o any failure by the servicer duly to observe or perform in any
material respect any other covenant or agreement in the trust
documents, among others which materially and adversely affects the
rights of the related securityholders and which continues
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unremedied for more than sixty (60) days after written notice of
the failure (1) to the servicer by the applicable trustee or (2) to
the servicer, and to the applicable trustee by holders of the
controlling securities evidencing not less than 50% of the voting
rights of the controlling securities; and
o events of financial insolvency, readjustment of debt, marshaling of
assets and liabilities, or similar proceedings with respect to the
servicer.
Rights upon Servicer Termination Event.
Except as otherwise provided in the related prospectus supplement, as
long as a servicer termination event under the related trust documents remains
unremedied, the applicable trustee or holders of the controlling securities
evidencing not less than 50% of the voting rights of the controlling securities
may terminate all the rights and obligations of the servicer, if any, under the
sale and servicing agreement or pooling and servicing agreement, whereupon a
successor servicer appointed by the trustee or the trustee will become servicer
under the trust documents. If, however, a bankruptcy trustee or similar official
has been appointed for the servicer, and no servicer termination event has
occurred, the bankruptcy trustee or official may have the power to prevent the
trustee or the securityholders from effecting a transfer of servicing.
Waiver of Past Defaults.
With respect to the trust, except as otherwise provided in the
prospectus supplement, the holders of the controlling securities evidencing not
less than 50% of the voting rights of the controlling securities may, on behalf
of all securityholders of the related securities, waive any default by the
servicer in the performance of its obligations under the related trust documents
and its consequences, except a default in making any required deposits to or
payments from any of the Trust Accounts in accordance with the trust documents.
No waiver will impair the securityholders' rights with respect to subsequent
defaults.
Amendments.
Unless otherwise specified in the related prospectus supplement, each
of the trust documents may be amended by the parties to each agreement, without
the consent of the related securityholders, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the trust documents or of modifying in any manner the rights of the
securityholders. These amendments require:
o a confirmation from each Rating Agency then rating the related
securities that the amendment will not result in a reduction or
withdrawal of its rating on the securities of that class, and
o the servicer shall have delivered an officer's certificate stating
that the amendment will not materially and adversely affect the
interest of any securityholder.
Unless otherwise specified in the related prospectus supplement, World
Omni Financial Corp., the servicer, and the applicable trustee with the consent
of the holders of the controlling
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securities evidencing not less than 50% of the voting rights of the controlling
securities may amend the trust documents for the purpose of adding, changing,
modifying or eliminating any of the provisions of the trust documents. The
consent of all securityholders is required for any amendment that:
o increases or reduces the amount or priority of, or accelerates or
delays the timing of, collections of payments on the related
receivables or distributions to securityholders; or
o reduces the required percentage of the securities which are
required to consent to these amendments.
Termination.
With respect to each trust, the obligations of the servicer, World Omni
Financial Corp. and the applicable trustee pursuant to the related trust
documents will terminate upon the earlier to occur of:
o the maturity or other liquidation of the last related receivable
and the disposition of any amounts received upon liquidation of any
remaining receivables;
o the payment to securityholders of the related series of all amounts
required to be paid to them pursuant to the trust documents; and
o the exercise by the seller or servicer of its option to purchase
all the remaining receivables as of the end of any collection
period immediately preceding a payment date to the extent the
principal balance of the receivables pool of the related contracts
is less than 10% of the initial principal balance of the
receivables pool in respect of the trust assets, for a price equal
to the aggregate of the principal balance of the remaining
receivables, plus accrued and unpaid interest during the related
collection period.
Unless otherwise specified in the related prospectus supplement, any
outstanding securities of the related series will be redeemed concurrently with
the events specified above. The resulting distribution to the related
securityholders of proceeds may affect the prepayment rate of the securities.
Voting Rights; Controlling Securities.
Voting rights will be exercised by the holders of the controlling
securities as identified in the related prospectus supplement. If specified in
the related prospectus supplement, holders of senior securities may be the
controlling securities until they are repaid in full.
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DESCRIPTION OF THE NOTES
General
With respect to each trust that issues notes, one or more classes of
notes of the related series will be issued pursuant to the terms of an
indenture, the form of which has been filed as an exhibit to the registration
statement of which this prospectus forms a part. We have filed a form of the
indenture as an exhibit to the registration statement related to this
prospectus. This summary does not purport to be complete.
Principal and Interest on the Notes
The timing and priority of payment, seniority, allocations of losses,
interest rate and amount of or method of determining payments of principal and
interest with respect to each class of notes of a series will be described in
the related prospectus supplement. The right of holders of any class of notes of
a series to receive payments of principal and interest may be senior or
subordinate to the rights of holders of any other class or classes of notes of
such series, as described in the related prospectus supplement. Unless otherwise
provided in the related prospectus supplement, payments of interest on the notes
of the related series will be made prior to payments of principal. To the extent
provided in the related prospectus supplement, a series may include one or more
classes of strip notes entitled to:
o principal payments with disproportionate, nominal or no
interest payments; or
o interest payments with disproportionate, nominal or no
principal payments.
Each class of notes may have a different interest rate, which may be a
fixed, variable or adjustable interest rate (and which may be zero for some
classes of strip notes), or any combination of the foregoing. The related
prospectus supplement will specify the interest rate for each class of notes of
a series or the method for determining the interest rate. One or more classes of
notes of a series may be redeemable in whole or in part under the circumstances
specified in the related prospectus supplement, including at the end of the
funding period (if any) or as a result of the servicer's exercising its option
to purchase the related receivables pool.
To the extent specified in any prospectus supplement, one or more
classes of notes of a given series may have fixed principal payment schedules,
as set forth in the related prospectus supplement. Noteholders of the notes
would be entitled to receive as payments of principal on any given payment date
the applicable amounts set forth on the schedule with respect to the notes, in
the manner and to the extent set forth in the related prospectus supplement. The
aggregate initial principal amount of the notes and certificates, if any, of a
series may, after giving effect to the purchase of all additional receivables,
if any, be greater or less than the aggregate initial principal balance of the
receivables in that series.
To the extent specified in the related prospectus supplement, payments
of interest to holders of two or more classes of notes within a series may have
the same priority. Under some circumstances, the amount available for the
payments could be less than the amount of
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interest payable on the notes on any of the dates specified for payments in the
related prospectus supplement, in which case the holders of the classes of notes
will receive their ratable share (based upon the aggregate amount of interest
due to the noteholders) of the aggregate amount available to be distributed in
respect of interest on the notes.
In the case of a series of notes which includes two or more classes of
notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination of the order and priority of the payment, of each class will be
set forth in the related prospectus supplement. Payments in respect of principal
and interest of any class of notes will be made on a pro rata basis among all
the noteholders of the class. A series with notes may provide for a revolving
period, during which collections of principal in respect of the receivables are
not applied to payments of principal of the notes, or may provide for a
liquidity facility or similar arrangement that permits one or more classes of
notes to be paid in planned amounts on scheduled payment dates.
The Indenture
Events of Default; Rights upon Event of Default.
Unless otherwise specified in the prospectus supplement, "Events of
Default" under the indenture will consist of:
o a default for five days or more in the payment of any interest on
any note;
o a default in the payment of the principal of or any installment of
the principal of any such note when the same becomes due and
payable to the extent funds are available therefor and on the
related final scheduled payment date;
o a material default in the observance or performance of any covenant
or agreement of the trust, subject to notice and cure provisions;
o any representation or warranty made by the trust being materially
incorrect as of the date it was made, subject to notice and care
provisions; or
o some events of bankruptcy, insolvency, receivership or liquidation
of the trust.
Unless otherwise specified in the applicable prospectus supplement, the
indenture generally entitles noteholders to principal only to the extent of
amounts deposited in the distribution account. Therefore, the failure to pay
principal on a class of notes generally will not result in the occurrence of an
Event of Default until the final scheduled payment date for the class of notes.
If an Event of Default should occur and be continuing with respect to
the notes, the indenture trustee or holders of the controlling securities
evidencing not less than 50% of the voting rights of the controlling securities
may immediately declare the notes due and payable. This declaration of
acceleration may, under some circumstances, be rescinded by the holders
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of the controlling securities evidencing not less than 50% of the voting rights
of the controlling securities.
If the notes are due and payable following an Event of Default, the
indenture trustee may institute proceedings to collect amounts due or foreclose
on the trust assets, exercise remedies as a secured party, sell the receivables
included or elect to have the trust maintain possession of the receivables and
continue to apply collections on such receivables as if there had been no
declaration of acceleration. The indenture trustee is generally prohibited from
selling the receivables following an Event of Default unless:
o the holders of all the outstanding notes consent to such sale,
o the proceeds of such sale are sufficient to fully pay the
outstanding notes, or
o the indenture trustee determines that the future collections on the
receivables would be insufficient to make payments on the notes and
the indenture trustee obtains the consent of the holders of the
controlling securities evidencing not less than 66 2/3% of the
voting rights of the controlling securities.
Unless otherwise specified in the applicable prospectus supplement, if
an Event of Default occurs and is continuing with respect to the notes, the
indenture trustee is generally under no obligation to exercise any of its rights
or powers at the request or direction of any of the holders of such notes, if
the indenture trustee reasonably believes it will not be adequately indemnified
against any resulting costs, expenses and liabilities. Subject to the provisions
for indemnification and some limitations contained in the indenture, the holders
of the controlling securities evidencing not less than 50% of the voting rights
of the controlling securities will have the right to direct the time, method and
place of conducting any proceeding or any remedy available to the indenture
trustee. Holders of the controlling securities evidencing not less than 50% of
the voting rights of the controlling securities may, generally, waive any
default with respect to the notes, except a default in the payment of principal
or interest.
Unless otherwise specified in the applicable prospectus supplement, no
holder of a note will have the right to institute any proceeding with respect to
the indenture, unless (i) such holder previously has given to the indenture
trustee written notice of a continuing Event of Default, (ii) the holders of the
controlling securities evidencing not less than 25% of the voting rights of the
controlling securities have made a written request to such indenture trustee to
institute such proceeding in its own name as indenture trustee, (iii) such
holder or holders have offered such indenture trustee reasonable indemnity, (iv)
such indenture trustee has for 60 days failed to institute such proceeding and
(v) no direction inconsistent with such written request has been given to such
indenture trustee during such 60-day period by the holders of the controlling
securities evidencing not less than 50% of the voting rights of the controlling
securities.
In addition, the indenture trustee and the holders of notes, by
accepting such notes, will covenant, to the extent legally enforceable, that
they will not at any time institute against the trust any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
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Certain Covenants. A trust may not consolidate with or merge into any
other entity, unless the trust meets specific conditions, including that the
rating of the notes then in effect would not be reduced or withdrawn by the
Rating Agencies rating the notes as a result of such merger or consolidation.
Each trust makes negative covenants. Unless otherwise specified in the
applicable prospectus supplement, these covenants generally provide that a trust
will not sell, transfer, exchange or otherwise dispose of any of the trust
assets, (i) except as expressly permitted by the trust documents or some related
documents with respect to the trust, (ii) claim any credit on or make any
deduction from the principal and interest payable in respect of the notes (other
than amounts withheld under the Code or applicable state law) or assert any
claim against any present or former holder of such notes because of the payment
of taxes levied or assessed upon the trust, (iii) dissolve or liquidate in whole
or in part, (iv) permit the validity or effectiveness of the indenture to be
impaired or permit any person to be released from any covenants or obligations
with respect to the notes under the indenture except as may be expressly
permitted by the indenture or (v) permit any lien, charge, excise, claim,
security interest, mortgage or other encumbrance to be created on or extend to
or otherwise arise upon or burden the trust assets or any part of the trust
assets, or any interest in the trust assets or the proceeds of the trust assets.
Each trust will engage only in the activities specified in this
prospectus. A trust will not incur, assume or guarantee any indebtedness other
than indebtedness incurred pursuant to the notes, the indenture or other related
documents.
Annual Compliance Statement. The indenture requires the trust to file
annually with the indenture trustee a written statement as to the fulfillment of
its obligations under the indenture.
Indenture Trustee's Annual Report. The indenture requires the indenture
trustee to mail each year to all noteholders a brief report relating to its
eligibility and qualification to continue as indenture trustee under the
indenture, any amounts advanced by it under the indenture, the amount, interest
rate and maturity date of some indebtedness owing by the trust to the indenture
trustee in its individual capacity, the property and funds physically held by
such indenture trustee as such and any action taken by it that materially
affects the notes and that has not been previously reported.
Modification of Indenture. Unless otherwise specified in the applicable
prospectus supplement, the trust and the indenture trustee may, with the consent
of the holders of the controlling securities evidencing not less than 50% of the
voting rights of the controlling securities, execute a supplemental indenture to
add provisions to, change in any manner or eliminate any provisions of, the
indenture, or modify (except as provided below) in any manner the rights of the
noteholders.
Unless otherwise specified in the applicable prospectus supplement, the
consent of each holder of outstanding notes affected thereby will generally be
required to:
o change the due date of any installment of principal of or interest
on any such note, reduce its principal amount, interest rate or the
redemption price;
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o impair the right to institute suit for the enforcement of some
provisions of the indenture regarding payment or otherwise
terminate or impair the lien of the indenture trustee on the trust
assets;
o reduce the percentage of the aggregate amount of the outstanding
notes required to consent to supplemental indentures or to waive
compliance or defaults;
o liquidate the receivables when the proceeds of such sale would be
insufficient to fully pay outstanding notes; or
o terminate the lien of the indenture on any collateral or deprive
the holder of the security afforded by the lien of the indenture.
Unless otherwise specified in the applicable prospectus supplement, a
trust and the indenture trustee may also enter into supplemental indentures,
without obtaining the consent of the noteholders for the purpose of, among other
things, adding any provisions to or changing in any manner or eliminating any of
the provisions of the indenture or of modifying in any manner the rights of such
noteholders; provided that such action will not materially and adversely affect
the interest of any such noteholder.
Satisfaction and Discharge of Indenture. An indenture will be
discharged with respect to the trust assets securing a series of notes upon the
delivery to the indenture trustee for cancellation of all such notes or, with
some limitations, upon deposit with such indenture trustee of funds sufficient
for the payment in full of all such notes.
The Indenture Trustee.
The indenture trustee may resign at any time, in which event the
servicer will appoint a successor trustee. The servicer may also remove any such
indenture trustee if such indenture trustee ceases to be eligible to continue as
such under the indenture or if such indenture trustee becomes insolvent. In such
circumstances, the servicer will appoint a successor trustee for the notes. Any
resignation or removal of the indenture trustee and appointment of a successor
trustee does not become effective until acceptance of the appointment by the
successor trustee.
DESCRIPTION OF THE CERTIFICATES
General
With respect to each trust that issues certificates, one or more
classes of certificates of the related series will be issued pursuant to the
terms of a pooling and servicing agreement or trust agreement, the forms of
which have been filed as exhibits to the registration statement of which this
prospectus forms a part. We have filed a form of the pooling and servicing
agreement and trust agreement as exhibits to the registration statement related
to this prospectus. This summary does not purport to be complete.
DISTRIBUTIONS OF PRINCIPAL AND INTEREST
The timing and priority of distributions, seniority, allocations of
losses, interest rate
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and amount of or method of determining distributions with respect to principal
and interest of each class of certificates will be described in the related
prospectus supplement. Distributions of interest on the certificates will be
made on the dates specified in the related prospectus supplement and will be
made prior to distributions with respect to principal of the certificates. To
the extent provided in the related prospectus supplement, a series may include
one or more classes of strip certificates entitled to:
o distributions in respect of principal with disproportionate,
nominal or no interest distributions, or
o interest distributions with disproportionate, nominal or no
distributions in respect of principal.
Each class of certificates may have a different interest rate, which
may be a fixed, variable or adjustable interest rates (and which may be zero for
some classes of certificates) or any combination of the foregoing. The related
prospectus supplement will specify the interest rate for each class of
certificates of a series or the method for determining the interest rate. Unless
otherwise provided in the related prospectus supplement, distributions in
respect of the certificates of a series that includes notes may be subordinate
to payments in respect of the notes as more fully described in the related
prospectus supplement. Distributions in respect of interest on and principal of
any class of certificates will be made on a pro rata basis among all the
certificateholders of such class.
In the case of a series of certificates which includes two or more
classes of certificates, the timing, sequential order, priority of payment or
amount of distributions in respect of interest and principal, and any schedule
or formula or other provisions applicable to the determination of the order,
priority of payment or amount of each class shall be as set forth in the related
prospectus supplement. A series with certificates may provide for a revolving
period, during which collections of principal on the receivables are not applied
to distributions on the related securities, or may provide for a liquidity
facility or similar arrangement that permits one or more classes of the related
securities to be paid in planned amounts on scheduled distribution dates. The
aggregate initial principal amount of the certificates and the notes, if any, of
a series may, after giving effect to the purchase of all additional receivables,
if any, for a series be greater or less than the aggregate initial principal
balance of the receivables in that series.
SOME LEGAL ASPECTS OF THE RECEIVABLES
General.
The transfer of receivables by World Omni Financial Corp. to the
seller, and by the seller to the trust, the perfection of the security interests
in the receivables and the enforcement of rights to realize on the financed
vehicles as collateral for the receivables are subject to a number of federal
and state laws, including the Uniform Commercial Code as in effect in various
states.
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Interests in the Receivables.
The trustee will appoint the servicer as custodian of the receivables
and all related documents. The servicer will not physically segregate the
receivables from the servicer's other receivables or other receivables that the
servicer services for others to reflect the sale to the trust. However, Uniform
Commercial Code financing statements reflecting the sale and assignment of the
receivables by World Omni Financial Corp. to the seller and by the seller to the
trust will be filed, and the respective accounting records and computer files of
World Omni Financial Corp. and the seller will reflect the sale and assignment.
The receivables will remain in the possession of the servicer and will not be
stamped or otherwise marked to reflect the assignment to the trustee. If,
through inadvertence or fraud, a third party purchases (including the taking of
a security interest in) a receivable for new value in the ordinary course of its
business, without actual knowledge of the trust's interest, and take possession
of a receivable, this purchaser would acquire an interest in the receivable
superior to the interest of the trust.
The seller will take no action to perfect the rights of the trustee in
proceeds of any insurance policies covering individual financed vehicles or
obligors. Therefore, the rights of a third party with an interest in the
proceeds could prevail against the rights of the trust prior to the time the
proceeds are deposited by the servicer into a Trust Account.
Security Interests in the Financed Vehicles.
General.
In states in which retail installment sale contracts evidence the
credit sale of financed vehicles by dealers to obligors, the contracts also
constitute personal property security agreements and include grants of security
interests in the vehicles under the applicable Uniform Commercial Code.
Perfection of security interests in the financed vehicles is generally governed
by the motor vehicle registration laws of the state in which the vehicle is
located. In all states in which the receivables have been originated, a security
interest in financed vehicles is perfected by obtaining the certificate of title
to the financed vehicle or notation of the secured party's lien on the vehicles'
certificate of title.
Unless the related prospectus supplement specifies otherwise, each
receivable will name World Omni Financial Corp. as obligee or assignee and as
the secured party. World Omni Financial Corp. also takes all actions necessary
under the laws of the state in which the financed vehicle is located to perfect
World Omni Financial Corp.'s security interest in the financed vehicle,
including, where applicable, having a notation of its lien recorded on the
vehicle's certificate of title. The obligors on the receivables will not be
notified of the sale from World Omni Financial Corp. to the seller, or the sale
from the seller to the trust, and no action will be taken to record the transfer
of the security interest from World Omni Financial Corp., directly or
indirectly, to the seller or from the seller to the trust by amendment of the
certificates of title for the financed vehicles or otherwise.
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Perfection.
World Omni Financial Corp. will transfer and assign its security
interest in the related financed vehicles to the seller, and the seller will
transfer and assign its security interest in the financed vehicles to the
related trust. However, because of the administrative burden and expense,
neither World Omni Financial Corp. nor the seller will amend the certificates of
title of the financed vehicles to identify the related trust as the new secured
party.
In most states, these assignments are an effective conveyance of a
security interest without amendment of any lien noted on a vehicle's certificate
of title, and the assignee succeeds to the assignor's rights as secured party.
However, by not identifying the trust as the secured party on the certificate of
title, the security interest of the trust in the vehicle could be defeated
through fraud or negligence.
Continuation of Perfection.
Under the laws of most states, the perfected security interest in a
vehicle continues for four months after the vehicle is moved to a state other
than the state in which it is initially registered and thereafter until the
owner re-registers the vehicle in the new state. A majority of states generally
require surrender of a certificate of title to re-register a vehicle.
Accordingly, a secured party must surrender possession if it holds the
certificate of title to the vehicle. In the case of a vehicle registered in a
state providing for the notation of a lien on the certificate of title but not
possession by the secured party, the secured party will receive notice of
surrender if the security interest is noted on the certificate of title. Thus,
the secured party will have the opportunity to re-perfect its security interest
in the vehicle in the state of relocation. In states that do not require a
certificate of title for registration of a motor vehicle, re-registration could
defeat perfection. Under each sale and servicing agreement or pooling and
servicing agreement, the servicer will be obligated to take appropriate steps,
at the servicer's expense, to maintain perfection of security interests in the
financed vehicles and will be obligated to purchase the related receivable if it
fails to do so.
Priority of Certain Liens Arising by Operation of Law.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected security
interest in a financed vehicle. Federal tax liens may have priority over the
lien of a secured party. The laws of some states and federal law permit the
confiscation of vehicles by government authorities under some circumstances if
used in unlawful activities, which may result in the loss of a secured party's
perfected security interest in the confiscated vehicle.
Repossession.
In the event of default by vehicle purchasers, the holder of the motor
vehicle retail installment sale contract has all the remedies of a secured party
under the Uniform Commercial Code, except where specifically limited by other
state laws. Among the Uniform Commercial Code remedies, the secured party has
the right to perform self-help repossession unless the act would constitute a
breach of the peace. Unless the financed vehicle is voluntarily surrendered
self-help is the most likely method to be used by the servicer and is
accomplished by retaking possession of the financed vehicle. Some jurisdictions
require that the obligor be notified of
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the default and be given a time period within which he may cure the default
prior to repossession. Generally, the right of reinstatement may be exercised on
a limited number of occasions in any one-year period. In cases where the obligor
objects or raises a defense to repossession, or applicable state law requires a
court order from the appropriate state court to repossess the financed vehicle
in accordance with that order.
Notice of Sale; Redemption Rights.
The Uniform Commercial Code and other state laws require the secured
party to provide the obligor with reasonable notice of the date, time and place
of any public sale and/or the date after which any private sale of the
collateral may be held. The obligor has the right to redeem the collateral prior
to actual sale by paying the secured party the unpaid principal balance of the
obligation plus reasonable expenses for repossessing, holding and preparing the
collateral for disposition and arranging for its sale, plus, in some
jurisdictions, reasonable attorneys' fees. In some states the obligor must pay
any delinquent installments or the unpaid balance.
Deficiency Judgments and Excess Proceeds.
The proceeds of resale of the vehicles generally will be applied first
to the expenses of resale and repossession and then to the satisfaction of the
indebtedness. Some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness. Other states do not prohibit or limit deficiency judgments.
However, a deficiency judgment is a personal judgment against the obligor for
the shortfall, and a defaulting obligor likely has little capital or sources of
income available following repossession. Therefore, in many cases, deficiency
judgments will provide little or no recoveries.
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
Occasionally, after resale of a vehicle and payment of all expenses and
all indebtedness, a surplus of funds exist. In that case, the Uniform Commercial
Code requires the creditor to remit the surplus to any other lienholder, with
respect to the vehicle. If they do not exist or there are remaining funds, the
Uniform Commercial Code requires the creditor to remit the surplus to the former
owner of the vehicle.
Consumer Protection Laws.
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers involved
in consumer finance. The application of these laws to particular circumstances
is often unclear and some courts and regulatory authorities have adopted new
interpretations of these often unclear laws. These laws include the
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade
Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the
Fair Debt Collection Procedures Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's
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Regulations B and Z, the Solders' and Sailors' Civil Relief Act of 1940, state
adoptions of the National Consumer Act and the Uniform Consumer Credit Code, and
state motor vehicle retail installment sales act, retail installment sales acts
and other similar laws. Also, state laws impose finance charge ceilings and
other restrictions on consumer transactions and require contract disclosures in
addition to those required under federal law. These requirements impose specific
statutory liabilities upon creditors who fail to comply with their provisions.
In some cases, this liability could affect an assignee's ability to enforce
consumer finance contracts or result in the imposition of penalties in excess of
amounts owing on the receivables. If the trust were obligated to pay any
damages, its assets would be directly reduced, resulting in a potential loss to
the securityholders.
Under the laws of some states, finance charges with respect to motor
vehicle retail installment contracts may include the additional amount, if any,
that a purchaser pays as part of the purchase price for a vehicle solely because
the purchaser is buying on credit rather than for cash (a cash sale
differential). If a dealer charges a differential, applicable finance charge
ceilings could be exceeded.
The "holder-in-due-course" rule of the Federal Trade Commission (the
"FTC Rule"), subjects an assignee of a seller of goods in a consumer credit
transaction (and some related creditors) to all claims and defenses that the
obligor in the transaction could assert against the seller of the goods. Other
state laws may duplicate the effect of the FTC Rule. The FTC Rule limits
liability to the amounts paid by the obligor under the contract. The holder of
the contract may also be unable to collect any balance remaining due from the
obligor.
The FTC Rule applies to most of the receivables. Accordingly, the
purchaser for the applicable financed vehicle may assert claims or defenses
against the related trust as holder of the related receivables that the
purchaser may assert against the seller of the financed vehicle. The maximum
liability under these claims equals the amounts paid by the obligor on the
receivable. If an obligor were successful in asserting any claim or defense, the
claim or defense would constitute a breach of World Omni Financial Corp.'s
warranties under the related purchase agreement and would create an obligation
of World Omni Financial Corp. to repurchase the receivable unless the breach is
cured. We refer you to "Description of the Trust Documents -- Sale and
Assignment of Receivables."
In several cases, consumers have asserted that the self-help remedies
of secured parties under the Uniform Commercial Code and related laws violate
the due process protections provided under the 14th Amendment to the
Constitution of the United States. Courts have generally upheld the notice
provisions of the Uniform Commercial Code and related laws as reasonable or have
found that the repossession and resale by the creditor do not involve sufficient
state action to afford constitutional protection to borrowers.
Most state vehicle dealer licensing laws require sellers of vehicles to
have a license to sell vehicles at retail sale. In addition, with respect to
used vehicles, the Federal Trade Commission requires that all sellers of used
vehicles prepare, complete and display a "buyer's guide" which explains the
warranty coverage for the vehicles. Furthermore, federal odometer regulations
promulgated under the Motor Vehicle Information and Cost Savings Act and the
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motor vehicle title laws of most states require that all sellers of used
vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. The obligor may be able to assert a defense
against the seller of the financed vehicle if a seller is not properly licensed
a seller failed to provide a buyer's guide or odometer disclosure statement to
the purchaser of a financed vehicle. If an obligor on a receivable were
successful in asserting any claim or defense, the servicer could pursue on
behalf of the related trust any reasonable remedies against the seller or the
manufacturer of the vehicle.
Under each purchase agreement, World Omni Financial Corp. will have
represented and warranted that each receivable complies with all requirements of
law in all material respects. Accordingly, if an obligor has a claim against a
trust for violation of any law and the claim materially and adversely affects
the trust's interest in a receivable, the violation would constitute a breach of
the warranties of World Omni Financial Corp. and would create an obligation of
World Omni Financial Corp. to repurchase the receivable unless the breach is
cured.
Other Limitations.
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or to enforce a deficiency judgment. For example, in
a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a vehicle and, as part of the rehabilitation plan,
may reduce the amount of the secured indebtedness to the market value of the
vehicle at the time of bankruptcy (as determined by the court), leaving the
creditor as a general unsecured creditor for the remainder of the indebtedness.
A bankruptcy court may also reduce the monthly payments due under a contract or
change the rate of interest and time of repayment of the indebtedness. In
addition, the Soldiers' and Sailors' Civil Relief Act of 1940, as amended and
similar state legislation may limit the interest payable on a receivable during
and obligor's active duty in the military. We refer you to "Risk Factors -
Consumer Protection Laws May Adversely Affect the Receivables" in this
prospectus.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax
consequences of the purchase, ownership and disposition of the securities.
However, the summary does not purport to deal with federal income tax
consequences applicable to all categories of holders, some of which may be
subject to special rules. For example, it does not discuss the tax treatment of
noteholders or certificateholders that are insurance companies, regulated
investment companies or dealers in securities. This discussion is directed to
prospective purchasers who purchase securities in the initial distribution and
who hold the securities as "capital assets" within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the "Code"). Prospective
investors are urged to consult their own tax advisors in determining the
federal, state, local, foreign and any other tax consequences to them of the
purchase, ownership and disposition of the securities.
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The following summary is based upon current provisions of the Code, the
Treasury regulations promulgated, judicial authority, and ruling authority, all
of which are subject to change, which change may be retroactive. Each trust will
be provided with an opinion of Cadwalader, Wickersham & Taft, special federal
tax counsel to the trust, regarding some federal income tax matters discussed
below. An opinion of federal tax counsel, however, is not binding on the IRS or
the courts. Moreover, there are no cases or IRS rulings on similar transactions
involving both debt and equity interests issued by a trust with terms similar to
those of the securities. As a result, the IRS may disagree with all or a part of
the discussion below. No ruling on any of the issues discussed below will be
sought from the IRS. For purposes of the following summary, references to the
trust, the securities and related terms, parties and documents shall be deemed
to refer, unless otherwise specified, to each trust and the securities and
related terms, parties and documents applicable to the trust.
The federal income tax consequences to certificateholders will vary
depending on whether the trust is treated as a partnership under the Code and
applicable Treasury regulations or whether the trust will be treated as a
grantor trust. The prospectus supplement for each series of certificates will
specify whether the trust will be treated as a partnership or as a grantor
trust.
FASITs
Section 860H through 860L of the Code provide for the creation of
entity for federal income tax purposes, referred to as a "financial asset
securitization investment trust" ("FASIT"). These provisions were effective as
of September 1, 1997 and Treasury regulations were proposed on February 4, 2000,
but many technical issues concerning FASITs remain. To qualify as a FASIT, an
entity must meet certain requirements under Section 860L of the Code and must
elect such treatment. The applicable sale and servicing agreement or pooling and
servicing agreement and indenture, if applicable, may provide for a FASIT
election with respect to the trust, or be amended in accordance with the
provisions thereof to provide that the seller and trustee will cause a FASIT
election to be made for the trust if the seller delivers to the trustee or the
indenture trustee and, if applicable, the insurer, an opinion of counsel to the
effect that, for federal income tax purposes, (1) the deemed issuance of FASIT
regular interests (occurring in connection with such election) will not
adversely affect the federal income tax treatment of the securities, (2)
following such election such trust will not be deemed to be an association (or
publicly traded partnership) taxable as a corporation and (3) such election will
not cause or constitute an event in which gain or loss would be recognized by
any securityholder or the trust.
Trusts Treated as Partnerships
Tax Characterization of the Trust as a Partnership.
A trust which is not treated as a grantor trust and which does not
affirmatively elect to be treated as a corporation will be treated as a
partnership under applicable Treasury regulations as long as there are two or
more beneficial owners and will be ignored as a separate entity where there is a
single beneficial owner of all equity classes of the related series
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(including any class of notes treated as equity for federal income tax
purposes). Federal tax counsel will deliver its opinion that a trust will not be
an association (or publicity traded partnership) taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption that
the terms of the sale and servicing agreement or pooling and servicing agreement
and indenture and related documents will be complied with, including the making
of no affirmative election to be treated as a corporation. Such counsel's
opinion will also conclude that the nature of the income of the trust will
exempt it from the rule that certain publicly traded partnerships are taxable as
corporations.
If the trust were taxable as a corporation for federal income tax
purposes, the trust would be subject to corporate income tax on its taxable
income. The trust's taxable income would include all its income on the
receivables, possibly reduced by its interest expense on the notes. Any
corporate income tax could materially reduce cash available to make payments on
the notes and distributions on the securities, and certificateholders could be
liable for any tax that is unpaid by the trust.
Tax Consequences to Holders of the Notes.
Treatment of the Notes as Indebtedness.
The seller will agree, and the noteholders will agree by their purchase
of notes, to treat the notes as debt for federal, state and local income and
franchise tax purposes. Prior to the sale of securities by the related trust,
federal tax counsel will deliver its opinion to the trust with respect to each
series of notes that either:
o the notes of the series will be characterized as debt for federal
income tax purposes; or
o the notes of the series should be characterized as debt for federal
income tax purposes, but if the notes are not characterized as
debt, the notes will be characterized as interests in a
partnership.
Except as described below under the heading "-- Possible Alternative Treatment
of the Notes" below, the discussion below assumes that the characterization of
the notes as debt for federal income tax purposes is correct.
OID.
The discussion below assumes that all payments on the notes are
denominated in U.S. dollars, and that the notes are not "interest only" or
"principal only" notes. To the extent we offer these notes, the related
prospectus supplement will describe the relevant federal income tax
consequences. Moreover, the discussion assumes that the interest formula for the
notes meets the requirements for "qualified stated interest" under Treasury
regulations (the "OID Regulations") relating to debt instruments issued with
original issue discount ("OID"). Finally, the discussion assumes that any OID on
the notes (i.e., any excess of the principal amount of the notes over their
issue price) is de minimis (i.e., less than 1/4% of their principal amount
multiplied by the weighted average maturity of the notes), all within the
meaning of the
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OID Regulations. If these conditions are not satisfied with respect to any given
series of notes and as a result the notes are treated as issued with OID,
additional tax considerations with respect to the notes will be disclosed in the
applicable prospectus supplement.
Interest Income on the Notes.
Based on the above assumptions, except as discussed below, the notes
will not be considered issued with OID. The stated interest thereon generally
will be taxable to a noteholder as ordinary interest income when received or
accrued in accordance with the noteholder's method of tax accounting. Under the
OID Regulations, a holder of a note issued with a de minimis amount of OID
generally must include OID in income, on a pro rata basis, as principal payments
are made on the note. It is believed that any prepayment premium paid as a
result of a mandatory redemption will be taxable as ordinary income when it
becomes fixed and unconditionally payable. A purchaser who buys a note for more
or less than its principal amount will generally be subject, respectively, to
the premium amortization or market discount rules of the Code.
A holder of a note that has a fixed maturity date of not more than one
year from the issue date of the note (a "Short-Term Note") may be subject to
special rules. Under the OID Regulations, all stated interest will be treated as
OID. An accrual basis holder of a Short-Term Note (and some cash basis holders,
including regulated investment companies, as described in Section 1281 of the
Code) generally would be required to report interest income as OID accrues on a
straight-line basis over the term of each interest period. Other cash basis
holders of a Short-Term Note would, in general, be required to report interest
income as interest is paid (or, if earlier, upon the taxable disposition of the
Short-Term Note). However, a cash basis holder of a Short-Term Note reporting
interest income as it is paid may be required to defer a portion of any interest
expense otherwise deductible on indebtedness incurred to purchase or carry the
Short-Term Note until the taxable disposition of the Short-Term Note. A cash
basis taxpayer may elect under Section 1281 of the Code to accrue interest
income on all nongovernment debt obligations with a term of one year or less, in
which case the taxpayer would include OID on the Short-Term Note in income as it
accrues, but would not be subject to the interest expense deferral rule referred
to in the preceding sentence. Certain special rules apply if a Short-Term Note
is purchased for more or less than its principal amount.
Market Discount.
Whether or not the notes are issued with OID, a subsequent purchaser
(i.e., a purchaser who acquires a note not at the time of original issue) of a
note at a discount will be subject to the "Market Discount Rules" of Sections
1276 through 1278 of the Code. In general, these rules provide that if the
holder of a note purchases the note at a market discount (i.e., a discount from
its original issue price plus any accrued OID that exceeds a de minimis amount
specified in the Code) and thereafter recognizes gain upon a disposition (or
receives a principal payment), the lesser of:
o the gain (or the principal payment); or
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o the accrued market discount (not previously included in income)
will be taxed as ordinary income.
Generally, the accrued market discount for each interest accrual period will be
the total market discount (not previously included in income) on the note
multiplied by a fraction, the numerator of which is the interest (or OID, if the
note was issued with more than de minimis OID) for such period and the
denominator of which is the total interest (or OID) from the beginning of such
period to maturity date of the note. The holder may elect, however, to determine
accrued market discount under the constant yield method. The adjusted basis of a
note subject to the election will be increased to reflect market discount
included in gross income, thereby reducing any gain or increasing any loss on a
subsequent sale or taxable disposition. Holders should consult with their own
tax advisors as to the effect of making this election.
Limitations imposed by the Code, which are intended to match deductions
with the taxation of income, may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
note with accrued market discount. A noteholder who elects to include market
discount in gross income as it accrues, however, is exempt from this rule.
Notwithstanding the above rules, market discount on a note will be
considered to be zero if it is less than a de minimis amount, which is 0.25% of
the remaining principal balance of the note multiplied by its expected weighted
average remaining life. If market discount is de minimis, the actual amount of
discount must be allocated to the remaining principal distributions on the note,
and when the distribution is received, capital gain will be recognized equal to
discount allocated to the distribution.
Amortizable Bond Premium.
In general, if a subsequent purchaser acquires a note at a premium
(i.e., an amount in excess of the amount payable upon the maturity of the note),
the noteholder will be considered to have purchased the note with "amortizable
bond premium" equal to the amount of the excess. A noteholder may elect to
deduct the amortizable bond premium as it accrues under a constant yield method
over the remaining term of the note. Accrued amortized bond premium may only be
used as an offset against qualified stated interest income when the income is
included in the holder's gross income under the holder's normal accounting
method.
Election to Treat All Interest as Original Issue Discount.
A holder may elect to include in gross income all interest that accrues
on a note using constant yield method. For purposes of this election, interest
includes stated interest, OID, de minimis OID, market discount, de minimis
market discount and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium. In applying the constant yield method to a note
with respect to which this election has been made, the issue price of the
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note will equal the electing holder's adjusted basis in the note immediately
after its acquisition, the issue date of the note will be the date of its
acquisition by the electing holder, and no payments on the note will be treated
as payments of qualified stated interest. This election, if made, may not be
revoked without the consent of the IRS. Holders should consult with their own
tax advisors as to the effect of making this election in light of their
individual circumstances.
Sale or Other Disposition.
If a noteholder sells a note, the holder will recognize gain or loss in
an amount equal to the difference between the amount realized on the sale and
the holder's adjusted tax basis in the note. The adjusted tax basis of a note to
a particular noteholder will equal the holder's cost for the note, increased by
any market discount, OID and gain previously included by the noteholder in
income with respect to the note and decreased by the amount of premium (if any)
previously amortized and by the amount of principal payments previously received
by the noteholder with respect to the note. Any gain or loss will be capital
gain or loss, except for gain representing accrued interest and accrued market
discount not previously included in income. Capital losses generally may be used
by a corporate taxpayer only to offset capital gains, and by an individual
taxpayer only to the extent of capital gains plus $3,000 of other income.
Capital gains realized by individual taxpayers from the sale or exchange of
capital assets held for more than one year are subject to preferential rates of
tax.
Non-U.S. Holders.
Interest paid (or accrued) to a noteholder who is other than a U.S.
person as defined in the Code and Treasury Regulations (a "non-U.S. person")
generally will be considered "portfolio interest," and generally will not be
subject to United States federal income tax and withholding tax, if the interest
is not effectively connected with the conduct of a trade or business within the
United States by the non-U.S. person and the non-U.S. person:
o is not actually or constructively a "10 percent shareholder" of the
trust or the seller (including a holder of 10% of the outstanding
certificates) or a "controlled foreign corporation" with respect to
which the trust or the seller is a "related person" within the
meaning of the Code; and
o provides the trustee or other person who is otherwise required to
withhold U.S. tax with respect to the notes with an appropriate
statement (on Form W-8 or a similar form), signed under penalties
of perjury, certifying that the beneficial owner of the note is a
foreign person and providing the foreign person's name and address.
If the information provided in this statement changes, the non-U.S. person must
inform the trust within 30 days of the change. If a note is held through a
securities clearing organization or some other financial institutions, the
organization or institution may provide the relevant signed statement to the
withholding agent; in that case, however, the signed statement must be
accompanied by a Form W-8 or substitute form provided by the non-U.S. person
that owns the note. If the interest is not portfolio interest, then it will be
subject to United States federal
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income and withholding tax at a rate of 30%, unless reduced or eliminated
pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a non-U.S. person will be exempt from United
States federal income and withholding tax; provided that:
o the gain is not effectively connected with the conduct of a trade
or business in the United States by the non-U.S. person; and
o in the case of an individual non-U.S. person, the non-U.S. person
is not present in the United States for 183 days or more in the
taxable year.
For these purposes "U.S. person" means a citizen or resident of the
United States for U.S. federal income tax purposes, a corporation or partnership
(except to the extent provided in applicable Treasury regulations) created or
organized in or under the laws of the United States, any state or the District
of Columbia, including an entity treated as a corporation or partnership for
U.S. federal income tax purposes, an estate the income of which is subject to
U.S. federal income taxation regardless of its source, or a trust if a court
within the United States is able to exercise primary supervision over the
administration of such trust, and one or more such U.S. persons have the
authority to control all substantial decisions of such trust (or, to the extent
provided in applicable Treasury regulations, certain trusts in existence on
August 20, 1996, which are eligible to elect to be treated as U.S. persons.
Final regulations dealing with withholding tax on income paid to
non-U.S. persons and related matters (the "new withholding regulations") were
issued by the Treasury Department on October 6, 1997. The new withholding
regulations will generally be effective for payments made after December 31,
2000, subject to some transition rules. Prospective noteholders who are non-U.S.
persons are strongly urged to consult their own tax advisors with respect to the
new withholding regulations.
Backup Withholding.
Each holder of a note (other than an exempt holder such as a
corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt noteholder fail to
provide the required certification, the trust will be required to withhold 31%
of the amount otherwise payable to the holder, and remit the withheld amount to
the IRS as a credit against the holder's federal income tax liability.
Possible Alternative Treatment of the Notes.
In the opinion of federal tax counsel, in the event that any series of
notes were not treated as debt for federal income tax purposes, the series of
notes would be characterized for federal income tax purposes as interests in a
partnership. If any series of the notes did
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constitute interests in a partnership, it is expected that stated interest
payments on the notes would be treated either as guaranteed payments under
section 707(c) of the Code or as a preferential allocation of net income of the
trust (with all other items of trust income, gain, loss, deduction and credit
being allocated to the holders of the securities). Although the federal income
tax treatment of the notes for most accrual basis taxpayers should not differ
materially under the characterization from the treatment of the notes as debt,
the characterization could result in adverse effects for some holders of notes.
For example, holders of notes treated as interests in a partnership could be
subject to tax on income equal to the entire amount of the stated interest
payments on the notes (plus possibly some other items) even though the trust
might not have sufficient cash to make current cash distributions of the amount.
Thus, cash basis holders would in effect be required to report income in respect
of the notes on the accrual basis and holders of the notes could become liable
for taxes on trust income even if they have not received cash from the trust to
pay the taxes. Moreover, income allocable to a holder of a note treated as a
partnership interest that is a pension, profit-sharing or employee benefit plan
or other tax-exempt entity (including an individual retirement account) could
constitute "unrelated debt-financed income" generally taxable to a holder under
the Code. In addition, foreign persons holding the notes could be subject to
withholding or required to file a U.S. federal income tax return and to pay U.S.
federal income tax (and, in the case of a corporation, branch profits tax) on
their share of accruals of guaranteed payments and trust income, and individuals
holding the notes might be subject to some limitations on their ability to
deduct their share of trust expenses.
Tax Consequences to Holders of the Certificates.
Treatment of the Trust as a Partnership.
The seller and the servicer will agree, and the certificateholders will
agree by their purchase of certificates, to treat the trust as a partnership for
purposes of federal and state income tax, franchise tax and any other tax
measured in whole or in part by income, with the assets of the partnership being
the assets held by the trust, the partners of the partnership being the
certificateholders (including the seller in its capacity as recipient of
distributions from the Spread Account and any other account specified in the
related prospectus supplement in which the seller has an interest), and the
notes being debt of the partnership. However, the proper characterization of the
arrangement involving the trust, the certificates, the notes, the seller and the
servicer is not clear because there is no authority on transactions closely
comparable to those contemplated herein.
A variety of alternative characterizations are possible. For example,
because the certificates may have some features characteristic of debt, the
certificates might be considered debt of the seller or the trust. Any
characterization should not result in materially adverse tax consequences to
certificateholders as compared to the consequences from treatment of the
certificates as equity in a partnership, described below. The following
discussion assumes that the certificates represent equity interests in a
partnership.
The following discussion assumes that all payments on the certificates
are denominated in U.S. dollars, none of the certificates are strip securities
and a series of certificates includes a
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single class of certificates. If these conditions are not satisfied with respect
to any given series of certificates, additional tax considerations with respect
to the certificates will be disclosed in the applicable prospectus supplement.
Partnership Taxation.
As a partnership, the trust will not be subject to federal income tax.
Rather, each certificateholder will be required to separately take into account
the holder's accruals of guaranteed payments (if any) from the trust and its
allocated share of other income, gains, losses, deductions and credits of the
trust. The trust's income will consist primarily of interest and finance charges
earned on the receivables (including appropriate adjustments for market
discount, OID and premium) and any gain upon collection or disposition of
receivables. The trust's deductions will consist primarily of interest accruing
with respect to the notes, guaranteed payments (if any) on the certificates,
servicing and other fees, and losses or deductions upon collection or
disposition of receivables.
Under the trust agreement, stated interest payments on the certificates
(including interest on amounts previously due on the certificates but not yet
distributed) will be treated as allocations of net interest income (that is,
interest income on the receivables less interest deductions on the notes) and,
to the extent distributions of the stated interest exceed the net interest
income, as "guaranteed payments" under Section 707(c) of the Code. Guaranteed
payments are payments to partners for the use of their capital and, in the
present circumstances, are treated as deductible to the trust and ordinary
income to the certificateholders. The trust will have a calendar year tax year
and will deduct the guaranteed payments under the accrual method of accounting.
Certificateholders with a calendar year tax year are required to include the
accruals of net interest income and guaranteed payments in income in their
taxable year that corresponds to the year in which the net income accrues or the
trust deducts the guaranteed payments, and certificateholders with a different
taxable year are required to include the amounts in income in their taxable year
that includes the December 31 of the trust year in which the net income accrues
or the trust deducts the guaranteed payments. It is possible that guaranteed
payments will not be treated as interest for all purposes of the Code.
In addition, the trust agreement will provide, in general, that the
certificateholders will be allocated taxable income of the trust for each
collection period equal to the sum of:
o any trust income attributable to discount on the receivables that
corresponds to any excess of the principal amount of the securities
over their initial issue price;
o prepayment premium, if any, payable to the certificateholders for
the month; and
o any other amounts of income payable to the certificateholders for
the month.
The allocation will be reduced by any amortization by the trust of premium on
receivables that corresponds to any excess of the issue price of securities over
their principal amount. All remaining items of income, gain, loss and deduction
of the trust will be allocated to the seller.
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Based on the economic arrangement of the parties, this approach for
allocating trust income and accruing guaranteed payments should be permissible
under applicable Treasury regulations, although no assurance can be given that
the IRS would not require a greater amount of income to be allocated to
certificateholders. Moreover, even under the foregoing method of allocation,
certificateholders may be subject to tax on income equal to the entire amount of
stated interest payments on the certificates plus the other items described
above even though the trust might not have sufficient cash to make current cash
distributions of the amount. Thus, cash basis holders will in effect be required
to report income from the certificates on the accrual basis and
certificateholders may become liable for taxes on trust income even if they have
not received cash from the trust to pay the taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
certificateholders but certificateholders may be purchasing securities at
different times and at different prices, certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the trust.
Most of the taxable income and guaranteed payments allocated to a
certificateholder that is a pension, profit-sharing or employee benefit plan or
other tax-exempt entity (including an individual retirement account) will
constitute "unrelated debt-financed income" generally taxable to a holder under
the Code.
An individual taxpayer's share of expenses of the trust (including fees
to the servicer but not interest expense) would be miscellaneous itemized
deductions. The deductions might be disallowed to the individual in whole or in
part and might result in the holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to the holder over the life of
the trust. It is not clear whether these rules would be applicable to a
certificateholder to the extent it received guaranteed payments.
The trust intends to make all tax calculations relating to income and
allocations to certificateholders on an aggregate basis. If the IRS were to
require that the calculations be made separately for each receivable, the trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on certificateholders.
Discount and Premium.
The purchase price paid by the trust for the receivables may be greater
or less than the remaining principal balance of the receivables at the time of
purchase. If so, the receivables will have been acquired at a premium or
discount, as the case may be. (As indicated above, the trust will make this
calculation on an aggregate basis, but might be required to recompute it on a
receivable-by-receivable basis.)
If the trust acquires the receivables at a market discount or premium,
the trust will elect to include any discount in income currently as it accrues
over the life of the receivables or to offset any premium against interest
income on the receivables. As indicated above, a portion of the market discount
income or premium deduction may be allocated to certificateholders.
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Disposition of Certificates.
Generally, capital gain or loss will be recognized on a sale of
certificates in an amount equal to the difference between the amount realized
and the seller's tax basis in the certificates sold. A certificateholder's tax
basis in a certificate will generally equal the holder's cost increased by the
holder's share of trust income and accruals of guaranteed payments (includible
in income) and decreased by any distributions received with respect to the
certificate. In addition, both the tax basis in the certificates and the amount
realized on a sale of a certificate would include the holder's share of the
notes and other liabilities of the trust. A holder acquiring certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in the certificates, and, upon sale or other disposition of some of the
certificates, allocate a pro rata portion of the aggregate tax basis to the
certificates sold (rather than maintaining a separate tax basis in each
certificate for purposes of computing gain or loss on a sale of that
certificate).
Any gain on the sale of a certificate attributable to the holder's
share of unrecognized accrued market discount on the receivables would generally
be treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The trust does not expect to have any other assets that
would give rise to the special reporting requirements. Thus, to avoid those
special reporting requirements, the trust will elect to include market discount
in income as it accrues.
If a certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the certificates that exceeds the aggregate
cash distributions with respect thereto, the excess will generally give rise to
a capital loss upon the retirement of the certificates.
Allocations Between Transferors and Transferees.
In general, the trust's taxable income and losses will be determined
monthly and the tax items and accruals of guaranteed payments, if any, for a
particular calendar month will be apportioned among the certificateholders in
proportion to the principal amount of certificates owned by them as of the close
of the last day of the month. As a result, a holder purchasing certificates may
be allocated tax items and any accruals of guaranteed payments (which will
affect its tax liability and tax basis) attributable to periods before the
actual transaction.
The use of a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
and accruals of guaranteed payments of the trust might be reallocated among the
certificateholders. The trust's method of allocation between transferors and
transferees may be required to conform to a method permitted by future
regulations.
Section 754 Election.
In the event that a certificateholder sells its certificates at a
profit (loss), the purchasing certificateholder will have a higher (lower) basis
in the certificates than the selling certificateholder had. The tax basis of the
trust's assets will not be adjusted to reflect that higher (or lower) basis
unless the trust were to file an election under Section 754 of the Code. In
order to avoid the administrative complexities that would be involved in keeping
accurate
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accounting records, as well as potentially onerous information reporting
requirements, the trust will not make the election. As a result,
certificateholders might be allocated a greater or lesser amount of trust income
than would be appropriate based on their own purchase price for certificates.
Administrative Matters.
The trustee is required to keep or have kept complete and accurate
books of the trust. The books will be maintained for financial reporting and tax
purposes on an accrual basis and the fiscal year of the trust will be the
calendar year. The trustee will file a partnership information return (IRS Form
1065) with the IRS for each taxable year of the trust issuing certificates and
will report each certificateholder's allocable share of items of trust income
and expense and accruals of guaranteed payments to holders and the IRS on
Schedule K-1. The trust will provide the Schedule K-1 information to nominees
that fail to provide the trust with the information statement described below
and the nominees will be required to forward the information to the beneficial
owners of the certificates. Generally, holders must file tax returns that are
consistent with the information return filed by the trust or be subject to
penalties unless the holder notifies the IRS of all the inconsistencies.
Under Section 6031 of the Code, any person that holds certificates as a
nominee at any time during a calendar year is required to furnish the trust with
a statement containing some information on the nominee, the beneficial owners
and the certificates so held. The information includes (i) the name, address and
taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and taxpayer identification number of the person,
(y) whether the person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly-owned agency or
instrumentality of either of the foregoing and (z) some information on
certificates that were held, bought or sold on behalf of the person throughout
the year. In addition, brokers and financial institutions that hold certificates
through a nominee are required to furnish directly to the trust information as
to themselves and their ownership of certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any information
statement to the trust. The information referred to above for any calendar year
must be furnished to the trust on or before the following January 31. Nominees,
brokers and financial institutions that fail to provide the trust with the
information described above may be subject to penalties.
The seller will be designated as the tax matters partner in the trust
agreement and will be responsible for representing the certificateholders in any
dispute with the IRS. The Code provides for administrative examination of a
partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years after the date on which the partnership information return is
filed. Any adverse determination following an audit of the return of the trust
by the appropriate taxing authorities could result in an adjustment of the
returns of the certificateholders, and, under some circumstances, a
certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the trust. An adjustment could also result in an
audit of a certificateholder's returns and adjustments of items not related to
the income and losses of the trust.
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Tax Consequences to Non-U.S. Certificateholders.
It appears under recent amendments to the Code that the trust would not
be considered to be engaged in the conduct of a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons, and, although there is no clear authority dealing with that issue under
facts substantially similar to those described here, the trust intends to take
the position that it is not engaged in the conduct of a trade or business in the
United States. Non-U.S. persons that are partners in a partnership that is not
engaged in the conduct of a trade or business in the United States are subject
to U.S. withholding tax at a rate of 30 percent assessed on a gross basis on
certain items of fixed or determinable annual or periodical gains, profits and
income earned by the partnership from U.S. sources that are allocable to the
non-U.S. partners. To the extent that any income earned by a partnership is
allocable to partners that are non-U.S. persons, the partnership is obligated to
withhold the gross basis tax, unless the tax is eliminated by an income tax
treaty to which the United States is a signatory or another exemption applies.
It is not expected that interest earned by the trust would qualify as "portfolio
interest" that is not subject to U.S. withholding tax to the extent allocable to
a certificateholder that is a non-U.S. person. Assuming then that the trust is
not considered to be engaged in the conduct of a trade or business in the United
States, the trust would be required to withhold U.S. tax on interest earned by
the trust on the receivables that is allocable to certificateholders that are
non-U.S. persons, unless the tax is eliminated by an income tax treaty. Non-U.S.
persons holding certificates will therefore be required to provide to the
trustee an IRS Form 1001 or successor form establishing the non-U.S.
certificateholder's entitlement to benefits under an income tax treaty that
eliminates U.S. withholding tax on payments of interest from U.S. sources.
Subsequent adoption of Treasury regulations or the issuance of other
administrative pronouncements may require the trust to change its withholding
procedures.
Backup Withholding.
Distributions made on the certificates and proceeds from the sale of
the certificates will be subject to a "backup" withholding tax of 31% if, in
general, the certificateholder fails to comply with certain identification
procedures, unless the holder is an exempt recipient under applicable provisions
of the Code. We refer you to "Federal Income Tax Consequences to Holders of the
Notes -- Backup Withholding."
Trusts Treated As Grantor Trusts
Tax Characterization of Grantor Trusts.
If specified in the related prospectus supplement, Cadwalader,
Wickersham & Taft will deliver its opinion that the trust will not be classified
as an association taxable as a corporation and that such trust will be
classified as a grantor trust under subpart E, Part I of subchapter J of the
Code. In this case, beneficial owners of grantor trust certificates will be
treated for federal income tax purposes as owners of a portion of the trust's
assets as described below. The certificates issued by a trust that is treated as
a grantor trust are referred to as grantor trust certificates.
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Characterization of Certificates.
Each grantor trust certificateholder will be treated as the owner of a
pro rata undivided interest in the interest and principal portions of the trust
represented by the grantor trust certificates and will be considered the
equitable owner of a pro rata undivided interest in each of the receivables in
the trust. Any amounts received by a grantor trust certificateholder in lieu of
amounts due with respect to any receivable because of a default or delinquency
in payment will be treated for federal income tax purposes as having the same
character as the payments they replace.
Each grantor trust certificateholder will be required to report on its
federal income tax return in accordance with such grantor trust
certificateholder's method of accounting its pro rata share of the entire income
from the receivables in the trust represented by grantor trust certificates,
including interest, OID, if any, prepayment fees, assumption fees, any gain
recognized upon an assumption and late payment charges received by the servicer.
Under Code Section 162 or 212, each grantor trust certificateholder will be
entitled to deduct its pro rata share of servicing fees, prepayment fees,
assumption fees and late payment charges retained by the servicer, provided that
such amounts are reasonable compensation for services rendered to the trust.
Grantor trust certificateholders that are individuals, estates or trusts will be
entitled to deduct their share of expenses only to the extent such expenses plus
all other miscellaneous itemized deductions exceed two percent of their
respective adjusted gross incomes. A grantor trust certificateholder using the
cash method of accounting must take into account its pro rata share of income
and deductions as and when collected by or paid to the servicer. A grantor trust
certificateholder using an accrual method of accounting must take into account
its pro rata share of income and deductions as they become due or are paid to
the servicer, whichever is earlier. If the servicing fees paid to the servicer
are deemed to exceed reasonable servicing compensation, the amount of such
excess could be considered as an ownership interest retained by the servicer (or
any person to whom the servicer assigned for value all or a portion of the
servicing fees) in a portion of the interest payments on the receivables. The
receivables would then be subject to the "coupon stripping" rules of the Code
discussed below.
Stripped Bonds and Stripped Coupons.
Although the tax treatment of stripped bonds is not entirely clear,
based on recent guidance by the IRS, it appears that each purchaser of a grantor
trust certificate that bears non-pro rata portions of the principal and interest
payment on the receivables will be treated as the purchaser of a stripped bond
or stripped coupon, which generally should be treated as a single debt
instrument issued on the day it is purchased for purposes of calculating any
OID. Generally, under Treasury regulations issued under Section 1286 of the
Code, if the discount on a stripped bond is larger than a de minimis amount (as
calculated for purposes of the OID rules of the Code) such stripped bond will be
considered to have been issued with OID. For these purposes, OID is the excess
of the "stated redemption price at maturity" (generally, principal and any
interest which is not "qualified stated interest") of a debt instrument over its
issues-price. We refer you to "OID" below. Based on the preamble to the Section
1286 Treasury Regulations, federal tax counsel is of the opinion that, although
the matter is not
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entirely clear, the interest income on the certificates at the sum of the
pass-through rate and the portion of the servicing fee rate that does not
constitute excess servicing will be treated as "qualified stated interest"
within the meaning of the Section 1286 Treasury Regulations and such income will
be so treated in the trustee's tax information reporting. It is possible that
the treatment described in this paragraph will apply only to that portion of the
receivables in a particular trust as to which there is "excess servicing" and
that the remainder of such receivables will not be treated as stripped bonds,
but as undivided interests as described above. Unless indicated otherwise in the
applicable prospectus supplement, it is not anticipated that grantor trust
certificates which are stripped bonds will be issued with greater than de
minimis OID. Stripped coupons will have OID equal to the excess of all
anticipated payments thereon over their issue price, and that OID will not be de
minimis.
OID.
The rules of the Code relating to OID (currently Sections 1271 through
1273 and 1275) will be applicable to a grantor trust certificateholder that
acquires an undivided interest in a stripped bond or stripped coupon issued or
acquired with OID, and such person must include in gross income the sum of the
"daily portions," as defined below, of the OID on such stripped bond or stripped
coupon for each day on which it owns a certificate, including the date of
purchase but excluding the date of disposition. Because payments on such
stripped bonds and stripped coupons may be accelerated by prepayments on the
underlying obligations, OID will be determined as required under Code Section
1272(a)(6). Pursuant to Code Section 1272 (a)(6), OID accruals will be
calculated based on a constant interest method and a prepayment assumption
indicated in such prospectus supplement. In the case of an original grantor
trust certificateholder, the daily portions of OID generally would be determined
as follows. A calculation will be made of the portion of OID that accrues on the
stripped bond or stripped coupon during each successive monthly accrual period
(or shorter period in respect of the date of original issue or the final payment
date). This will be done, in the case of each full monthly accrual period, by
adding (1) the present value of all remaining payments to be received on the
stripped bond or stripped coupon under the prepayment assumption used in respect
of the grantor trust certificates and (2) any payments (other than qualified
stated interest) received during such accrual period, and subtracting from the
total the "adjusted issue price" of the stripped bond or stripped coupon at the
beginning of such accrual period. No representation is made that the grantor
trust certificates will prepay at any prepayment assumption. The "adjusted issue
price" of a stripped bond or stripped coupon at the beginning of the first
accrual period is its issue price (as determined for purposes of the OID rules
of the Code) and the "adjusted issue price" of a stripped bond or stripped
coupon at the beginning of a subsequent accrual period is the "adjusted issue
price" at the beginning of the immediately preceding accrual period plus the
amount of OID allocable to that accrual period and reduced by the amount of any
payment (other than qualified stated interest) made at the end of or during that
accrual period. The OID accruing during such accrual period will then be divided
by the number of days in the period to determine the daily portion of OID for
each day in the period. A subsequent grantor trust certificateholder will be
required to adjust its OID accrual to reflect its purchase price, the remaining
period to maturity and, possibly, a new prepayment
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assumption. The servicer will report to all grantor trust certificateholders
holding stripped bonds or stripped coupons as if they were original holders.
With respect to the receivables, the method of calculating OID as
described above will cause the accrual of OID to either increase or decrease
(but never below zero) in any given accrual period to reflect the fact that
prepayments are occurring at a faster or slower rate than the prepayment
assumption used in respect of the receivables. Subsequent purchasers that
purchase grantor trust certificates at more than a de minimis discount should
consult their tax advisors with respect to the proper method to accrue such OID.
Market Discount.
A grantor trust certificateholder that acquires an undivided interest
in receivables may be subject to the market discount rules of Sections 1276
through 1278 to the extent an undivided interest in a receivable or stripped
bond is considered to have been purchased at a "market discount." Generally, the
amount of market discount is equal to the excess of the portion of the principal
amount of such receivable allocable to such holder's undivided interest over
such holder's tax basis in such interest. Market discount with respect to a
grantor trust certificate will be considered to be zero if the amount allocable
to the grantor trust certificate is less than 0.25% of the grantor trust
certificate's stated redemption price at maturity multiplied by the weighted
average maturity remaining after the date of purchase. Treasury regulations
implementing the market discount rules have not yet been issued; therefore,
investors should consult their own tax advisors regarding the application of
these rules and the advisability of making any of the elections allowed under
Code Section 1276 and 1278. The IRS may require you to compute market discount
on a receivable by receivable basis, based on the allocation of your purchase
price among the receivables based on their fair market values. However, we will
not furnish information to you on a receivable by receivable basis. Accordingly,
if you compute premium amortization on an aggregate basis, you may be required
by the IRS to recompute such premium on a receivable by receivable basis.
The Code provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain or disposition of a market discount bond
shall be treated as ordinary income to the extent that it does not exceed the
accrued market discount at the time of such payment. The amount of accrued
market discount for purposes of determining the tax treatment of subsequent
principal payments or dispositions of the market discount bond is to be reduced
by the amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
While the Treasury Department has not yet issued regulations, rules described in
the relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
grantor trust certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of (1) the total
remaining market discount and (2) a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For grantor trust certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of (1) the total remaining market discount and (2) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of
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which is the total amount of stated interest remaining to be paid at the
beginning of the accrual period. For purposes of calculating market discount
under any of the above methods in the case of instruments (such as the grantor
trust certificates) that provide for payments that may be accelerated by reason
of prepayments of other obligations securing such instruments, the same
prepayment assumption applicable to calculating the accrual of OID will apply.
Because the regulations described above have not been issued, it is impossible
to predict what effect those regulations might have on the tax treatment of a
grantor trust certificate purchased at a discount or premium in the secondary
market.
A holder who acquired a grantor trust certificate at a market discount
also may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to purchase
or carry such grantor trust certificate purchased with market discount. For
these purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which such market discount is includible in income. If such holder elects to
include market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
Premium.
The price paid for a grantor trust certificate by a holder will be
allocated to such holder's undivided interest in each receivable based on each
receivable's relative fair market value, so that such holder's undivided
interest in each receivable will have its own tax basis. A grantor trust
certificateholder that acquires an interest in receivables at a premium may
elect to amortize such premium under a constant interest method. Amortizable
bond premium will be treated as an offset to interest income on such grantor
trust certificate. The basis for such grantor trust certificate will be reduced
to the extent that amortizable premium is applied to offset interest payments.
We cannot tell you whether a reasonable prepayment assumption should be used in
computing amortization of premium allowable under Section 171 of the Code. A
grantor trust certificateholder that makes this election for a grantor
certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such grantor trust certificateholder acquires
during the year of the election or thereafter. We will not furnish information
to you on a receivable by receivable basis. Accordingly, if you compute premium
amortization on an aggregate basis, the IRS may require you to recompute such
premium.
If a premium is not subject to amortization using a reasonable
prepayment assumption, the holder of a grantor trust certificate acquired at a
premium should recognize a loss if a receivable prepays in full, equal to the
difference between the portion of the prepaid principal
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amount of such receivable that is allocable to the grantor trust certificate and
the portion of the adjusted basis of the grantor trust certificate that is
allocable to such receivable. If a reasonable prepayment assumption is used to
amortize such premium, it appears that such a loss would be available, if at
all, only if prepayments have occurred at a rate faster than the reasonable
assumed prepayment rate. It is not clear whether any other adjustments would be
required to reflect differences between an assumed prepayment rate and the
actual rate of prepayments.
Election to Treat All Interest as OID.
The OID regulations permit a grantor trust certificateholder to elect
to accrue all interest, discount (including de minimis market discount or OID)
and premium in income as interest, based on a constant yield method. If such an
election were to be made with respect to a grantor trust certificate with market
discount, the certificateholder would be deemed to have made an election to
include in income currently market discount with respect to all other debt
instruments having market discount that such grantor trust certificateholder
acquires during the year of the election or thereafter. Similarly, a grantor
trust certificateholder that makes this election for a grantor trust certificate
that is acquired at a premium will be deemed to have made an election to
amortize bond premium with respect to all debt instruments having amortizable
bond premium that such grantor trust certificateholder owns or acquires. We
refer you to "--Premium" above. The election to accrue interest, discount and
premium on a constant yield method with respect to a grantor trust certificate
is irrevocable.
Sale or Exchange of a Grantor Trust Certificate.
Sale or exchange of a grantor trust certificate prior to its maturity
will result in gain or loss equal to the difference, if any, between the amount
received and the owner's adjusted basis in the grantor trust certificate. Such
adjusted basis generally will equal the seller's purchase price for the grantor
trust certificate, increased by the OID and any market discount included in the
seller's gross income with respect to the grantor trust certificate, and reduced
by any market premium amortized by the seller and by principal payments on the
grantor trust certificate previously received by the seller. Such gain or loss
will be capital gain or loss to an owner for which a grantor trust certificate
is a "capital asset" within the meaning of Section 1221 of the Code (except in
the case of gain attributable to accrued market discount, as noted above under
"--Market Discount") and, with respect to noncorporate owners, will be
short-term or long-term, depending on weather the grantor trust certificate has
been held for 12 months or less, or more than 12 months respectively. (Long-term
capital gain tax rates of noncorporate owners provide a reduction as compared
with short-term capital gains, which are taxed at ordinary income tax rates.)
Grantor trust certificates will be "evidences of indebtedness" within
the meaning of Section 582(c)(1) of the Code, so that gain or loss recognized
from the sale of a grantor trust certificate by a bank or a thrift institution
to which such section applies will be treated as ordinary income or loss.
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Non-U.S. Persons.
Interest or OID paid to non-U.S. persons who own grantor trust
certificates will be treated as "portfolio interest" for purposes of United
States withholding tax. Such interest (including OID, if any) attributable to
the underlying receivables will not be subject to the normal 30% (or such lower
rate provided for by an applicable tax treaty) withholding tax imposed on such
amounts provided that (1) the non-U.S. person is not a "10% shareholder" (within
the definition of Section 871(h)(3)) of any obligor on the receivables; and is
not a controlled foreign corporation (within the definition of Section 957)
related to any obligor on the receivables and (2) such certificateholder
fulfills certain certification requirements. Under these requirements, the
certificateholder must certify, under penalty of perjury, that it is not a U.S.
person and must provide its name and address. If, however, such interest or gain
is effectively connected to the conduct of a trade or business within the U.S.
by such certificateholder, such owner will be subject to U.S. federal income tax
thereon at graduated rates. Potential investors who are not U.S. persons should
consult their own tax advisors regarding the specific tax consequences of owning
a certificate. See "Tax Consequences to the Holders of the Notes -- Non-U.S.
Holders" above for a further discussion of these rules.
Information Reporting and Backup Withholding.
The servicer will furnish or make available, within a reasonable time
after the end of each calendar year, to each person who was a grantor trust
certificateholder at any time during such year, such information as the servicer
deems necessary or desirable to assist grantor trust certificateholders in
preparing their federal income tax returns, or to enable holders to make such
information available to beneficial owners or financial intermediaries that hold
grantor trust certificates as nominees on behalf of beneficial owners or
financial intermediaries that hold grantor trust certificates as nominees on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments. Any amounts
deducted and withheld from a distribution to a recipient would be allowed as a
credit against such recipient's federal income tax liability.
The federal tax discussion set forth above is included for general
information only and may not be applicable to your particular tax situation. You
should consult your tax advisor with respect to the tax consequences of the
purchase, ownership and disposition of securities, including the tax
consequences under state, local and foreign and other tax laws and the possible
effects of changes in federal or other tax laws.
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ERISA CONSIDERATIONS
The prospectus supplement for each series of securities will summarize,
subject to the limitations discussed in each prospectus supplement,
considerations under ERISA relevant to the purchase of the securities by
employee benefit plans and individual retirement accounts.
PLAN OF DISTRIBUTION
The securities offered hereby and by means of the related prospectus
supplements will be offered through one or more of the methods described below.
The prospectus supplement with respect to each series of securities will
describe the method of offering of the series of securities, including the
initial public offering or purchase price of each class of securities or the
method by which the price will be determined and the net proceeds to the seller
of the sale.
The offered securities will be offered through the following methods
from time to time and offerings may be made concurrently through more than one
of these methods or an offering of a particular series of securities may be made
through a combination of two or more of these methods:
By negotiated firm commitment underwriting and public reoffering
by underwriters specified in the applicable prospectus supplement;
o By placements by the seller with investors through dealers; and
o By direct placements by the seller with investors.
As more fully described in the prospectus supplement, if underwriters
are used in a sale of any offered securities, the securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices to be determined at the time of sale or at
the time of commitment of the sale. Firm commitment underwriting and public
reoffering by underwriters may be done through underwriting syndicates or
through one or more firms acting alone. The specific managing underwriter or
underwriters, if any, with respect to the offer and sale of the offered
securities of a particular series will be described on the cover of the related
prospectus supplement and the members of the underwriting syndicate, if any,
will be named in the prospectus supplement. If so specified in the related
prospectus supplement, the offered securities will be distributed in a firm
commitment underwriting, subject to the terms and conditions of the underwriting
agreement, by the underwriters named in the underwriting agreement. The
prospectus supplement will describe any discounts and commissions to be allowed
or paid by the seller to the underwriters, any other items constituting
underwriting compensation and any discounts and commissions to be allowed or
paid to the dealers. The obligations of the underwriters will be subject to
certain conditions precedent. The underwriters with respect to a sale of any
class of securities will be obligated to purchase all the securities if any are
purchased.
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The seller and its affiliates will agree to indemnify the underwriters
against certain civil liabilities, including liabilities under the Securities
Act or will contribute to payments required to be made in respect of the civil
liabilities.
The place and time of delivery for any series of securities in respect
of which this prospectus is delivered will be described in the accompanying
prospectus supplement. To the extent specified in the prospectus supplement for
the related series, the seller or its affiliates may retain some of the classes
of securities.
FINANCIAL INFORMATION
Certain specified trust assets will secure each series of securities,
no trust will engage in any business activities or have any assets or
obligations prior to the issuance of the related series of securities.
Accordingly, no financial statements with respect to any trust assets will be
included in this prospectus or in the related prospectus supplement.
A prospectus supplement may contain the financial information or
financial statements of any provider of credit enhancement.
INCORPORATION OF CERTAIN INFORMATION
BY REFERENCE
All documents filed by us pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this prospectus and prior to
the termination of the offering of the offered securities of a series will be
deemed to be incorporated by reference into this prospectus and to be a part of
this prospectus from the date of filing of the documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
in this prospectus shall be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained in this prospectus or
in any other subsequently filed document which is or is deemed to be
incorporated by reference in this prospectus modifies or supersedes the
statement. Any statement so modified or superseded will not be deemed, except as
so modified or superseded, to constitute a part of this prospectus.
We will provide without charge to each person to whom a copy of this
prospectus is delivered, upon the written or oral request of the person, a copy
of any and all of the documents incorporated by reference in this prospectus
(not including the exhibits to the documents, unless the exhibits are
specifically incorporated by reference in the documents). Requests for the
copies should be directed to the office of the General Counsel, 120 N.W. 12th
Avenue Deerfield Beach, Florida 33442 (954) 429-2200.
This prospectus and the prospectus supplement for each series are parts
of our registration statement. This prospectus does not contain, and the related
prospectus supplement will not contain, all of the information in our
registration statement. For further information, please see our registration
statement and the accompanying exhibits which we have filed with the Commission.
This prospectus and any prospectus supplement may summarize contracts and/or
other documents. For further information, please see the copy of
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the contract or other document filed as an exhibit to the registration
statement. You can obtain copies of the registration statement from the
Commission upon payment of the prescribed charges, or you can examine the
registration statement free of charge at the Commission's offices. Reports and
other information filed with the Commission can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission at
Seven World Trade Center, 13th Floor, New York, New York 10048; and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
the material can be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You can
obtain information on the operation of the Public Reference Section by calling
1-800-732-0330. The Commission also maintains a site on the World Wide Web at
"http://www.sec.gov" at which users can view and download copies of reports,
proxy and information statements and other information filed electronically
through the EDGAR system. Copies of the trust documents relating to a series of
securities will be provided to each person to whom a prospectus and the related
prospectus supplement are delivered, upon written or oral request directed to
our offices at 120 N.W. 12th Avenue Deerfield Beach, Florida 33442 (954)
429-2200.
LEGAL MATTERS
The validity of the securities offered hereby and certain federal
income tax matters will be passed upon for the seller by Cadwalader, Wickersham
& Taft or by other counsel identified in the related prospectus supplement.
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INDEX OF TERMS
Clearstream Participants...........................26
Code...............................................47
Commission..........................................4
Deerfield office...................................18
Depositories.......................................24
Euroclear Participants.............................26
Events of Default..................................38
Federal Tax Counsel................................47
five state area....................................16
FTC Rule...........................................45
Indirect Participants..............................24
IRS................................................17
JMFE...............................................16
Mobile center......................................18
New Withholding Regulations........................52
OID................................................49
OID Regulations....................................49
Payment Date.......................................23
Payment Extension Program..........................20
Pool Factor........................................21
Pre-Funded Amount..................................14
Rating Agencies....................................22
Receivables Pool...................................13
Rules..............................................25
Securities Act......................................4
Servicer Termination Event.........................34
Short-Term note....................................49
Simple Interest Receivables........................14
St. Louis center...................................18
Terms and Conditions...............................26
Trust Accounts.....................................29
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Subject to completion, dated April 25, 2000.
Prospectus Supplement/1 to Prospectus dated ______________.
$[ ]
(Approximate)
World Omni Auto Receivables Trust 2000-[ ]
[$[_______] class A-1, [___]% asset backed notes, due [________]
$[_______] class A-2, [___]% asset backed notes, due [________]
$[_______] class A-3, [___]% asset backed notes, due [________]
$[_______] class A-4, [___]% asset backed notes, due [________]]
World Omni Auto Receivables LLC
Seller
Word Omni Financial Corp.
Servicer
The World Omni Auto Receivables LLC Auto Receivables Backed Notes
Series 2000-__ will include [_______] classes of notes, that we are offering
pursuant to this prospectus supplement. The Series 2000-__ notes are
collateralized by the assets of a trust. The trust's main assets will be a pool
of retail installment sale contracts secured by new and used automobiles and
light trucks and other assets as described in the prospectus and this prospectus
supplement.
o Only the securities described on the following table are being
offered by this prospectus supplement and the prospectus.
o The securities will accrue interest from , .
o The price to the public and the proceeds to the seller listed below
exclude interest accrued from , the date the notes
will be issued.
o The proceeds from the sale of the securities exclude expenses,
estimated at $ .
o The controlling securities are [class A-1, class A-2, class A-3 and
class A-4] notes.
<TABLE>
<S> <C> <C> <C>
Price to Public Underwriting Discounts and Proceeds to Seller
Commissions
[Per class A-1 note]
[Per class A-2 note]
[Per class A-3 note]
[Per class A-4 note]
</TABLE>
- --------------------
We will not list the notes on any national securities exchange or on
any automated quotation system of any registered securities association such as
NASDAQ.
- --------------------
1/ This form of prospectus supplement is representative of the form of
prospectus supplement that may typically be used in a particular transaction.
The provisions in this form may change from transaction to transaction, whether
or not the provisions are bracketed in the form to reflect the specific parties,
the structure of the securities, servicing provisions, receivables pool,
provisions of the sale and servicing agreement, indenture and other matters. In
all cases, the provisions in the prospectus supplement will be consistent in
material respects with the provisions in the prospectus.
<PAGE>
------------------------------------
The Series 2000-__ notes are not obligations of World Omni Auto
Receivables LLC, World Omni Financial Corp., the trustees, or any of their
respective affiliates. [The offered notes and the underlying receivables are not
insured or guaranteed by any governmental agency or any of the persons specified
above. Principal will be paid on the notes in sequence. All principal will be
paid on the class A-1 notes until they are fully paid, then on the class A-2
until fully paid, etc.]
Investing in the offered notes involves risk. We refer you to "Risk
Factors" beginning on page [ ] in this prospectus supplement and page [ ] in the
prospectus.
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of the notes, or passed upon the accuracy or
adequacy of this prospectus supplement or prospectus. Any representation to the
contrary is a criminal offense.
We expect that the delivery of the offered notes will be made in
book-entry form only through the facilities of the Depository Trust Company and
Clearstream Bank, societe anonyme and the Euroclear System on or about
[________].
[UNDERWRITERS]
[ ], 2000
<PAGE>
The information in this prospectus supplement is not complete and may be
changed. We may not sell these securities until we deliver a final prospectus
supplement and prospectus. This prospectus supplement and prospectus are not an
offer to sell these securities and are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
IMPORTANT NOTICE about INFORMATION PRESENTED in this
PROSPECTUS SUPPLEMENT and the ACCOMPANYING PROSPECTUS
Information about the offered notes is contained in two separate documents
that progressively provide more detail: (a) the accompanying prospectus, which
provides general information, some of which may not apply to the offered notes;
and (b) this prospectus supplement, which describes the specific terms of the
offered notes. If the terms of the offered notes vary between this prospectus
supplement and the accompanying prospectus, you should rely on the information
in this prospectus supplement.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with information that is different from that contained in this
prospectus supplement and the prospectus. The information in this prospectus
supplement is accurate only as of the date of this prospectus supplement.
This prospectus supplement begins with several introductory sections
describing the Series 2000-__ notes and the trust in abbreviated form:
Summary Of Prospectus Supplement, which gives a brief introduction of the
key features of the Series 2000-__ notes and a description of the receivables;
and
Risk Factors, appearing on page ____ of this prospectus supplement, which
describes risks that apply to the Series 2000-__ notes which are in addition to
those described in the prospectus with respect to the securities issued by the
trust generally.
This prospectus supplement and the accompanying prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this prospectus supplement and the
prospectus identify the pages where these sections are located.
Certain capitalized terms are defined and used in this prospectus
supplement and the prospectus to assist you in understanding the terms of the
offered notes and this offering. The capitalized terms used in this prospectus
supplement are defined on the pages indicated under the caption "Index of
Significant Definitions" beginning on page S-___ in this prospectus supplement.
In this prospectus supplement, the terms "seller", "we," "us" and "our"
refer to World Omni Auto Receivables LLC.
S-2
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TABLE OF CONTENTS
SUMMARY OF TERMS....................................4
RISK FACTORS.......................................10
FORMATION OF THE TRUST.............................13
General........................................13
Capitalization of the Trust....................13
The Owner Trustee..............................13
The Indenture Trustee..........................14
THE RECEIVABLES POOL...............................14
COMPOSITION OF THE RECEIVABLES POOL................15
Delinquencies, Repossessions and Net Losses....17
YIELD CONSIDERATIONS...............................17
POOL FACTORS AND OTHER INFORMATION.................18
USE OF PROCEEDS....................................18
DESCRIPTION OF THE SECURITIES......................18
General........................................18
Payments of Interest...........................18
Payments of Principal..........................19
Optional Redemption............................20
REGISTRATION OF NOTES..............................20
Book Entry Registration........................20
DESCRIPTION OF THE CERTIFICATES....................21
DESCRIPTION OF THE TRUST DOCUMENTS.................22
Sale and Assignment of Receivables.............22
Trust Accounts.................................22
Advances.......................................23
Servicing Compensation and Payment
of Expenses..................................23
Distributions..................................23
[Reserve Account]..............................26
Statements to Noteholders......................27
FEDERAL INCOME TAX CONSEQUENCES....................28
[STATE AND LOCAL TAX CONSEQUENCES].................28
ERISA CONSIDERATIONS...............................33
UNDERWRITING.......................................34
LEGAL OPINIONS.....................................36
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SUMMARY OF TERMS
The following summary is a short, concise description of the main terms
of the notes. For this reason, the summary does not contain all the information
that may be important to you. You will find a detailed description of the terms
of the notes following this summary and in the prospectus.
PARTIES AND DATES:
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Issuer: The issuer of the notes is World Omni Auto Receivables Trust 2000-[ ].
The trust was formed on [_________, 2000] under a trust agreement
between World Omni Auto Receivables LLC, a Delaware limited liability
company and [owner trustee], as the owner trustee.
The Seller: The seller is World Omni Auto Receivables LLC, a wholly-owned,
special-purpose subsidiary of World Omni Financial Corp.
The address and telephone number of the seller is:
120 N.W. 12th Avenue
Deerfield Beach, Florida 33442
(954) 429-2200
Closing Date: On or about [_______________________]
Cutoff Date: [__________________________]
Indenture Trustee: [__________________________]
Owner Trustee: [__________________________]
TRUST ASSETS: The trust's primary source of funds to make payments of principal of and
interest on the notes will be the trust assets, which will include:
o a pool of retail installment sale contracts between dealers in
new and used automobiles and light trucks and retail obligors;
o the right to receive payments under the receivables after
specified cutoff dates;
o security interests in the financed vehicles;
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o the rights of the seller to receive any proceeds with respect to
the receivables from claims on physical damage and other
insurance policies covering the financed vehicles or the
obligors;
o [the reserve account]; and
o any and all proceeds of the foregoing.
The Receivables: The receivables that the seller will transfer to the trust will be
secured by new and used automobiles and light trucks including the
rights to all payments received with respect to the contracts after the
applicable cutoff date.
On the closing date, the trust will acquire receivables. For further
information about the characteristics of the receivables as of the
cutoff date, see "The Receivables Pool - The Receivables" in the
prospectus and "The Receivables Pool" in this prospectus supplement.
General characteristics of the receivables as of the cutoff date:
Initial Pool Balance:..............................$
Weighted Average APR...............................%
Weighted Average Remaining
Term to Maturity (months):.........................
Weighted Average Original Term
to Maturity (months):..............................
Latest Scheduled Maturity Date.....................
We refer you to "The Receivables Pool" in this prospectus supplement.
TITLE, REGISTRATION AND DENOMINATION OF World Omni Auto Receivables Trust 2000-[ ] will issue the following
OFFERED SECURITIES: securities:
o [ %] asset-backed notes, class A-1 in the aggregate original
principal amount of
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[$________];
o [ %] asset-backed notes, class A-2 in the aggregate original
principal amount of [$______];
o [ %] asset-backed notes, class A-3 in the aggregate original
principal amount of [$______]; and
o [ %] asset-backed notes, class A-4 in the aggregate original
principal amount of [$______].
The aggregate original principal amount of the notes will be
[$__________]. We will issue the notes in minimum denominations of
$1,000 and integral multiples of $1,000, in book entry form only,
through The Depository Trust Company. For more information, read
"Description of the Securities - Book-Entry Registration" in the
prospectus.
The trust will also issue certificates that represent interests in the
property of the trust that remains after full payment to you of interest
on and principal of the notes. This prospectus supplement and the
accompanying prospectus offer only the notes.
TERMS OF NOTES: The principal terms of the notes follow:
Payment Dates: The indenture trustee will make payments on the notes on the [__] day of
each [month] or, if the [__] day is not a business day, on the next
business day. The first payment date will be [_________________, 2000]
</TABLE>
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Interest: On each payment date, the indenture trustee will pay to the holders of
record of each class of notes (the noteholders as of the related record
date), [thirty (30) days] of interest at the interest rate with respect
to that class of notes on the outstanding principal amount of that class
of notes at the close of the preceding payment date. Interest on the
notes will be calculated on the basis of a [360 day year of twelve 30
day] months. On the initial payment date, the interest payable on each
class of notes will be based on the initial principal amount of each
class of notes and number of days from and including the closing date to
and including [ ], 2000. We refer you to "Description of the
Securities--Payments of Interest" in this prospectus supplement.
The indenture trustee will make all payments of interest to the
noteholders on a pro rata basis to the extent of available funds.
Principal: The indenture trustee will pay principal of the notes on each payment
date on the classes of notes in the following order:
o [first, on the class A-1 notes until their outstanding principal
amount equals zero;
o second, on the class A-2 notes until their outstanding principal
amount equals zero;
o third, on the class A-3 notes until their outstanding principal
amount equals zero; and
o fourth, on the class A-4 notes until their outstanding principal
amount equals zero].
All outstanding principal and interest with respect to a class of notes
will be payable in full on its final scheduled payment date. We refer
you to "Description of the Trust Documents--Distributions--Payments to
Noteholders" in this prospectus supplement.
Record Dates: The indenture trustee will make payments to holders of record of the
notes as of the close of business on the record date applicable to the
payment date. The record date for a payment date will be the [__]
calendar day of the month in which the payment date occurs.
</TABLE>
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SERVICING: After the sale of the receivables to the trust, World Omni Financial
Corp. will continue to service the receivables. World Omni Financial
Corp.'s responsibilities as servicer will include, among other things,
collection of payments, realization on the receivables and the financed
vehicles and monitoring the performance of the receivables. In return
for World Omni Financial Corp.'s services, the trust will pay a fee to
World Omni Financial Corp. out of the interest payments received by the
trust. We refer you to "Description of the Trust Documents-Servicing
Compensation" in this prospectus supplement.
PRIORITY OF PAYMENTS: On each payment date, funds available for distribution from the
receivables, net of specified trust expenses, will be distributed in the
following amounts and order of priority:
(1) to the servicer, the servicing fee and all unpaid servicing
fees;
(2) [to the noteholders of each class, pro rata, in accordance
with their interest entitlements; and
(3) to the noteholders of each class, sequentially, their
principal entitlements.]
We refer you to "Description of the Trust Documents--Distributions--
Payments to Noteholders" in this prospectus supplement.
Optional Redemption: The seller or the servicer may, at their option, redeem the outstanding
notes by purchasing all the receivables. The seller or the servicer may
only redeem the notes when the aggregate principal balance of the
receivables is equal to 10% or less of the initial pool balance. The
redemption price will at least equal the unpaid principal amount of the
notes, plus accrued and unpaid interest.
</TABLE>
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CREDIT ENHANCEMENT:
[Use of Excess Spread to Increase The aggregate cutoff date principal balance of the receivables which
Overcollateralization: aggregate $_____________ will exceed the $_____________ initial
aggregate principal amount of the notes by $____________, which is
approximately ____% of the initial principal amount of the notes.
Unless offset by losses of the receivables, the use of excess spread to
pay principal of the notes will cause the outstanding principal amount
of the notes to decrease faster than the principal balance of the
receivables decreases, thereby increasing overcollateralization and the
overcollateralization percentage.
Excess Spread: Excess spread is the excess of interest collections on the receivables
(exclusive of some amounts) over servicing fees and interest on the
notes. This amount will be used first to offset net losses on the
receivables, then, if necessary, to increase the reserve account to the
required amount and finally, in some circumstances, to release cash to
the seller].
[Reserve Account The initial amount in the reserve account will be $___________, which is
___ % of the original principal amount of the securities. The indenture
trustee will apply funds in the reserve account to make payments due on
the notes that are not covered by collections on the receivables. The
reserve account will be replenished to its required amount with excess
spread, if available.]
[Priority of Payments; Subordination On each payment date, the indenture trustee will apply the trust's
of Certificates: available funds first, to pay interest on the notes and second, to pay
the outstanding principal amount of the notes in the order described
herein. The subordination of payments on the certificates is intended
to decrease the likelihood that the trust will default in making payment
due on the notes.]
</TABLE>
S-9
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<S> <C>
[Tax Status: In the opinion of Cadwalader, Wickersham & Taft, for federal income tax
purposes the notes will be characterized as debt and the trust will not
be characterized as an association (or publicly traded partnership)
taxable as a corporation. In accepting a note, each holder of that note
will agree to treat the notes as indebtedness for federal income tax
purposes. We refer you to "Federal Income Tax Consequences" in the
prospectus and "Federal Income Tax Consequences" in this prospectus
supplement for additional information concerning the application of
federal tax laws to the trust and the notes.]
[ERISA Considerations: Subject to the considerations discussed under "ERISA Considerations",
the notes are eligible for purchase by pension, profit-sharing or other
employee benefit plans, as well as individual retirement accounts and
some types of Keogh Plans. By its acquisition of a note, each of these
entities is deemed to represent that its purchase and holding of a note
will not give rise to a non-exempt prohibited transaction]. We refer
you to "ERISA Considerations" in this prospectus supplement.
Ratings of the Notes: It is a condition of issuance that the notes be rated "______" (or its
equivalent) by at least two nationally recognized rating agencies. A
security rating is not a recommendation to buy, sell or hold securities
and may be revised or withdrawn at any time by the assigning rating
agency. We refer you to "Risk Factors--Ratings of the Notes" in this
prospectus supplement.
</TABLE>
RISK FACTORS
Prospective investors in the notes should consider the following
factors and the additional factors discussed under "Risk Factors" in the
prospectus:
<TABLE>
<S> <C>
The occurrence of default under the The trust will not have any significant assets or sources of funds to
indenture may result in insufficient make payments on the notes other than the receivables and the reserve
funds to make payments on your securities: account. You must rely for repayment of your notes upon payments on the
receivables and amounts, if any, in the reserve account. Although funds
in the reserve account may be available on each payment date to cover
shortfalls in distributions of interest and principal on the notes, the
amounts available in the reserve account are limited. If the reserve
account becomes
</TABLE>
S-10
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<S> <C>
depleted, the trust will depend solely on current collections on the
receivables to make payments on the notes.
Proceeds of the sale of receivables may If so directed by the holders of the requisite percentage of outstanding
not be sufficient to pay your securities notes of a series, following an acceleration of the notes upon an event
in full; failure to pay principal on your of default, the indenture trustee will sell the receivables owned by the
notes will not constitute an event of trust only in limited circumstances. However, there is no assurance
default until maturity. that the market value of those receivables will at any time be equal to
or greater than the aggregate principal amount of the notes. Therefore,
upon an event of default, there can be no assurance that sufficient
funds will be available to repay you in full. In addition, the amount
of principal required to be paid to the noteholders will generally be
limited to amounts available in the collection account (and the reserve
fund, if any). Therefore, the failure to pay principal of your notes
generally will not result in the occurrence of an event of default until
the final scheduled payment date for your notes.
Prepayment on receivables may cause Principal on each class of notes must be fully paid by the final
prepayments on securities: scheduled payment date for that class of notes. We have determined the
final scheduled payment date for each class of notes so that
distributions on the underlying receivables will be sufficient to retire
each such class on or before its final scheduled payment date. However,
because some prepayments of the receivables are likely and some
receivables have terms to maturity that are shorter than the term to
maturity assumed in calculating each class's final scheduled payment
date, the actual payment of any class of notes likely will occur
earlier, and could occur significantly earlier, than such class's final
scheduled payment date. Nevertheless, there can be no assurance that
the final distribution of principal of any or all classes of notes will
be earlier than such class's final scheduled payment date.
[The geographic concentration and Economic conditions in the states where obligors reside may affect
performance of the receivables may delinquencies, losses and prepayments on the receivables. The following
increase the risk of loss on your economic conditions may affect payments on the receivables:
investment:
o unemployment,
o interest rates,
o inflation rates, and
o consumer perceptions of the economy.
If a large number of obligors are located in a particular
</TABLE>
S-11
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<S> <C>
state, these conditions could increase the delinquency, credit loss or
repossession experience of the receivables. If there is a concentration
of obligors and receivables in particular states, any adverse economic
conditions in those states may affect the performance of the securities
more than if this concentration did not exist.
As of [ ,] World Omni Financial Corp.'s records indicate that the
billing addresses of the obligors of the receivables were in the
following states:
PERCENTAGE OF TOTAL
STATE PRINCIPAL BALANCE:
-------------------------- --------------------------
-------------------- [ ]%
-------------------- [ ]%
-------------------- [ ]%
-------------------- [ ]%
-------------------- [ ]%
We refer you to "The Receivables Pool" in this prospectus supplement.]
You may have difficulty selling your There will have been no secondary market for any series of your
securities and/or obtaining your desired securities prior to the related offering. The underwriters intend to
price due to the absence of a secondary make a secondary market for the securities, but are not obligated to do
market. so. We cannot assure you that a market will develop or, if it does
develop, that it will provide you with liquidity of investment or
continue for the life of your securities.
There have been times in the past when very few buyers of asset backed
securities existed and there may be similar times in the future. As a
result, you may be unable to obtain the price that you wish to receive
for your securities or you may suffer a loss on your investment.
</TABLE>
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FORMATION OF THE TRUST
General
The trust is a business trust formed under the laws of the State of
Delaware under a trust agreement. Before the sale and assignment of the trust
assets to the trust, the trust will have no assets or obligations or any
operating history. The trust will not engage in any business other than:
(1) acquiring, holding and managing the receivables, the other trust
assets and any proceeds from the receivables and other trust
assets;
(2) issuing and making payments on the securities; and
(3) engaging in other activities to accomplish the above.
The trust will initially be capitalized with equity (exclusive of the
amounts allocated in the reserve account) equal to $_______________, which is
the aggregate principal amount of the receivables as of the cutoff date less the
initial aggregate principal amount of the notes. The certificates evidence the
equity in the trust. The seller will hold the certificates or sell or otherwise
transfer them.
If the protection provided to the investment of the noteholders by the
reserve account is insufficient, the trust will look only to the obligors on the
receivables and the proceeds from the repossession and sale of financed vehicles
which secure defaulted receivables. In this event, some factors, such as the
trust's not having first priority perfected security interests in some of the
Financed Vehicles, may affect the trust's ability to realize on the collateral
securing the receivables. These factors may reduce the proceeds available to
noteholders with respect to the notes. We refer you to "Description of the Trust
Documents--Distributions--Allocations and Distributions" in this prospectus
supplement and "Certain Legal Aspects of the Receivables" in the prospectus.
Capitalization of the Trust
The following table illustrates the capitalization of the trust as of
the closing date, as if the issuance and sale of the notes had taken place on
such date:
[class A-1 notes]............................................. $ __________
[class A-2 notes]............................................. __________
[class A-3 notes]............................................. __________
[class A-4 notes]............................................. __________
certificates.................................................. __________
Total......................................................... ===============
S-13
<PAGE>
The Owner Trustee
[________________] is the owner trustee under the trust agreement.
[___________] is a Delaware banking corporation and its principal offices are
located at [________________]. The owner trustee will perform limited
administrative functions under the trust agreement.
The Indenture Trustee
[_____________________] is the indenture trustee under the indenture.
It is a national banking association and its principal offices are located at
[_____________________].
THE RECEIVABLES POOL
The pool of receivables (the receivables pool) purchased on the closing
date will have an aggregate outstanding principal balance of approximately
$[___________] as of the cutoff date. Each receivable is a simple interest
receivable. World Omni Financial Corp. purchased most of the receivables from
dealers in the ordinary course of business. Approximately [__%] of the
receivables were originated by World Omni Financial Corp. under a program where
World Omni Financial Corp. offers to obligors which lease vehicles from its
affiliates the option of financing the purchase of the leased vehicle when the
related lease expires. As of the cutoff date, the receivables meet the criteria
described in the prospectus under "The Receivables Pool." In addition, as of the
applicable cutoff date, each receivable:
o [is secured by a new or used automobile or light duty truck;
o was originated in the United States;
o provides for level monthly payments that fully amortize the amount
financed over its original term, subject to some exceptions;
o was originated on or prior to [_______];
o has an original term of [____] to [_____] months and has a
remaining term to maturity of not less than [___] months nor more
than [___] months;
o provides for the payment of a finance charge at a stated annual
percentage rate ("APR") ranging from [___]% to [___]%;
o shall not have a scheduled payment that is more than 30 days past
due;
o was not due, to the best knowledge of World Omni Financial Corp.,
from any obligor who is presently the subject of a bankruptcy
proceeding or is bankrupt or insolvent;
o was not secured by a financed vehicle that had been repossessed
without reinstatement; and
o has a scheduled maturity not later than [____________].]
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COMPOSITION OF THE RECEIVABLES POOL
Initial Pool Balance ...................................................$[ ]
Number of Receivables...................................................[ ]
Average Cutoff Date Principal Balance...................................$[ ]
Average Original Amount Financed........................................[ ]
Range of Original Amount Financed.....................................[ ]
Weighted Average APR of Receivables(1)..................................[ ]%
Range of APRs.........................................................[ ]
Weighted Average Remaining Maturity(1)..................................[ ]
Range of Remaining Maturities as of the Cutoff Date...................[ ]
- ---------------------
(1) By original principal balance as of the cutoff date.
Approximately [____]% of the aggregate cutoff date principal balance of
the receivables purchased on the closing date, constituting [____]% of the
number of the total receivables, represent new vehicles, and approximately
[_____]% of the aggregate cutoff date principal balance of the receivables
purchased on the closing date, constituting [____]% of the number of the total
receivables, represent used vehicles.
The geographic distribution and distribution by annual percentage rate
of the receivables conveyed to the trust on the closing date as of the cutoff
date are described in the following tables.
Geographic Distribution of the Receivables as of the Cutoff Date
<TABLE>
<CAPTION>
PERCENT OF
PERCENT OF INITIAL INITIAL
NUMBER OF NUMBER OF POOL POOL
STATE(1) RECEIVABLES RECEIVABLES(3) BALANCE BALANCE(3)
- -------------------------------------- ----------- -------------- ------- ----------
<S> <C> <C> <C> <C>
Alabama............................... % $ %
Florida...............................
Georgia...............................
North Carolina........................
South Carolina........................
All Others(2).........................
Total........................ 100% 100%
</TABLE>
- ---------------------
(1) Based on address of origination.
(2) No other state represents a percentage of the aggregate Principal Balance
as of the initial cutoff date in excess of ____ percent.
(3) Percentages may not add up to 100% because of rounding.
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Distribution of the Receivables by Annual Percentage Rate as of the Cutoff Date
<TABLE>
<CAPTION>
PERCENT OF
PERCENT OF INITIAL INITIAL
ANNUAL PERCENTAGE RATE RANGE NUMBER OF NUMBER OF POOL POOL
- ---------------------------------- RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
----------- -------------- ------- ----------
<S> <C> <C> <C> <C>
[----]% - [----]%..................... % $ %
[----]% - [----]%.....................
[----]% - [----]%.....................
[----]% - [----]%.....................
[----]% - [----]%.....................
[----]% - [----]%.....................
----------- -------------- ------- ----------
-------------- ------- ----------
Total 100.00% 100.00%
============== ======= ==========
</TABLE>
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(1) Percentages may not add up to 100% because of rounding.
S-16
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Delinquencies, Repossessions and Net Losses.
Set forth below is some information concerning World Omni Financial
Corp.'s experience with respect to its portfolio of new and used automobile and
light duty truck retail installment sale contracts similar to the receivables.
The data presented in the following tables are for illustrative
purposes only. There is no assurance that World Omni Financial Corp.'s
delinquency, credit loss and repossession experience with respect to automobile
and light duty truck installment sale contracts in the future, or the experience
of the trust with respect to the receivables, will be similar to that described
below. Losses and delinquencies are affected by, among other things, general and
regional economic conditions and the supply of and demand for automobiles and
light duty trucks.
Delinquency Experience
(Dollars in Thousands)
<TABLE>
<CAPTION>
1999 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Ending Number of Contracts................. 106,337 76,883 56,442 46,897
Percentage of Delinquent Contracts(1)(2)(3)
31-60 Days................................. 1.39% 1.82% 1.99% 2.69%
61-90 Days................................. 0.13% 0.16% 0.25% 0.23%
91 Days and Over........................... 0.02% 0.02% 0.06% 0.04%
----- ----- ----- -----
Total.......................... 1.54% 2.00% 2.30% 2.96%
</TABLE>
- ----------
(1) Delinquency figures reported exclude delinquent bankrupt contracts. As
of December 31, 1999, bankrupt contracts greater than 60 days past due
totaled 749.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
(3) As a percentage of the total number of contracts at period end.
Net Loss and Repossession Experience(1)
(Dollars in Thousands)
<TABLE>
<CAPTION>
1999 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Ending Net Receivables......................... $1,235,065 $818,488 $607,890 $475,410
Ending Number of Contracts..................... 106,337 76,883 56,442 46,897
Average Portfolio Outstanding During the Period $985,303 $758,566 $495,091 $427,851
Average Number of Contracts Outstanding During
the Period..................................... 88,807 72,772 50,210 42,949
Number of Repossessions........................ 1,335 1,300 1,178 1,181
Repossessions as a Percentage of Average
Number of Contracts Outstanding................ 1.50% 1.79% 2.35% 2.75%
Net Repossession Losses (1) (2)................ $5,223 $6,248 $6,293 $6,643
Net Losses as a Percentage of Average
Portfolio Outstanding.......................... 0.53% 0.82% 1.27% 1.55%
</TABLE>
- -----------------------------------------------
(1) Net losses equal the aggregate net principal balances of all contracts
determined to be uncollectable in the period plus accrued but unpaid
interest earned through the point of charge-off, less any recoveries.
(2) Includes charged-off amounts as well as repossession losses but does not
include expenses incurred to dispose of vehicles.
YIELD CONSIDERATIONS
All of the receivables can be prepaid at any time without charge. For
this purpose "prepayments" include prepayments in full, liquidations due to
default, as well as receipts of proceeds from physical damage, credit life and
credit accident and health insurance policies and some other receivables
repurchased for administrative reasons. A variety of economic, social, and other
factors may influence the rate of prepayments on the receivables. For example,
an obligor generally may not sell or transfer the Financed Vehicle securing a
S-17
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receivable without the consent of World Omni Financial Corp. Noteholders will
bear all reinvestment risk resulting from a faster or slower incidence of
prepayment of receivables. The exercise by the seller or servicer of its option
to purchase the receivables and redeem the notes under the conditions described
in "Description of the Securities--Optional Redemption" in this prospectus
supplement will also accelerate the payment of the notes.
POOL FACTORS AND OTHER INFORMATION
The pool factor with respect to any class of notes is a seven digit
decimal which the servicer will compute each month indicating the principal
balance of that class of notes as a fraction of the initial principal balance of
that class of notes. The pool factor will be 1.0000000 as of the closing date;
thereafter, the pool factor will decline to reflect reductions in the principal
balance of the applicable class of notes. Therefore, if you are a class A-1
noteholder, your share of the principal balance of the class A-1 notes is the
product of (1) the original denomination of your note and (2) the pool factor.
Under the indenture, the noteholders will receive monthly reports
concerning the payments received on the receivables, the pool factors and
various other items of information. The indenture trustee will furnish to the
noteholders of record during any calendar year information for tax reporting
purposes not later than the latest date permitted by law. We refer you to
"Description of the Trust Documents--Statements to Noteholders" in this
prospectus supplement.
USE OF PROCEEDS
The seller will use the net proceeds of the sale of the notes to
purchase the receivables from World Omni Financial Corp.
DESCRIPTION OF THE SECURITIES
General
The notes will be issued under the terms of an indenture between the
Issuer and the indenture trustee, and the certificates will be issued under the
terms of the trust agreement between the seller and the owner trustee. We have
filed forms of the indenture and the trust agreement as exhibits to the
Registration Statement.
Payments of Interest
Interest on the principal balances of the classes of the notes will
accrue at their respective per annum interest rates and will be payable to the
noteholders monthly on each payment date, commencing [__________]. Payments will
be made to the noteholders of record as of the day immediately preceding such
payment date or, if Definitive Securities are issued, as of the 15th day of the
preceding month. Interest on the outstanding principal amount of the notes will
accrue at the applicable interest rate during the interest accrual period (from
the closing date (in the case of the first payment date) or from the [fifteenth]
day of the month preceding the month of a payment date to and including the
[fourteenth] day of the month of
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the payment date). Interest on each class of the notes will be calculated on the
basis of a 360-day year consisting of twelve 30-day months. The indenture
trustee will generally apply the Total Distribution Amount remaining after the
payment of the servicing fee and any withdrawals from the reserve account to
make interest payments on the notes. We refer you to "Description of the Trust
Documents--Distributions--Payments to Noteholders" in this prospectus
supplement.
Interest payments to all classes of noteholders will have the same
priority. Under some circumstances, the amount available for interest payments
could be less than the amount of interest payable on the notes on any payment
date. In this instance each class of noteholders will receive its ratable share
(based upon the aggregate amount of interest due to such class of noteholders)
of the aggregate amount available to be distributed in respect of interest on
the notes.
Payments of Principal
The indenture trustee will make principal payments to the noteholders
on each payment date in an amount generally equal to the sum of (1) the Regular
Principal Distribution Amount plus (2) the Accelerated Principal Distribution
Amount. [The "Regular Principal Distribution Amount" with respect to any payment
date will generally equal the sum of principal payments received with respect to
the receivables during the calendar month (the "Collection Period") preceding
such payment date, plus the principal balances of defaulted receivables written
off in the related Collection Period. The "Accelerated Principal Distribution
Amount" with respect to any payment date will equal the portion, if any, of the
Total Distribution Amount for the related Collection Period that remains after
payment of (a) the servicing fee, (b) the noteholders' Interest Distributable
Amount, (c) the Regular Principal Distribution Amount, and (d) any required
deposits to the reserve account on such payment date. The indenture trustee will
make principal payments on the notes from the Total Distribution Amount, if any
remaining after the payment of the servicing fee and the noteholders' Interest
Distributable Amount. Amounts in the reserve account are also available to make
payments of the Regular Principal Distribution Amount. The indenture trustee
will make payments of any Accelerated Principal Distribution Amount from the
Total Distribution Amount, if any, remaining after required deposits to the
reserve account]. We refer you to "Description of the Trust
Documents--Distributions--Payments to Noteholders" in this prospectus
supplement.
On the Business Day immediately preceding each payment date (a
"Determination Date"), the indenture trustee shall determine the amount in the
Collection Account for the related Collection Period allocable to interest and
the amount allocable to principal on an actual basis. Payments to noteholders on
the following payment date will be based on this allocation. A "Business Day" is
a day other than a Saturday, a Sunday or a day on which banking institutions or
trust companies in the City of New York, Deerfield Beach, Florida or Mobile,
Alabama are authorized by law, regulation or executive order to be closed.
On each payment date, principal payments on the notes will be applied
in the following order of priority:
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(1) to the principal balance of the class A-1 notes until the
principal balance of the class A-1 notes is reduced to zero;
(2) to the principal balance of the class A-2 notes until the
principal balance of the class A-2 notes is reduced to zero;
(3) to the principal balance of the class A-3 notes until the
principal balance of the class A-3 notes is reduced to zero; and
(4) to the principal balance of the class A-4 notes until the
principal balance of the class A-4 notes is reduced to zero].
The principal balance of each class of notes, to the extent not
previously paid, will be due as described below:
o the principal balance of the class A-1 notes, to the extent not
previously paid, will be due on the [_____] payment date;
o the principal balance of the class A-2 notes, to the extent not
previously paid, will be due on the [_____] payment date;
o the principal balance of the class A-3 notes, to the extent not
previously paid, will be due on the [_____] payment date; and
o the principal balance of the class A-4 notes, to the extent not
previously paid, will be due on the [_____] payment date.
The actual date on which the aggregate outstanding principal amount of
any class of notes is paid in full may be earlier than the respective final
scheduled payment dates.
Optional Redemption
To avoid excessive administrative expense, the seller or the servicer
may at its option purchase all remaining receivables from the trust. The seller
or the servicer (or its successor) may exercise this repurchase option on or
after the last day of any month on or after which the aggregate principal
balance of the receivables is equal to 10% or less of the aggregate cutoff date
principal balance of receivables. The redemption price will at least equal the
aggregate of the unpaid principal amount of the notes plus accrued and unpaid
interest as of such last day. Exercise of this right will result in the early
retirement of the notes. Upon declaration of an optional redemption, the
indenture trustee will give written notice of termination to each noteholder of
record. The final distribution to any noteholder will be made only upon
surrender and cancellation of each noteholder's note at the office or agency of
the indenture trustee specified in the notice of termination.
REGISTRATION OF NOTES
Book Entry Registration
The notes will initially be represented by notes registered in the name
of Cede & Co. as nominee of The Depository Trust Company ("DTC"), and will only
be available in the form of
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book-entries on the records of DTC and participating members of DTC in
denominations of $1,000. DTC is a limited-purpose trust company organized under
the laws of the State of New York, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code, and a "clearing agency" registered under the provisions of Section 17A of
the Securities Exchange Act of 1934, as amended. DTC accepts securities for
deposit from its participating organizations ("Participants") and facilitates
the clearance and settlement of securities transactions between Participants
through electronic book-entry changes in accounts of Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks and trust companies and clearing
corporations and may include some other organizations. Indirect access to the
DTC system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly.
A person acquiring an interest in the notes (each, a "Note Owner") will
hold his or her interest through DTC, in the United States, or Clearstream
Banking, societe anonyme ("Clearstream") or the Euroclear System ("Euroclear"),
in Europe. Transfers within DTC, Clearstream or Euroclear, as the case may be,
will be in accordance with the usual rules and operating procedures of the
relevant system. Cross-market transfers between persons holding directly or
indirectly through DTC, on the one hand, and counterparties holding directly or
indirectly through Clearstream or Euroclear, on the other, will be effected in
DTC through Citibank, N.A. or Morgan Guaranty Trust Company of New York, the
relevant depositaries of Clearstream or Euroclear, respectively, and each a
participating member of DTC. We refer you to "Description of the
Securities--Book Entry Registration" in the prospectus.
If you are acquiring beneficial ownership interests in the notes, you
may hold the notes directly though DTC if you are a Participant, or you may hold
your interest indirectly through organizations which are Participants. Your
ownership of a book-entry note will be recorded on the records of the brokerage
firm, bank, thrift institution or other financial intermediary that maintains
your account for that purpose. In turn the entity's ownership of the book-entry
note will be recorded on the records of DTC (or of a participating firm that
acts as its agent, whose interest will in turn be recorded on the records of
DTC). We refer you to "Description of the Securities--Book-Entry Registration"
in the prospectus.
DESCRIPTION OF THE CERTIFICATES
[The trust will also issue the certificates with an aggregate initial
balance of $[_________]. The certificates will represent fractional undivided
interests in the trust and will be issued pursuant to the trust agreement. The
certificates are not being offered hereby and will initially be held by the
seller, which may thereafter sell the certificates. The certificates will not
bear interest. No principal will be paid on the certificates until the
outstanding principal balances of the notes have been paid in full.]
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DESCRIPTION OF THE TRUST DOCUMENTS
The following summary describes some terms of the trust documents which
are comprised of the purchase agreement, the sale and servicing agreement, the
indenture and the trust agreement. We have filed forms of the trust documents as
exhibits to the Registration Statement. We will file a copy of the final trust
documents with the Commission following the issuance of the securities. Because
this is a summary of the trust documents, it does not contain all the
information that may be important to you. You should read the trust documents in
their entirety if you require complete information regarding their contents.
Sale and Assignment of Receivables
On or before the closing date, the seller will purchase from World Omni
Financial Corp. under the purchase agreement, without recourse (except as
provided in the purchase agreement), World Omni Financial Corp.'s entire
interest in the receivables, together with World Omni Financial Corp.'s security
interests in the related financed vehicles. At the time of issuance of the
notes, the seller will sell and assign to the trust, without recourse, except as
provided in the sale and servicing agreement, its entire interest in the
receivables, together with its security interests in the financed vehicles. The
indenture trustee will, concurrently with such sale and assignment, execute,
authenticate, and deliver the notes to the seller in exchange for the
receivables. The seller will sell the notes to the underwriters. We refer you to
"Underwriting" in this prospectus supplement.
To assure uniform quality in servicing, both the receivables and the
servicer's own portfolio of automobile and light duty truck installment sale
contracts, as well as to reduce administrative costs, the indenture trustee will
appoint the servicer as custodian of the receivables and all documents related
thereto. The receivables will not be physically segregated from other automobile
and light duty truck retail installment sale contracts of the servicer, or those
which the servicer services for others, to reflect the transfer to the trust.
In the purchase agreement, World Omni Financial Corp. will make
representations and warranties to the seller concerning the receivables, as
described under "Receivables Pool" in the prospectus supplement. As of the last
day of the second (or, if World Omni Financial Corp. elects, the first) month
following the discovery by or notice to the seller and World Omni Financial
Corp. of a breach of any representation or warranty that materially and
adversely affects the interest of the trust or the indenture trustee, unless the
breach is cured, World Omni Financial Corp. will purchase such receivable from
the trust for the Purchase Amount. The repurchase obligation will constitute the
sole remedy available to the noteholders, the owner trustee or the indenture
trustee for any such uncured breach.
Trust Accounts
The indenture trustee will establish and maintain one or more accounts
(collectively, the "Collection Account") in the name of the indenture trustee on
behalf of the noteholders. Within two Business Days of receipt of funds, the
servicer will deposit collections into the Collection Account. The indenture
trustee will also establish and maintain one or more
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accounts, in the name of the indenture trustee on behalf of the noteholders,
from which it will make all distributions with respect to the notes
(collectively, the "Distribution Account").
Advances
[The servicer will make advances of interest] in respect of the
receivables.
Servicing Compensation and Payment of Expenses
The servicing fee for the servicer will be [__]% per annum of the Pool
Balance as of the first day of the related Collection Period (or, in the case of
the first distribution date, as of the initial Cutoff Date). The "Pool Balance"
will represent the aggregate principal balance of the receivables at the end of
a Collection Period, after giving effect to all payments received from obligors,
Purchase Amounts for that Collection Period, and all losses realized on
receivables liquidated during such Collection Period.
The servicing fee in respect of a Collection Period (together with any
portion of the servicing fee that remains unpaid from prior payment dates) will
be paid on the payment date following such Collection Period out of collections
for such Collection Period. The servicer may elect to waive the servicing fee
with respect to a related collection period as discussed in "Description of the
Trust Documents - Servicing Compensation" in the prospectus.
Distributions
Deposits to Distribution Account
On or before each payment date, the indenture trustee will deposit into
the Distribution Account all collections and other amounts on deposit in the
Collection Account constituting the Total Distribution Amount (net of the
servicing fee for such payment date and any previously unpaid servicing fees).
Allocations and Distributions
On each payment date, the servicer will instruct the indenture trustee
to make the following distributions, to the extent of the amount then on deposit
in the Distribution Account, in the following order of priority:
(1) allocate to the noteholders for distribution as described below,
from the Total Distribution Amount remaining after the deduction
of the unpaid servicing fees, the Noteholders' Interest
Distributable Amount;
(2) allocate to the noteholders for distribution as described below,
from the Total Distribution Amount remaining after the application
of clause (1) and the deduction of the unpaid servicing fees, the
Noteholders' Principal Distributable Amount;
(3) allocate to the reserve account, from the Total Distribution
Amount remaining after the application of clause (2) and the
deduction of the unpaid servicing fees, the excess, if any, of the
specified reserve amount over the amount then allocated to the
reserve account;
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(4) distribute to the certificateholders, from the Total Distribution
Amount remaining after the application of clause (3) and the
deduction of unpaid servicing fees and only after the notes have
been paid in full, until the certificate balance has been reduced
to zero; and
(5) distribute to the seller the remaining balance, if any.
For purposes of this prospectus supplement, the following terms shall have the
following meanings:
"Accelerated Principal Distribution Amount" means with respect
to any payment date, the portion, if any, of the Total Distribution
Amount for the related Collection Period that remains after payment of
(a) the servicing fee, (b) the Noteholders' Interest Distributable
Amount, (c) the Regular Principal Distribution Amount, and (d) the
amount, if any, required to be allocated to the reserve account on such
payment date.
"Interest Distribution Amount" means, generally, with respect
to any payment date, the sum of the following amounts with respect to
the preceding Collection Period:
o that portion of all collections on the receivables allocable to
interest;
o all proceeds of the liquidated receivables, net of expenses
incurred by the servicer in connection with such liquidation and
any amounts required by law to be remitted to the obligor on the
liquidated receivables ("Liquidation Proceeds"), in accordance
with the servicer's customary servicing procedures, and all
recoveries in respect of liquidated receivables which were written
off in prior Collection Periods;
o the Purchase Amount of each receivable that was repurchased by the
seller or purchased by the servicer under an obligation which
arose during the related Collection Period, to the extent
attributable to accrued interest thereon; and
o investment earnings on funds on deposit in the Collection Account.
"Noteholders' Distributable Amount" means, with respect to any
payment date, the sum of the Noteholders' Interest Distributable Amount
and the Noteholders' Principal Distributable Amount.
"Noteholders' Interest Carryover Shortfall" means, with
respect to any payment date, the excess of the Noteholders' Interest
Distributable Amount for the preceding payment date, over the amount in
respect of interest that was actually paid on the notes on such
preceding payment date, plus interest on the amount of interest due but
not paid to Noteholders on the preceding payment date, to the extent
permitted by law, at the respective interest rates borne by each class
of the notes for the related interest accrual period.
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"Noteholders' Interest Distributable Amount" means, with
respect to any payment date, the sum of the Noteholders' Monthly
Interest Distributable Amount for such payment date and the
Noteholders' Interest Carryover Shortfall for such payment date.
"Noteholders' Monthly Interest Distributable Amount" means,
with respect to any payment date, interest accrued for the related
interest accrual period on each class of notes at the respective
interest rate for such class on the outstanding principal balance of
the notes of such class on the immediately preceding payment date (or,
in the case of the first payment date, on the Closing Date), after
giving effect to all payments of principal to the Noteholders of such
class on or prior to such payment date.
"Noteholders' Monthly Principal Distributable Amount" means,
with respect to each payment date, the sum of (i) the Regular Principal
Distribution Amount and (ii) the Accelerated Principal Distribution
Amount.
"Noteholders' Principal Carryover Shortfall" means, as of the
close of any payment date, the excess of the Noteholders' Monthly
Principal Distributable Amount and any outstanding Noteholders'
Principal Carryover Shortfall from the preceding payment date over the
amount in respect of principal that is actually distributed to the
noteholders on such payment date.
"Noteholders' Principal Distributable Amount" means, with
respect to any payment date, the sum of the Noteholders' Monthly
Principal Distributable Amount for such payment date and the
Noteholders' Principal Carryover Shortfall as of the close of the
preceding payment date; provided, however, that the Noteholders'
Principal Distributable Amount shall not exceed the outstanding
principal balance of the notes; and provided, further, that the
Noteholders' Principal Distributable Amount on the final scheduled
payment date for each class of notes will equal at least the amount
that is necessary (after giving effect to other amounts to be deposited
in the Distribution Account on such payment date and allocable to
principal) to reduce the outstanding principal balance of the related
class of notes to zero.
"Realized Losses" means the excess of the principal balance of
any liquidated receivable over Liquidation Proceeds to the extent
allocable to principal.
"Regular Principal Distribution Amount" means, generally, with
respect to any payment date, the sum of the following amounts with
respect to the related Collection Period:
o that portion of all collections on the receivables allocable to
principal;
o all Liquidation Proceeds attributable to the principal amount of
receivables which became liquidated receivables during such
Collection Period in accordance with the servicer's customary
servicing procedures, plus the amount of Realized Losses with
respect to such liquidated receivables;
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o to the extent attributable to principal, the Purchase Amount
received with respect to each receivable repurchased by the seller
or purchased by the servicer under an obligation which arose
during the related Collection Period; and
o partial prepayments relating to refunds of extended warranty
protection plan costs or of physical damage, credit life or
disability insurance policy premiums, but only if such costs or
premiums were financed by the respective obligor as of the date of
the original contract.
The Regular Principal Distribution Amount is the reduction in the
aggregate principal balance of the receivables in a Collection Period
and will be determined on the related Determination Date on an actual
basis.
"Total Distribution Amount" for a payment date is the sum of
the Interest Distribution Amount and the Regular Principal Distribution
Amount (other than the portion attributable to Realized Losses).
Payments to Noteholders
On each payment date, all amounts allocated to the noteholders
will be generally paid in the following order of priority:
(i) to the applicable noteholders, accrued and unpaid interest
on the outstanding principal balance of the applicable class of notes
at the applicable interest rate;
(ii) the noteholders' Principal Distributable Amount in the
following order of priority:
(a) [to the class A-1 noteholders in reduction of
principal until the principal balance of the class A-1 notes
has been reduced to zero;
(b) to the class A-2 noteholders in reduction of
principal until the principal balance of the class A-2 notes
has been reduced to zero;
(c) to the class A-3 noteholders in reduction of
principal until the principal balance of the class A-3 notes
has been reduced to zero; and
(d) to the class A-4 noteholders in reduction of
principal until the principal balance of the class A-4 notes
has been reduced to zero.]
[Reserve Account
The reserve account will provide protection to the noteholders. The
seller will initially deposit into the reserve account a specified reserve
amount equal to an initial deposit on the closing date in cash or eligible
investments in the amount of $[_________], which is [__]% of the initial
principal balance of the securities. The trustee will deposit investment
earnings on
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funds in the reserve account, net of losses and investment expenses, into the
reserve account until the reserve account reaches the specified balance
required.
The indenture trustee will hold amounts allocated from time to time to
the reserve account for the benefit of noteholders. On each payment date the
indenture trustee will pay to the noteholders from the reserve account the
amount by which the Total Distribution Amount (after the payment of the
servicing fee) with respect to any Collection Period is less than the
Noteholders' Distributable Amount. On each payment date, the indenture trustee
will deposit into the reserve account up to the specified reserve amount to the
extent of the portion, if any, of the Total Distribution Amount remaining after
payment of the servicing fee and the payment of the Noteholders' Distributable
Amount.
If the amount allocated to the reserve account on any payment date
(after giving effect to all deposits therein or other withdrawals therefrom on
such payment date) is greater than the specified reserve amount for the related
payment date, the indenture trustee will generally distribute the excess amount
to the seller. [To the extent the seller elects, the seller may instruct the
indenture trustee to deposit such excess amounts in the Collection Account for
application as described in [__________]. The seller has no obligation to make
this election.] Upon this distribution, the noteholders will not have any rights
in, or claims to, such amounts. Subsequent to any reduction or withdrawal by any
rating agency of its rating of any class of notes, unless such rating has been
restored, the indenture trustee will pay any such excess to noteholders on each
payment date as an accelerated payment of principal.
After the payment in full, or the provision for such payment, of (i)
all accrued and unpaid interest on the notes and (ii) the outstanding principal
balance of the securities, the indenture trustee will distribute any remaining
funds in the reserve account, subject to some limitations, to the seller.
The subordination of the certificates and the reserve account are
intended to enhance the likelihood of receipt by noteholders of the full amount
of principal and interest due them and to decrease the likelihood that the
noteholders will experience losses. However, in some circumstances, the reserve
account could be depleted. If the amount required to be withdrawn from the
reserve account to cover shortfalls in collections on the receivables exceeds
the amount then allocated to the reserve account, noteholders could incur losses
or a temporary shortfall in the amounts distributed to the noteholders could
result, which could, in turn, increase the average lives of the notes.]
Statements to Noteholders
On each payment date, the indenture trustee will include with each
distribution to each noteholder of record as of the close of business on the
applicable record date a statement (prepared by the servicer) as described in
"Description of the Securities-Statements to Noteholders" in the prospectus.
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FEDERAL INCOME TAX CONSEQUENCES
General
Set forth below is a summary of certain United States federal income tax
considerations relevant to the beneficial owner of a note that holds the note as
a capital asset and, unless otherwise indicated below, is a U.S. Person (as
defined in the accompanying prospectus). This summary does not address special
tax rules which may apply to certain types of investors, and investors that hold
notes as part of an integrated investment. This summary supplements the
discussion contained in the accompanying prospectus under the heading "Federal
Income Tax Consequences," and supersedes that discussion to the extent that the
two discussions are not consistent. The authorities on which we based this
discussion are subject to change or differing interpretations, and any such
change or interpretation could apply retroactively. This discussion reflects the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), as well as regulations promulgated by the U.S. Department of Treasury.
You should consult your own tax advisors in determining the federal, state,
local and any other tax consequences of the purchase, ownership and disposition
of the notes.
Characterization of the Notes. There are no regulations, published rulings
or judicial decisions addressing the characterization for federal income tax
purposes of securities with terms that are substantially the same as those of
the notes. A basic premise of United States federal income tax law is that the
economic substance of a transaction generally will determine the federal income
tax consequences of such transaction. The determination of whether the economic
substance of a loan secured by an interest in property is instead a sale of a
beneficial ownership interest in such property has been made by the Internal
Revenue Service (the "IRS") and the courts on the basis of numerous factors
designed to determine whether the trust has relinquished (and the investor has
obtained) substantial incidents of ownership in such property. Among those
factors, the primary factors examined are whether the investor has the
opportunity to gain if the property increases in value, and has the risk of loss
if the property decreases in value. Based on an assessment of these factors, in
the opinion of Cadwalader, Wickersham & Taft, special tax counsel to the seller,
(i) the class [__] notes will be treated as indebtedness for federal income tax
purposes and not as an ownership interest in the receivables or an equity
interest in the trust and (ii) the class [ ] notes may either be treated as
indebtedness or as an equity interest in the trust for federal income tax
purposes. We refer you to "Federal Income Tax Consequences" in the accompanying
prospectus. Except as set forth below under "--Alternative Treatment of the
Class [ ] Notes," the remainder of this discussion assumes that the class [ ]
notes are debt for federal income tax purposes. Prospective investors should
consult their own tax advisors as to the characterization of the class [ ]
notes.
Classification of the Trust. In the opinion of Cadwalader, Wickersham &
Taft, special tax counsel to the seller, the trust will not be treated as an
association taxable as a corporation or a publicly traded partnership taxable as
a corporation for federal income tax purposes, but rather will be disregarded as
a separate entity and treated as a mere security device when there is a single
beneficial owner of the trust, or will be treated as a domestic partnership when
there are
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two or more beneficial owners of the trust, including the case if the class [ ]
notes are treated as equity interests in the trust.
Discount and Premium
For federal income tax reporting purposes, it is anticipated that the notes
will not be treated as having been issued with original issue discount. The
prepayment assumption that will be used in determining the rate of accrual of
original issue discount and of market discount and premium, if any, for federal
income tax purposes will be based on the assumption that subsequent to the date
of any determination the receivables will prepay at [______], and there will be
no extensions of maturity for any receivable. However, no representation is made
as to the rate, if any, at which the receivables will prepay.
The IRS has issued regulations under Sections 1271 and 1275 of the Code
generally addressing the treatment of debt instruments issued with original
issue discount. The original issue discount regulations and Section 1272(a)(6)
of the Code do not adequately address certain issues relevant to, or are not
applicable to, securities such as the notes. Prospective purchasers of the notes
are advised to consult with their tax advisors concerning the tax treatment of
such notes.
Certain classes of the notes may be treated for federal income tax purposes
as having been issued at a premium. Whether any holder of such a class of notes
will be treated as holding notes with amortizable bond premium will depend on
such noteholder's purchase price and the payments remaining to be made on such
note at the time of its acquisition by such noteholder. You should consult your
own tax advisors regarding the possibility of making an election to amortize
such premium on such classes of notes.
Gain or Loss on Disposition
If you sell a note, you must recognize gain or loss equal to the difference
between the amount realized from the sale and your adjusted basis in such note.
The adjusted basis generally will equal your cost of such note, increased by any
original issue discount included in your ordinary gross income with respect to
the note and reduced (but not below zero) by any payments on the note previously
received or accrued by you (other than qualified stated interest payments) and
any amortizable premium. Similarly, when you receive a principal payment with
respect to a note, you will recognize gain or loss equal to the difference
between the amount of the payment and the allocable portion of your adjusted
basis in the note. Such gain or loss will generally be a long-term capital gain
or loss if you held the note for more than one year.
Backup Withholding and Information Reporting
Payments of interest and principal, as well as payments of proceeds from
the sale of notes, may be subject to the "backup withholding tax" under Section
3406 of the Code at a rate of 31% if you fail to furnish to the trust certain
information, including your taxpayer identification number, or otherwise fail to
establish an exemption from such tax. Any amounts deducted and withheld from a
payment should be allowed as a credit against your federal
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income tax. Furthermore, certain penalties may be imposed by the IRS on a
recipient of payments that is required to supply information but that does not
do so in the proper manner.
We will report to noteholders and to the IRS for each calendar year the
amount of any "reportable payments" during such year and the amount of tax
withheld, if any, with respect to payments on the notes.
Withholding Regulations Effective December 31, 2000
On October 6, 1997, the Treasury Department issued regulations which make
certain modifications to the withholding rules for investors who are non-U.S.
Persons (as defined in the accompanying prospectus) and the backup withholding
and information reporting rules described above. The regulations attempt to
unify certification requirements and modify reliance standards. Such regulations
will generally be effective for payments made after December 31, 2000, subject
to certain transition rules. Non-U.S. Persons are urged to consult their tax
advisors regarding the effect of these regulations. We refer you to "--
Alternative Treatment of the Class [ ] Notes" below, concerning the possible
application of withholding tax with respect to class [ ] notes held by non-U.S.
Persons.
Alternative Treatment of the Class [ ] Notes
If the class [ ] notes are treated as equity (partnership) interests rather
than indebtedness, while the aggregate amount of income reportable by an
investor should not differ over the life of the obligation, the timing and
character of such income could differ significantly. It is possible that
payments on the class [ ] notes would be treated as "guaranteed payments" under
the Code to the extent of the amount of interest and any discount accrued, and a
return of capital as to any excess. To the extent payments are so characterized,
a class [ ] noteholder who is a U.S. Person would be subject to federal income
tax in substantially the same manner, except for timing and income
characterization differences, as if the class [ ] notes were treated as debt.
If a class [ ] noteholder's ownership of a class [ ] note is characterized
as an equity interest but payments thereon are not treated as "guaranteed
payments," it is unclear how its distributable share of partnership income would
be calculated. A class [ ] noteholder may be allocated a share of net income of
the partnership equal to the amount of interest and discount income that accrued
on the class [ ] notes for the applicable period. A class [ ] noteholder would
be subject to federal income taxes on such income even though it may not have
received an equivalent amount of cash from the partnership, for example, because
of defaults or delinquencies on the trust assets. The characterization of an
item of income or loss (e.g., as dividends, as interest, as rental income or as
capital gain or loss as opposed to ordinary income or loss) will usually be the
same for the class [ ] noteholder as it is for the partnership.
It is not known whether any of the receivables were issued with original
issue discount greater than a de minimis amount. If any of such trust assets
were in fact issued at greater than de minimis discount or are otherwise treated
as issued with original issue discount under the Treasury regulations, an amount
of income will be imputed to the trust with respect to such trust assets. In
general, aggregate amount of original issue discount imputed to the trust with
S-30
<PAGE>
respect to each such trust asset will be the excess of the "stated redemption
price at maturity" of such asset over its original issue price. The trust would
have to include original issue discount in income as interest over the term of
the respective trust asset possessing original issue discount under a constant
yield method. In general, original issue discount must be included in income in
advance of the receipt of cash representing that income. As indicated above,
class [ ] noteholders may be allocated items of income of the trust in the event
that such class [ ] noteholder's income is not treated as "guaranteed payments".
Such allocated income would include any original issue discount determined to
exist with respect to any of the trust assets. Each class [ ] noteholder should
consult its own tax adviser regarding the impact to it of the original issue
discount rules as applied to the trust and the impact of such with respect to
such class [ ] noteholders. Some receivables may not have been issued with
original issue discount, but, rather, may have been issued with "unstated
interest" as determined under Section 483 of the Code. In this event, such
unstated interest will be treated in a manner similar to original issue
discount.
Moreover, the purchase price paid by the trust for receivables may be
greater or less than the remaining principal balance of the receivables at the
time of purchase. If so, such trust assets will have been acquired at a premium
or discount, as the case may be. Accordingly, in a manner similar to original
issue discount, a class [ ] noteholder may be allocated a portion of such market
discount income or premium amortization in the event that such class [ ]
noteholder's income is not treated as "guaranteed payments". Each class [ ]
noteholder should consult its own tax adviser regarding the impact to it of the
market discount and premium rules as applied to the trust and the impact of such
with respect to such class [ ] noteholder.
A class [ ] noteholder will not be able to deduct its share of losses on
the trust assets (to the extent otherwise deductible under the Code) to the
extent that such losses exceed its adjusted basis in its partnership interest
(i.e., the class [ ] note). In addition, class [ ] noteholders who are
individuals or certain closely held corporations (and certain other taxpayers)
may be subject to other limitations on losses or deductions including the at
risk limitations, the passive loss rules, the limitation on the deduction of
investment interest, the limitation on deduction of non-business bad debts, and
the limitation on the deduction of certain miscellaneous itemized non-trade or
business expenses to the extent they do not, in the aggregate, exceed two
percent of the taxpayer's adjusted gross income. Such taxpayers should consult
their tax advisor concerning the various limitations on losses that may be
applicable to an investment in a class [ ] note.
All or a portion of any taxable income allocated to a class [ ] noteholder
that is a pension, profit-sharing or employee benefit plan or other tax-exempt
entity (including an individual retirement account) may constitute "unrelated
business taxable income" which generally would be taxable to the holder under
the Code.
If the class [ ] notes are treated as equity (partnership) interests for
income tax purposes, a class [ ] noteholder who is a non-U.S. Person may be
subject to withholding tax on its share of the income of the trust.
S-31
<PAGE>
In view of the foregoing treatment of individuals, certain closely held
corporations, tax-exempt entities and non-U.S. Persons, if the Class [ ] Notes
are treated as equity, the class [ ] notes may not be a suitable investment for
such persons, and such persons should consult their own tax advisors in this
regard.
[STATE AND LOCAL TAX CONSEQUENCES
A rule under the Florida Income Tax Code (the "Loan Rule") provides
that a "financial organization" earning or receiving interest from loans secured
by tangible property located in Florida will be deemed to be conducting business
or earning or receiving income in Florida, and will be subject to Florida
corporate income tax regardless of where the interest was received. A financial
organization is defined to include any bank, trust company, savings bank,
industrial bank, land bank, safe deposit company, private banker, savings and
loan association, credit union, cooperative bank, small loan company, sales
finance company or investment company. If the Loan Rule were to apply to the
notes, then a financial organization investing in the notes would be subject to
Florida corporate income tax on a portion of its income at a maximum rate of
5.5%, and would be required to file an income tax return in Florida, even if it
has no other Florida contacts. The seller believes the Loan Rule does not apply
to an investment in the notes or the receipt of interest on the notes by a
financial organization with no other Florida contacts. We urge you to consult
your own tax advisor as to the applicability of the Loan Rule to an investment
in the notes and your ability to offset any such Florida tax against any other
state tax liabilities.
The State of Florida imposes a value-based intangibles tax on January 1
of each year at the rate of $1.50 per $1,000 of value on certain intangibles
owned, managed or controlled by Florida domiciliaries or intangibles having a
business situs in Florida. On the last business day of each year, in an effort
to minimize the impact of this intangibles tax, the seller intends to transfer
99% of its right, title and interest in, to and under the certificates owned by
the seller as of such day, together with all of its duties, rights and
obligations under the sale and servicing agreement to World Omni Acceptance III
Corp., ("WOAC III"), a wholly-owned subsidiary of World Omni Financial Corp.,
located and managed outside the State of Florida (such transfer, the "Annual
Servicing Transfer"). In connection with such Annual Transfer, World Omni
Financial Corp. shall transfer all of its rights, obligations and duties under
the sale and servicing agreement to WOAC III. The trust will continue to
maintain its first priority perfected security interest in the receivables. Only
the seller's interest in the receivables, together with World Omni Financial
Corp.'s management and control authority and obligations, will be transferred to
WOAC III, to be held in escrow and returned to the seller and World Omni
Financial Corp., respectively, on the first business day of the following year.
This annual transfer is consistent with the Technical Assistance Advisement
95(C)2-021 issued by the Florida Department of Revenue, which holds that a
transfer of receivables to a wholly-owned subsidiary located outside the State
of Florida and having no contacts with the State of Florida was sufficient to
avoid the imposition of the intangibles tax on the receivables subject to such
tax. As additional protection, the trust will be indemnified by World Omni
Financial Corp. with respect to any liability for this intangibles tax. World
Omni Financial Corp. has agreed in the sale and servicing agreement not to
conduct any servicing activities during the period of the Annual Servicing
Transfer.
S-32
<PAGE>
The discussion above does not address the tax treatment of the trust,
the securities or the security owners under any state or local tax law other
than Florida law to the extent set forth above. Prospective investors are urged
to consult their own tax advisors regarding the local tax treatment of the trust
and the securities, and the consequences of purchase, ownership or disposition
of the securities under any state or local tax law, if applicable.
ERISA CONSIDERATIONS
[Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan within the meaning of Section 3(3)
of ERISA, as well as an individual retirement account, a Keogh plan and any
other plan within the meaning of Section 4975 of the Code (each a "Benefit
Plan"), from engaging in particular transactions with persons that are "parties
in interest" under ERISA or "disqualified persons" under the Code with respect
to such Benefit Plan. A violation of these "prohibited transaction" rules may
result in an excise tax or other penalties and liabilities under ERISA and the
Code for such persons or the fiduciaries of the Benefit Plan. In addition, Title
I of ERISA also requires fiduciaries of a Benefit Plan subject to ERISA to make
investments that are prudent, diversified and in accordance with the governing
plan documents.
Certain transactions involving the trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased notes if assets of the trust were deemed to be assets of the
Benefit Plan. Under a regulation issued by the United States Department of Labor
(the "Regulation"), the assets of the trust would be treated as plan assets of a
Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan
acquired an "equity interest" in the trust and none of the exceptions contained
in the Regulation was applicable. An equity interest is defined under the
Regulation as an interest other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features. Although there is little guidance on the subject, the seller believes
that, at the time of their issuance, the notes should be treated as indebtedness
of the trust without substantial equity features for purposes of the Regulation.
This determination is based in part upon the traditional debt features of the
notes, including the reasonable expectation of purchasers of notes that the
notes will be repaid when due, as well as the absence of conversion rights,
warrants and other typical equity features. The debt treatment of the notes for
ERISA purposes could change if the trust incurred losses].
[However, without regard to whether the notes are treated as an equity
interest for purposes of the Regulation, the acquisition or holding of notes by
or on behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if the trust, the seller, the servicer, the owner trustee or the
indenture trustee is or becomes a party in interest or a disqualified person
with respect to such Benefit Plan. Certain exemptions from the prohibited
transaction rules could be applicable to the purchase and holding of notes by a
Benefit Plan depending on the type and circumstances of the plan fiduciary
making the decision to acquire such notes. Included among these exemptions are:
Prohibited Transaction Class Exemption ("PTCE") 96-23, regarding transactions
effected by "in-house asset managers"; PTCE 95-60, regarding investments by
insurance company general accounts; PTCE 90-1, regarding
S-33
<PAGE>
investments by insurance company pooled separate accounts; PTCE 91-38, regarding
investments by bank collective investment funds; and PTCE 84-14, regarding
transactions effected by "qualified professional asset managers." By acquiring a
note, each initial purchaser, transferee and owner of a beneficial interest will
be deemed to represent that either (1) it is not acquiring the notes with the
assets of a Benefit Plan; or (2) the acquisition and holding of the notes will
not give rise to a nonexempt prohibited transaction under Section 406(a) of
ERISA or Section 4975 of the Code.]
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and some church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements; however, governmental plans may be
subject to comparable state law restrictions.
A plan fiduciary considering the purchase of notes should consult its
legal advisors regarding whether the assets of the trust would be considered
plan assets, the possibility of exemptive relief from the prohibited transaction
rules and other issues and their potential consequences.
UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement dated [_______________________, 2000] among World Omni
Financial Corp., the seller and the underwriters, the seller has agreed to sell
to the underwriters named below and each of the underwriters has severally
agreed to purchase, the principal amount of the offered notes described opposite
its name below:
S-34
<PAGE>
CLASS A-1 NOTES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C>
[ ]........................................................... $[ ]
[ ]........................................................... [ ]
[ ]........................................................... [ ]
[ ]........................................................... [ ]
---------------------
Total.................................................... $[ ]
=====================
</TABLE>
CLASS A-2 NOTES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C>
[ ]........................................................... $[ ]
[ ]........................................................... [ ]
[ ]........................................................... [ ]
[ ]........................................................... [ ]
---------------------
Total.................................................... $[ ]
=====================
</TABLE>
CLASS A-3 NOTES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C>
[ ]........................................................... $[ ]
[ ]........................................................... [ ]
[ ]........................................................... [ ]
[ ]........................................................... [ ]
---------------------
Total.................................................... $[ ]
=====================
</TABLE>
S-35
<PAGE>
CLASS A-4 NOTES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C>
[ ]........................................................... $[ ]
[ ]........................................................... [ ]
[ ]........................................................... [ ]
[ ]........................................................... [ ]
---------------------
Total.................................................... $[ ]
=====================
</TABLE>
The underwriters have advised the seller that they propose initially to
offer the offered notes to the public at the prices described herein, and to
some dealers at such prices less the initial concession not in excess of [____%
per class A-1 note, ____% per class A-2 note, ____% per class A-3 note and ____%
per class A-4 note.] The underwriters may allow and the related dealers may
reallow a concession not in excess of [____% per class A-1 note, ____% per class
A-2 note, ____% per class A-3 note and ____% per class A-4 note] to some other
dealers. After the initial public offering of the offered notes, the public
offering price and such concessions may be changed.
The underwriting agreement provides that the obligations of the
underwriters are subject to some conditions precedent and that the underwriters
will purchase all the notes offered hereby if any of such notes are purchased.
[Each underwriter has represented and agreed that (a) it has not
offered or sold, and will not offer to sell, any offered notes to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal agent)
for the purposes of their businesses or otherwise in circumstances that do not
constitute an offer to the public in the United Kingdom for the purposes of the
Public Offers of Securities Regulations 1995, (b) it has complied and will
comply with all applicable provisions of the Financial Services Act of 1986 of
Great Britain with respect to anything done by it in relation to the offered
notes in, from or otherwise involving the United Kingdom and (c) it has only
issued or passed on and will only issue or pass on in the United Kingdom any
document in connection with the issue of the offered notes to a person who is of
a kind described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom the document may
otherwise lawfully be issued or passed on.]
The notes are a new issue of securities with no established trading
market. World Omni Financial Corp. and the seller do not intend to apply for
listing of the notes on a national securities exchange. The underwriters have
advised World Omni Financial Corp. and the seller that they intend to act as
market makers for the notes. However, the underwriters are not obligated to do
so and may discontinue any market making at any time without notice.
Accordingly, no assurance can be given as to the liquidity of any trading market
for the notes.
S-36
<PAGE>
[In connection with the offering of the notes, the underwriters may
engage in transactions that stabilize, maintain or otherwise affect the market
price of the notes. Such transactions may include stabilization transactions
effected in accordance with Rule 104 of Regulation M, pursuant to which such
person may bid for or purchase the notes for the purpose of stabilizing its
market price. In addition, the underwriters may impose "penalty bids" whereby
they may reclaim from a dealer participating in the offering the selling
concession with respect to the notes that the dealer distributed in the offering
but subsequently purchased for the account of the underwriters in the open
market. Any of the transactions described in this paragraph may result in the
maintenance of the price of the notes at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph is required, and, if they are taken, may be discontinued at any time
without notice].
World Omni Financial Corp. and the seller have agreed to indemnify the
underwriters against some liabilities, including civil liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in respect of some liabilities, including civil liabilities under the
Securities Act.
[In the ordinary course of their respective businesses, the
underwriters and their affiliates have engaged and may engage in investment
banking and/or commercial banking transactions with World Omni Financial Corp.
and the seller and their affiliates]. We refer you to "Use of Proceeds" herein
and "Plan of Distribution" in the accompanying prospectus.
This prospectus supplement and the accompanying prospectus may be used
by the underwriters, affiliates of which have an ownership interest in, or
participate in banking transactions with, World Omni Financial Corp. and the
seller, in connection with offers and sales related to market making
transactions in the notes. The underwriters may act as principals or agents in
such transactions. Such sales will be made at prices related to prevailing
market prices at the time of the sale or otherwise.
LEGAL OPINIONS
Some legal matters relating to the securities will be passed upon for
the seller and the servicer by Cadwalader, Wickersham & Taft, New York, New
York. Some legal matters relating to Florida state tax laws will be passed upon
for the seller and the servicer by____________________________. Certain legal
matters relating to the notes will be passed upon for the underwriters by [ ].
S-37
<PAGE>
INDEX OF TERMS
Accelerated Principal Distribution Amount........19, 24
APR..................................................15
Benefit Plan.........................................33
Business Day.........................................19
Clearstream..........................................21
Collection Account...................................22
Collection Period....................................19
Determination Date...................................19
disqualified persons.................................33
Distribution Account.................................23
DTC..................................................20
equity interest......................................33
ERISA................................................33
ERISA Considerations.................................11
Euroclear............................................21
Interest Distribution Amount.........................24
Liquidation Proceeds.................................24
Note Owner...........................................21
Noteholders' Distributable Amount....................24
Noteholders' Interest Carryover Shortfall............24
Noteholders' Interest Distributable Amount...........24
Noteholders' Monthly Interest Distributable Amount...25
Noteholders' Monthly Principal Distributable Amount..25
Noteholders' Principal Carryover Shortfall...........25
Noteholders' Principal Distributable Amount..........25
Participants.........................................21
parties in interest..................................33
Pool Balance.........................................23
PTCE.................................................33
Realized Losses......................................25
Regular Principal Distribution Amount............19, 25
Regulation...........................................33
Total Distribution Amount............................26
S-38
<PAGE>
================================================================================
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus and
prospectus supplement. You must not rely on any unauthorized information or
representations. This prospectus and prospectus supplement is an offer to sell
only the securities offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus and prospectus supplement is current only as of its dates. Until
[__________], all dealers effecting transactions in the offered securities,
whether or not participating in this distribution, may be required to deliver a
prospectus supplement and prospectus. This is in addition to the dealers'
obligation to deliver a prospectus supplement and prospectus when acting as
underwriters and with respect to an unsold allotment or subscription.
================================================================================
================================================================================
$[ ]
(Approximate)
WORLD OMNI AUTO RECEIVABLES
LLC
seller
Auto Receivables Backed Notes Series
2000-_
------------------
PROSPECTUS SUPPLEMENT
------------------
[UNDERWRITER]
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
<TABLE>
<S> <C> <C>
Registration Fee..................................... $264.00
Printing and Engraving............................... *
Legal Fees and Expenses.............................. *
Accountants' Fees and Expenses....................... *
Rating Agency Fees................................... *
Miscellaneous Fees................................... *
Total..................................... $*
---------------
*To be filed by amendment.
</TABLE>
Item 15. Indemnification of Officers And Directors.
Section 18-108 of the Delaware Limited Liability Company Act (the
"Act") provides that, subject to the standards and restrictions, if any, as are
described in its limited liability company agreement, a limited liability
company may, and shall have the power to, indemnify and hold harmless any member
or manager or other person from and against any and all claims and demands
whatsoever.
The Registrant was formed under the laws of Delaware. The limited
liability company agreement of the Registrant provides, in effect, that, subject
to certain limited exceptions, it will indemnify its members, directors or
officers and may indemnify any employee or agent of the Registrant who was or is
a party or is threatened to be made a party to a threatened, pending, or
completed action, suit, or proceeding (whether civil, criminal, administrative,
or investigative and whether formal or informal) other than an action by or in
the right of the Registrant, where such person is a party because such person is
or was a member, director, officer, employee, or agent of the Registrant. The
Registrant's limited liability company agreement also provides that it will
generally indemnify its members and directors against expenses, including,
attorney fees, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by a director in connection with an action,
suit or proceeding relating to acts or omissions of that director regarding
specified items relating to bankruptcy and insolvency.
In general, the Registrant will indemnify its members, directors or
officers and may indemnify its employees or agents against expenses, including
attorneys fees, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with an action,
suit or proceeding. To the fullest extent permitted by law, the Registrant will
also indemnify such member, director or officer and may indemnify such employee
or agent if the person acted in good faith and did not engage in willful
misconduct or
<PAGE>
gross negligence. With respect to a criminal action or proceeding, the person
must have had no reasonable cause to believe his misconduct was unlawful. Unless
ordered by a court, certain indemnifications shall be made by the Registrant
only as it authorizes in the specific case after (1) determining that the
indemnification is proper under the circumstances because the person to be
indemnified has met the applicable standard of conduct and (2) evaluating the
reasonableness of the expenses and of the amounts paid in settlement. This
determination and evaluation shall be made by a majority vote of the
disinterested members or, if there is only one member, by that member. However,
no indemnification shall be provided to any member, director, officer, employee,
or agent of the Registrant for or in connection with (1) the receipt of a
financial benefit to which the person is not entitled; (2) voting for or
assenting to a distribution to members in violation of the limited liability
company agreement or the Delaware Limited Liability Company Act; (3) a knowing
violation of law; or (4) acts or omissions of such person constituting willful
misconduct or gross negligence. To the extent that a member, director, officer,
employee, or agent of the Registrant has been successful on the merits or
otherwise in defense of an action, suit, or proceeding or in defense of any
claim, issue, or other matter in such action, suit or proceeding, such person
shall be indemnified against actual and reasonable expenses, including
reasonable attorney fees, incurred by such person in connection with the action,
suit, proceeding and any action, suit or proceeding brought to enforce such
mandatory indemnification.
In addition, no Member, director or officer of the Registrant shall be
liable to the Registrant or any other person who has an interest in the
Registrant for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such member, director or officer in good faith
on behalf of the Registrant and in a manner reasonably believed to be within the
scope of the authority conferred on such member, director or officer by the
limited liability company agreement of the Registrant, except that a member,
director or officer shall be liable for any such loss, damage or claim incurred
by reason of such member's, director's or officer's willful misconduct or gross
negligence.
Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
The Registrant also maintains insurance providing for payment, subject
to certain exceptions, on behalf of officers, directors and managers of the
Registrant and its subsidiaries of money damages incurred as a result of legal
actions instituted against them in their capacities as such officers, directors
or managers (whether or not such person could be indemnified against such
expense, liability or loss under the Delaware Limited Liability Company Act).
Each underwriting agreement will provide that the underwriter will
indemnify the Registrant against specified liabilities, including liabilities
under the Securities Act of 1933.
II-2
<PAGE>
Item 16. Exhibits and Financial Statements.
(a) Exhibits
1.1 Form of Underwriting Agreement*
3.1 Limited Liability Company Agreement of Registrant
4.1 Form of Trust Agreement and exhibits thereto*
4.2 Form of Indenture and exhibits thereto*
4.3 Form of Pooling and Servicing Agreement*
5.1 Opinion of Cadwalader, Wickersham & Taft with respect to
legality*
8.1 Opinion of Cadwalader, Wickersham & Taft with respect to
tax matters (incorporated in Exhibit 5.1)*
10.1 Form of Sale and Servicing Agreement*
10.2 Form of Purchase Agreement*
23.1 Consent of Cadwalader, Wickersham & Taft (incorporated
in Exhibit 5.1)*
24.1 Power of Attorney (included on page II-6)
------------------
*To be filed by amendment.
(b) Financial Statements
All financial statements, schedules and historical financial
information have been omitted as they are not applicable.
Item 17. Undertakings
The Registrant hereby undertakes:
(a) To file during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended (the "Securities Act"), each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(d) That for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual reports pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein,
II-3
<PAGE>
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(e) To provide to the Underwriters at the closing specified in the
Underwriting Agreements certificates in such denominations and registered in
such names as required by the Underwriters to provide prompt delivery to each
purchaser.
(f) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, that the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission (the "Commission") such indemnification is against public policy as
expressed in the Securities 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 question whether
such indemnification by it is against public policy as expressed in the
securities Act and will be governed by the final adjudication of such issue.
(g) That for purposes of determining any liability under the Securities
Act, 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.
(h) That for the purpose of determining any liability under the
Securities Act, 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.
(i) To file an application for the purpose of determining the
eligibility of the trustee to act under subsection (a) of Section 310 of the
trust Indenture Act in accordance with the rules and regulations prescribed by
the Commission under Section 305(b)(2) of the trust Indenture Act.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3, and reasonably believes that the
security rating requirement contained in Transaction Requirement B.5. of Form
S-3 will be met by the time of the sale of the securities registered hereunder
and has duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized in the City of Deerfield Beach, State
of Florida, on April 20, 2000.
WORLD OMNI AUTO RECEIVABLES LLC
By: /s/ A. Tucker Allen
-----------------------------------
Name: A. Tucker Allen
Title: Treasurer
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<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints A. Tucker Allen his true and lawful
attorney-in-fact and agent, with full power of substitution and re-substitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent full power and authority to do and
perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming said attorney-in-fact and agent or his substitutes or
substitute may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ A. Tucker Allen Treasurer
- ---------------------------------------
A. Tucker Allen
/s/ Louis R. Feagles President and Director
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Louis R. Feagles
/s/ Colin W. Brown Director
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Colin W. Brown
/s/ Jeffrey B. Shapiro Director
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Jeffrey B. Shapiro
/s/ Christopher C. Wheeler Director
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Christopher C. Wheeler
/s/ James R. Foster Director
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James R. Foster
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<PAGE>
EXHIBIT INDEX
1.1 Form of Underwriting Agreement*
3.1 Limited Liability Company Agreement of Registrant
4.1 Form of Trust Agreement and exhibits thereto*
4.2 Form of Indenture and exhibits thereto*
4.3 Form of Pooling and Servicing Agreement*
5.1 Opinion of Cadwalader, Wickersham & Taft with respect to legality*
8.1 Opinion of Cadwalader, Wickersham & Taft with respect to tax matters
(incorporated in Exhibit 5.1)*
10.1 Form of Sale and Servicing Agreement*
10.2 Form of Purchase Agreement*
23.1 Consent of Cadwalader, Wickersham & Taft (incorporated in Exhibit 5.1)*
24.1 Power of Attorney (included on page II-6)
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*To be filed by amendment.
Exhibit 3.1
LIMITED LIABILITY COMPANY AGREEMENT
OF
WORLD OMNI AUTO RECEIVABLES LLC
A Delaware Limited Liability Company
THIS LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") is
executed as of the 20th day of April, 2000, by the undersigned, the sole member,
to continue the Company (as defined below) under the laws of the State of
Delaware for the purposes and upon the terms and conditions hereinafter set
forth. The Company, the Independent Directors and the Springing Member (each as
defined below) join in the execution of this Agreement so as to be bound by this
Agreement.
World Omni Financial Corp., as the sole member (the "Member"), by
execution of this Agreement, hereby continues the Company pursuant to and in
accordance with the Delaware Limited Liability Company Act (6 Del.C. ss.18-101,
et seq.), as amended from time to time, and hereby desires that this Agreement
be, and hereby is, the sole governing document of the Company, superseding all
prior agreements and hereby agrees as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Whenever used in this Agreement the
following terms shall have the meanings respectively assigned to them in this
Article I unless otherwise expressly provided herein or unless the context
otherwise requires:
Act: "Act" shall mean the Delaware Limited Liability Company Act, 6
Del. C.ss.ss. 18-101 et seq., as amended from time to time.
Affiliate: "Affiliate" of another Person shall mean any Person
directly or indirectly controlling, controlled by, or under common control with,
such other person.
Agreed Value: "Agreed Value" shall mean the fair market value of
Contributed Property or services rendered as agreed to by the contributing
Member and the Company, using such reasonable method of valuation as they may
adopt.
Agreement: "Agreement" shall mean this Limited Liability Company
Agreement of the Company as the same may be amended or restated from time to
time in accordance with its terms.
<PAGE>
Assignee: "Assignee" shall mean a Person who has acquired a share of
the Company's profits and losses and such rights to receive distributions from
the Company as are assigned to that Person, but who is not a Substitute Member.
Bankrupt Member: "Bankrupt Member" shall mean any member (a) that (i)
makes an assignment for the benefit of creditors; (ii) files a voluntary
petition in bankruptcy; (iii) is adjudged bankrupt or insolvent, or has entered
against such Member an order for relief, in any bankruptcy or insolvency
proceedings; (iv) files a petition or answer seeking for the Member any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation; (v) files an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against the Member in any proceeding of the type described in
subclauses (i) through (iv) of this clause (a); or (vi) seeks, consents to, or
acquiesces in the appointment of a trustee, receiver or liquidator of the Member
or of all or any substantial part of the Member's properties; or (b) against
which, a proceeding seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any statute, law
or regulation has been commenced and one hundred twenty (120) days have expired
without dismissal thereof or with respect to which, without the Member's consent
or acquiescence, a trustee, receiver or liquidator of the Member or of all or
any substantial part of the Member's properties has been appointed and ninety
(90) days have expired without the appointment having been vacated or stayed, or
ninety (90) days have expired after the date of expiration of a stay, if the
appointment has not previously been vacated. The foregoing is intended to and
shall supersede and replace the events of bankruptcy described in Sections
18-304(a) and (b) of the Act.
Bankruptcy: "Bankruptcy" shall mean, with respect to any Person, if
such Person (i) makes an assignment for the benefit of creditors, (ii) files a
voluntary petition in bankruptcy, (iii) is adjudged a bankrupt or insolvent, or
has entered against it an order for relief, in any bankruptcy or insolvency
proceedings, (iv) files a petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation or similar
relief under any statute, law or regulation, (v) file an answer or other
pleading admitting or failing to contest the material allegations of a petition
filed against it in any proceeding of this nature, (vi) seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator of the Person
or of all or any substantial part of its properties, or (vii) if 120 days after
the commencement of any proceeding against the Person seeking reorganization,
arrangement, composition, readjustment, liquidation or similar relief under any
statute, law or regulation, if the proceeding has not been dismissed, or if
within 90 days after the appointment without such Person's consent or
acquiescence of a trustee, receiver or liquidator of such Person or of all or
any substantial part of its properties, the appointment is not vacated or
stayed, or within 90 days after the expiration of any such stay, the appointment
is not vacated. The foregoing definition of "Bankruptcy" is intended to replace
and shall supersede and replace the definition of "Bankruptcy" set forth in
Sections 18-101(1) and 18-304 of the Act.
Capital Contribution: "Capital Contribution" shall mean the amount in
cash contributed and the Agreed Value of other property contributed by each
Member (or its
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predecessors in interest) to the capital of the Company for such Member's
Membership Interest.
Cash Flow: "Cash Flow" for any period shall mean operating cash flow,
which shall be defined according to generally accepted accounting principles,
before deduction for depreciation, cost recovery or other noncash expenses of
the Company during that period.
Code: "Code" shall mean the Internal Revenue Code of 1986, as amended.
Company: "Company" shall mean World Omni Auto Receivables LLC, the
Delaware limited liability company formed pursuant to the Act and this
Agreement.
Contributed Property: "Contributed Property" shall mean each Member's
interest in property or other consideration (excluding services and cash)
contributed to the Company by such Member.
Director: "Director" has the meaning set forth in Section 7.2.
Dispose, Disposing or Disposition: "Dispose," "Disposing" or
"Disposition" shall mean a sale, assignment, transfer, exchange, mortgage,
pledge, grant of a security interest, or other disposition or encumbrance
(including, without limitation, by operation of law), or any act thereof.
Independent Director: "Independent Director" shall mean a Director of
the Company who shall not at the present, at anytime during the preceding five
years nor while serving as Director be (i) a director (with the exception of
serving as the Independent Director of the Company), officer, partner, member,
attorney or counsel, employee or former employee of the Company or any
Affiliate, (ii) a holder (directly or indirectly) of any voting securities of
any Affiliate, (iii) a customer, supplier or other person who derives any of its
purchases or revenues from its activities with the Company, (iv) a natural
person related to any such director, officer, partner, member, attorney or
counsel, employee or former employee, customer, supplier, or holder (directly or
indirectly) of any voting securities of any Affiliate. For purposes of this
definition only, "Affiliate" shall mean any entity other than the Company (but
excluding any similarly organized special purpose finance subsidiary of an
Affiliate) (i) which owns beneficially, directly or indirectly, more than 10% of
the outstanding Membership Interests of the Company, (ii) which is in control of
the Company, as currently defined under ss. 230.405 of the Rules and Regulations
of the Securities and Exchange Commission, 17 C.F.R. ss. 230.405, (iii) of which
10% or more of the outstanding equity interests is owned beneficially, directly
or indirectly, by any entity described in clause (i) or (ii) above, or (iv)
which is controlled by an entity described in clause (i) or (ii) above, as
currently defined under ss. 230.405 of the rules and Regulations of the
Securities and Exchange Commission, 17 C.F.R. ss. 230.405.
IRS: "IRS" shall mean the Internal Revenue Service.
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<PAGE>
Managing Member: "Managing Member" shall mean the Member and any
successor Managing Member appointed pursuant to this Agreement, each in its
capacity as a managing member of the Company.
Member: "Member" shall mean World Omni Financial Corp. in its capacity
as a managing member of the Company, and includes any Person admitted as an
additional member of the Company or a Substitute Member of the Company pursuant
to the provisions of this Agreement, each in its capacity as a member of the
Company.
Membership Interest: "Membership Interest" shall mean the limited
liability company interest of the Member in the Company, including, without
limitation, rights in the capital of the Company, rights to receive
distributions (liquidating or otherwise) and allocations of profits and losses.
The Member's Membership Interest shall be expressed as a percentage which shall
equal the ratio that the value of the Capital Contributions made by such Member
bears to the Capital Contributions of all members. The initial Member's initial
Membership Interest shall be one hundred percent (100%).
Person: "Person" shall have the meaning given that term in Section
18-101(12) of the Act.
Rating Agency: "Rating Agency" shall mean any nationally-recognized
statistical rating organization that provides a rating at the request of the
Company with respect to Securities.
Securities: "Securities" shall mean any certificate, notes or other
securities issued by a Trust.
Springing Member: "Springing Member" has the meaning set forth in
Section 8.1(b).
Substitute Member: "Substitute Member" shall mean any Person to whom
the Membership Interest in the Company has been transferred and who was not the
Member immediately prior to such transfer and who has been admitted to the
Company as the Member pursuant to and in accordance with the provisions of
Article IV of this Agreement.
Trust: "Trust" means any trust formed by the Company.
ARTICLE II
ORGANIZATION
Section 2.1. Formation. The Member hereby executes this Agreement for
the purpose of setting forth the rights and obligations of the Member, the
Springing Member and the Independent Directors.
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<PAGE>
Section 2.2. Name. The name of the limited liability company continued
hereby is World Omni Auto Receivables LLC.
Section 2.3. Certificate of Formation; Foreign Qualification. Jon A.
Brilliant, as an authorized person, within the meaning of the Act, caused the
execution, delivery and filing of the Certificate of Formation of the Company
(the "Certificate") in the office of the Secretary of State of the State of
Delaware, in accordance with the Act on April 13, 1999. Immediately following
such filing, the Managing Member is hereby designated as an authorized person,
within the meaning of the Act, to execute, deliver and file, or to cause the
execution, delivery and filing of, all certificates (and any amendments and/or
restatements thereof) required or permitted by the Act to be filed in the office
of the Secretary of State of the State of Delaware. Prior to the Company's
conducting business in any jurisdiction other than the State of Delaware, the
Managing Member of the Company shall cause the Company to comply, to the extent
procedures are available and those matters are reasonably within the control of
the Managing Member, with all requirements necessary to qualify the Company as a
foreign limited liability company in that jurisdiction. At the request of the
Managing Member of the Company, each Member shall execute, acknowledge, swear
to, and deliver all certificates and other instruments conforming with this
Agreement that are necessary or appropriate to qualify, continue and terminate
the qualification of the Company as a foreign limited liability company in all
such jurisdictions in which the Company may conduct business.
Section 2.4. No State Law Partnership; Liability to Third Parties;
Federal Taxation. The Member intends that the Company not be a partnership
(including, without limitation, a limited partnership) or joint venture, and
that no Member be a partner or joint venturer of any other Member, for any
purpose including federal and state tax purposes, and that this Agreement not be
construed to suggest otherwise. The Member, on behalf of the Company, will elect
for the Company to be a nonentity for federal tax purposes. Except as otherwise
specifically provided in the Act, no Member shall be liable for the debts,
obligations or liabilities of the Company or any other Member, including under a
judgment, decree or order of a court.
ARTICLE III
PURPOSES AND POWERS, PRINCIPAL OFFICE, REGISTERED
AGENT, PERIOD OF DURATION AND MEMBER LIST
Section 3.1. Purposes and Powers. The Company has been formed solely
for the following purposes:
(a) purchasing or otherwise acquiring from time to time all
right, title and interest in and to installment sale or lease contracts or
promissory notes arising out of or relating to the purchase or lease of motor
vehicles, monies due thereunder, the motor vehicles financed thereby or security
interests therein, proceeds from claims on insurance policies
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<PAGE>
related thereto, liquidation proceeds thereof and related rights and other
property appurtenant thereto and proceeds of any of the foregoing (collectively,
"Assets");
(b) acquiring, owning, holding, servicing, selling, assigning,
pledging, granting security interests in, and otherwise dealing with the Assets,
collateral securing the Assets, related insurance policies, agreements with
motor vehicle dealers or lessors or other originators or servicers of the Assets
and any proceeds or further rights associated with any of the foregoing;
(c) forming Trusts and transferring from time to time the
Assets, or interests therein, to Trusts pursuant to one or more sale and
servicing agreements, trust agreements, pooling and servicing agreements or
other agreements and executing and delivering purchase agreements,
administration agreements, custodial agreements, and any other agreement
(collectively, the "Securitization Agreements"), which may be required or
advisable to effect issuances and sales of Securities;
(d) authorizing, selling, delivering and acquiring the
Securities;
(e) holding and enjoying all of the rights and privileges of
any subordinate or residual certificates issued under Securitization Agreements,
and selling and delivering any interests for a purchase price determined under
fair and commercially reasonable terms;
(f) preparing, executing and filing with the Securities
Exchange Commission a registration statement, including a prospectus and forms
of prospectus supplements relating to Securities;
(g) preparing private placement memorandums relating to
Securities to be offered and sold privately;
(h) performing its obligations under each Securitization
Agreement to which it is a party; and
(i) engaging in any activity and exercising any powers
permitted to limited liability companies organized under the Act that are
incidental to and necessary, suitable or convenient for the accomplishment of
the foregoing.
Section 3.2. Principal Office. The initial principal office of the
Company is located at 120 N.W. 12th Avenue, Deerfield Beach, FL 33442. The
principal office of the Company may be relocated from time to time by
determination of the Managing Member.
Section 3.3. Registered Office; Registered Agent. The address of the
registered office of the Company shall be c/o The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County
Delaware, 19801 and the registered agent for service of process on the Company
in the State of Delaware shall be The Corporation Trust Company at such address.
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Section 3.4. Period of Duration. The term of the Company shall
continue in perpetuity, unless the Company is earlier dissolved pursuant to law
or the provisions of this Agreement.
ARTICLE IV
MEMBERSHIP AND DISPOSITIONS OF INTERESTS
Section 4.1. Members. The name and the mailing address of the initial
Member are as follows:
Name Address
---- -------
World Omni Financial Corp. 120 N.W. 12th Avenue
Deerfield Beach, FL 33442
Attn: Corporate Treasurer
Section 4.2. Elimination of Preemptive Rights. No Member shall be
entitled as such, as a matter of right, to subscribe for or purchase interests
in the Company of any class, now or hereafter authorized.
Section 4.3. Resignation. Except as otherwise provided in this
Agreement, a Member does not have the right or power to resign from the Company
as a Member.
Section 4.4. Restriction on the Disposition of the Membership
Interest.
(a) Subject to compliance with all applicable provisions of
this Section 4.4, any Member may Dispose of all or any part of its Membership
Interest. The Person to whom such Disposition is made shall be an Assignee of
such interest but shall not be a Substitute Member unless admitted as a
Substitute Member in accordance with Section 4.4(b).
(b) The Person to whom a Disposition is made as described in
Section 4.4(a) shall have the right to become a Substitute Member only if (i)
the Member making such Disposition grants the transferee the right to be a
Substitute Member (which grant (subject to the following clause (ii)) is hereby
permitted) and (ii) such admission as a Substitute Member is consented to by all
of the Members and all members of the Board of Directors (as hereinafter
defined), which consent may not be unreasonably withheld.
(c) The Company shall not recognize for any purpose any
purported Disposition of all or part of the Member's Membership Interest or any
right or interest appertaining thereto unless and until the Company has received
a document (i) executed by both the Member effecting the Disposition and the
Person acquiring such Membership Interest or part thereof, (ii) including the
notice address of any Person to be admitted to the Company
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as a Substitute Member and such Person's agreement to be bound by this Agreement
in respect of the Membership Interest or part thereof being obtained, (iii)
setting forth the Membership Interest of the parties to the Disposition after
the Disposition, (iv) containing a warranty and representation that the
Disposition was made in accordance with this Agreement and all applicable laws
and regulations, (v) delivering an acceptable nonconsolidation opinion to the
holder of the Mortgage Loan and to the applicable rating agencies concerning the
Company, the Person acquiring such Membership and/or their respective owners,
and (vi) the applicable rating agencies confirm that the transfer will not
result in a qualification, withdrawal or downgrade of any securities ratings.
Each Disposition and, if applicable, admission complying with the provisions of
this Section 4.4 is effective as of the date of the document described in this
Section 4.4(c), but only if the other requirements of this Section 4.4 have been
met.
Section 4.5. Bankrupt Member. A Member shall not cease to be a Member
as a result of such Member becoming a Bankrupt Member and, upon the occurrence
of such event, the Company shall continue without dissolution.
Section 4.6. Personal Representative. Upon the occurrence of any event
that causes the Member to cease to be a member (other than the assignment by the
Member of all its interest in the Company pursuant to Section 4.4 and the
simultaneous admission of the assignee as a Substitute Member and continuation
of the Company without dissolution) or the last remaining member to cease to be
a member of the Company, to the fullest extent permitted by law, the personal
representative of the last remaining member is hereby authorized to, and shall,
within 90 days after the occurrence of the event that terminated the continued
membership of the last remaining member in the Company, agree in writing (i) to
continue the Company and (ii) to the admission of the personal representative or
its nominee or designee, as the case may be, as the Substitute Member, effective
as of the occurrence of the event that terminated the continued membership of
the Member in the Company, and thereafter all references in this Agreement to
the last remaining member shall be deemed to refer to such Substitute Member.
ARTICLE V
CAPITAL CONTRIBUTIONS
Section 5.1. Admission and Initial Capital Contributions. World Omni
Financial Corp. has been admitted as the initial Member of the Company. The
Member has contributed $1000.00, in cash, and no other property, to the Company
and may contribute in the future any additional capital deemed necessary by the
Managing Member, in its sole discretion, for the operation of the Company. No
other Person shall be admitted as an additional member of the Company without
the approval of the Member and the unanimous approvals of all members of the
Board of Directors, including, without limitation, the affirmative vote of each
of the Independent Directors.
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Section 5.2. Additional Capital; Adjustment of Membership Interests.
Except as specifically set forth elsewhere in this Agreement, no Member shall be
required to contribute capital to the company in excess of such Member's initial
Capital Contribution. The Membership Interests of the Members shall be adjusted
to reflect (i) additional capital contributed to the Company by one or more
Members, (ii) the transfer of Membership Interests, or (iii) the withdrawal of a
Member. As of the time of an event specified in the immediately preceding
sentence, the Membership Interest of the Members may be adjusted by the Managing
Member, in its discretion, to reflect the relative Capital Accounts of the
Members after giving effect to any additional capital contributed to, or amounts
distributed by, the Company, as the case may be, and any appreciation or
depreciation in the fair market value of the Company's property.
Section 5.3. Return of Contributions. A Member is not entitled to
demand the return of any part of its Capital Contribution or to payment of
interest in respect of either its Capital Account or its Capital Contribution.
Except as otherwise expressly set forth in this Agreement, neither the Company
nor any Member has any obligation to return the Capital Contribution of a
Member.
ARTICLE VI
ACCOUNTING AND DISTRIBUTION
Section 6.1. Books; Fiscal Year; Accounting Terms.
(a) The books of the Company shall be kept on the accrual
basis and in accordance with generally accepted accounting principles
consistently applied.
(b) The fiscal year of the Company for financial and tax
reporting purposes shall end on December 31 of each year.
Section 6.2. Distributions of Cash Flow. From time to time, the
Managing Member shall determine to what extent (if any) there exists sufficient
Cash Flow, after taking into account such working capital, capital expenditures
and debt service reserves as it deems necessary, to permit a distribution of
Cash Flow to the Members. Any such distribution shall be made to the Members
proportionately in accordance with their Membership Interests and shall be
subject to Section 18-607 of the Act and other applicable law.
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ARTICLE VII
MANAGEMENT, LIABILITY OF MEMBERS,
RIGHTS TO OBTAIN INFORMATION
Section 7.1. Managing Member. Except as otherwise specifically
provided in this Agreement, the Managing Member shall have the authority to, and
shall, conduct the affairs of the Company.
Section 7.2. Board of Directors. The Company shall have a Board of
Managers which shall be designated as the Company's "Board of Directors" and
each member of the Board of Directors shall be designated as a "Director." All
Company powers shall be by or under the authority of, and the business and
affairs of the Company managed under the direction of, its Board of Directors.
The Board of Directors shall also have such other authority set forth in this
Agreement. The Directors are not "managers" within the meaning of the Act. The
Board of Directors in place prior to the execution of this Agreement shall
continue as the Board of Directors of the Company. For purposes of voting, the
Member shall have a total of three votes and the Independent Directors shall
each have one vote. Members of the Board of Directors may be appointed and
removed from time to time by the Managing Member, in its sole discretion,
provided, however, that the Company shall at all times have at least two
Independent Directors. The Board of Directors shall hold meetings, at such times
and places to be agreed upon by a majority of the Board of Directors.
Section 7.3. Action by Directors. (a) Except as set forth in
Subsection (d) of this Section, any action required by this Agreement to be
taken by the Directors shall require the agreement of not less than a majority
of the Directors.
(b) Anything elsewhere in this Agreement or in the Certificate
to the contrary notwithstanding, for so long as any Securities which are
assigned a rating by a Rating Agency remain outstanding, no Member shall
approve, nor shall the Company undertake (except as provided in the
Securitization Agreements): (i) the incurrence or assumption on behalf of the
Company, directly or indirectly, of any indebtedness; or (ii) the grant of a
security interest of any nature whatsoever in the Company's assets.
(c) Anything elsewhere in this Agreement or in the Certificate
to the contrary notwithstanding, to the fullest extent permitted by law, no
Member shall cause or permit the Company to, nor shall the Company (for so long
as any Securities which are assigned a rating by a Rating Agency remain
outstanding): (i) engage in any dissolution, liquidation, consolidation or
merger (with or into any other business entity) or, except as provided in
Section 3.1, sell all or substantially all of its assets; (ii) engage in any
business activity not described in Section 3 above; or (iii) amend, modify,
waive or terminate this Agreement or the Certificate (except as otherwise
expressly provided in this Agreement).
(d) The Company may take the following actions only with the
affirmative
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vote of the Member and unanimous affirmative vote of all members of the Board of
Directors, including, without limitation, the affirmative vote of each of the
Independent Directors; provided, however, that the Board of Directors may not
vote on, or authorize the taking of, any of the following actions, unless there
are two Independent Directors then serving in such capacity:
(i) make an assignment for the benefit of creditors;
(ii) file a voluntary petition in bankruptcy;
(iii) file a petition or answer seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation;
(iv) file an answer or other pleading admitting or
failing to contest the material allegations of a petition filed
against the Company in any proceeding of the type described in
subclauses (i) through (iii) of this Subsection (d);
(v) seek, consent to, or acquiesce in the appointment
of a trustee, receiver or liquidator of the Company or of all or any
substantial part of the Company's properties;
(vi) voluntarily dissolve and wind up, or consolidate
or merge with or into another entity or sell all or substantially all
of the assets of the Company;
(vii) engage in any business activity not set forth
in Section 3.1 of this Agreement; and
(viii) to the fullest extent permitted by law, take
any action that would cause a Trust to: (a) dissolve or liquidate, in
whole or in part, or institute proceedings to be adjudicated bankrupt
or insolvent; (b) consent to the institution of bankruptcy or
insolvency proceedings against it; (c) file a petition seeking, or
consent to, reorganization or relief under any applicable Federal or
state law relating to bankruptcy; (d) consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of it or a substantial part of its property; (e)
make a general assignment for the benefit of creditors; (f) admit in
writing its inability to pay debts generally as they become; or (g)
take any action in furtherance of the actions set forth in clauses (a)
through (f) above.
(e) The Company may not amend, alter or repeal the definition
of Independent Director, Section 3.1, Section 4.4, Section 7.2, Section 7.3,
Section 8.1, Section 9.1 or Section 11.1 without the affirmative vote of the
Member and the unanimous affirmative vote of all members of the Board of
Directors, including, without limitation, the affirmative vote of each of the
Independent Directors and such additional approvals or consents, if any, as
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may be required under the Securitization Agreements.
Except as may be specifically required by applicable law, no
member of the Board of Directors shall be guilty of breaching any fiduciary duty
to any Member by refusing to consent to any of the listed actions in subsections
(d) or (e) of this Section 7.3.
(f) In the event of the insolvency of the Company and with
regard to any action contemplated by subsection (d) or (e) above, no Independent
Director will owe a fiduciary duty to any Person who holds a Membership Interest
(except as may be specifically required by applicable law), but any fiduciary
duty of such Independent Director with regard to such action shall be owed
instead to the creditors of the Company. No Independent Director shall serve as
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company, any Affiliate of the Company, or a substantial part of
their respective property.
(f) To the extent consistent with applicable law, when acting
on matters subject to the vote of the Board of Directors, the Board of
Directors, including the interests of the creditors as well as the members of
the Company.
Section 7.4. Officers. (a) The Company shall have an officer
designated as the Company's president (the "President") who shall be appointed
from time to time by the Managing Member. The President shall be the chief
operating officer of the Company. The President of the Company is hereby
delegated the power, authority and responsibility of the day-to-day management,
administrative, financial and implementive acts of the Company's business. The
President of the Company shall have the right and power to bind the Company and
to make the final determination on questions relative to the usual and customary
daily business decisions, affairs and acts of the Company. Other primary
management functions of the Company shall be assigned by the Managing Member.
(b) The Company shall also have officers designated as vice
presidents ("Vice Presidents") who shall be appointed from time to time by the
Managing Member. The Vice Presidents shall have such powers and duties as may
from time to time be assigned to them by the Managing Member or the President.
At the request of the President, or in the case of his absence or disability,
the Vice President designated by the President (or in the absence of such
designation, the Vice President designated by the Managing Member) shall perform
all the duties of the President and when so acting, shall have all the powers of
the President.
(c) The Managing Member may appoint such other officers as it
may deem advisable from time to time. Each officer of the Company shall hold
office at the pleasure of the Managing Member, and the Managing Member may
remove any officer at any time, with or without cause. If appointed by the
Managing Member, the officers shall have the duties assigned to them by the
Managing Member.
Section 7.5. Indemnification.
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(a) General. Except as otherwise provided in this Section 7.5,
and to the fullest extent permitted by applicable law, the Company shall
indemnify the Member and any Director or officer and may indemnify any employee
or agent of the Company who was or is a party or is threatened to be made a
party to a threatened, pending, or completed action, suit, or proceeding
(whether civil, criminal, administrative, or investigative and whether formal or
informal) other than an action by or in the right of the Company, where such
Person is a party because such Person is or was a Member, Director, officer,
employee, or agent of the Company. Except as otherwise provided in this Section
7.5, and to the fullest extent permitted by applicable law, the Company shall
indemnify its Member and Directors against expenses, including, attorney fees,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by a Director in connection with an action, suit or
proceeding relating to acts or omissions of that Director regarding the items
set forth in Section 7.3(c) of this Agreement.
(b) Permissive Indemnification. Except as otherwise provided
in this Section 7.5, and to the fullest extent permitted by applicable law, the
Company shall indemnify such Member, Director or officer and may indemnify such
employee or agent against expenses, including attorneys fees, judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with the action, suit or proceeding. To the fullest
extent permitted by law, the Company shall indemnify such Member, Director or
officer and may indemnify such employee or agent if the Person acted in good
faith and did not engage in willful misconduct or gross negligence. With respect
to a criminal action or proceeding, the Person must have had no reasonable cause
to believe such Person's misconduct was unlawful. Unless ordered by a court, any
indemnification permitted under this Section 7.5(b) shall be made by the Company
only as the Company authorizes in the specific case after (i) determining that
the indemnification is proper under the circumstances because the person to be
indemnified has met the applicable standard of conduct and (ii) evaluating the
reasonableness of the expenses and of the amounts paid in settlement. This
determination and evaluation shall be made by a majority vote of the Members who
are not parties or threatened to be made parties to the action, suit or
proceeding or, if there is only one Member, by that Member. However, no
indemnification shall be provided to any Member, Director, officer, employee, or
agent of the Company for or in connection with (i) the receipt of a financial
benefit to which the person is not entitled; (ii) voting for or assenting to a
distribution to Members in violation of this Agreement or the Act; (iii) a
knowing violation of law; or (iv) acts or omissions of such Person constituting
willful misconduct or gross negligence.
(c) Mandatory Indemnification. To the extent that a Member,
Director, officer, employee, or agent of the Company has been successful on the
merits or otherwise in defense of an action, suit, or proceeding described in
Section 7.5(a) or in defense of any claim, issue, or other matter in such
action, suit or proceeding, such person shall be indemnified against actual and
reasonable expenses, including reasonable attorney fees, incurred by such person
in connection with the action, suit, proceeding and any action, suit or
proceeding brought to enforce such mandatory indemnification.
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Section 7.6. Exculpation; Duties.
(a) No Member, Director or officer of the Company shall be
liable to the Company or any other Person who has an interest in the Company for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Member, Director or officer in good faith on behalf of the
Company and in a manner reasonably believed to be within the scope of the
authority conferred on such Member, Director or officer by this Agreement,
except that a Member, Director or officer shall be liable for any such loss,
damage or claim incurred by reason of such Member's, Director's or officer's
willful misconduct or gross negligence.
(b) To the extent that at law or in equity, the Managing
Member or a Director, officer, employee or agent of the Company (each, an
"Indemnified Person") has duties (including fiduciary duties) and liabilities
relating thereto to the Company or to any Member, any such Indemnified Person
acting under this Agreement shall not be liable to the Company or to any Member
for its good faith reliance on the provisions of this Agreement. The provisions
of this Agreement, to the extent that they restrict the duties and liabilities
of an Indemnified Person otherwise existing at law or in equity, are agreed by
the Members to replace such other duties and liabilities of such Indemnified
Person.
(c) Whenever in this Agreement the Managing Member is
permitted or required to make a decision (i) in its "sole discretion,"
"discretion" or under a grant of similar authority or latitude, the Managing
Member shall be entitled to consider only such interests and factors as it
desires, including its own interests, and shall have no duty or obligation to
give any consideration to any interest of or factors affecting the Company or
any other Member, or (ii) in its "good faith" or under another expressed
standard, the Managing Member shall act under such express standard and shall
not be subject to any other or different standards imposed by this Agreement or
any other agreement contemplated herein or by relevant provisions of law or in
equity or otherwise.
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ARTICLE VIII
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY
Section 8.1. Dissolution.
(a) The Company shall be dissolved and its affairs wound up
only upon (i) the written consent of all the Members and all members of the
Board of Directors, including, without limitation, the Independent Directors or
(ii) the entry of a decree of judicial dissolution under Section 18-802 of the
Act. The Company shall not be dissolved as a result of there no longer being any
Members of the Company if the Company is continued in accordance with Section
4.7 of this Agreement and Section 18-801(a)(4) of the Act. Notwithstanding
anything in this Agreement to the contrary, and to the fullest extent permitted
by applicable law, the Company shall not be dissolved as long as any Securities
which are assigned a rating by a Rating Agency are outstanding.
(b) So long as any Securities which are assigned a rating by a
Rating Agency are outstanding, the Member shall cause the Company to have at all
times, one person who shall automatically become a member having no economic
interest in the Company (the "Springing Member"). Upon the dissolution of the
Member or upon the occurrence of any event that causes the Member to cease to be
a member of the Company (other than upon an assignment by the Member of all its
interest in the Company pursuant to Section 4.4 and the simultaneous admission
of the assignee as a Substitute Member and continuation of the Company without
dissolution), the Springing Member shall, without any further act or vote being
necessary and simultaneously with the Member ceasing to be a member of the
Company, automatically be admitted to the Company as a member having no economic
interest and the economic interest in the LLC shall pass to the recipient of the
assets of the single member in dissolution. The Springing Member shall have the
powers, rights and duties of a member and shall continue the Company without
dissolution. In order to implement such admission of the Springing Member, the
Springing Member has executed a counterpart to this Agreement as of the date
hereof. No Springing Member may resign from the Company or transfer its rights
as Springing Member unless (i) a successor Springing Member has been admitted to
the Company as Springing Member by executing a counterpart to this Agreement;
provided, however, the Springing Member shall automatically cease to be a member
of the Company upon the admission to the Company of a Substitute Member.
Section 8.2. Liquidation and Termination. On dissolution of the
Company, the Managing Member shall appoint one or more Persons, which appointee
or appointees may include itself, to act as a liquidator. The liquidator shall
proceed diligently to wind up the affairs of the Company and make final
distributions as provided herein and in the Act. The costs of liquidation shall
be borne as a Company expense. Until final distribution, the liquidator shall
continue to operate the Company properties with all of the power and authority
of the Managing Member. A reasonable time shall be allowed for the orderly
liquidation of the assets of the Company and the discharge of liabilities to
creditors so as to enable the liquidator to minimize any losses resulting from
liquidation. The liquidator, as promptly as
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possible after dissolution and again after final liquidation, shall cause a
proper accounting to be made by a nationally recognized firm of certified public
accountants of the Company's assets, liabilities, and operations through the
last day of the calendar month in which the dissolution occurs or the final
liquidation is completed, as applicable, and shall apply the proceeds of
liquidation as set forth in the remaining sections of this Article VIII.
Section 8.3. Payment of Debts. The assets shall first be applied to
the satisfaction of the liabilities of the Company (including any loans or
advances that may have been made by Members to the Company and the expenses of
liquidation).
Section 8.4. Remaining Distribution. The remaining assets shall then
be distributed to the Member in accordance with the Member's positive capital
account balances.
Section 8.5. Reserve. Notwithstanding anything to the contrary in
Section 8.4, the liquidator may retain such amount as it deems necessary as a
reserve for any contingent, conditional or unmatured liabilities or obligations
of the Company, which reserve, after the passage of a reasonable period of time
as determined by the liquidator, shall be distributed in accordance with this
Article VIII.
Section 8.6. Final Accounting. Each of the Members shall be furnished
with a statement prepared by the Company's certified public accountants, which
shall set forth the assets and liabilities of the Company as of the date of the
complete liquidation. Upon compliance by the liquidator with the foregoing
distribution plan, the liquidator shall execute and cause to be filed a
Certificate of Cancellation and any and all other documents necessary with
respect to termination and cancellation of the Company under the Act. The
existence of the Company as a separate legal entity shall continue until the
cancellation of its Certificate of Formation.
ARTICLE IX
AMENDMENTS
Section 9.1. Authority to Amend. Subject to Section 7.3, this
Agreement may only be amended with approval of the Managing Member and the
majority vote of the members of the full Board of Directors and such additional
approvals or consents, if any, as may be required under the Securitization
Agreements. The Managing Member shall provide prior written notice of any
proposed amendment to each Rating Agency then rating any Security that remains
outstanding, but only if such rating initially was provided at the request of
the Company, any Trust or an affiliate thereof.
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ARTICLE X
POWER OF ATTORNEY
Section 10.1. Power. Each member irrevocably constitutes and appoints
the Managing Member as his true and lawful attorney in his name, place and stead
to make, execute, swear to, acknowledge, deliver and file:
(a) Any certificates or other instruments which may be
required to be filed by the Company under the laws of the State of Delaware or
of any other state or jurisdiction in which the Managing Member shall deem it
advisable;
(b) Any documents, certificates or other instruments,
including but not limited to, any and all amendments and modifications of this
Agreement or of the instruments described in Subsection 10.1(a) which may be
required or deemed desirable by the Managing Member to effectuate the provisions
of any part of this Agreement, and, by way of extension and not in limitation,
to do all such other things as shall be necessary to continue and to carry on
the business of the Company; and
(c) All documents, certificates or other instruments which may
be required to effectuate the dissolution and termination of the Company, to the
extent such dissolution and termination is authorized hereby. The power of
attorney granted hereby shall not constitute a waiver of, or be used to avoid,
the rights of the Members to approve certain amendments to this Agreement
pursuant to Subsection 9.1 or be used in any other manner inconsistent with the
status of the Company as a limited liability company or inconsistent with the
provisions of this Agreement.
Section 10.2. Survival of Power. It is expressly intended by each
Member that the foregoing power of attorney is coupled with an interest, is
irrevocable and shall survive the death, retirement or adjudication of
incompetency of such Member. The foregoing power of attorney shall survive the
delivery of an assignment by the Member of its entire interest in the Company,
except that where an assignee of such entire interest has become a Substitute
Member, then the foregoing power of attorney of the assignor Member shall
survive the delivery of such assignment for the sole purpose of enabling the
Managing Member to execute, acknowledge and file any and all instruments
necessary to effectuate such substitution.
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ARTICLE XI
SEPARATE LEGAL ENTITY
Section 11.1. Separate Legal Entity. Anything elsewhere in
this Agreement or in the Certificate to the contrary notwithstanding, for so
long as any Securities which are assigned a rating by a Rating Agency remain
outstanding, the Company covenants that:
(a) It shall not enter into any contractual obligation with
any Affiliate of the Company or the Managing Member, any constituent party of
the Company or any shareholder of the Managing Member, except upon terms and
conditions that are intrinsically fair and substantially similar to those that
would be available on an arm's-length and commercially reasonable basis with a
Person other than any such Affiliate, constituent party or shareholder.
(b) It shall: (i) maintain and prepare financial reports and
financial statements showing its assets and liabilities separate and apart from
those of any other person or entity and will not have its assets listed on the
financial statement of any other entity; (ii) maintain its books, records and
bank accounts separate from those of its Affiliates, any constituent party and
any other Person; and (iii) not permit any Affiliate or constituent party
independent access to its bank accounts.
(c) It shall not commingle any of the funds and other assets
of the Company with those of any Affiliate or constituent party or any other
Person and shall hold all of its assets in its own name.
(d) It shall conduct its own business in its own name.
(e) It is and will remain solvent and shall pay its own debts,
liabilities and expenses (including employment and overhead expenses) only out
of its own assets as the same shall become due.
(f) It has done, or caused to be done, and shall do, all
things necessary to observe limited liability company formalities, as
applicable, and other organizational formalities, and preserve its existence,
and it shall not, nor will it permit any constituent party to, amend, modify or
otherwise change the Certificate or this Agreement in a manner which would
adversely affect the existence of the Company as a single purpose entity.
(g) It shall pay the salaries of its own employees from its
own funds and maintain a sufficient number of employees in light of its
contemplated business operations.
(h) It shall compensate each of its consultants and agents
from its own funds for services provided to it and pay from its own assets all
obligations of any kind incurred.
(i) It does not, and shall not, guarantee, become obligated
for, or hold itself or its credit out to be responsible for or available to
satisfy, the debts or obligations of any other Person or the decisions or
actions respecting the daily business or affairs of any other Person (except as
the Member of the Company may be liable under the Act).
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(j) It shall not acquire obligations or securities of any
Affiliate or any of the Members. It shall not buy or hold any evidence of
indebtedness issued by any other Person (other than cash and investment-grade
securities).
(k) It shall allocate fairly and reasonably the cost of: (i)
any overhead expenses shared with any Member, Affiliate or with any Affiliate of
any Member; and (ii) any services (such as asset management, legal and
accounting) that are provided jointly to the Company and one or more Affiliates.
(l) It shall maintain and utilize separate stationery,
invoices and checks bearing its own name and allocate separate office space
(which may be a separately identified area in office space shared with one or
more Affiliates) and maintain a separate sign in the office directory (if
applicable) of the Company.
(m) It has not made any loans or advances to, or pledged its
assets (except as provided in the Securitization Agreements) for the benefit of,
and shall not make any loans or advances to, or pledge its assets (except as
provided in the Securitization Agreements) for the benefit of, any Person,
including, without limitation, any Affiliate, constituent party, or any
Affiliate of any constituent party.
(n) It shall, at all times, hold itself out to the public as a
legal entity separate and distinct from any other Person and shall correct any
known misunderstanding regarding its separate identity.
(o) It shall not identify itself as a division of any other
Person.
(p) It shall maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations.
(q) It has and shall maintain its assets in such a manner that
it will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any Affiliate or constituent party, any
guarantor, or any Affiliate of any constituent party or guarantor, or any other
Person.
(r) It shall at all times cause there to be at least two duly
appointed Independent Directors.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Method of Giving Consent. Any consent of the Member
required by this Agreement may be given by a written consent, given by the
consenting Member and
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received by the Person soliciting such consent. Any consent of a member of the
Board of Directors required by this Agreement may be given by a written consent
given by the consenting member of the Board of Directors and received by the
Person soliciting such consent.
Section 12.2. Governing Law. This Agreement and the rights and duties
of the Members shall be governed by and construed in accordance with the laws of
the State of Delaware, without regard to principles of conflict of laws.
Section 12.3. Agreement for Further Execution. At any time or times
upon the request of the Managing Member, each Member agrees to sign and swear to
any certificate, any amendment to or cancellation of such certificate,
acknowledge similar certificates or affidavits or certificates of fictitious
firm name or the like (and any amendments or cancellations thereof) required by
the laws of the State of Delaware, or any other jurisdiction in which the
Company does, or proposes to do, business. This Section 12.3 shall not prejudice
or affect the rights of the Members to approve amendments to this Agreement
pursuant to Section 9.1.
Section 12.4. Entire Agreement. This Agreement contains the entire
understanding between the parties and supersedes any prior understandings or
agreements between them respecting the within subject matter. There are no
representations, agreements, arrangements or understandings, oral or written,
between the parties hereto relating to the subject matter of this Agreement
which are not fully expressed.
Section 12.5. Severability. This Agreement is intended to be performed
in accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations of the jurisdictions in which the Company does
business. If any provision of this Agreement or the application thereof to any
Person or circumstance shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby, but
rather shall be enforced to the greatest extent permitted by law.
Section 12.6. Notices. Notices to Members or to the Company shall be
deemed to have been given when personally delivered or mailed, by prepaid
registered or certified mail, addressed as set forth in this Agreement, unless a
notice of change of address has previously been given in writing by the
addressee to the addressor, in which case such notice shall be addressed to the
address set forth in such notice of change of address.
Section 12.7. Counterparts. This Agreement may be executed in multiple
counterparts, each one of which shall constitute an original executed copy of
this Agreement.
Section 12.8. Pronouns. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular or plural, as
the identity of the person or persons may require.
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Section 12.9. Titles and Captions. All titles and captions are for
convenience only, do not form a substantive part of this Agreement, and shall
not restrict or enlarge any substantive provisions of this Agreement.
Section 12.9. Binding Agreement. Notwithstanding any other provision
of this Agreement, the Member agrees that this Agreement consitutes a legal,
valid and binding obligation of the Member, and is enforceable against the
Member by the Independent Directors, in accordance with its terms. In addition,
the Independent Directors shall be intended beneficiaries of this Agreement.
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IN WITNESS WHEREOF, the undersigned have duly executed this
Agreement as of April 20, 2000.
MEMBER:
WORLD OMNI FINANCIAL CORP.,
as sole Member
By: __________________________________
Name:
Title:
INDEPENDENT DIRECTOR:
By: __________________________________
Name:
INDEPENDENT DIRECTOR:
By: __________________________________
Name:
SPRINGING MEMBER:
By: ___________________________________
Name:
Title:
WORLD OMNI AUTO RECEIVABLE LLC:
By: World Omni Financial Corp.,
as sole member
By: ___________________________________
Name:
Title:
