Pursuant to Rule 424(b)(5)
Registration No. 333-84579
PROSPECTUS SUPPLEMENT
(To prospectus dated February 16, 2001)
$300,000,000
World Omni Master Owner Trust
$277,000,000 Series 2001-1 Floating Rate Automobile Dealer Floorplan Asset
Backed Notes, Class A
$23,000,000 Series 2001-1 Floating Rate Automobile Dealer Floorplan Asset
Backed Notes, Class B
WODFI LLC, Transferor
World Omni Financial Corp., Servicer
---------------
The trust will issue the following classes of Series 2001-1
Before you of Notes:
purchase any of
the notes, you
should
carefully
consider the
risk factors
beginning on
page S-9 in
this prospectus
supplement and
on page 4 in
the prospectus.
Class A Notes Class B Notes
Principal Amount............. $277,000,000 $23,000,000
Interest Rate (1)............ LIBOR + .13% LIBOR + .47%
Payment Dates................ Monthly Monthly
Expected Principal Payment
Date........................ February 17, 2004 February 17, 2004
Stated Maturity Date......... February 15, 2006 February 15, 2006
Price to Public.............. 100% 100%
Underwriting Discount or
Placement Fee............... .25% .325%
Proceeds to Transferor (2)... 99.75% 99.675%
The sole source
of payments on
the notes is a
portion of the
assets of the
trust. The
notes are not
interests in or
obligations of
World Omni
Financial
Corp., WODFI
LLC or any
other person.
(1) Or, if lower, the assets receivables rate described
in this prospectus supplement.
(2) Before deducting expenses which are estimated to be
approximately $600,000. Total price to the public is
$300,000,000, total underwriting discount and
placement fee is $767,250, and total proceeds to the
Transferor are $299,232,750.
Trust Assets:
. The primary assets of the trust consist of a revolving
pool of receivables arising under selected revolving
floorplan financing agreements entered into with World
Omni Financial Corp. by retail automobile dealers to
finance their inventory of new and used automobiles and
light-duty trucks.
This prospectus
may be used to
offer and sell
the notes only
if accompanied
by the
prospectus.
Credit Enhancement
. The certificates issued by the trust are subordinate to
the Series 2001-1 Notes to the extent of the available
subordinated amount.
. A reserve account, with an initial balance of
$1,500,000.
. The Class B Notes are subordinated to the Class A
Notes. Subordination of the Class B Notes provides
additional credit enhancement to the Class A Notes.
This prospectus supplement and the accompanying prospectus relate only to
the offering of the notes. The certificates issued by the trust are not being
offered under this prospectus supplement and the prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these notes or determined if this
prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
Delivery of the notes will be made only in book-entry form through the
facilities of The Depository Trust Company, the Clearstream system and the
Euroclear system on or about March 6, 2001.
$120,000,000 of the Class A Notes are being sold by WODFI LLC under this
prospectus supplement directly to an affiliate of Merrill Lynch, Pierce, Fenner
& Smith Incorporated and are not being offered by the underwriters.
---------------
Underwriters of the underwritten Class A Notes
Merrill Lynch & Co. JPMorgan
Underwriter of the Class B Notes
Merrill Lynch & Co.
February 21, 2001
[Intentionally Left Blank]
S-2
TABLE OF CONTENTS
Page
----
Where to Find Information in this Prospectus Supplement and the
Prospectus.............................................................. S-4
Limitations on Offers or Solicitations................................. S-4
Transactions That May Affect the Price of the Series 2001-1 Notes...... S-4
Summary of Terms......................................................... S-5
The Parties............................................................ S-5
The Notes.............................................................. S-5
Credit Enhancement..................................................... S-7
Servicing Fee Rate..................................................... S-7
Optional Repurchase.................................................... S-7
Tax Status............................................................. S-8
ERISA Considerations................................................... S-8
Ratings................................................................ S-8
Risk Factors............................................................. S-9
Use of Proceeds.......................................................... S-12
The Wholesale Portfolio.................................................. S-12
Loss Experience........................................................ S-12
Aging Experience....................................................... S-13
Geographic Distribution................................................ S-14
Dealer Concentration................................................... S-15
Maturity and Principal Payment Considerations............................ S-15
Series Provisions........................................................ S-16
General................................................................ S-16
Interest............................................................... S-16
Principal.............................................................. S-17
Allocation Percentages................................................. S-20
Allocation of Collections; Limited Subordination of Certificates....... S-21
Distributions from the Collection Account; Reserve Fund................ S-21
Available Subordinated Amount.......................................... S-24
Principal Collections.................................................. S-24
Excess Principal Collections........................................... S-25
Distributions.......................................................... S-25
Noteholder Charge-Offs................................................. S-26
Early Amortization Events.............................................. S-27
Stated Maturity Date................................................... S-28
Payment Event of Default............................................... S-29
Optional Repurchase.................................................... S-29
Principal Funding Account.............................................. S-29
Excess Funding Account................................................. S-30
Reports................................................................ S-30
Definitions............................................................ S-31
Page
----
Certain Federal Income Tax Consequences.................................... S-36
Florida Income Taxation.................................................... S-37
ERISA Considerations....................................................... S-37
Underwriting............................................................... S-38
Legal Matters.............................................................. S-39
Index of Terms............................................................. S-40
Annex I.................................................................... A-1
S-3
WHERE TO FIND INFORMATION IN THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS
We provide information to you about your series of the notes in two
separate documents that provide varying levels of detail:
(a) the prospectus, which provides general information, some of which
may not apply to a particular series of notes, including your
series,
(b) this prospectus supplement, which provides information regarding the
pool of receivables held by the trust and specifies the terms of
your series.
If the terms of your series of notes vary between the prospectus and this
prospectus supplement, you should rely on the information in this prospectus
supplement.
You should rely only on the information provided in the prospectus and
this prospectus supplement. We have not authorized anyone to provide you with
other or different information. You should not assume that the information in
the prospectus and this prospectus supplement is accurate on any date other
than the dates stated on their respective covers.
Capitalized terms used in this prospectus supplement are defined either
in this prospectus supplement or in the prospectus. You can find a list of the
pages where capitalized terms used in this prospectus supplement are defined
under the caption "Index of Terms" which appears at the end of the prospectus
and this prospectus supplement.
Limitations on Offers or Solicitations
We do not intend this document to be an offer or solicitation under any
of the following circumstances:
(a) when it is used in a jurisdiction in which such offer or
solicitation is not authorized;
(b) when the person making the offer or solicitation is not qualified to
do so; or
(c) when the offer or solicitation is made to anyone to whom it is
unlawful to make the offer or solicitation.
Transactions That May Affect the Price of the Series 2001-1 Notes
The underwriters may engage in transactions that stabilize, maintain, or
otherwise affect the price of the Series 2001-1 Notes. Such transactions may
include stabilizing and the purchase of the notes to cover syndicate short
positions. For a description of these activities, see "Underwriting."
S-4
SUMMARY OF TERMS
This summary highlights selected information from this prospectus
supplement and provides an overview to aid in your understanding of the Series
2001-1 Notes. It does not contain all the information that you need to consider
in making an investment decision. To understand all of the terms of the notes,
you should carefully read this prospectus supplement and the accompanying
prospectus.
The Parties
Trust/Issuer
World Omni Master Owner Trust, a Delaware business trust formed by WODFI
LLC as Transferor and Chase Manhattan Bank Delaware as Owner Trustee.
Transferor
WODFI LLC, a wholly-owned subsidiary of World Omni Financial Corp.
Servicer
World Omni Financial Corp., a wholly-owned subsidiary of JM Family
Enterprises, Inc.
Indenture Trustee
BNY Midwest Trust Company (as successor-in-interest to the corporate
trust administration of Harris Trust and Savings Bank).
Owner Trustee
Chase Manhattan Bank USA, National Association (successor-by-merger to
Chase Manhattan Bank Delaware).
Administrator
World Omni Financial Corp.
The Notes
The trust will issue the following classes of Series 2001-1 Notes:
Aggregate
Interest Principal
Class Rate Amount
- ----- ----------- ------------
Class A Notes......................................... LIBOR + .13% $277,000,000
Class B Notes......................................... LIBOR + .47% $ 23,000,000
The sole source of payments on the Series 2001-1 Notes is a portion of
the assets of the trust. The Series 2001-1 Notes are not interests in or
obligations of World Omni, the Transferor or any other entity or person. The
trust has previously issued other series of notes. A summary of each
outstanding series of notes is contained in Annex I--Outstanding Series of
Notes at the end of this prospectus supplement. The trust has also issued
certificates. The certificates are not being offered for sale by this
prospectus supplement and are currently held by the Transferor. The trust may
issue additional series of notes and additional certificates.
Series Issuance Date
March 6, 2001.
Series Cut-off Date
February 1, 2001.
Payment Dates
Payments on the Series 2001-1 Notes will generally be made on the 15th
day of each month or, if such day is not a business day, on the next succeeding
business day.
Interest Payments
The interest rate for each class of the Series 2001-1 Notes is as
follows:
Class A Notes: LIBOR plus .13% or, if lower, the Assets Receivables Rate
described in this prospectus supplement.
Class B Notes: LIBOR plus .47% or, if lower, the Assets Receivables Rate.
The trust will pay interest on the Series 2001-1 Notes on each Payment
Date beginning on March 15, 2001 for the period from the prior
S-5
Payment Date or, in the case of the first Payment Date, from the Series
Issuance Date to the day prior to the Payment Date. Interest will be calculated
on the basis of the actual number of days divided by 360.
The payment of interest on the Class B Notes is subordinate to the
payment of interest on the Class A Notes. No interest will be paid on the Class
B Notes on any Payment Date unless all interest due and payable on the Class A
Notes has been paid.
Principal Payments
The entire principal balance of the Class A Notes and the Class B Notes
is expected to be paid on February 17, 2004, unless an Amortization Period
begins or an Early Amortization Period that is not terminated begins.
The commencement of an Amortization Period or an Early Amortization
Period or other circumstances could cause principal to be paid earlier or later
than the expected principal payment date or in reduced amounts. See "Maturity
and Principal Payment Considerations."
If not previously paid, the outstanding principal amount of the Class A
Notes and the Class B Notes will be payable in full on February 15, 2006.
The payment of principal on the Class B Notes is subordinate to the
payment of principal on the Class A Notes. No principal will be paid on the
Class B Notes until all principal on the Class A Notes has been paid in full.
Revolving Period
The Series 2001-1 Notes will have a Revolving Period that will begin at
the close of business on the Series Cut-Off Date and end when the Accumulation
Period for the Series 2001-1 Notes begins. The Revolving Period will also end
if an Amortization Period begins or an Early Amortization Period begins. No
principal payments will be made on the Series 2001-1 Notes during the Revolving
Period.
Accumulation Period
The Series 2001-1 Notes will have an Accumulation Period, unless an
Amortization Period begins or an Early Amortization Period begins before the
start of the Accumulation Period. The Accumulation Period will be a period of
one to four months preceding the expected principal payment date. No principal
payments will be made on the Series 2001-1 Notes during the Accumulation
Period. During an Accumulation Period, funds allocable to pay principal of the
Series 2001-1 Notes will be set aside and used to make principal payments on
the Series 2001-1 Notes on the expected principal payment date.
Amortization Period
The Series 2001-1 Notes may have an Amortization Period if the Servicer
elects to terminate the automatic extension of the Amortization Period
Commencement Date. The Amortization Period Commencement Date initially will be
March 1, 2002, but will be successively and automatically extended unless the
Servicer elects to terminate the automatic extension and begin the Amortization
Period. If the Servicer has not terminated the automatic extension on the date
that is one month prior to the Amortization Period Commencement Date then in
effect, the Amortization Period Commencement Date will automatically be
extended by one month. During an Amortization Period, funds allocable to pay
principal of the Series 2001-1 Notes during a month will be set aside and used
to make principal payments on the Series 2001-1 Notes on the related Payment
Date. In the event that the Servicer does not terminate the automatic extension
of the Amortization Period Commencement Date prior to September 30, 2003, the
Series 2001-1 Notes will not have an Amortization Period, but will have an
Accumulation Period unless an Early Amortization Period begins.
Early Amortization Period
The Series 2001-1 Notes may have an Early Amortization Period if an Early
Amortization Event occurs and is not cured. See "The Transfer and
S-6
Servicing Agreements--Investment Events and Early Amortization Events" in the
prospectus and "Series Provision--Early Amortization Events" in this prospectus
supplement for a description of the events that might cause an Early
Amortization Period to start and, in some cases, terminate. During an Early
Amortization Period, principal payments will be made on the Series 2001-1 Notes
to the extent of funds available for that purpose.
Credit Enhancement
Subordination of the Certificates
The certificates are subordinated to the rights of the holders of Series
2001-1 Notes to the extent described in this prospectus supplement. Collections
on the Receivables otherwise allocable to the certificates may be used to pay
interest and principal on the Series 2001-1 Notes but only to the extent of the
Available Subordinated Amount.
On the Series Issuance Date, assuming there are no amounts in the Excess
Funding Account, the Invested Amount would be $300.0 million and the Available
Subordinated Amount would be $26,086,956 plus the incremental subordinated
amount as of the Series Issuance Date. The Available Subordinated Amount is
subject to reduction from time to time. See "Series Provisions--Allocation of
Collections; Limited Subordination of Certificates" for more information about
the Available Subordinated Amount.
The portion of the assets of the trust securing the Series 2001-1 Notes
and the portion of collections from those assets allocated to the Series 2001-1
Notes will be based on the sum of the Available Subordinated Amount and the
Invested Amount. Assuming there are no amounts in the Excess Funding Account,
the Invested Amount will initially be $300.0 million but is subject to
reduction from time to time as described in this prospectus supplement under
the caption "Series Provisions--Allocation Percentages."
Reserve Account
A Reserve Fund will be established and maintained in the name of the
Indenture Trustee for the benefit of the holders of the Series 2001-1 Notes. On
the Series Issuance Date, $1,500,000 will be deposited into the Reserve Fund.
The Reserve Fund Required Amount for any Payment Date will equal 0.50% of the
outstanding principal balance of the Series 2001-1 Notes for such Payment Date,
after giving effect to any change in the principal balance on such Payment
Date. The Reserve Fund Required Amount will increase to 0.60% of the
outstanding principal balance of the Series 2001-1 Notes on and after the
August 2003 Payment Date, unless an Amortization Period has begun prior to that
date. The Reserve Fund Required Amount will also increase to the extent
described herein during an Early Amortization Period for the Series 2001-1
Notes.
Amounts on deposit in the Reserve Fund will be available to pay Monthly
Interest, the Monthly Servicing Fee and Noteholder Defaulted Amounts. In
addition, on the stated maturity date for a class of notes or on the date on
which the principal amount of the notes has been reduced to zero, amounts on
deposit in the Reserve Fund will be available to pay Carry-Over Amounts for
that class of notes.
Excess Principal Collections
Principal Collections allocable to a series of Notes, including the
Series 2001-1 Notes, to the extent not needed to make payments on that series
of Notes, will be applied to make principal payments on the Series 2001-1 Notes
and on other series of notes entitled to principal payments.
Subordination of Class B Notes
The Class B Notes will be subordinated to the Class A Notes to the extent
described in this prospectus supplement.
Servicing Fee Rate
The trust will pay the Servicer a monthly 1.0% per annum servicing fee as
compensation for servicing the receivables.
Optional Repurchase
The Series 2001-1 Notes are subject to optional repurchase by the
Servicer on any Payment Date after the outstanding principal amount of the
Series 2001-1 Notes is reduced to $30,000,000 or less.
S-7
Tax Status
Kirkland & Ellis, special tax counsel, is of the opinion that, for
federal income tax purposes, the Series 2001-1 Notes will be characterized as
indebtedness and the trust will not be characterized as an association (or
publicly traded partnership) taxable as a corporation.
By accepting a Series 2001-1 Note, you agree to treat the notes as
indebtedness for federal, state and local income and franchise tax purposes.
See "Certain Federal Income Tax Consequences" and "Florida Income
Taxation" in this prospectus supplement and "Certain Federal Income Tax
Consequences" and "State and Local Tax Consequences" in the prospectus
concerning the application of federal, state and local tax laws.
ERISA Considerations
Subject to the considerations discussed under "ERISA Considerations," an
employee benefit plan regulated by the Employee Retirement Income Security Act
of 1974 may purchase the Series 2001-1 Notes, including the Class B Notes. See
"ERISA Considerations" in the prospectus and in this prospectus supplement for
a description of the limitations on purchases of Series 2001-1 Notes by
employee benefit plans. An employee benefit plan should consult with its
counsel before purchasing any Series 2001-1 Notes.
Ratings
The Series 2001-1 Notes will not be issued unless:
. the Class A Notes are rated in the highest rating category for long-
term debt obligations by at least one nationally recognized rating
agency, and
. the Class B Notes are rated in at least the "A" category or its
equivalent for long-term debt obligations by at least one nationally
recognized rating agency.
The rating agencies do not evaluate and their ratings do not address the
likelihood that any Class A Carry-Over Amount or Class B Carry-Over Amount will
be paid.
S-8
RISK FACTORS
In addition to the risk factors on page 4 of the prospectus, you should
consider the following risk factors in deciding whether to purchase any Series
2001-1 Notes.
Class B Notes Are Subject to
Greater Credit Risk Because
the Class B Notes Are
Subordinated to the Class A
Notes The Class B Notes bear greater credit risk than
the Class A Notes because payments of interest
on the Class B Notes are subordinated in
priority to the payment of interest due on the
Class A Notes and payments of principal on the
Class B Notes will not be made until the
principal of the Class A Notes has been paid in
full.
This subordination could result in delays or
reductions in the payment of principal and
interest on the Class B Notes.
Dependence on Other Series'
Allocated Principal
Collections May Result in
Delayed Payment of Series
2001-1 Note Principal
The shorter the Accumulation Period for the
Series 2001-1 Notes, the greater the chance
that payment in full of the Series 2001-1 Notes
on the Expected Principal Payment Date will
depend on principal collections initially
allocated to another series of notes being
available to make principal payments on the
Series 2001-1 Notes. A series of notes from
which principal collections were expected to be
available to make payments on the Series 2001-1
Notes may enter an early amortization period or
investment period after the beginning of the
accumulation period for the Series 2001-1
Notes. If that were to occur, excess principal
collections from that series that otherwise
would have been available to the Series 2001-1
Notes would not be available. As a result, the
final payment of principal of the Series 2001-1
Notes may be later than the Expected Principal
Payment Date. On written request, the
Transferor will give Series 2001-1 Noteholders
disclosure documents relating to any other
outstanding series of notes. Those documents
describe the events which could result in the
start of an early amortization period or
investment period for those series.
See "The Dealer Floorplan Financing Business"
in the prospectus and "Maturity and Principal
Payment Considerations" and "Series
Provisions--Early Amortization Events" in this
prospectus supplement for more information
about the timing of payments on the Series
2001-1 Notes.
Early Amortization of Series
2001-1 Notes May Result in
Early, Delayed and/or
Reduced Payment of Series
2001-1 Notes
A significant decline in the amount of
Receivables generated could cause an Early
Amortization Event. If the Pool Balance is not
maintained at a specified level, World Omni
must designate additional Accounts, the
Receivables of which will be sold to the
Transferor. The Transferor will be required to
transfer those
S-9
Receivables to the trust. If additional
Accounts are not designated by World Omni when
required, an Early Amortization Period will
begin and could result in payment of the Series
2001-1 Notes prior to the Expected Principal
Payment Date and/or reduced payment of the
Series 2001-1 Notes. In certain cases, however,
the resulting Early Amortization Period may end
and the Revolving Period will start again. In
addition, if certain events occur, an Early
Amortization Period will begin and could also
result in payment of the Series 2001-1 Notes
before or after the Expected Principal Payment
Date and/or reduced payment of the Series 2001-
1 Notes.
The Occurrence of an
Amortization Period May
Result in the Payment of
Principal of the Series
2001-1 Notes Prior to the
Expected Principal Payment
Date
In the event that the Servicer terminates the
automatic extension of the Amortization Period
Commencement Date, the Series 2001-1 Notes will
enter an Amortization Period, which will result
in the payment of principal of the Series 2001-
1 Notes prior to the Expected Principal Payment
Date. If a Series 2001-1 Note is purchased at a
premium, faster than anticipated payment of the
Series 2001-1 Notes could result in an actual
yield that is less than the anticipated yield.
In addition, investors will bear any
reinvestment risk resulting from earlier than
anticipated payment of the Series 2001-1 Notes.
The Class A Note Rate and
the Class B Note Rate are
Limited by the Assets
Receivables Rate
The Assets Receivables Rate is based on the
interest rates on the Receivables and
investment earnings on amounts on deposit in
certain accounts of the trust. If the interest
rate on the Class A Notes or the Class B Notes,
which is based on LIBOR, exceeds the Assets
Receivables Rate, then the interest rate on the
Class A Notes or the Class B Notes, as
applicable, will be adjusted to equal the
Assets Receivables Rate.
The Trust May Not Be Able to
Make up a Deficiency in
Interest Payments If the
Class A Note Rate or the
Class B Note Rate is Higher
than the Assets Receivables
Rate
The interest rates on the Class A Notes and the
Class B Notes are based on LIBOR and may exceed
the Assets Receivables Rate as a result of
LIBOR exceeding the interest rate on the
Receivables (which may be reduced by the
Servicer) and/or LIBOR exceeding the investment
earnings on amounts, if any, on accounts of the
trust in which principal collections are held.
Any deficiency in interest payments resulting
from the Assets Receivables Rate being lower
than the interest rate based on LIBOR and
interest on such deficiency will be paid to the
extent of:
. any funds remaining after all required
distributions and deposits for the Series
2001-1 Notes have been made; and
S-10
. on the last Payment Date for Series 2001-1
Notes, certain amounts in the Reserve
Account and Additional Noteholder
Collections.
The Transferor cannot assure that those
amounts, if any, will be sufficient to pay such
deficiency. If any such deficiency is
outstanding for six Payment Dates in a row, an
Early Amortization Event will occur.
Credit Enhancement Is
Limited and May be Reduced
Credit enhancement of the Series 2001-1 Notes
will be provided by the subordination of the
certificates to the extent of the Available
Subordinated Amount as described in this
prospectus supplement and by amounts in the
Reserve Account. In addition, the Class B Notes
are subordinated to the Class A Notes to the
extent described in this prospectus supplement.
The amount of such credit enhancement is
limited and may be reduced from time to time.
See "Series Provisions--Allocation of
Collections; Limited Subordination of
Certificates" for more information about credit
enhancement for the Series 2001-1 Notes.
Limited Ability to Resell The underwriters may assist in the resale of
Notes the Series 2001-1 Notes, but they are not
required to do so. A trading market for the
Series 2001-1 Notes may not develop. If a
trading market does develop, it might not
continue or it might not be sufficiently liquid
to allow you to resell any of your Series 2001-
1 Notes.
S-11
USE OF PROCEEDS
The Transferor will use $1.5 million of the net proceeds to fund the
Reserve Fund and expects to use any remaining net proceeds, together with
amounts on deposit in the Excess Funding Account, to repay amounts then
outstanding under the Series 2000-VFN and the Series 1999-VFN. As of February
14, 2001, there was $150.0 million outstanding under the Series 2000-VFN,
$150.0 million outstanding under the Series 1999-VFN and $74.9 million on
deposit in the Excess Funding Account. The actual amount on deposit in the
Excess Funding Account as of the Series Issuance Date, after giving effect to
the repayment of the outstanding Series 2000-VFN and Series 1999-VFN, will
depend on the repayment of Receivables held by the Trust and the rate of
purchase of additional Receivables by the Trust on or prior to that date.
THE WHOLESALE PORTFOLIO
As of December 31, 2000, there were approximately 240 Dealers with active
credit lines in the Wholesale Portfolio, and with respect to the Accounts in
the Wholesale Portfolio:
. there were 75 active Southeast Toyota Distributors Dealer Accounts
and 165 active non-Southeast Toyota Distributors Dealer Accounts;
. the average credit line per Account was $5.17 million; the average
principal balance of Receivables per Account was $4.49 million;
. the aggregate total principal balance of Receivables as a percentage
of the aggregate total credit line was approximately 86.84%;
. the weighted average spread over the prime rate charged to Dealers
was (0.28%); and
. the weighted average spread over LIBOR charged to Dealers was 2.03%.
There can be no assurance that the experience of the Accounts set forth
in the tables below under "--Loss Experience," "--Aging Experience," "--
Geographic Distribution" and "--Dealer Concentration" in the future will be
similar to the historical experience set forth below.
Because the Accounts from which Receivables are transferred to the Trust
(the "Pool of Accounts") are only a portion of the Wholesale Portfolio, actual
experience with respect to such Accounts may be different from that of the
Wholesale Portfolio. Because such Accounts are selected from the Wholesale
Portfolio in a manner not adverse to Noteholders and represent a sizeable
portion of the Wholesale Portfolio, the Transferor believes that the
performance of the Wholesale Portfolio reflected in the following tables is
indicative of the historical performance of the Accounts being transferred to
the Trust. Historical loss experience, aging experience and geographic
distribution with respect to the Accounts transferred to the Trust may be
different from that of the Wholesale Portfolio in the future.
Loss Experience
The following tables set forth World Omni's average principal receivables
balance and loss experience for each of the periods shown with respect to the
Wholesale Portfolio. Losses occur on Receivables when a Dealer has been
terminated under circumstances in which the Dealer has sold one or more
Vehicles to a retail customer and has failed to remit the appropriate proceeds
of such sale to World Omni. Losses also occur when used Vehicles financed at
wholesale and repossessed by World Omni from a terminated Dealer cannot be sold
for the balance due on the related Receivables. By contrast, losses generally
have not occurred when new Vehicles financed by World Omni are repossessed from
terminated Dealers, because such new Vehicles will generally be returned to the
manufacturers or distributors for a purchase price which generally covers the
balance due on the related Receivables. World Omni recognizes losses on
Receivables at the time it deems such Receivables to be uncollectible (which is
generally at the time it has exhausted all non-legal remedies). Because
S-12
the Eligible Accounts may be only a portion of the entire portfolio, actual
loss experience with respect to the Eligible Accounts may be different.
As shown in the table below, World Omni experienced no losses on the
Wholesale Portfolio during 1996, 1997 and 2000 and minimal losses during 1998
and 1999. Management attributes the strong performance during the periods shown
below to World Omni's conservative underwriting policies, its effective
monitoring and loss mitigation efforts and the significant collateral value
that supports its floorplan receivables. In addition, the strong economy and
the improving environment for new vehicle dealerships contributed to the low
level of losses during this period. The losses incurred in 1998 and 1999 were
primarily related to floorplan loans to dealerships that only sold used
vehicles. As of December 31, 2000, loans to used-vehicle-only Dealer groups
represented approximately 1.6% of the Receivables.
The data presented in the following table is for illustration purposes
only. Loss experience may be influenced by a variety of economic, social,
geographic and other factors. Accordingly, we cannot assure you that the loss
experience for the Receivables in the future will be similar to the historical
experience set forth below with respect to the Wholesale Portfolio.
Loss Experience for the Wholesale Portfolio
Year Ended December 31,
------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
(Dollars in millions)
Average Principal Balance of
Receivables(1).................. $879.1 $753.3 $694.3 $623.9 $495.4
Net Losses (Recoveries)(2)....... 0.0 1.25 4.8 0.0 0.0
Net Losses/Average Principal
Balance of Receivables.......... 0.00% 0.17% 0.69% 0.00% 0.00%
- --------
(1) Average principal balance of receivables is the average of the monthly
average principal balances (based on beginning and ending month balances)
for the twelve months ending on the last day of the period.
(2) Net losses in any period are gross losses less recoveries for such period.
Recoveries include recoveries from Collateral Security in addition to the
Vehicle. Losses do not include losses with respect to certain Accounts
guaranteed by Southeast Toyota Distributors.
Aging Experience
The following table provides the age distribution of Vehicle inventory
for all Dealers in the Wholesale Portfolio, as a percentage of total principal
outstanding at the date indicated. Because the Eligible Accounts may only be a
portion of the entire Wholesale Portfolio, actual age distribution with respect
to the Eligible Accounts may be different.
Age Distribution for the Wholesale Portfolio
December
31,
------------
Days 2000 1999
- ---- ----- -----
1-120............................................................. 88.16% 90.82%
121-180........................................................... 7.09 5.40
Over 180.......................................................... 4.75 3.78
The average payoff rate in the Wholesale Portfolio is described under
"Maturity and Principal Payment Considerations."
S-13
Geographic Distribution
The following table provides the geographic distribution of the Vehicle
inventory for all Dealers in the Wholesale Portfolio. As of December 31, 2000,
approximately 20.5% of Receivables in the Wholesale Portfolio arose in the
State of Florida.
Geographic Distribution of Accounts in the Wholesale Portfolio
as of December 31, 2000
Percentage of Number Percentage
Receivables Receivables of of Total
Outstanding Outstanding Vehicles Vehicles
----------------- ------------- -------- ----------
Alabama..................... $ 35,680,347.79 3.31% 1,585 3.17%
California.................. 4,010,770.00 0.37 329 0.66
Colorado.................... 1,829,037.70 0.17 121 0.24
Connecticut................. 22,654,400.01 2.10 993 1.99
Florida..................... 220,871,203.38 20.52 11,136 22.29
Georgia..................... 144,612,967.74 13.43 6,723 13.45
Illinois.................... 41,071,347.04 3.82 2,193 4.39
Indiana..................... 47,057,617.10 4.37 1,832 3.67
Kansas...................... 23,040,555.79 2.14 1,246 2.49
Massachusetts............... 82,557,181.52 7.67 3,617 7.24
Maryland.................... 3,072,493.50 0.29 86 0.17
Mississippi................. 5,235,016.80 0.49 269 0.54
North Carolina.............. 67,499,351.51 6.27 3,240 6.48
New Hampshire............... 21,870,380.38 2.03 1,092 2.19
New Jersey.................. 15,161,542.00 1.41 436 0.87
New Mexico.................. 2,229,523.30 0.21 163 0.33
New York.................... 72,645,902.69 6.75 3,153 6.31
Ohio........................ 62,101,588.02 5.77 2,885 5.77
Pennsylvania................ 24,599,056.08 2.28 1,134 2.27
South Carolina.............. 28,285,248.27 2.63 1,374 2.75
Texas....................... 52,051,784.72 4.83 1,790 3.58
Virginia.................... 98,435,164.26 9.14 4,572 9.15
----------------- ------ ------ ------
Total..................... $1,076,572,479.60 100.00% 49,969 100.00%
S-14
Dealer Concentration
The following table provides information with respect to the
concentration of Receivables relating to certain Dealers as of December 31,
2000. The Accounts described below (identified by Dealer group code, which
includes each Dealer and its affiliates under common ownership and control)
constitute all Accounts with at least 2% or more of the outstanding Wholesale
Portfolio as of December 31, 2000. The amount set forth under the column
entitled "Receivables Outstanding" has not been reduced by the amount of
Floorplan Equity Program deposits on hand as of December 31, 2000.
Dealer Concentration for the Wholesale Portfolio
As of December 31, 2000
--------------------------
Percentage
Receivables of Total
Outstanding Receivables
-------------- -----------
95................................................... $64,090,741.07 5.95%
58................................................... 62,101,588.02 5.77
15................................................... 58,281,954.52 5.41
120.................................................. 45,844,350.56 4.26
111.................................................. 43,579,987.72 4.05
30................................................... 42,077,697.09 3.91
01................................................... 31,803,437.96 2.95
12................................................... 30,629,641.65 2.85
82................................................... 26,322,644.68 2.45
13................................................... 25,721,810.77 2.39
33................................................... 25,509,249.11 2.37
121.................................................. 23,040,555.79 2.14
22................................................... 21,870,380.38 2.03
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS
It is expected that the outstanding principal balance of the Class A
Notes and the Class B Notes will be paid on February 17, 2004 (the "Expected
Principal Payment Date"). Full payment of the Series 2001-1 Notes on the
Expected Principal Payment Date depends in large part on repayment by Dealers
of the Receivables. Timely payment on the Notes may not occur if Dealer
payments are insufficient. Because the Receivables generally are paid upon
retail sale of the underlying Vehicle, the timing of Receivable payments is
uncertain. There is no assurance that any particular pattern of Dealer payments
will occur. In addition, the shorter the Accumulation Period Length, the
greater the likelihood that payment of the Class A Notes or the Class B Notes
in full by the Expected Principal Payment Date may be dependent on the
reallocation of Principal Collections from other outstanding series of notes.
If one or more other series from which Principal Collections are expected to be
reallocated to pay the Series 2001-1 Notes enters into an early amortization
period or investment period after the start of the Accumulation Period for the
Series 2001-1 Notes, Principal Collections allocated to such series generally
will not be reallocated to pay principal of the Series 2001-1 Notes. In such a
case, the final payment of principal of the Series 2001-1 Notes may be later
than the Expected Principal Payment Date.
The commencement of an Amortization Period would cause principal to be
paid earlier than the Expected Principal Payment Date. There is no assurance
that World Omni will generate additional Receivables under the Accounts. The
Servicer may elect to terminate the automatic extension of the Amortization
Period Commencement Date and start the Amortization Period if World Omni does
not generate sufficient additional Receivables, or for any other reason in the
discretion of the Servicer.
S-15
Principal for the Series 2001-1 Notes will be payable if an Early
Amortization Period that is not terminated has commenced. Because an Early
Amortization Event for the Series 2001-1 Notes may occur and initiate an Early
Amortization Period, the final distribution of principal on the Class A Notes
and the Class B Notes may be made prior to or after the scheduled termination
of the Revolving Period or prior to or after the Expected Principal Payment
Date.
The amount of new Receivables generated in any month and Monthly Payment
Rates on the Receivables may vary because of seasonal variations in Vehicle
sales and inventory levels, retail incentive programs provided by Vehicle
manufacturers and various economic factors affecting Vehicle sales generally.
The following table sets forth the highest and lowest Monthly Payment Rates for
the Wholesale Portfolio during any month in the periods shown and the average
of the Monthly Payment Rates for all months during the periods shown. In each
case the data is calculated as the percentage equivalent of a fraction, the
numerator being the aggregate of all collections of principal during the period
and the denominator being the average aggregate principal balance for such
period. Monthly Payment Rates reflected in the table include principal credit
adjustments. There can be no assurance that the rate of Principal Collections
will be similar to the historical experience set forth below. As the Eligible
Accounts will be only a portion of the entire Wholesale Portfolio, historical
monthly payment rates for the Eligible Accounts may be different than those
shown below.
Monthly Payment Rates for the Wholesale Portfolio
Year Ended December 31,
---------------------------------
2000 1999 1998 1997 1996
----- ----- ----- ----- -----
Highest Month................................ 67.82% 76.05% 77.29% 71.21% 78.79%
Lowest Month................................. 44.04 57.74 53.10 51.05 50.69
Average of the Months in the Period.......... 57.46 66.20 63.77 61.52 61.18
SERIES PROVISIONS
General
The Series 2001-1 Notes will be issued pursuant to the Indenture and a
Series Supplement to the Indenture for the Series 2001-1 Notes (the "Series
Supplement"). The Transferor will provide a copy of the Indenture and the
Series Supplement (each without exhibits) upon request of a Noteholder. The
following summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all of the provisions of the Series
2001-1 Notes, the Indenture and the Series Supplement. Where particular
provisions or terms used in the Indenture or the Series Supplement are referred
to, the actual provisions, including definitions of terms, are incorporated by
reference as part of this summary. You should see the prospectus for additional
information about the Series 2001-1 Notes and the Indenture.
The Series 2001-1 Notes will consist of two classes, the Class A Notes
and the Class B Notes. The Series 2001-1 Notes will be offered in minimum
denominations of $1,000 and integral multiples of $1,000.
Interest
Interest on the principal balance of the Class A Notes and the Class B
Notes will accrue at the Class A Note Rate and the Class B Note Rate,
respectively, and will be payable to the holders of the Class A Noteholders
(the "Class A Noteholders") and to the holders of the Class B Notes (the "Class
B Noteholders" and, together with the Class A Noteholders, the "Series 2001-1
Noteholders") on each Payment Date, commencing March 15, 2001. Interest payable
on any Payment Date will accrue from and including the preceding Payment Date
to but excluding such Payment Date (or, in the case of the first Payment Date,
from
S-16
and including the Series Issuance Date to but excluding the first Payment Date)
(each, an "Interest Period"). Interest will be calculated on a basis of the
actual number of days in each Interest Period divided by 360. Interest due for
any Payment Date but not paid on such Payment Date will be due on the next
Payment Date, together with interest on such amount at the applicable Note Rate
calculated on the basis of LIBOR, to the extent permitted by applicable law.
Interest payments on the Series 2001-1 Notes will generally be derived from
Noteholder Non-Principal Collections for a Collection Period, any withdrawals
from the Reserve Fund, Investment Proceeds and, under certain circumstances,
Additional Noteholder Collections to the extent of the Available Subordinated
Amount.
The Class A Note Rate and the Class B Note Rate for each Interest Period
will be determined on the LIBOR Determination Date preceding such Interest
Period. The "Class A Note Rate" will be equal to the lesser of (a) LIBOR plus
.13% and (b) the Assets Receivables Rate for the related Payment Date. The
"Class B Note Rate" will be equal to the lesser of (a) LIBOR plus .47% and (b)
the Assets Receivables Rate for the related Payment Date. The Class A Note Rate
and the Class B Note Rate are each referred to as a "Note Rate."
If the Class A Note Rate or the Class B Note Rate for a Payment Date
calculated on the basis of LIBOR as described above is greater than the Assets
Receivable Rate, then the Note Rate for such Payment Date and such class will
be the Assets Receivables Rate.
If the Class A Note Rate or the Class B Note Rate for any Payment Date is
based on the Assets Receivables Rate, the excess of (a) the amount of interest
on the Class A Notes or the Class B Notes, as the case may be, that would have
accrued in respect of the related Interest Period had interest on that Class
been calculated based on LIBOR over (b) the amount of interest on the Class A
Notes or the Class B Notes, as the case may be, actually accrued in respect of
such Interest Period based on the Assets Receivables Rate (such excess,
together with the unpaid portion of any such excess from prior Payment Dates
(and interest accrued thereon calculated on the basis of LIBOR), is referred to
as the "Class A Carry-Over Amount" or the "Class B Carry-Over Amount," as
applicable, and together as the "Carry-Over Amount"), will be paid on such
Payment Date to the extent funds are allocated and available therefor after
making all required distributions and deposits with respect to the Series 2001-
1 Notes, including payments with respect to principal (including deposits to
the Excess Funding Account), Monthly Interest, the Noteholder Monthly Servicing
Fee, the Reserve Fund Deposit Amount, the Noteholder Defaulted Amount, the
Monthly Dilution Amount, the Noteholder Charge-Off Reversal Amount and
Noteholder Defaulted Amounts and Monthly Dilution Amounts from prior periods
that had not previously been paid as described below under "--Distributions
from the Collection Account; Reserve Fund." In addition, any Class A Carry-Over
Amount outstanding on the Class A Stated Maturity Date and any Class B Carry-
Over Amount outstanding on the Class B Stated Maturity Date, or in each case on
the date on which the Invested Amount of the Series 2001-1 Notes has been
reduced to zero, after making the distributions described in the preceding
sentence, will be paid on such date, as applicable, from certain amounts on
deposit in the Reserve Fund (to the extent such amounts would otherwise be
available to the Certificateholders) and Additional Noteholder Collections on
deposit in the Collection Account (to the extent such amounts would otherwise
be available to the Certificateholders) as described under""--Distributions
from the Collection Account; Reserve Fund." The ratings of the Series 2001-1
Notes do not address the likelihood of payment of any Carry-Over Amount.
Principal
In general, no principal payments will be made to the Series 2001-1
Noteholders until the earliest of the Expected Principal Payment Date, the
Principal Commencement Date and the first Special Payment Date after the
commencement of an Early Amortization Period.
S-17
Revolving Period. The "Revolving Period" shall mean the period beginning
at the close of business on the Series Cut-Off Date and terminating on the
earlier of (a) the close of business on the day immediately preceding the
Accumulation Period Commencement Date, (b) the close of business on the day
immediately preceding the Amortization Period Commencement Date, and (c) the
close of business on the day immediately preceding the day on which an Early
Amortization Event occurs; provided, however, that the Revolving Period may
recommence in certain circumstances upon the termination of an Early
Amortization Period. See "--Early Amortization Event."
No principal payments will be made on the Series 2001-1 Notes during the
Revolving Period. On each Deposit Date with respect to the Revolving Period,
collections of Principal Receivables will be (a) allocated to one or more other
series of notes which are in amortization, early amortization, investment or
accumulation periods to cover principal payments due to the noteholders of any
such series; (b) deposited into the Excess Funding Account or (c) paid to the
Certificateholders. See "--Allocation Percentages," "--Distributions from the
Collection Account; Reserve Fund" and "--Principal Collections."
Accumulation Period. Unless an Amortization Period or an Early
Amortization Period that is not terminated as described herein shall have
commenced, the Series 2001-1 Notes will have an Accumulation Period (the
"Accumulation Period") of one to four months long as described in the following
paragraph.
On the September 2003 Payment Date and each Payment Date thereafter that
occurs prior to the Accumulation Period Commencement Date, the Servicer shall
calculate the Accumulation Period Length. The "Accumulation Period Length" will
be calculated on each such date as the lesser of (1) the number of full
Collection Periods between such Payment Date and the Expected Principal Payment
Date and (2) the product, rounded upwards to the nearest integer not greater
than four, of (a) one divided by the lowest Monthly Payment Rate on the
Receivables during the last 12 months and (b) a fraction, the numerator of
which is the sum of (1) the Invested Amount as of such Payment Date (after
giving effect to all changes therein on such date) and (2) the invested amounts
of all other series (excluding certain series) currently in their amortization
or accumulation periods or expected to be in their amortization or accumulation
periods by the Expected Principal Payment Date and the denominator of which is
the sum of the Invested Amount and the invested amounts as of such Payment Date
(after giving effect to all changes therein on such date) of all other
outstanding series (excluding certain series) which are scheduled to be
outstanding on the Expected Principal Payment Date.
The "Accumulation Period Commencement Date" (which will be the first day
of a Collection Period) will occur when the number of full Collection Periods
remaining until the Expected Principal Payment Date first equals the
Accumulation Period Length as calculated above and shall not thereafter be
changed except as described in the following sentence. If at any time after the
September 2003 Payment Date, any other outstanding series (excluding certain
series) shall have entered into an investment period or an early amortization
period, the Accumulation Period Commencement Date shall be the earlier of (1)
the date that such outstanding series shall have entered into its investment
period or early amortization period and (2) the Accumulation Period
Commencement Date as previously determined.
The calculation described above will result in a (1) shorter Accumulation
Period in the event of increases in the Monthly Payment Rate and (2) longer
Accumulation Period in the event of decreases in the Monthly Payment Rate or in
the event other series shall have entered into an investment period or early
amortization period.
"Monthly Payment Rate" shall be a fraction, the numerator of which is the
amount of Principal Collections for the immediately preceding Collection Period
and the denominator of which is the daily average Pool Balance for such
Collection Period.
S-18
During the Accumulation Period, unless and until an Early Amortization
Period that is not terminated as described herein shall have occurred and until
the outstanding principal balance of the Notes is paid in full, on each Deposit
Date with respect to the Accumulation Period, collections of Principal
Receivables allocable to the Series 2001-1 Noteholders will no longer be
allocated to another series or paid to the Certificateholders as described
above but instead an amount thereof up to the sum of the Class A Controlled
Deposit Amount and the Class B Controlled Deposit Amount for that Deposit Date
will be deposited into the Principal Funding Account; provided, however, in
some circumstances amounts in excess of the Class A Controlled Deposit Amount
and the Class B Controlled Deposit Amount may be deposited into the Principal
Funding Account. On the first business day of the Accumulation Period, the
Series 2001-1 Excess Funding Amount as of the last day of the Revolving Period
will be deposited in the Principal Funding Account. The funds deposited in the
Principal Funding Account will be used to pay the outstanding principal balance
of the Notes on the Expected Principal Payment Date. If on the Expected
Principal Payment Date the Principal Funding Account Balance is less than the
outstanding principal balance of the Notes, an Early Amortization Period will
commence.
On the Expected Principal Payment Date the Class A Noteholders will
receive distributions with respect to principal of amounts allocable to the
Series 2001-1 Notes, but not in excess of the Class A Invested Amount, until
the outstanding principal balance of the Class A Notes has been paid in full or
the Class A Stated Maturity Date has occurred. Even if the Principal Funding
Account Balance on the Expected Principal Payment Date is insufficient to pay
the outstanding principal balance of the Class A Notes in full, such amount
will be distributed to the Class A Noteholders at such time.
On the Expected Principal Payment Date after the Class A Invested Amount
has been reduced to zero, the Class B Noteholders will receive distributions
with respect to principal of amounts allocable to the Series 2001-1 Notes, but
not in excess of the Class B Invested Amount, until the outstanding principal
balance of the Class B Notes has been paid in full or the Class B Stated
Maturity Date has occurred. Even if the Principal Funding Account Balance
remaining after payment of the Class A Notes on the Expected Principal Payment
Date is insufficient to pay the outstanding principal balance of the Class B
Notes in full, such balance will be distributed to the Class B Noteholders at
such time.
Amortization Period. The Series 2001-1 Notes may have an Amortization
Period if the Servicer elects to terminate the automatic extension of the
Amortization Period Commencement Date prior to the commencement of the
Accumulation Period. The "Amortization Period Commencement Date" initially will
be March 1, 2002, but will be successively and automatically extended unless
the Servicer elects to terminate the automatic extension and begin the
Amortization Period. If the Servicer has not terminated the automatic extension
on the date that is one month prior to the Amortization Period Commencement
Date, the Amortization Period Commencement Date will automatically be extended
by one month. In the event that the Servicer does not terminate the automatic
extension of the Amortization Period Commencement Date prior to September 30,
2003, the Series 2001-1 Notes will not have an Amortization Period but will
have an Accumulation Period unless an Early Amortization Period begins.
During the Amortization Period, unless and until an Early Amortization
Period that is not terminated as described herein shall have occurred and until
the outstanding principal balance of the Notes is paid in full, on each Deposit
Date with respect to the Amortization Period, collections of Principal
Receivables allocable to Series 2001-1 Noteholders will be deposited into the
Principal Funding Account for payment to the Series 2001-1 Noteholders on the
related Payment Date. On the first business day of the Amortization Period, the
Series 2001-1 Excess Funding Amount as of the last day of the Revolving Period
will be deposited in the Principal Funding Account. On the Payment Date in the
month following the month in which the Amortization Period begins (the
"Principal Commencement Date") and each following Payment Date, all amounts
deposited into the Principal Funding Account will be paid to the Class A
Noteholders in respect of principal, but not in excess of the Class A Invested
Amount, until the outstanding principal balance of the Class A Notes
S-19
has been paid in full or the Class A Stated Maturity Date has occurred and,
after the Class A Invested Amount has been reduced to zero, to the Class B
Noteholders in respect of principal, but not in excess of the Class B Invested
Amount, until the outstanding principal balance of the Class B Notes has been
paid in full or the Class B Stated Maturity Date has occurred.
Early Amortization Period. The Series 2001-1 Notes will have an Early
Amortization Period if an Early Amortization Event occurs that is not cured.
The Early Amortization Period will begin on the date an Early Amortization
Event occurs and will end on the earliest of (1) the payment in full of the
outstanding principal balance of the Series 2001-1 Notes, (2) the
recommencement of the Revolving Period and (3) the Termination Date for the
Series 2001-1 Notes. The Revolving Period, the Amortization Period or the
Accumulation Period, as the case may be, will terminate upon the commencement
of an Early Amortization Period. See "--Early Amortization Events" for a
description of events that might result in the commencement of an Early
Amortization Period for the Series 2001-1 Notes.
During an Early Amortization Period until the outstanding principal
balance of the Notes is paid in full, on each Deposit Date with respect to the
Early Amortization Period, collections of Principal Receivables allocable to
Series 2001-1 Noteholders will be deposited into the Principal Funding Account
for payment to the holders of the Series 2001-1 Notes on the related Payment
Date. On the first business day of the Early Amortization Period that
terminates the Revolving Period, the Series 2001-1 Excess Funding Amount as of
the last day of the Revolving Period will be deposited in the Principal Funding
Account. On the Payment Date in the month following the month in which the
Early Amortization Period begins and each following Payment Date (each, a
"Special Payment Date"), all amounts deposited into the Principal Funding
Account during the related Collection Period will be paid to the Class A
Noteholders in respect of principal, but not in excess of the Class A Invested
Amount, until the outstanding principal balance of the Class A Notes has been
paid in full or the Class A Stated Maturity Date has occurred and, after the
Class A Invested Amount has been reduced to zero, to the Class B Noteholders in
respect of principal, but not in excess of the Class B Invested Amount, until
the outstanding principal balance of the Class B Notes has been paid in full or
the Class B Stated Maturity Date has occurred.
It is expected that the outstanding principal balance of the Class A
Notes and the Class B Notes will be paid on the Expected Principal Payment
Date. The commencement of an Amortization Period or an Early Amortization
Period or other circumstances could cause principal to be paid earlier or later
than the Expected Principal Payment Date or in reduced amounts. See "Maturity
and Principal Payment Considerations," "Risk Factors--Dependence on Other
Series' Allocated Principal Collections May Result in Delayed Payment of Series
2001-1 Note Principal" and "--The Occurrence of an Amortization Period May
Result in the Payment of Principal of the Series 2001-1 Notes Prior to the
Expected Principal Payment Date" in this prospectus supplement and "Risk
Factors--The Failure of Dealers to Make Payments on the Receivables Could Delay
or Reduce Payments on the Notes" in the prospectus.
Allocation Percentages
The Servicer will allocate amounts initially allocated to Series 2001-1
as described under "The Notes--Allocation Percentages--Allocations among
Series" in the prospectus between the Series 2001-1 Noteholders and the
Certificateholders for each Deposit Date or Collection Period, as applicable,
as follows:
(1) Series Allocable Non-Principal Collections will be allocated
to Series 2001-1 Noteholders based on the Floating Allocation
Percentage;
(2) during the Revolving Period, Series Allocable Principal
Collections will be treated as Excess Principal Collections based on the
Floating Allocation Percentage;
S-20
(3) during the Accumulation Period, the Amortization Period and
any Early Amortization Period, Series Allocable Principal Collections
will be allocated to Series 2001-1 Noteholders based on the Principal
Allocation Percentage;
(4) Series Allocable Miscellaneous Payments will be treated as
Noteholder Principal Collections; provided, however, that Series
Allocable Miscellaneous Payments consisting of the amount of Adjustment
Payments that (1) were paid after their due date and (2) have been
included in the Monthly Dilution Amount for any prior Collection Period
will be treated as Noteholder Non-Principal Collections; and
(5) Series Allocable Defaulted Amount will be allocated to Series
2001-1 Noteholders based on the Weighted Average Floating Allocation
Percentage.
Amounts not allocated to the Series 2001-1 Noteholders as described above
will be allocated to the Certificateholders, but portions thereof may be
available to pay the principal of, interest on or other amounts with respect to
the Series 2001-1 Notes to the extent described in this prospectus supplement.
"Series Adjusted Invested Amount" with respect to the Series 2001-1
means, for any date, an amount equal to the sum of (a) the Invested Amount as
of the most recent Reset Date (or, during an Early Amortization Period, the
Invested Amount as of the close of business on the date immediately preceding
the date on which such Early Amortization Period began) and (b) the Available
Subordinated Amount as of the most recent Reset Date.
Allocation of Collections; Limited Subordination of Certificates
On each Deposit Date, the Servicer will allocate and distribute to the
Certificateholders an amount equal to (a) the Excess Certificateholder
Percentage of Series Allocable Principal Collections for such date; provided
that if the Pool Balance (determined after giving effect to any Principal
Receivables transferred to the Trust on such Deposit Date) is less than the
Required Pool Balance (after giving effect to the allocations, distributions,
withdrawals and deposits to be made on that Deposit Date), such funds shall be
deposited into the Excess Funding Account to the extent necessary so that the
Pool Balance at least equals the Required Pool Balance and (b) the Excess
Certificateholder Percentage of Series Allocable Non-Principal Collections for
such date. In addition, on each Deposit Date, the Additional Noteholder Non-
Principal Collections for such Deposit Date shall be retained in the Collection
Account; provided that, during the Revolving Period, Amortization Period or the
Accumulation Period, the amount so retained shall not exceed the amount by
which the Reserve Fund Required Amount exceeds the amount in the Reserve Fund.
During the Amortization Period or an Early Amortization Period, Additional
Noteholder Principal Collections shall be retained in the Collection Account
and, to the extent not otherwise required to be allocated, on the related
Payment Date shall be treated as Noteholder Principal Collections.
Any remaining Additional Noteholder Collections for a Deposit Date not
required to be retained in the Collection Account pursuant to the preceding
paragraph or distributed in the amount of the Required Draw Amount will be
distributed to the Certificateholders if the Pool Balance (determined after
giving effect to the Principal Receivables transferred to the Trust on such
date) exceeds the Required Pool Balance (after giving effect to the
allocations, distributions, withdrawals and deposits to be made on the Deposit
Date).
Distributions from the Collection Account; Reserve Fund
Non-Principal Collections. On each Payment Date, commencing with the
initial Payment Date, the Servicer shall instruct the Indenture Trustee to
apply Noteholder Non-Principal Collections and Investment
S-21
Proceeds, if any, in respect of the related Collection Period to make the
following distributions in the following priority to the extent funds are
available therefor:
(1) first, an amount equal to Class A Monthly Interest for such
Payment Date, plus the amount of any Class A Monthly Interest previously
due but not distributed on a prior Payment Date (plus, but only to the
extent permitted under applicable law, interest at the Class A Note Rate
on Class A Monthly Interest previously due but not distributed), shall
be distributed to the Class A Noteholders;
(2) second, an amount equal to Class B Monthly Interest for such
Payment Date, plus the amount of any Class B Monthly Interest previously
due but not distributed on a prior Payment Date (plus, but only to the
extent permitted under applicable law, interest at the Class B Note Rate
on Class B Monthly Interest previously due but not distributed), shall
be distributed to the Class B Noteholders;
(3) third, an amount equal to the Noteholder Monthly Servicing Fee
for such Payment Date, plus the amount of any Noteholder Monthly
Servicing Fee previously due but not distributed to the Servicer on a
prior Payment Date shall be distributed to the Servicer (unless such
amounts have been netted against deposits to the Collection Account as
described in the prospectus under "The Notes--Allocation of Collections;
Deposits in Collection Account" or waived by the Servicer);
(4) fourth, an amount equal to the Reserve Fund Deposit Amount, if
any, for such Payment Date shall be deposited in the Reserve Fund;
(5) fifth, an amount equal to the Noteholder Defaulted Amount and
the Monthly Dilution Amount, if any, for such Payment Date shall be
treated as a portion of Noteholder Principal Collections for such day;
(6) sixth, an amount equal to the aggregate amount of Noteholder
Charge-Offs which have not been previously reversed shall be treated as
a portion of Noteholder Principal Collections for such day and shall
increase the Class A Invested Amount or the Class B Invested Amount as
described under "--Noteholder Charge-Offs" (the "Noteholder Charge-Off
Reversal Amount");
(7) seventh, an amount equal to the amount of reductions of the
Available Subordinated Amount on account of Noteholder Defaulted Amounts
and Monthly Dilution Amounts that have not previously been reinstated
shall be treated as a portion of Additional Noteholder Principal
Collections for such day and shall increase the Available Subordinated
Amount;
(8) eighth, an amount equal to any outstanding Class A Carry-Over
Amount shall be distributed to the Class A Noteholders;
(9) ninth, an amount equal to any outstanding Class B Carry-Over
Amount shall be distributed to the Class B Noteholders;
(10) tenth, an amount equal to the aggregate outstanding amounts
of Noteholder Monthly Servicing Fee which have been previously waived
shall be distributed to the Servicer; and
(11) eleventh, the balance shall be distributed to the
Certificateholders.
If such Noteholder Non-Principal Collections and Investment Proceeds are
not sufficient to make the entire distributions required by clauses (1), (2),
(3) and (5) and, in the case of the Class A Stated Maturity Date or the date on
which the Invested Amount of the Series 2001-1 Notes has been reduced to zero
only, clause (8) and, in the case of the Class B Stated Maturity Date or the
date on which the Invested Amount of the Series 2001-1 Notes has been reduced
to zero only, clause (9), the Indenture Trustee shall withdraw funds from the
Reserve Fund (in the case of clauses (8) and (9) only to the extent such
amounts would otherwise be distributed
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to the Certificateholders) and apply such funds to complete the distributions
pursuant to such clauses; provided, however, that during any Early Amortization
Period funds shall not be withdrawn from the Reserve Fund to make distributions
required by clause (5) to the extent that, after giving effect to such
withdrawal, the amount on deposit in the Reserve Fund shall be less than
$1,000,000.
If such Noteholder Non-Principal Collections, Investment Proceeds and
funds withdrawn from the Reserve Fund are not sufficient to make the entire
distributions required by clauses (1), (2), (3) and (5) (such shortfall being
the "Deficiency Amount"), the Indenture Trustee shall apply the amount of
Additional Noteholder Collections for the related Collection Period on deposit
in the Collection Account on such Payment Date, but only up to the Available
Subordinated Amount, to make the distributions required by clauses (1), (2),
(3) and (5) above that have not been made (the amount of Additional Noteholder
Collections so applied being referred to as the "Required Draw Amount"), and,
if such Payment Date is either the date on which the Invested Amount of the
Series 2001-1 Notes has been reduced to zero or the Class A Stated Maturity
Date or the Class B Stated Maturity Date, the distributions required by clause
(8) on the Class A Notes or clause (9) on the Class B Notes, as applicable,
that have not been made. The Available Subordinated Amount will be reduced by
the amount of Additional Noteholder Collections so applied. If the amount
necessary to complete the distributions referred to in this paragraph exceeds
such Additional Noteholder Collections, the Available Subordinated Amount will
be reduced by the amount of such excess, but not by more than the sum of the
Noteholder Defaulted Amount and the Monthly Dilution Amount.
Reserve Fund. The "Reserve Fund" will be an Eligible Deposit Account
established and maintained in the name of the Indenture Trustee for the benefit
of the Series 2001-1 Noteholders. On the Series Issuance Date, $1,500,000
(0.50% of the principal balance of the Series 2001-1 Notes) will be deposited
into the Reserve Fund. The "Reserve Fund Required Amount" for any Payment Date
with respect to an Early Amortization Period is an amount equal to the Excess
Reserve Fund Required Amount, and for any other Payment Date is an amount equal
to 0.50%, or on and after the August 2003 Payment Date, 0.60%, of the
outstanding principal balance of the Series 2001-1 Notes on such Payment Date
(after giving effect to any change therein on such Payment Date) unless an
Amortization Period has begun prior to that date. The "Reserve Fund Deposit
Amount" is the amount, if any, by which the Reserve Fund Required Amount
exceeds the amount on deposit in the Reserve Fund. Funds in the Reserve Fund
will be invested in Eligible Investments that will mature on or prior to the
next Payment Date. On each Determination Date, the Servicer will deposit any
investment earnings (net of losses and investment expenses) with respect to the
Reserve Fund in the Collection Account and treat such funds as Investment
Proceeds and apply such amount as set forth under "--Distributions from the
Collection Account; Reserve Fund." After the earlier of the payment in full of
the outstanding principal balance of the Series 2001-1 Notes and the Class B
Stated Maturity Date, any funds remaining on deposit in the Reserve Fund will
be paid to the Certificateholders.
If, after giving effect to the allocations, distributions and deposits in
the Reserve Fund described above under "--Non-Principal Collections," the
amount in the Reserve Fund is less than the Reserve Fund Required Amount for
such Payment Date, the Indenture Trustee shall deposit any remaining Additional
Noteholder Collections for the related Collection Period into the Reserve Fund
until the amount in the Reserve Fund is equal to such Reserve Fund Required
Amount.
The "Excess Reserve Fund Required Amount" for any such Payment Date means
an amount equal to the greater of
(a) 5.0% of the initial principal balance of the Series 2001-1
Notes
and
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(b) the excess of
(1) the Available Subordinated Amount on the most recent
Reset Date (after giving effect to the allocations, distributions,
withdrawals and deposits to be made on such Payment Date)
over
(2) the excess of (A) the Series Allocation Percentage of
the Pool Balance on the most recent Reset Date over (B) the
Invested Amount on such Payment Date (after giving effect to
changes therein on such Payment Date);
provided that the Excess Reserve Fund Required Amount shall not exceed such
Available Subordinated Amount.
Available Subordinated Amount
The "Available Subordinated Amount" means, on the Series Issuance Date,
the Required Subordinated Amount and, on any subsequent day of determination,
an amount equal to the lesser of (1) the Required Subordinated Amount for that
day and (2) the Available Subordinated Amount for the most recent Reset Date,
minus (A) the Required Draw Amount with respect to any Payment Date occurring
after that Reset Date, plus (B) the amount of Noteholder Non-Principal
Collections and Investment Proceeds treated as a portion of Additional
Noteholder Principal Collections in respect of Noteholder Defaulted Amounts and
Monthly Dilution Amounts that had previously reduced the Available Subordinated
Amount since the most recent Reset Date, minus (C) the Incremental Subordinated
Amount for the most recent Reset Date, plus (D) the Incremental Subordinated
Amount for such date of determination plus (E) the Subordinated Percentage of
the decrease in the Series 2001-1 Excess Funding Amount since the most recent
Reset Date, minus (F) the Subordinated Percentage of the increase in the Series
2001-1 Excess Funding Amount since the most recent Reset Date.
The Certificateholders may, in their sole discretion, at any time
increase the Available Subordinated Amount for so long as the cumulative amount
of such increases does not exceed the lesser of (1) $5,295,000 or (2) 1.765% of
the Invested Amount. The Certificateholders are not under any obligation to
increase the Available Subordinated Amount at any time, except as described
herein. If the Available Subordinated Amount were reduced to less than the
Required Subordinated Amount, an Early Amortization Event would occur. The
Certificateholders could elect to increase the Available Subordinated Amount at
the time such Early Amortization Event would otherwise occur, thus preventing
or delaying the occurrence of the Early Amortization Event.
Principal Collections
On each Deposit Date with respect to a Revolving Period, all Series
Allocable Principal Collections allocated to the Series 2001-1 Noteholders
shall be treated as Excess Principal Collections and made available to other
series, deposited into the Excess Funding Account or paid to the
Certificateholders.
On each Deposit Date, with respect to the Accumulation Period, the
Amortization Period or any Early Amortization Period, all Available Noteholder
Principal Collections will be allocated as follows:
(1) first, to the Principal Funding Account in an amount up to the
Class A Controlled Deposit Amount for such Deposit Date; provided,
however, in some circumstances amounts in excess of the Class A
Controlled Deposit Amount may be deposited into the Principal Funding
Account;
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(2) second, to the Principal Funding Account in an amount up to
the Class B Controlled Deposit Amount for such Deposit Date; provided,
however, in some circumstances amounts in excess of the Class B
Controlled Deposit Amount may be deposited into the Principal Funding
Account; and
(3) third, the balance, if any, will be allocated to Excess
Principal Collections and made available to other series.
In the event that the principal balance of the Class B Notes is greater
than zero on the Class B Stated Maturity Date, any funds remaining in the
Reserve Fund (after the application of funds in the Reserve Fund as described
above under "--Distributions from the Collection Account; Reserve Fund--Non-
Principal Collections") will be treated as a portion of Available Noteholder
Principal Collections for the Payment Date occurring on the Class B Stated
Maturity Date.
Excess Principal Collections
The Servicer will allocate Excess Principal Collections to cover any
deposits of principal for the benefit of noteholders of any series entitled
thereto which are either scheduled or permitted and which have not been covered
out of Principal Collections and certain other amounts allocated to such series
("Principal Shortfalls"). See "Maturity and Principal Payment Considerations."
Excess Principal Collections will not be used to cover reductions in the
invested amount of any series. If Principal Shortfalls exceed Excess Principal
Collections for any Collection Period, Excess Principal Collections will be
allocated pro rata among the applicable series based on the relative amounts of
Principal Shortfalls.
Distributions
Payments to Series 2001-1 Noteholders will be made from the Collection
Account, the Reserve Fund, and the Principal Funding Account.
(a) The Servicer shall instruct the Indenture Trustee to apply
funds on deposit in the Collection Account and the Reserve Fund and
shall instruct the Indenture Trustee to distribute on each Payment Date
the amounts on deposit in the Collection Account and the Reserve Fund as
are payable to the Series 2001-1 Noteholders with respect to accrued
interest to the Series 2001-1 Noteholders; provided, however, that no
Class B Monthly Interest shall be paid to the Class B Noteholders until
all Class A Monthly Interest has been paid the Class A Noteholders and
no Class B Carry-Over Amount shall be paid to the Class B Noteholders
until all Class A Carry-Over Amounts have been paid to the Class A
Noteholders.
(b) The Servicer shall instruct the Indenture Trustee in writing
to apply the funds on deposit in the Principal Funding Account and the
Collection Account and shall instruct the Indenture Trustee in writing
to make, without duplication, the following distributions at the
following times:
(1) on the Expected Principal Payment Date, the Principal
Commencement Date and each Payment Date thereafter, and each
Special Payment Date, the amounts on deposit in the Principal
Funding Account and the Collection Account as are payable to the
Class A Noteholders with respect to principal shall be distributed
to the Class A Noteholders up to a maximum amount on any such date
equal to the outstanding principal amount of the Class A Notes;
and
(2) if all of the amounts due and owing to the Class A
Noteholders pursuant to clause (1) above have been paid in full,
on the Expected Principal Payment Date, the Principal Commencement
Date and each Payment Date thereafter, and each Special Payment
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Date, the amounts on deposit in the Principal Funding Account and
the Collection Account as are payable to the Class B Noteholders
with respect to principal shall be distributed to the Class B
Noteholders up to a maximum amount on any such date equal to the
outstanding principal amount of the Class B Notes.
(c) On each Payment Date on which there is an unpaid Class A
Carry-Over Amount, the Servicer shall instruct the Indenture Trustee in
writing to distribute to the Class A Noteholders such Class A Carry-Over
Amount to the extent funds are available therefor after making all
required distributions and deposits with respect to the Series 2001-1
Notes as provided above under "--Distributions from the Collection
Account; Reserve Fund--Non-Principal Collections."
(d) On each Payment Date on which there is an unpaid Class B
Carry-Over Amount, the Servicer shall instruct the Indenture Trustee in
writing to distribute to the Class B Noteholders such Class B Carry-Over
Amount to the extent funds are available therefor after making all
required distributions and deposits with respect to the Series 2001-1
Notes as provided above under "--Distributions from the Collection
Account; Reserve Fund--Non-Principal Collections."
(e) If on the Class A Stated Maturity Date or the date on which
the Invested Amount of the Series 2001-1 Notes has been reduced to zero,
there is any Class A Carry-Over Amount or on the Class B Stated Maturity
Date or the date on which the Invested Amount of the Series 2001-1 Notes
has been reduced to zero, there is any Class B Carry-Over Amount (in
each case after giving effect to any distributions on such date pursuant
to (a) through (d) above), the Indenture Trustee shall distribute to the
Class A Noteholders or the Class B Noteholders, as applicable, (1)
certain amounts on deposit in the Reserve Fund (to the extent such
amounts would otherwise be distributed to the Certificateholders) and
(2) Additional Noteholder Collections on deposit in the Collection
Account (to the extent such amounts would otherwise be distributed to
the Certificateholders) which are available to satisfy such Class A
Carry-Over Amount or Class B Carry-Over Amount on the Class A Stated
Maturity Date or the Class B Stated Maturity Date, as applicable, as
described above under "--Distributions from the Collection Account;
Reserve Fund--Non-Principal Collections."
All distributions shall be made to the Series 2001-1 Noteholders of
record at the close of business on the day immediately preceding the related
Payment Date (each such day a "Record Date"), except that the final
distribution with respect to any Series 2001-1 Note will be made only upon
surrender of such Series 2001-1 Note.
Noteholder Charge-Offs
If the Available Subordinated Amount is reduced to zero and on any
Payment Date the Deficiency Amount is greater than zero, the Invested Amount of
the Series 2001-1 Notes will be reduced by the Deficiency Amount, but not by
more than the sum of the Noteholder Defaulted Amount and the Monthly Dilution
Amount for such Payment Date (a "Noteholder Charge-Off"). Any such reduction
shall be applied first to reduce the Class B Invested Amount (a "Class B
Noteholder Charge-Off") but not below zero, and then to reduce the Class A
Invested Amount (a "Class A Noteholder Charge-Off") but not below zero. Any
reduction in the Invested Amount of the Series 2001-1 Notes of either class
will have the effect of slowing or reducing the return of principal to the
Series 2001-1 Noteholders of that class. If the Invested Amount of either class
of the Series 2001-1 Notes has been reduced by any Noteholder Charge-Offs, it
will thereafter be increased on any Payment Date (but not by an amount in
excess of the aggregate unreversed Noteholder Charge-Offs for that class) by
the Noteholder Charge-Off Reversal Amount as described above under "--
Distributions from the Collection Account; Reserve Fund--Non-Principal
Collections." Any such increase shall be applied first to the Class A Invested
Amount until all previously unreversed Class A Noteholder Charge-Offs have been
reversed and then to the Class B Invested Amount until all previously
unreversed Class B Noteholder Charge-Offs have been reversed.
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Early Amortization Events
The Early Amortization Events with respect to the Series 2001-1 Notes will
include each of the events so defined in the prospectus, plus the following:
(1) failure on the part of the Transferor, the Servicer or World
Omni, as applicable, (a) to make any payment or deposit required by the
Trust Sale and Servicing Agreement or the Receivables Purchase Agreement,
including but not limited to any Transfer Deposit Amount or Adjustment
Payment, on or before the date occurring ten business days after the date
such payment or deposit is required to be made therein; or (b) to deliver
a Payment Date Statement on the date required under the Trust Sale and
Servicing Agreement (or within the applicable grace period which will not
exceed five business days); (c) to comply with its covenant not to create
any lien on a Receivable; or (d) to observe or perform in any material
respect any other covenants or agreements set forth in the Trust Sale and
Servicing Agreement or the Receivables Purchase Agreement, which failure
continues unremedied for a period of 45 days after written notice of such
failure;
(2) any representation or warranty made by World Omni in the
Receivables Purchase Agreement or by the Transferor in the Trust Sale and
Servicing Agreement or any information required to be given by the
Transferor to the Indenture Trustee to identify the Accounts proves to
have been incorrect in any material respect when made and continues to be
incorrect in any material respect for a period of 60 days after written
notice and, as a result, the interests of the Noteholders are materially
and adversely affected; provided, however, that an Early Amortization
Event shall not be deemed to occur thereunder if the Transferor has
repurchased the related Receivables or all such Receivables, if
applicable, during such period in accordance with the provisions of the
Trust Sale and Servicing Agreement;
(3) on any Determination Date, the Available Subordinated Amount for
the next Payment Date will be reduced to an amount less than the Required
Subordinated Amount on such Determination Date after giving effect to the
distributions to be made on the next Payment Date;
(4) any Servicing Default with respect to the Series 2001-1 Notes
occurs;
(5) on any Determination Date, the average of the Monthly Payment
Rates for the three preceding Collection Periods, is less than 25%;
(6) the occurrence of an Event of Default with respect to the Series
2001-1 Notes and the declaration that the Series 2001-1 Notes are due and
payable;
(7) on the first day of the Accumulation Period, the amount on
deposit in the Reserve Fund does not equal or exceed the Reserve Fund
Required Amount;
(8) on the Expected Principal Payment Date, the Series 2001-1 Notes
are not paid in full; and
(9) any Carry-Over Amount is outstanding on six consecutive Payment
Dates.
In the case of any event described in clauses (1), (2) or (4) above, an
Early Amortization Event with respect to Series 2001-1 will be deemed to have
occurred only if, after the applicable grace period described in such clauses,
if any, either the Indenture Trustee or Series 2001-1 Noteholders holding
Series 2001-1 Notes evidencing more than 50% of the aggregate unpaid principal
amount of the Controlling Class of Series 2001-1 Notes by written notice to the
Trust, the Transferor and the Servicer (and the Indenture Trustee, if given by
Noteholders) declare that an Early Amortization Event has occurred as of the
date of such notice. In the case of any Early Amortization Event described in
the prospectus or any event described in clauses (3), (5), (6), (7), (8)
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and (9) above, an Early Amortization Event with respect to Series 2001-1 will
be deemed to have occurred without any notice or other action on the part of
the Indenture Trustee or the Series 2001-1 Noteholders immediately upon the
occurrence of such event.
Under certain limited circumstances, an Early Amortization Period which
commences prior to the scheduled end of the Revolving Period may terminate and
the Revolving Period recommence. If an Early Amortization Event (other than an
Early Amortization Event described in the prospectus) occurs, the Revolving
Period will recommence following (1) satisfaction of the Rating Agency
Condition and (2) receipt of the consent of Series 2001-1 Noteholders
evidencing more than 50% of the aggregate unpaid principal amount of the
Controlling Class of the Series 2001-1 Notes to such recommencement; provided
that no other Early Amortization Event that has not been cured or waived as
described herein has occurred and the scheduled termination of the Revolving
Period has not occurred.
Stated Maturity Date
The last payment of principal and interest on the Class A Notes will be
due and payable no later than February 15, 2006 (the "Class A Stated Maturity
Date"). In the event that the aggregate outstanding principal amount of the
Class A Notes is greater than zero on the Class A Stated Maturity Date (after
giving effect to deposits and distributions otherwise to be made on such Class
A Stated Maturity Date), upon receipt of an opinion of counsel to the effect
that its action will not result in the Trust being characterized as an
association (or a publicly traded partnership) taxable as a corporation, the
Indenture Trustee will sell or cause to be sold an interest in the Receivables
or certain Receivables, as specified in the Indenture, in an amount such that
the proceeds of such sale equal the aggregate outstanding principal balance of,
and accrued and unpaid interest on, the Class A Notes on such Class A Stated
Maturity Date (after giving effect to such deposits and distributions);
provided, however, in no event shall such amount of Receivables to be sold
exceed the lesser of (a) the sum of the Invested Amount and the Available
Subordinated Amount on the preceding Determination Date (after giving effect to
the allocations, distributions, withdrawals and deposits to be made on the
Payment Date following such Determination Date) and (b) the Series Allocation
Percentage of Receivables on such Class A Stated Maturity Date. The amount of
Receivables sold shall first reduce the Class A Invested Amount, but not to
below zero, then any remaining amounts shall reduce the Available Subordinated
Amount, but not to below zero, and then any amounts still remaining shall
reduce the Class B Invested Amount. The net proceeds of such sale and any
collections on the Receivables will be paid pro rata to the Class A Noteholders
on the Class A Stated Maturity Date as the final payment of the Class A Notes,
and the Class A Noteholders shall not receive any additional payments with
respect to the Class A Notes.
The last payment of principal and interest on the Class B Notes will be
due and payable no later than February 15, 2006 (the "Class B Stated Maturity
Date"). In the event that the aggregate outstanding principal balance of the
Class B Notes is greater than zero on the Class B Stated Maturity Date (after
giving effect to deposits and distributions otherwise to be made on such Class
B Stated Maturity Date), upon receipt of an opinion of counsel to the effect
that its action will not result in the Trust being characterized as an
association (or a publicly traded partnership) taxable as a corporation, the
Indenture Trustee will sell or cause to be sold an interest in the Receivables
or certain Receivables in an amount such that the net proceeds of such sale
equal the aggregate outstanding principal balance of, and accrued and unpaid
interest on, the Class B Notes on such Class B Stated Maturity Date (after
giving effect to such deposits and distributions); provided, however, in no
event shall such amount of Receivables to be sold (including those sold
pursuant to the preceding paragraph) exceed the lesser of (a) the sum of the
Invested Amount and the Available Subordinated Amount on the preceding
Determination Date (after giving effect to the allocations, distributions,
withdrawals and deposits to be made on the Payment Date following such
Determination Date) and (b) the Series Allocation Percentage of Receivables on
such Class B Stated Maturity Date. The amount of Receivables sold shall first
reduce the Class B Invested Amount, but not to below zero, then any remaining
amounts shall reduce the Available Subordinated Amount. The net proceeds of
such sale and any collections on the Receivables will be paid pro rata to the
Class B Noteholders on the Class B Stated Maturity Date as the final payment of
the
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Class B Notes, and the Class B Noteholders shall not receive any additional
payments with respect to the Class B Notes.
Payment Event of Default
In the event that an Event of Default relating to the failure to make any
required payment of interest or principal on the Series 2001-1 Notes has
occurred and the Series 2001-1 Notes have been declared due and payable, on the
direction of the holders of a majority of the aggregate outstanding principal
amount of the Controlling Class of the Series 2001-1 Notes, upon receipt of an
opinion of counsel to the effect that its action will not result in the Trust
being characterized as an association (or a publicly traded partnership)
taxable as a corporation, the Indenture Trustee will sell or cause to be sold
an interest in the Receivables or certain Receivables in an amount such that
the net proceeds of such sale equal the aggregate outstanding principal balance
of, and accrued and unpaid interest on, the Series 2001-1 Notes then
outstanding on such date; provided, however, in no event shall such amount
exceed the lesser of (a) the sum of the Invested Amount and the Available
Subordinated Amount on the preceding Determination Date (after giving effect to
the allocations, distributions, withdrawals and deposits to be made prior to
such date); and (b) the Series Allocation Percentage of Receivables on such
date. The net proceeds of such sale will be paid pro rata to the Class A
Noteholders in an amount up to the aggregate outstanding principal balance of,
and accrued and unpaid interest on, the Class A Notes, and then, to the extent
of funds remaining, to the Class B Noteholders, and the Series 2001-1
Noteholders shall not receive any additional payments with respect to the
Series 2001-1 Notes.
Optional Repurchase
The Series 2001-1 Notes will be subject to optional repurchase by World
Omni on any Payment Date after the aggregate outstanding principal balance of
the Series 2001-1 Notes is reduced to an amount less than or equal to
$30,000,000 (10% of the initial outstanding principal amount of the Series
2001-1 Notes). The purchase price will equal the sum of (1) the aggregate
outstanding principal balance of the Series 2001-1 Notes to be repurchased on
the Determination Date preceding the Payment Date on which the purchase is
scheduled to be made, (2) accrued and unpaid interest on the Series 2001-1
Notes to be repurchased at the applicable Note Rate (together with interest on
overdue interest) and (3) any outstanding Carry-Over Amount with respect to the
Series 2001-1 Notes to be repurchased.
Principal Funding Account
The Servicer will establish and maintain in the name of the Indenture
Trustee, on behalf of the Trust, an Eligible Deposit Account for the benefit of
the Series 2001-1 Noteholders (the "Principal Funding Account"). On each
Deposit Date with respect to the Accumulation Period, the Amortization Period
or an Early Amortization Period, the Class A Controlled Deposit Amount and the
Class B Controlled Deposit Amount will be deposited in the Principal Funding
Account, in each case as provided above under "--Principal Collections";
provided, that, if an Early Amortization Period that is not terminated as
described herein commences during the Accumulation Period, the Principal
Funding Account Balance shall be paid to the Series 2001-1 Noteholders on the
first Special Payment Date and on each subsequent Special Payment Date.
All amounts on deposit in the Principal Funding Account on any Payment
Date prior to the Expected Principal Payment Date (after giving effect to
distributions to be made on such Payment Date) (the "Principal Funding Account
Balance") will be invested from the date of their deposit by the Indenture
Trustee at the direction of the Servicer in Eligible Investments that will
mature on or prior to the next Payment Date. The Servicer may select an
appropriate agent as representative of the Servicer for the purpose of
designating such investments. On each Payment Date, the interest and other
investment income on the Principal Funding Account Balance will be deposited in
the Collection Account, treated as Investment Proceeds and applied as provided
above under "--Distributions from the Collection Account; Reserve Fund."
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Excess Funding Account
On the business day immediately following the last day of the Revolving
Period, an amount equal to the Series 2001-1 Excess Funding Amount as of the
last day of the Revolving Period will be withdrawn from the Excess Funding
Account and deposited in the Principal Funding Account. The amount of that
deposit shall be deemed to have been first for the benefit of the Class A
Noteholders up to the Class A Invested Amount and then for the benefit of the
Class B Noteholders. The Series 2001-1 Noteholders will not be entitled to any
funds in the Excess Funding Account after such deposit has been made.
"Series 2001-1 Excess Funding Amount" means, for any day, the product of
(a) the amount on deposit in the Excess Funding Account on such day, and (b) a
fraction, the numerator of which is the sum of the Invested Amount (calculated
without giving effect to amounts in the Excess Funding Account) and the
Available Subordinated Amount (calculated without giving effect to the
Incremental Subordinated Amount or to amounts in the Excess Funding Account)
and the denominator of which is the sum of the numerators for each series of
Notes then being allocated a portion of the funds on deposit in the Excess
Funding Account; provided, however, that the Series 2001-1 Excess Funding
Amount shall be zero, and the Series 2001-1 Notes shall not be allocated a
portion of the funds on deposit in the Excess Funding Account, on any date
after funds have been withdrawn from the Excess Funding Account and deposited
into the Principal Funding Account.
Reports
On each Payment Date (including each Payment Date that corresponds to the
Expected Principal Payment Date, any Special Payment Date or the Principal
Commencement Date and each Payment Date thereafter), commencing with the
initial Payment Date, the Indenture Trustee will forward to each Series 2001-1
Noteholder of record a statement (the "Payment Date Statement") prepared by
the Servicer setting forth the following information (which, in the case of
(c), (d) and (e) below, will be stated on the basis of an original principal
amount of $1,000 per Series 2001-1 Note if the Accumulation Period or an Early
Amortization Period has commenced):
(a) the aggregate amount of Collections, the aggregate amount of
Non-Principal Collections and the aggregate amount of Principal
Collections processed during the immediately preceding Collection Period
and the Pool Balance, the Required Pool Balance and the Excess Funding
Account Balance as of the close of business on the last day of the
preceding Collection Period;
(b) the Series Allocation Percentage, the Floating Allocation
Percentage and the Principal Allocation Percentage for the preceding
Collection Period;
(c) the total amount, if any, distributed on the Class A Notes and
the Class B Notes;
(d) the amount of such distribution allocable to principal on each
class of Series 2001-1 Notes;
(e) the amount of such distribution allocable to interest on each
class of Series 2001-1 Notes;
(f) the Noteholder Defaulted Amount for such Payment Date;
(g) the Required Draw Amount, if any, for such Collection Period;
(h) the amount of the Class A Noteholder Charge-Offs and the Class B
Noteholder Charge-Offs and the amounts of the reversals thereof for such
Collection Period;
S-30
(i) the amount of the Monthly Servicing Fee and the Noteholder
Monthly Servicing Fee for such Collection Period;
(j) the Class A Controlled Deposit Amount and Class B Controlled
Deposit Amount, if any, as of the first day of the Collection Period
related to such Payment Date;
(k) the Invested Amount as of the last day of such Collection
Period;
(l) the outstanding principal balance of each class of Series 2001-1
Notes for such Payment Date (after giving effect to all distributions
which will occur on such Payment Date);
(m) the Available Subordinated Amount as of the last day of the
preceding Collection Period;
(n) the Reserve Fund balance for such date; and
(o) the Principal Funding Account Balance with respect to such date.
Definitions
"Additional Noteholder Collections" for any date means the sum of (a) the
Additional Noteholder Non-Principal Collections for such date and (b) the
Additional Noteholder Principal Collections for such date.
"Additional Noteholder Non-Principal Collections" for any Deposit Date
means an amount equal to the product of (a) the excess of (1) the
Certificateholder Percentage for such date over (2) the Excess
Certificateholder Percentage for such date and (b) Series Allocable Non-
Principal Collections for such date; provided, however, that the Additional
Noteholder Non-Principal Collections will be zero for any date on which the
Available Subordinated Amount is zero.
"Additional Noteholder Principal Collections" for any Deposit Date means
an amount equal to the product of (a) the excess of (1) the Certificateholder
Percentage for such date over (2) the Excess Certificateholder Percentage for
such date and (b) Series Allocable Principal Collections for such date;
provided, however, that the Additional Noteholder Principal Collections will
be zero for any date on which the Available Subordinated Amount is zero.
"Assets Receivables Rate" means, for any Interest Period, an amount equal
to the product of:
(a) the quotient obtained by dividing (1) 360 by (2) the actual
number of days elapsed in such period
and
(b) a fraction,
(1) the numerator of which is the sum of (A) Noteholder Non-
Principal Collections for the Collection Period immediately
preceding the last day of such period (which for this purpose only
is based on interest amounts billed to the Dealers which are due
during such Collection Period) less the Noteholder Monthly
Servicing Fee with respect to such immediately preceding Collection
Period, to the extent not waived by the Servicer and (B) the
Investment Proceeds to be applied on the Payment Date related to
such period
S-31
and
(2) the denominator of which is the sum of (A) the product
of the Floating Allocation Percentage, the Series Allocation
Percentage and the weighted average Pool Balance (after giving
effect to any charge-offs) for such immediately preceding
Collection Period, (B) the weighted average of the Series 2001-1
Excess Funding Amount for such immediately preceding Collection
Period, and (C) the weighted average of the principal balance on
deposit in the Principal Funding Account for such Collection
Period.
"Available Noteholder Principal Collections" for any Deposit Date falling
in the Accumulation Period, the Amortization Period or an Early Amortization
Period means the sum of (a) Noteholder Principal Collections for such Deposit
Date and (b) Excess Principal Collections allocated to the Series 2001-1 Notes
to cover any Principal Shortfall for such Deposit Date.
"Calculation Agent" means the Indenture Trustee.
"Certificateholder Percentage" means 100% minus (a) the Floating
Allocation Percentage, when used with respect to Non-Principal Collections and
Defaulted Amount at all times and Principal Collections during any Revolving
Period, and (b) the Principal Allocation Percentage, when used with respect to
Principal Collections during the Accumulation Period, the Amortization Period
and any Early Amortization Period.
"Class A Controlled Accumulation Amount" means an amount equal to (1) the
aggregate outstanding principal balance of the Class A Notes as of the Payment
Date immediately preceding the first day of the Accumulation Period (after
giving effect to any changes therein on such date) less the portion of the
Series 2001-1 Excess Funding Amount deposited into the Principal Funding
Account in respect of the Class A Notes divided by (2) the Accumulation Period
Length.
"Class A Controlled Deposit Amount" for a Deposit Date means (1) during
the Accumulation Period, the excess, if any, of (a) the product of the Class A
Controlled Accumulation Amount and the number of Payment Dates from and
including the first Payment Date with respect to the Accumulation Period
through and including the Payment Date related to the Collection Period during
which the Deposit Date occurs (but not in excess of the Accumulation Period
Length, expressed in number of months) over (b) the amount on deposit in the
Principal Funding Account to make payments of principal on the Class A Notes
less the portion of the Series 2001-1 Excess Funding Amount deposited into the
Principal Funding Account in respect of the Class A Notes before giving effect
to any withdrawals from or deposits to such account on such Deposit Date, but
not more than the Class A Invested Amount; provided, however, if Available
Noteholder Principal Collections for that Deposit Date would otherwise be
deposited into the Excess Funding Account so that the Pool Balance would not be
less than the Required Pool Balance, the Class A Controlled Deposit Amount for
that Deposit Date shall be increased by an amount equal to the product of (A)
the Available Noteholder Principal Collections that would have been so
deposited into the Excess Funding Account and (B) a fraction, the numerator of
which is the Class A Invested Amount for such Deposit Date and the denominator
of which is the Invested Amount for such Deposit Date, but not by more than the
Class A Invested Amount, and (2) during the Amortization Period or an Early
Amortization Period, the Class A Invested Amount.
"Class A Initial Invested Amount" means $277,000,000.
"Class A Invested Amount" means, for any date, an amount equal to the
Class A Initial Invested Amount minus the amount, without duplication, of
principal payments made to Class A Noteholders or deposited to the Principal
Funding Account in respect of the Class A Notes prior to such date since the
Series Issuance Date, minus the excess, if any, of the aggregate amount of
Class A Noteholder Charge-Offs for all Payment Dates preceding such date, over
the aggregate amount of any reversals of Class A Noteholder Charge-
S-32
Offs for all Payment Dates preceding such date, minus the Series 2001-1 Excess
Funding Amount for such day but limited to an amount that would reduce the
Class A Invested Amount to zero.
"Class A Monthly Interest" for any Payment Date means the amount of
interest accrued on the outstanding principal balance of the Class A Notes as
described above for such Payment Date.
"Class B Controlled Accumulation Amount" means an amount equal to (1) the
aggregate outstanding principal balance of the Class B Notes as of the Payment
Date immediately preceding the first day of the Accumulation Period (after
giving effect to any changes therein on such date) less the portion of the
Series 2001-1 Excess Funding Amount deposited into the Principal Funding
Account in respect of the Class B Notes divided by (2) the Accumulation Period
Length.
"Class B Controlled Deposit Amount" for a Deposit Date means (1) during
the Accumulation Period, the excess, if any, of (a) the product of the Class B
Controlled Accumulation Amount and the number of Payment Dates from and
including the first Payment Date with respect to the Accumulation Period
through and including the Payment Date related to the Collection Period during
which the Deposit Date occurs (but not in excess of the Accumulation Period
Length, expressed in number of months) over (b) the amount on deposit in the
Principal Funding Account to make principal payments on the Class B Notes less
the portion of the Series 2001-1 Excess Funding Amount deposited into the
Principal Funding Account in respect of the Class B Notes before giving effect
to any withdrawals from or deposits to such account on such Deposit Date, but
not more than the Class B Invested Amount; provided, however, if Available
Noteholder Principal Collections for that Deposit Date would otherwise be
deposited into the Excess Funding Account so that the Pool Balance would not be
less than the Required Pool Balance, the Class B Controlled Deposit Amount for
that Deposit Date shall be increased by an amount equal to the product of (A)
the Available Noteholder Principal Collections that would have been so
deposited into the Excess Funding Account and (B) a fraction, the numerator of
which is the Class B Invested Amount for such Deposit Date and the denominator
of which is the Invested Amount for such Deposit Date but not by more than the
Class B Invested Amount, and (2) during the Amortization Period or an Early
Amortization Period, the Class B Invested Amount.
"Class B Initial Invested Amount" means $23,000,000.
"Class B Invested Amount" means, for any date, an amount equal to the
Class B Initial Invested Amount, minus the amount, without duplication, of
principal payments made to Class B Noteholders or deposited to the Principal
Funding Account in respect of the Class B Notes prior to such date since the
Series Issuance Date minus the excess, if any, of aggregate amount of Class B
Noteholder Charge-Offs for all Payment Dates preceding such date, over the
aggregate amount of any reversals of Class B Noteholder Charge-Offs for all
Payment Dates preceding such date minus the amount, if any, of the Series 2001-
1 Excess Funding Amount remaining after allocation to the Class A Invested
Amount but limited to an amount that would reduce the Class B Invested Amount
to zero.
"Class B Monthly Interest" for any Payment Date means the amount of
interest accrued on the outstanding principal balance of the Class B Notes as
described above for such Payment Date.
"Excess Certificateholder Percentage" for any day means a percentage
(which percentage shall never be less than 0% nor more than 100%) equal to (a)
100% minus, when used with respect to Non-Principal Collections and Defaulted
Amount at all times and Principal Collections during any Revolving Period, the
sum of (1) the Floating Allocation Percentage with respect to such day and (2)
the percentage equivalent of a fraction, the numerator of which is the
Available Subordinated Amount as of the most recent Reset Date and the
denominator of which is the product of (A) the Pool Balance as of the most
recent Reset Date and (B) the Series Allocation Percentage for such day in
respect of which the Excess Certificateholder Percentage is being calculated or
(b) 100% minus, when used with respect to Principal Collections during the
Accumulation Period, the Amortization Period and any Early Amortization Period,
the sum of (1) the Principal Allocation Percentage
S-33
with respect to such day and (2) the percentage equivalent of a fraction, the
numerator of which is the Available Subordinated Amount as of the most recent
Reset Date and the denominator of which is the product of (A) the Pool Balance
as of the most recent Reset Date and (B) the Series Allocation Percentage for
the day in respect of which the Excess Certificateholder Percentage is being
calculated.
"Floating Allocation Percentage" means, with respect to any day, the
percentage equivalent (which shall never exceed 100%) of a fraction, the
numerator of which is the Invested Amount as of the most recent Reset Date and
the denominator of which is the product of (x) the Pool Balance as of such
Reset Date and (y) the Series Allocation Percentage for the day in respect of
which the Floating Allocation Percentage is being calculated; provided,
however, that, prior to the first Reset Date, the Floating Allocation
Percentage means the percentage equivalent of a fraction, the numerator of
which is the Initial Invested Amount and the denominator of which is the
product of the Pool Balance on the Series Cut-Off Date and the Series
Allocation Percentage with respect to the Series Cut-Off Date.
"Incremental Subordinated Amount" means, for any day, the product of (a)
a fraction, the numerator of which is the sum of the Invested Amount
(calculated without giving effect to amounts in the Excess Funding Account) and
the Available Subordinated Amount (calculated without giving effect to the
Incremental Subordinated Amount or to amounts in the Excess Funding Account)
and the denominator of which is the greater of (1) the Pool Balance and (2) the
sum of the amounts calculated as the numerator above for all series and (b) the
Trust Incremental Subordinated Amount, in each case, on the most recent Reset
Date.
"Initial Invested Amount" means the sum of the Class A Initial Invested
Amount and the Class B Initial Invested Amount.
"Invested Amount" means, for any date, an amount equal to the sum of the
Class A Invested Amount and the Class B Invested Amount.
"Investment Proceeds" for any Payment Date means an amount equal to the
sum of investment earnings deposited into the Collection Account on the related
Determination Date with respect to:
(a) funds held in the Reserve Fund;
(b) the Series Allocation Percentage of funds held in the
Collection Account;
(c) funds held in the Principal Funding Account; and
(d) funds held in the Excess Funding Account with respect to the
Series 2001-1 Excess Funding Amount, if any.
"LIBOR" with respect to any Interest Period will be established by the
Calculation Agent and will equal the offered rate for United States dollar
deposits for one month that appears on Telerate Page 3750 as of 11:00 A.M.,
London time, on the second LIBOR Business Day prior to such Interest Period (a
"LIBOR Determination Date"). "Telerate Page 3750" means the display page so
designated on the Dow Jones Telerate Service (or such other page as may replace
that page on that service, or such other service as may be nominated as the
information vendor, for the purpose of displaying London interbank offered
rates of major banks). If such rate appears on Telerate Page 3750, LIBOR will
be such rate.
"LIBOR Business Day" means a day on which banking institutions in New
York, New York and London, England are not required or authorized by law to be
closed. If on any LIBOR Determination Date the offered rate does not appear on
Telerate Page 3750, the Calculation Agent will request each of the reference
banks (which shall be major banks that are engaged in transactions in the
London interbank market selected by the Calculation Agent) to provide the
Calculation Agent with its offered quotation for United States dollar
S-34
deposits for one month to prime banks in the London interbank market as of
11:00 A.M., London time, on such date. If at least two reference banks provide
the Calculation Agent with such offered quotations, LIBOR on such date will be
the arithmetic mean, rounded upwards, if necessary, to the nearest 1/100,000
of 1% (.0000001), with five one-millionths of a percentage point rounded
upward, of all such quotations. If on such date fewer than two of the
reference banks provide the Calculation Agent with such offered quotations,
LIBOR on such date will be the arithmetic mean, rounded upwards, if necessary,
to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of a
percentage point rounded upward, of the offered per annum rates that one or
more leading banks in New York City selected by the Calculation Agent are
quoting as of 11:00 A.M., New York City time, on such date to leading European
banks for United States dollar deposits for one month; provided, however, that
if such banks are not quoting as described above, LIBOR for such date will be
LIBOR applicable to the Interest Period immediately preceding such Interest
Period.
"Monthly Dilution Amount" means an amount equal to the weighted average
Series Allocation Percentage for the related Collection Period of any
Adjustment Payment required to be deposited into the Collection Account
pursuant to the Trust Sale and Servicing Agreement with respect to the related
Collection Period that has not been so deposited as of the related
Determination Date.
"Monthly Interest" means Class A Monthly Interest plus Class B Monthly
Interest.
"Noteholder Defaulted Amount" means, with respect to any Payment Date,
an amount equal to the excess, if any, of (a) the product of the Series
Allocable Defaulted Amount for the related Collection Period and the Weighted
Average Floating Allocation Percentage for the related Collection Period over
(b) the Incremental Subordinated Amount for that Payment Date.
"Noteholder Monthly Servicing Fee" means an amount equal to one-twelfth
of the product of (a) the Servicing Fee Rate and (b) the Invested Amount as of
the last day of the Collection Period second preceding such Payment Date.
"Noteholder Non-Principal Collections" for any Deposit Date means the
portion of Series Allocable Non-Principal Collections for such Deposit Date
allocated to the Series 2001-1 Noteholders as described under "--Allocation
Percentages" plus any Series Allocable Miscellaneous Payments that are treated
as Noteholder Non-Principal Collections.
"Noteholder Principal Collections" means, with respect to any Deposit
Date falling in the Accumulation Period, the Amortization Period or an Early
Amortization Period, the sum of (a) the Principal Allocation Percentage then
in effect of Series Allocable Principal Collections plus any Series Allocable
Miscellaneous Payments that are treated as Noteholder Principal Collections
and (b) for any Deposit Date that is also a Payment Date, the amounts, if any,
of Noteholder Non-Principal Collections, Investment Proceeds, funds in the
Reserve Fund and Additional Noteholder Collections allocated to cover the
Noteholder Defaulted Amount or Monthly Dilution Amount or to reverse
Noteholder Charge-Offs.
"Principal Allocation Percentage" means, with respect to any day, the
percentage equivalent (which shall never exceed 100%) of a fraction, the
numerator of which is the Invested Amount as of the last day of the Revolving
Period and the denominator of which is the product of (x) the Pool Balance as
of such last day and (y) the Series Allocation Percentage for the day in
respect of which the Principal Allocation Percentage is being calculated.
"Required Participation Percentage" shall mean, with respect to Series
2001-1 Notes, 100%.
"Required Subordinated Amount" means, as of any date of determination,
the sum of (a) the product of the Subordinated Percentage and the Invested
Amount as of the opening of business on such date
S-35
and (b) the Incremental Subordinated Amount. On the Series Issuance Date, as-
suming that there are no amounts in the Excess Funding Account, the Invested
Amount would be $300.0 million and the Required Subordinated Amount would be
$26,086,956 plus the Incremental Subordinated Amount as of the Series
Issuance Date.
"Subordination Factor" shall mean 8%.
"Subordinated Percentage" means the percentage equivalent of a fraction,
the numerator of which is the Subordination Factor and the denominator of which
will be the excess of 100% over the Subordination Factor.
"Weighted Average Floating Allocation Percentage" means, for any
Collection Period, a percentage equal to the result of (a) the sum of the
Floating Allocation Percentages for each day during that Collection Period,
divided by (b) the number of days in that Collection Period.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Kirkland & Ellis, special tax counsel to the
Transferor, for U.S. federal income tax purposes, the Series 2001-1 Notes will
constitute indebtedness. Each Noteholder, by the acceptance of a Series 2001-1
Note, will agree to treat the Series 2001-1 Notes as indebtedness for federal,
state and local income and franchise tax purposes.
All the certificates issued as of the Series Issuance Date have been
issued to the Transferor. Accordingly, the Trust will be characterized as a
division of the Transferor for U.S. federal income tax purposes. See "Certain
Federal Income Tax Consequences--Tax Characterization of the Trust" in the
prospectus. If the Transferor sells any of the certificates or if the Trust
issues additional certificates, this characterization may change. See "Certain
Federal Income Tax Consequences--Tax Characterization of the Trust" in the
prospectus.
As discussed in the Prospectus, a series of Notes will be treated as
having been issued with original issue discount ("OID") if the interest payable
with respect to such series of Notes is not treated as qualified stated
interest ("QSI"). If a series of Notes does not pay QSI, all of the taxable
income thereon would be includible in income as OID, as described in the
prospectus.
The Transferor believes that all of the interest with respect to each
series of Notes will be treated as QSI. However, there is a minimal risk that
the interest would not be treated as QSI because the interest rate on a series
of Notes is capped at the Asset Receivables Rate, and thus, to the extent that
the interest rate on a series of Notes rose to or above the Asset Receivables
Rate, some of the interest with respect to such series of Notes would
effectively be deferred. The Transferor believes that the likelihood that this
could occur is extremely remote, and thus it does not believe that any of the
interest with respect to a series of Notes would be treated as not being QSI.
For a discussion of the consequences to a Noteholder if interest on a
series of Notes was not QSI, please see the prospectus.
See "Certain Federal Income Tax Consequences" and "State and Local Tax
Consequences" in the prospectus.
S-36
FLORIDA INCOME TAXATION
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
Series 2001-1 Notes, then a financial organization investing in the Series
2001-1 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. Bilzin Sumberg
Dunn Baena Price & Axelrod LLP, special Florida counsel to World Omni, is of
the opinion (although not free from doubt and subject to the assumptions and
circumstances contained in its full written opinion) that if the matter were
properly presented to a court with jurisdiction, and if relevant law were
interpreted consistent with existing authority, the court should hold that the
Loan Rule would not apply to an investment in the Series 2001-1 Notes or the
receipt of interest on the Series 2001-1 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 Series 2001-1 Notes
and your ability to offset any such Florida tax against any other state tax
liabilities.
ERISA CONSIDERATIONS
Although there is little guidance on the subject, the Transferor believes
that, at the time of their issuance, the Series 2001-1 Notes would be treated a
indebtedness without substantial equity features for purposes of the Plan Asset
Regulation. The debt treatment of the Series 2001-1 Notes could change,
subsequent to their issuance, if the Trust incurred losses. However, without
regard to whether Series 2001-1 Notes are treated as an equity interest for
such purposes, the acquisition or holding of Series 2001-1 Notes by or on
behalf of a Benefit Plan or a fund containing assets of a Benefit Plan could be
considered to give rise to a prohibited transaction if the Transferor, the
Trust or any of their respective affiliates 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 Series 2001-1 Notes by a Benefit Plan depending on the type and
circumstances of the plan fiduciary making the decision of acquire such Series
2001-1 Notes. Included among these exemptions are: PTCE 90-1, regarding
investments by insurance company pooled separate accounts; PTCE 91-38,
regarding investments by bank collective investment funds; PTCE 84-14,
regarding transactions effected by "qualified professional asset managers;"
PTCE 95-60, regarding investments by insurance company general accounts; and
PTCE 96-23, regarding transactions affected by in-house asset managers. For
additional information regarding treatment of the Series 2001-1 Notes under
ERISA, See "ERISA Considerations" in the prospectus.
S-37
UNDERWRITING
Under the Underwriting Agreement dated February 21, 2001 with respect to
the Class A Notes (the "Class A Underwriting Agreement"), the Underwriters
named below (the "Class A Underwriters") for whom Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch") is acting as representative
(the "Representative"), have severally (but not jointly) agreed to purchase
Class A Notes from the Transferor as follows:
Principal
Amount of
Class A
Underwriter Notes
----------- ------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................ $110,000,000
Chase Securities Inc......................................... $ 47,000,000
------------
Total.................................................... $157,000,000
============
In addition, the Transferor will sell directly to an affiliate of Merrill
Lynch Class A Notes with an aggregate principal balance of $120,000,000
pursuant to a purchase agreement. The affiliate has agreed in the purchase
agreement to purchase these Class A Notes at the public offering price for the
Class A Notes set forth in this prospectus supplement. The Transferor has
agreed to pay Merrill Lynch, as placement agent, a placement agent fee of .25%
of the aggregate principal balance of the Class A Notes purchased by the
affiliate. The Transferor and World Omni will indemnify the placement agent
against certain liabilities, including civil liabilities under the Securities
Act of 1933. The Class A Notes being sold by the Transferor to the affiliate
are not underwritten Class A Notes. The Class A Underwriters are purchasing,
offering and selling only underwritten Class A Notes with an aggregate
principal balance listed in the table above.
The Class A Underwriting Agreement provides that, subject to certain
conditions precedent, the Class A Underwriters will be obligated to purchase
all the underwritten Class A Notes if any are purchased. The Class A
Underwriting Agreement provides that if a Class A Underwriter defaults, in
certain circumstances the non-defaulting Class A Underwriter's commitment may
be increased or the Class A Underwriting Agreement may be terminated.
The Representative has advised the Transferor that:
(i) The Class A Underwriters propose to offer the underwritten
Class A Notes to the public initially at the public offering prices set
forth on the cover page of this prospectus supplement;
(ii) The Class A Underwriters propose to offer the underwritten
Class A Notes to certain dealers at the public offering prices set forth
on the cover page of this prospectus supplement, less a concession of
.15% of the initial principal amount of each Class A Note; and
(iii) The Class A Underwriters and the dealers described in clause
(ii) may allow a discount of .125% of the initial principal amount of
each Class A Note on sales to certain other dealers.
Under the Underwriting Agreement dated February 21, 2001 with respect to
the Class B Notes (the "Class B Underwriting Agreement"), Merrill Lynch (the
"Class B Underwriter" and, with the Class A Underwriters, the "Underwriters")
has agreed to purchase from the Transferor all of the Class B Notes.
The Class B Underwriting Agreement provides that, subject to certain
conditions precedent, the Class B Underwriter will be obligated to purchase all
the Class B Notes if any are purchased.
S-38
Merrill Lynch has advised the Transferor that:
(i) Merrill Lynch proposes to offer the Class B Notes to the
public initially at the public offering prices set forth on the cover
page of this prospectus supplement;
(ii) Merrill Lynch proposes to offer Class B Notes to certain
dealers at the public offering prices set forth on the cover page of
this prospectus supplement, less a concession of .195% of the initial
principal amount of each Class B Note; and
(iii) The Class B Underwriter and the dealers described in clause
(ii) may allow a discount of .15% of the initial principal amount of
each Class B Note on sales to certain other dealers.
After the initial public offering, the Underwriters may change the public
offering price and concessions and discounts to dealers.
The Transferor and World Omni have agreed to jointly and severally
indemnify the Underwriters against certain liabilities, including civil
liabilities under the Securities Act of 1933, or contribute to any payments the
Underwriters are required to make in respect of those liabilities. In addition,
the Transferor and World Omni have agreed to reimburse the Underwriters for
certain expenses incurred in the offering of the Series 2001-1 Notes.
We expect that we will deliver the Series 2001-1 Notes in return for
payment on or about the date specified in the last paragraph of the cover page
of this prospectus supplement, which is the ninth business day after the date
of this prospectus supplement. Applicable regulations under the Exchange Act
generally require that secondary market transactions settle in three business
days, unless the parties to the trade expressly agree otherwise. Accordingly,
because the Series 2001-1 Notes initially will settle nine business days after
the date of this prospectus supplement, purchasers who wish to trade them prior
to the Initial Issuance Date must specify an alternate settlement cycle at the
time of the trade to prevent a failed settlement. If you wish to trade Series
2001-1 Notes prior to the Initial Issuance Date, please consult your own
advisor.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Exchange Act. Over-allotment involves syndicate sales in excess of
the offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Series 2001-1 Notes in the open market
after the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the Underwriters to reclaim a selling concession
from a syndicate member when the Series 2001-1 Notes originally sold by such
syndicate member are purchased in a syndicate covering transactions and penalty
bids may cause the prices of the Series 2001-1 Notes to be higher than they
would otherwise be in the absence of such transactions. If the Underwriters
begin these transactions, they may discontinue them at any time.
Neither we nor any Underwriter makes any representation or prediction as
to the direction or magnitude of any effect that these transactions may have on
the prices of the Series 2001-1 Notes. In addition, neither we nor any
Underwriter makes any representation that the Underwriters will engage in these
transactions or that if they begin these transactions, they will not
discontinue them without notice.
LEGAL MATTERS
In addition to the legal opinions described in the prospectus, certain
legal matters relating to the Series 2001-1 Notes will be passed upon for the
Underwriters by Orrick, Herrington & Sutcliffe LLP.
S-39
INDEX OF TERMS
The following is a list of the defined terms used in this prospectus
supplement and the pages on which the definitions of such terms may be found in
this prospectus supplement.
Accumulation Period........................................................ S-18
Accumulation Period Commencement Date...................................... S-18
Accumulation Period Length................................................. S-18
Additional Noteholder Collections.......................................... S-31
Additional Noteholder Non-Principal Collections............................ S-31
Additional Noteholder Principal Collections................................ S-31
Amortization Period Commencement Date...................................... S-19
Assets Receivables Rate.................................................... S-31
Available Noteholder Principal Collections................................. S-32
Available Subordinated Amount.............................................. S-24
Calculation Agent.......................................................... S-32
Carry-Over Amount.......................................................... S-17
Certificateholder Percentage............................................... S-32
Class A Carry-Over Amount.................................................. S-17
Class A Controlled Accumulation Amount..................................... S-32
Class A Controlled Deposit Amount.......................................... S-32
Class A Initial Invested Amount............................................ S-32
Class A Invested Amount.................................................... S-32
Class A Monthly Interest................................................... S-33
Class A Note Rate.......................................................... S-17
Class A Noteholder Charge-Off.............................................. S-26
Class A Noteholders........................................................ S-16
Class A Stated Maturity Date............................................... S-28
Class A Underwriters....................................................... S-38
Class A Underwriting Agreement............................................. S-38
Class B Carry-Over Amount.................................................. S-17
Class B Controlled Accumulation Amount..................................... S-33
Class B Controlled Deposit Amount.......................................... S-33
Class B Initial Invested Amount............................................ S-33
Class B Invested Amount.................................................... S-33
Class B Monthly Interest................................................... S-33
Class B Note Rate.......................................................... S-17
Class B Noteholder Charge-Off.............................................. S-26
Class B Noteholders........................................................ S-16
Class B Stated Maturity Date............................................... S-28
Class B Underwriter........................................................ S-38
Class B Underwriting Agreement............................................. S-38
Deficiency Amount.......................................................... S-23
Excess Certificateholder Percentage........................................ S-33
Excess Reserve Fund Required Amount........................................ S-23
Expected Principal Payment Date............................................ S-15
Floating Allocation Percentage............................................. S-34
Incremental Subordinated Amount............................................ S-34
Initial Invested Amount.................................................... S-34
Interest Period............................................................ S-17
Invested Amount............................................................ S-34
Investment Proceeds........................................................ S-34
LIBOR...................................................................... S-34
LIBOR Business Day......................................................... S-34
LIBOR Determination Date................................................... S-34
Loan Rule.................................................................. S-37
Merrill Lynch.............................................................. S-38
Monthly Dilution Amount.................................................... S-35
Monthly Interest........................................................... S-35
Monthly Payment Rate....................................................... S-18
Note Rate.................................................................. S-17
Noteholder Charge-Off...................................................... S-26
Noteholder Charge-Off Reversal Amount...................................... S-22
Noteholder Defaulted Amount................................................ S-35
Noteholder Monthly Servicing Fee........................................... S-35
Noteholder Non-Principal Collections....................................... S-35
Noteholder Principal Collections........................................... S-35
OID........................................................................ S-36
Payment Date Statement..................................................... S-30
Pool of Accounts........................................................... S-12
Principal Allocation Percentage............................................ S-35
Principal Commencement Date................................................ S-19
Principal Funding Account.................................................. S-29
Principal Funding Account Balance.......................................... S-29
Principal Shortfalls....................................................... S-25
QSI........................................................................ S-36
Record Date................................................................ S-26
Representative............................................................. S-38
Required Draw Amount....................................................... S-23
Required Participation Percentage.......................................... S-35
Required Subordinated Amount............................................... S-35
Reserve Fund............................................................... S-23
Reserve Fund Deposit Amount................................................ S-23
Reserve Fund Required Amount............................................... S-23
Revolving Period........................................................... S-18
Series 1999-VFN Notes...................................................... A-1
Series 2000-1 Class A Notes................................................ A-1
Series 2000-1 Class B Notes................................................ A-1
Series 2000-1 Notes........................................................ A-1
Series 2000-VFN Notes...................................................... A-1
S-40
Series 2001-1 Excess Funding Amount........................................ S-30
Series 2001-1 Noteholders.................................................. S-16
Series Adjusted Invested Amount............................................ S-21
Series Supplement.......................................................... S-16
Special Payment Date....................................................... S-20
Subordinated Percentage.................................................... S-36
Subordination Factor....................................................... S-36
Telerate Page 3750......................................................... S-34
Underwriters............................................................... S-38
Weighted Average Floating Allocation Percentage............................ S-36
S-41
ANNEX I
OTHER SERIES OF NOTES
This Annex I sets forth the principal characteristics of each series of
Notes outstanding as of the date of this prospectus supplement. As of that
date, the following series of Notes were outstanding: Series 1999-VFN Asset
Backed Notes (the "Series 1999-VFN Notes"), (ii) the Series 2000-1 Floating
Rate Automobile Dealer Floorplan Asset Backed Notes, Class A (the "Series 2000-
1 Class A Notes") and the Series 2000-1 Floating Rate Automobile Dealer
Floorplan Asset Backed Notes, Class B (the "Series 2000-1 Class B Notes" and,
together with the Series 2000-1 Class A Notes, the "Series 2000-1 Notes") and
(iii) the Series 2000-VFN Asset Backed Notes (the "Series 2000-VFN Notes").
Series 1999-VFN Notes
Maximum Principal Amount..... $150,000,000
Scheduled Interest Payment Monthly on the 15th day of each month or, if
Date........................ that day is not a business day, the next
business day
Current Principal Amount..... $150,000,000
Required Subordinated Approximately 8.1% of its Invested Amount plus
Amount...................... any Incremental Subordinated Amount
Required Participation
Percentage.................. 100%
Revolving Period............. November 22, 1999 to the earlier of November 17,
2001 (which may be extended) and the occurrence
of an Early Amortization Event
Expected Final Payment Date.. 4th Payment Date after the end of its Revolving
Period
Stated Final Maturity Date... 28th Payment Date after the end of its Revolving
Period
The Transferor expects that on or shortly after the Series Issuance Date for
the Series 2001-1 Notes, the outstanding principal amount of the Series 1999-
VFN Notes will be reduced to $0.
Series 2000-1 Notes
Class A Initial Invested
Amount...................... $646,000,000
Class B Initial Invested
Amount...................... $54,000,000
Scheduled Interest Payment Monthly, on the 15th day of each month or, if
Date that day is not a business day, the next
business day
Current Class A Invested
Amount...................... $646,000,000
Current Class B Invested
Amount...................... $54,000,000
Required Subordinated 8.7% of its Invested Amount plus any Incremental
Amount...................... Subordinated Amount
Required Participation
Percentage.................. 100%
Revolving Period............. April 6, 2000 to the earlier of the Accumulation
Period Commencement Date and the occurrence of
an Early Amortization Event
Expected Final Payment Date.. March 17, 2003
Stated Final Maturity Date... March 15, 2005
A-1
Series 2000-VFN Notes
Maximum Principal Amount..... $150,000,000
Scheduled Interest Payment Monthly on the 15th day of each month or, if
Date........................ that day is not a business day, the next
business day
Current Principal Amount..... $150,000,000
Required Subordinated Approximately 11.7% of its Invested Amount plus
Amount...................... any Incremental Subordinated Amount
Required Participation
Percentage.................. 100%
Revolving Period............. December 22, 2000 to the earlier of December 21,
2001 (which may be extended) and the occurrence
of an Early Amortization Event
Expected Final Payment Date.. 4th Payment Date after the end of its Revolving
Period
Stated Final Maturity Date... 28th Payment Date after the end of its Revolving
Period
The Transferor expects that on or shortly after the Series Issuance Date for
the Series 2001-1 Notes, the outstanding principal amount of the Series 2000-
VFN Notes will be reduced to $0.
A-2
PROSPECTUS
World Omni Master Owner Trust
Issuer
WODFI LLC
Transferor
World Omni Financial Corp.
Servicer
Automobile Dealer Floorplan Asset Backed Notes
Before you The trust--
purchase any of
the notes, you
should
carefully
consider the
risk factors
beginning on
page 4 in this
prospectus.
. may periodically issue asset backed notes in one
or more series;
. will own--
. receivables arising from a selected portfolio
of automobile dealer revolving floorplan
financing agreements;
The sole source . payments due on those receivables; and
of payments on
the notes is a
portion of the
assets of the
trust. The
notes are not
interests in or
obligations of
World Omni
Financial
Corp., or WODFI
LLC or any
other person.
. other property described in this prospectus
and in the prospectus supplement; and
. will not own the dealer accounts from which the
receivables arise.
The notes--
. will represent indebtedness secured by the
assets of the trust;
. will be paid only from the assets of the trust;
This prospectus . will represent the right to payments in the
may be used to amounts and at the times described in the
offer and sell prospectus supplement for that series;
the notes only
if accompanied
by the
prospectus.
. offered by this prospectus will be rated
investment grade by at least one nationally
recognized rating agency;
. may benefit from one or more forms of credit
enhancement; and
. may be issued as part of a designated series
which may include one or more classes.
Neither the Securities and Exchange Commission Nor Any State Securities
Commission Has Approved or Disapproved These Notes or Determined If this
Prospectus Is Accurate or Complete. Any Representation to the Contrary Is a
Criminal Offense.
February 16, 2001
TABLE OF CONTENTS
Page
----
Where to Find Information in this Prospectus and the Prospectus
Supplement............................................................... iii
Summary................................................................... 1
The Parties............................................................. 1
Securities to Be Issued by the Trust.................................... 1
Payments on the Notes................................................... 1
Assets of the Trust..................................................... 2
Servicing Fees.......................................................... 3
Tax Status.............................................................. 3
ERISA Considerations.................................................... 3
Ratings................................................................. 3
Risk Factors.............................................................. 4
The Servicer.............................................................. 9
The Transferor............................................................ 9
The Trust................................................................. 10
The Owner Trustee....................................................... 11
Use of Proceeds........................................................... 11
The Dealer Floorplan Financing Business................................... 12
Creation of Receivables................................................. 12
Credit Approval and Credit Guidelines................................... 13
Payment Terms........................................................... 15
Billing and Collection Procedures....................................... 16
Dealer Monitoring....................................................... 16
Intercreditor Agreement for Security Interests in Vehicles and Non-
Vehicle Collateral Security............................................ 17
Participation Agreements................................................ 18
Participation Interests Purchased by World Omni......................... 18
Relationship with Affiliates............................................ 18
The Accounts.............................................................. 19
The Notes................................................................. 19
General................................................................. 19
Interest................................................................ 20
Principal............................................................... 20
The Indenture and the Series Supplements................................ 23
Excluded Series......................................................... 28
Collection Account...................................................... 28
Excess Funding Account.................................................. 30
Page
----
Allocation Percentages................................................... 31
Allocation of Collections; Deposits in Collection Account................ 32
Subordination of Certificate; Enhancements............................... 33
Distributions............................................................ 34
New Issuances............................................................ 34
The Indenture Trustee.................................................... 36
Reports to Noteholders................................................... 36
Book-Entry Registration.................................................. 37
Definitive Notes......................................................... 40
The Transfer and Servicing Agreements...................................... 40
Receivables Purchase Agreement........................................... 41
Conveyance of Receivables and Collateral Security........................ 43
Representations and Warranties by the Transferor......................... 44
Eligible Accounts and Eligible Receivables............................... 46
Ineligible Receivables and Excess Receivables............................ 47
Addition of Accounts..................................................... 49
Removal of Accounts; Transfers of Participations......................... 50
The Certificates......................................................... 53
Defaulted Receivables and Recoveries..................................... 53
Optional Repurchase...................................................... 54
Investment Events and Early Amortization Events.......................... 55
Termination; Fully Funded Date........................................... 56
Indemnification.......................................................... 57
Collection and Other Servicing Procedures................................ 57
Servicer Covenants....................................................... 58
Servicing Compensation and Payment of Expenses........................... 59
Certain Matters Regarding the Servicer................................... 59
Servicing Default........................................................ 60
Rights upon Servicing Default............................................ 61
Waiver of Past Defaults.................................................. 61
Reports.................................................................. 61
Evidence as to Compliance................................................ 62
Amendments............................................................... 62
Intercreditor Arrangements............................................... 63
Administration Agreement................................................. 64
i
Page
----
Certain Administrative and Legal Proceedings............................... 64
Certain Legal Aspects of the Receivables................................... 64
Transfer of Receivables.................................................. 64
Certain Matters Relating to Bankruptcy................................... 65
Certain Federal Income Tax Consequences.................................... 66
General.................................................................. 66
Tax Characterization and Treatment of Notes.............................. 67
Tax Characterization of the Trust........................................ 70
Page
----
State and Local Tax Consequences........................................... 71
ERISA Considerations....................................................... 71
Plan of Distribution....................................................... 72
Legal Opinions............................................................. 73
Where You Can Find More Information........................................ 73
Incorporation by Reference................................................. 73
Index of Terms............................................................. 75
ii
WHERE TO FIND INFORMATION IN THIS PROSPECTUS AND THE
PROSPECTUS SUPPLEMENT
We provide information to you about the notes in two separate documents
that provide varying levels of detail:
(a) this prospectus, which provides general information, some of which
may not apply to a particular series of notes, including your
series; and
(b) the prospectus supplement for a series of notes, which will provide
financial and other information regarding the pool of receivables
held by the trust and will specify the terms of a particular series
of notes, including:
. which classes of the series are being offered;
. the timing of interest and principal payments for each class of
the series;
. the priority of interest and principal payments for each class of
the series;
. information about credit enhancement for each class of the series,
if any;
. the ratings for each class of the series; and
. the method for selling each class of the series.
If the terms of your series of notes vary between this prospectus and the
prospectus supplement for that series, you should rely on the information in
the prospectus supplement.
You should rely only on the information provided in this prospectus and
the prospectus supplement for your series of notes. We have not authorized
anyone to provide you with other or different information. You should not
assume that the information in this prospectus and any prospectus supplement is
accurate on any date other than the dates stated on their respective covers.
We are not offering the notes in any state where the offer is not
permitted.
You can find a list of the pages where capitalized terms used in this
prospectus are defined under the caption "Index of Terms" which appears at the
end of this prospectus.
We include cross-references in this prospectus to captions in this
prospectus where you can find further related discussions.
iii
SUMMARY
This summary highlights selected information from this prospectus and
provides an overview to aid in your understanding of the notes. It does not
contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of a series of notes,
carefully read this entire prospectus and the prospectus supplement for that
series.
The Parties
Issuer/Trust
World Omni Master Owner Trust, a Delaware business trust formed by the
Transferor and the Owner Trustee.
Transferor
WODFI LLC, a Delaware limited liability company and a wholly-owned
subsidiary of World Omni Financial Corp.
Servicer
World Omni Financial Corp., a Florida corporation and a wholly-owned
subsidiary of JM Family Enterprises, Inc.
Owner Trustee
The Owner Trustee is Chase Manhattan Bank USA, National Association
(successor-by-merger to Chase Manhattan Bank Delaware), a national banking and
trust association.
Indenture Trustee
The Indenture Trustee is BNY Midwest Trust Company (as successor-in-
interest to the corporate trust administration of Harris Trust and Savings
Bank), an Illinois banking corporation.
Securities to Be Issued by the Trust
The Notes
The trust will issue one or more series of notes. The prospectus
supplement will contain additional information about the notes, including the
classes of notes offered in the series. The trust has previously issued a
series of notes. Each series of notes may include one or more classes. The
trust may issue additional series of notes after the issuance of notes offered
by this prospectus.
The Certificates
The trust has also issued certificates. The certificates are not being
offered for sale by this prospectus and are currently held by the Transferor.
Certificates held by the Transferor may be exchanged only upon satisfaction of
the conditions contained in the Trust Agreement and the Rating Agency
Condition.
Subordination
A portion of the certificates will be subordinated to a series of notes
to the extent described in this prospectus and the prospectus supplement for
the series.
One or more classes of notes of a series may be subordinate to one or
more other classes of notes. The relative priority of each series and class of
notes will be described in the prospectus supplement for that series.
Payments on the Notes
Interest
The trust will pay interest on the notes with the frequency specified in
the prospectus supplement for that series. Each series or class of notes will
have its own interest rate, which may be fixed, variable, contingent,
adjustable or any combination of these characteristics. The interest rate or
the method for determining the interest rate for a series or class of notes
will be specified in the prospectus supplement for that series.
The sources of funds the trust will use to pay interest on a series or
class of notes will be
1
specified in the prospectus supplement for that series. Typically, these
sources will include:
. interest collections on the receivables held by the trust; and
. available credit enhancement.
Principal
Each series or class of notes will have a stated principal amount.
Ordinarily, principal payments on the notes will occur on one or more
dates specified in the prospectus supplement for that series. The sources of
funds the trust will use to pay principal will be specified in the prospectus
supplement for that series. Typically, these sources will include:
. all or a portion of the principal collections on the receivables held
by the trust;
. all or a portion of the interest collections remaining after interest
payments; and
. available credit enhancement.
The manner in which the trust will apply available funds toward principal
payments on a series of notes will be set forth in the prospectus supplement
for that series.
Each series of notes will have a revolving period during which no
principal payments are made. Among the possible ways principal payments may be
made are the following:
. a single targeted final payment date, on which all principal is repaid
at once;
. an amortization period, during which principal is repaid on each
specified payment date until all principal has been repaid; or
. an index amortization period, during which the amount of principal
that is repaid is determined by reference to an index.
However, it is possible that principal payments on a class or series of
notes will begin earlier than the date specified in the prospectus supplement
for that series. Upon the occurrence of an early amortization event for a
series of notes, the trust will apply all funds allocated to that series to the
repayment of the outstanding principal of and interest on the notes and the
other securities, if any, in that series, unless the prospectus supplement for
that series provides that those funds will be set aside for payment on a later
date. An early amortization event will likely result in the commencement of the
repayment of principal on the notes occurring earlier than the date specified
in the prospectus supplement for that series. In addition, an early
amortization event may result in delays or reductions in the payments on your
notes.
Assets of the Trust
The primary assets of the trust consist of a revolving pool of
receivables arising under selected revolving floorplan financing agreements
entered into with World Omni by retail automotive dealers to finance their
inventory of new and used automobiles and light-duty trucks and may also
include participation interests in financing arrangements of a third party.
Receivables are sold by World Omni to the Transferor and are then
transferred by the Transferor to the trust. The trust has granted a security
interest in the receivables and the other property of the trust to the trustee
under the indenture for the notes for the benefit of the noteholders. The trust
property also includes:
. security interests in the collateral securing the dealers' obligations
to pay the receivables, which will include unsold vehicles and which
may include parts inventory, equipment, fixtures, service accounts,
real estate and guarantees;
. amounts held on deposit in specified trust accounts maintained for the
trust or for a series or class of notes;
2
. recourse World Omni may have against the dealers under the financing
agreements;
. an assignment of the Transferor's rights under its purchase agreement
with World Omni; and
. any additional property, or exclusions of the foregoing types of
property, described in the prospectus supplement.
As new receivables arise under the selected financing agreements, they
generally will be transferred to the trust on a daily basis. Prior to the date
on which funds are required to be set aside for payment on a series of notes,
the trust generally will transfer the principal collections on the receivables
to the certificateholders, provided there are sufficient assets in the trust.
If there are insufficient assets in the trust, the trust will retain the
principal collections and invest them in eligible investments.
However, if a cash accumulation event specified in the prospectus
supplement for a series of notes occurs, the trust will retain all or a portion
of the principal collections and invest them in eligible investments in a cash
accumulation account dedicated to the noteholders of that series for future
payment on the notes of that series.
Servicing Fees
For each series of notes, the trust will pay the servicer a set monthly
fee set forth in the related prospectus supplement as compensation for
servicing the receivables.
Tax Status
Kirkland & Ellis, special tax counsel, is of the opinion that, for
federal income tax purposes, the notes will be characterized as indebtedness
and the trust will not be characterized as an association (or publicly traded
partnership) taxable as a corporation.
By accepting a note, you agree to treat the notes as indebtedness for
federal, state and local income and franchise tax purposes.
See "Certain Federal Income Tax Consequences" and "State and Local Tax
Consequences" in this prospectus concerning the application of federal, state
and local tax laws.
ERISA Considerations
Subject to the considerations discussed under "ERISA Considerations," an
employee benefit plan regulated by the Employee Retirement Income Security Act
of 1974 may purchase the notes, including any subordinated notes. See "ERISA
Considerations" for a description of the limitations on the purchase of notes
by employee benefit plans. Employee benefit plans should consult with their
counsel before purchasing any notes.
Ratings
All of the notes offered under this prospectus will be rated investment
grade by at least one nationally recognized rating agency. Ratings for a series
or class of notes offered under this prospectus will be described in the
prospectus supplement for that series.
3
RISK FACTORS
You should consider carefully the following risk factors in deciding
whether to purchase the notes.
Dealer Concentration May
Result in Larger Losses
from a Single Dealer
Default
As of December 31, 2000, World Omni provided new
and used car floorplan financing for
approximately 240 dealers or dealer groups.
Although no dealer or dealer group accounted for
more than 5.95% of the aggregate principal
amount of the outstanding receivables as of
December 31, 2000, approximately 35.15% of the
aggregate principal amount of the receivables
outstanding as of that date were generated by
the 8 largest dealers or dealer groups. A
default by one or more of these dealers or
dealer groups could result in delays or
reductions in payments on your notes. In
addition, as of December 31, 2000, approximately
$30.6 million of receivables were generated by
dealers or dealer groups affiliated with JM
Family Enterprises, Inc., the parent company of
World Omni.
Receivables May Be
Uncollectible due to
Superior Interests
World Omni and the Transferor have filed
financing statements covering the receivables
sold by World Omni to the Transferor and then
transferred to the trust. The financing
statements will perfect the security interests
of the Transferor and the trust in the
receivables. However, World Omni will serve as
the custodian of the receivables and will not
physically segregate or mark the receivables to
indicate that they have been sold to the
Transferor and then transferred to the trust.
See "The Transfer and Servicing Agreements--
Conveyance of Receivables and Collateral
Security." If the receivables are "chattel
paper" under the Uniform Commercial Code and
another party purchases or takes a security
interest in the receivables for value, in the
ordinary course of business and without actual
knowledge of the Transferor's or the trust's
interest, that purchaser or secured party will
acquire an interest in the receivables superior
to the trust's interest. The trust will not be
able to collect on the receivable if there is a
superior interest. This may result in delays or
reductions in payments on your notes. See
"Certain Legal Aspects of the Receivables--
Transfer of Receivables."
Receivables May Be
Unsecured due to Sales out
of Trust Dealers give World Omni a security interest in
the vehicles they purchase to secure their
obligations under the receivables. When the
financed vehicle is sold, World Omni's security
interest in the vehicle generally will
terminate. If the dealer who sold the vehicle
fails to pay World Omni the amount owed on the
receivable, the receivable will become unsecured
because the buyer generally takes the vehicle
free of the security interest. If the financed
vehicle is sold "out of trust," i.e., sold
without the dealer applying the proceeds of the
sale to repay the receivable, the trust will not
be able to foreclose on the financed vehicle.
This may result in delays or reductions in
payments on your notes.
4
A Bankruptcy of World Omni
or the Transferor May Delay
or Reduce Payments on the
Notes
World Omni will sell receivables to the
Transferor, and the Transferor will transfer
the receivables to the trust. Although World
Omni and the Transferor have taken steps, such
as the creation of the Transferor as a special
purpose entity, to ensure that the transactions
described in this prospectus are respected, and
to reduce the likelihood that the Transferor
would voluntarily file for bankruptcy, if World
Omni or the Transferor were to become a debtor
in bankruptcy, a court could conclude that the
receivables transferred to the trust are not
owned by the trust, but rather are part of the
estate of the debtor in bankruptcy. The court
may conclude that the transfer of the
receivables from the party in bankruptcy was
not really a sale, but rather a secured
financing, or the court may conclude that the
party in bankruptcy and the owner of the
receivables should be treated as a single
entity rather than separate entities. If this
were to occur, you could experience delays or
reductions in payments on your notes as a
result of:
. the "automatic stay" provisions of the U.S.
Bankruptcy Code, which prevent creditors
from exercising remedies against a debtor in
bankruptcy, and provisions of the U.S.
Bankruptcy Code that permit substitution of
collateral in specified circumstances;
. some tax or government liens on World Omni's
or the Transferor's property that arose
prior to the transfer of a receivable to the
trust having a right to be paid from
collections on the receivables before those
collections are used to make payments on
your notes; and
. the fact that the trust or the indenture
trustee may not have a perfected security
interest in the financed vehicles or cash
collections on the receivables held by World
Omni at the time a bankruptcy proceeding
begins.
If World Omni or the Transferor were to become
a debtor in bankruptcy, it may be able to
recover payments made by it to the trust to
repurchase receivables prior to the date of the
bankruptcy petition. This could result in
delays or reductions in payments on your notes.
In addition, if World Omni, any of its
affiliates, or any of the manufacturers of the
related vehicles filed for bankruptcy, the
dealers might respond by delaying or
withholding payments on the receivables, even
without legal or contractual justification.
This could result in delays or reductions in
payments on your notes.
5
Failure of Southeast Toyota
Distributors to Repurchase
Vehicles from Terminated
Dealers May Result in
Increased Losses on the
Receivables
Southeast Toyota Distributors, Inc.,
("Southeast Toyota Distributors") an affiliate
of World Omni and the largest distributor of
vehicles to the dealers generating the
receivables, is obligated to repurchase some of
the dealer's vehicles if its dealership
agreement is terminated or expires. If
Southeast Toyota Distributors is unwilling or
unable to repurchase those vehicles, losses on
the receivables of those dealers may increase.
This could result in delays or reductions in
payments on your notes.
Failure of World Omni to
Generate Sufficient New
Receivables May Result in
the Trust Holding Assets
with a Lower Yield
The trust depends upon World Omni to generate
new receivables to replace the receivables that
are repaid. In the event that World Omni is
unable to generate sufficient new receivables,
or is unable to transfer the receivables it
generates because of restrictions in its
financing arrangements or otherwise, the trust
will be required to hold cash or investment
securities rather than receivables. The yield
on cash or investment securities may be lower
than the yield on receivables. Because the
trust's assets are the sole source of payments
on the notes, this could result in delays or
reductions in payments on your notes. World
Omni does not guarantee that it will continue
to generate receivables at historical rates.
The following events could negatively impact
World Omni's ability to generate new
receivables:
. a decline in the manufacture and sale of
automobiles and light trucks due to an
economic downturn, a labor disruption,
competitive pressure, or other factors;
. a change in vehicle distribution practices;
. a change in dealer inventory management
practices;
. a change in the interest rates charged by
World Omni to dealers;
. a change in the amounts of the credit lines
or other terms offered by World Omni to
dealers;
. defaults on accounts by dealers;
. termination of dealer franchises;
. dealers becoming insolvent or filing for
bankruptcy; and
. seasonal fluctuations in the sale and
leasing of vehicles.
As of December 31, 2000, approximately 33% of
the aggregate principal balance of the
receivables held by World Omni were related to
vehicles sold to dealers by Southeast Toyota
Distributors. Accordingly, the ability of World
Omni to supply new receivables
6
to the trust will be in part dependent upon the
ability of Southeast Toyota Distributors to
sell vehicles.
The Failure of Dealers to
Make Payments on the
Receivables Could Delay or
Reduce Payments on the Notes
The trust's ability to make payments on the
notes generally depends on collections from
dealers on the receivables. The prospectus
supplement will describe past patterns of
dealer payments on similar receivables.
The timing of the sale and lease of vehicles is
uncertain. It depends on many economic and
social factors that are beyond the control of
World Omni, the Transferor and the trust. Sales
incentive programs and financing incentive
programs of vehicle manufacturers, including
Toyota, and distributors, including Southeast
Toyota Distributors, also affect the sale and
lease of vehicles. World Omni does not
guarantee that dealers will pay on the
receivables at the same rates as in the past or
in any particular pattern. If the dealers'
ability to pay on the receivables declines for
whatever reason, you might experience delays or
reductions in payments on your notes.
Failure of World Omni or the
Transferor to Fulfill its
Repurchase Obligations May
Adversely Affect the Trust
World Omni, the Transferor and their respective
affiliates generally are not obligated to make
payments to you on your notes and do not insure
or guarantee the payment of the receivables or
your notes. However, World Omni will make
representations and warranties to the
Transferor regarding the characteristics of the
receivables. The Transferor will assign these
representations and warranties to the trust,
and the Transferor will make its own
representations and warranties to the trust in
connection with the transfer of the receivables
to the trust. If World Omni or the Transferor
breaches its representations and warranties,
and the breach materially and adversely affects
the receivable or the interests of the
noteholders in that receivable, the Transferor
will be obligated to repurchase the receivable
from the trust, and World Omni would be
required to purchase the receivable from the
Transferor. If World Omni fails to repurchase
the receivable from the Transferor, the
Transferor may not have adequate funds to
repurchase the affected receivable from the
trust and you may experience delays or
reductions in payments on your notes. See "The
Transfer and Servicing Agreements--Receivables
Purchase Agreement" and "--Representations and
Warranties of the Transferor."
7
The Trust Assets Are Limited
to the Receivables and any
Forms of Credit Enhancement
The notes represent obligations of the trust
only. The sole source of payments on the notes
are the assets of the trust. The trust will not
have any significant assets or sources of funds
other than the receivables, its limited rights
in specified accounts, and other rights or
credit enhancements as specified in the
prospectus supplement for the series. The notes
are not obligations of and are not insured or
guaranteed by World Omni, the Transferor or any
other entity or person (including any affiliate
of World Omni or the Transferor).
You must rely primarily on payments on the
trust's receivables, funds in the specified
accounts and other credit enhancements, if any,
for repayment of your notes. In addition, you
may have to look to the proceeds from the
repossession and sale of the collateral that
secures defaulted receivables and the proceeds
from any recourse against dealers under the
financing agreements. If these sources are
insufficient, you might experience delays or
reductions in payments on your notes.
The Trust Has Limited
Restrictions on Issuing
Additional Series of Notes
The trust, as a master trust, may issue
additional series of notes. The terms of any
additional series of notes will be established
at the time of their issuance and may vary
substantially from the terms of your notes. The
terms of the agreements creating a new series
of notes may not change the terms of any
existing series of notes, and it is a condition
to the issuance of any additional series of
notes that it not result in a decrease in the
rating of any existing series of notes.
However, the issuance of additional series of
notes could ultimately result in delays or
reductions in payments on your notes.
Ability to Change Terms of
the Accounts
World Omni may change at any time the terms of
the Accounts, including the interest rate of
the related receivables. There is no assurance
that the interest rate generated by the
receivables will always be sufficient to cover
the stated interest rate on any series of
notes. Failing to maintain an appropriate
spread between the interest rate of the
receivables and the interest rate on the notes
may cause delays or reductions in the amount of
interest paid to the noteholders and may cause
an investment event or an early amortization
event with respect to a series to occur.
8
THE SERVICER
World Omni Financial Corp. ("World Omni" or the "Servicer") is a Florida
corporation and a subsidiary of JM Family Enterprises, Inc. ("JM Family
Enterprises"), a Delaware corporation. World Omni is primarily engaged in
providing automobile dealerships throughout the United States with a full range
of financial services. World Omni provides wholesale floorplan financing,
capital loans and mortgages to dealers and also provides retail motor vehicle
leasing and installment financing to the customers of these dealers and to
others. The principal executive offices of World Omni are located at 190 N.W.
12th Avenue, Deerfield Beach, Florida 33442, and its telephone number is (954)
429-2200.
THE TRANSFEROR
WODFI LLC (the "Transferor") is a Delaware limited liability company and
a wholly-owned subsidiary of World Omni. The Transferor was organized in July
1999 for limited purposes, which include:
. purchasing receivables from World Omni;
. financing the receivables purchased;
. transferring the receivables to third parties; and
. any activities incidental to and necessary or convenient for the
accomplishment of those purposes.
The principal executive office of the Transferor is located at 190 N.W.
12th Avenue, Deerfield Beach, Florida 33442, and its telephone number is (954)
429-2200.
The Transferor has taken steps in structuring the transactions
contemplated by this prospectus that are intended to ensure that a petition for
relief by World Omni under the U.S. Bankruptcy Code or similar applicable state
laws ("Insolvency Laws") will not result in a court disregarding the Transferor
as a separate entity and consolidating its assets and liabilities with those of
World Omni. These steps include the creation of the Transferor as a separate,
limited purpose entity pursuant to its certificate of formation and limited
liability company agreement, which contain limitations, including restrictions
on the nature of the Transferor's business and a restriction on the
Transferor's ability to file a petition for relief under any Insolvency Law
without the unanimous affirmative vote of all of its board directors. The
Transferor's limited liability company agreement also includes a provision
requiring the Transferor to have two directors who qualify as independent as
that term is defined in the Transferor's limited liability company agreement.
See "Risk Factors--A Bankruptcy of World Omni or the Transferor May Delay or
Reduce Payments on the Notes" and "Certain Legal Aspects of the Receivables--
Certain Matters Relating to Bankruptcy."
9
THE TRUST
World Omni Master Owner Trust (the "Trust") is a Delaware business trust
formed pursuant to a Trust Agreement (as amended from time to time, the "Trust
Agreement"), between the Transferor and Chase Manhattan Bank Delaware, the
predecessor-by-merger to Chase Manhattan Bank USA, National Association (in its
capacity as successor Owner Trustee, the "Owner Trustee"), dated as of November
22, 1999 (the "Initial Closing Date").
On the Initial Closing Date the Transferor conveyed to the Trust, without
guaranty that the Trust will be able to collect, the non-participated portion
of receivables (the "Receivables") arising under selected revolving financing
agreements (the "Accounts") acquired by or entered into with World Omni by
retail automotive dealers (the "Dealers") to finance their inventory of new and
used automobiles and light-duty trucks. The property of the Trust (the "Trust
Estate") consists of or will consist of:
. the Receivables existing in the Accounts on November 18, 1999 (the
"Initial Cut-Off Date");
. all Receivables generated in the Accounts after the Initial Cut-Off
Date;
. Receivables existing in or generated in any Accounts added to the
Trust on or after the related addition date;
. the participation interest of the Transferor in Purchased
Participation Receivables added to the Trust on or after the related
addition date;
. an assignment of all the Transferor's rights and remedies under the
Receivables Purchase Agreement, dated as of the Initial Closing Date,
between World Omni and the Transferor, amended and restated as of
April 6, 2000 and further amended pursuant to Amendment No. 1, dated
as of August 11, 2000, (as amended from time to time, the
"Receivables Purchase Agreement"), pursuant to which the Transferor
has purchased and will continue to purchase Receivables from World
Omni;
. all collections of principal under the Receivables ("Principal
Collections");
. all collections of interest and other nonprincipal charges (including
insurance service fees, amounts recovered on Defaulted Receivables
and insurance proceeds) under the Receivables and rebate amounts
deposited by the Servicer with respect to specified interest rebate
programs into the Collection Account ("Non-Principal Collections"
and, together with Principal Collections, "Collections");
. all funds on deposit in specified accounts of the Trust;
. any letter of credit, surety bond, cash collateral account, spread
account, guaranteed rate agreement, swap or other interest rate
protection agreement, maturity liquidity facility, tax protection
agreement or other arrangement (each, an "Enhancement") issued for a
series or class of notes; and
. a security interest in motor vehicles securing the Receivables (the
"Vehicles") and specified parts inventory, equipment, fixtures,
service accounts and, in some cases, realty and/or personal
guarantees securing the Receivables (together, the "Collateral
Security").
See "The Transfer and Servicing Agreements--Receivables Purchase
Agreement" for an overview of the Receivables Purchase Agreement. The
noteholders will not have any interest in any Enhancements provided for the
benefit of the noteholders of another series or class or in any Receivable or
Account removed from the Trust. See "The Transfer and Servicing Agreements--
Removal of Accounts; Transfers of Participations" for information regarding the
removal of Receivables and Accounts from the Trust.
10
The Transferor, the Trust and World Omni as Servicer entered into a Trust
Sale and Servicing Agreement, dated as of the Initial Closing Date, amended and
restated as of April 6, 2000, and further amended pursuant to Amendment No. 1,
dated as of August 11, 2000 (as amended from time to time, the "Trust Sale and
Servicing Agreement"). Pursuant to the Trust Sale and Servicing Agreement, the
Trust acquired the Receivables from the Transferor and the Servicer agreed to
service the Receivables. Under the Trust Sale and Servicing Agreement, the
Transferor is conditionally allowed, and in some circumstances is obligated:
. to designate new Accounts to be included as Accounts and to convey to
the Trust the Receivables of those new Accounts,
. to acquire certain Purchased Participation Receivables to be conveyed
to the Trust,
. to designate certain Accounts to be removed, and
. to require the Trust to return Receivables in certain removed
Accounts to the Transferor.
See "The Transfer and Servicing Agreements--Addition of Accounts" for
information regarding the addition of Accounts.
The Trust has issued several series of asset backed notes and may issue
one or more series of notes (collectively, the "Notes"). The Trust has also
issued certificates (the "Certificates"). The Certificates are not being
offered for sale by this prospectus and are currently held by the Transferor.
Prior to its formation, the Trust had no assets or obligations. The Trust
has not and will not engage in any business activity other than:
. acquiring and holding the Receivables, the other assets of the Trust
and proceeds therefrom;
. issuing the Notes and the Certificates; and
. making payments on the above and related activities.
As a consequence, the Trust is not expected to have any need for, or
source of, capital resources other than the assets of the Trust.
The Owner Trustee
Chase Manhattan Bank USA, National Association (successor-by-merger to
Chase Manhattan Bank Delaware), a national banking and trust association,
serves as Owner Trustee under the Trust Agreement. The principal executive
offices of the Owner Trustee are located at 1201 North Market Street, 8th
Floor, Wilmington, Delaware 19801, and its telephone number is (302) 428-3300.
USE OF PROCEEDS
As provided in the prospectus supplement, the Transferor will use the net
proceeds from the sale of a series of the notes to repay the outstanding
principal amount of other series of Notes then outstanding, to make deposits
into the Excess Funding Account to the extent required and for the other
purposes specified in the related prospectus supplement.
11
THE DEALER FLOORPLAN FINANCING BUSINESS
The Receivables to be conveyed to the Trust by the Transferor result from
loans made by World Omni to Dealers under floorplan financing agreements to
finance the Dealers' purchases of new and used Vehicles. Used Vehicles may be
purchased by Dealers at auctions, from other dealers, from finance companies
such as World Omni or directly from Vehicle owners.
The vast majority of floorplan financing agreements are structured so
that World Omni lends an amount on the acquisition by the Dealer of a specific
Vehicle and the Dealer is required to repay the loan upon the sale of such
Vehicle. In certain limited circumstances, floorplan financing agreements are
structured so that World Omni lends an aggregate amount based on the value of
all of the Vehicles securing the Receivables. In these financing arrangements,
the Receivables created are referred to as "Asset Based Receivables," and, so
long as the aggregate value of Vehicles securing the Receivables exceeds
specified levels, the Dealer is not required to repay the loan upon the sale of
a specific Vehicle. Except as noted below, World Omni originates, underwrites,
services, and monitors Asset Based Receivables in the same manner that it does
for its other Receivables.
World Omni is the major wholesale financing source for Dealers in
Southeast Toyota Distributors' distribution network. As of December 31, 2000,
World Omni provided floorplan financing to approximately 46% of those Dealers.
World Omni services all of the Dealers from its main office located in
Deerfield Beach, Florida.
Creation of Receivables
World Omni generally finances 100% of the invoice price of new Vehicles.
A Receivable is created upon shipment of the new Vehicle from the Vehicle
manufacturer or distributor to the Dealer. The amount that World Omni will lend
on a used Vehicle varies as follows:
. For Vehicles purchased by the Dealer at an auction and financed by
World Omni via payment directly to the auction, World Omni typically
finances 100% of the auction price plus the buyer's fees paid to the
auction.
. In some circumstances, the Vehicle being financed by World Omni is
one that was sold by World Omni to the Dealer. Most of these vehicles
were leased by World Omni to a consumer and were returned to World
Omni at the end of the lease. If the used Vehicle being financed
under World Omni's floorplan is one that was sold by World Omni to
the Dealer, World Omni will lend 100% of the price the Dealer paid to
World Omni for the Vehicle.
. For select Dealers, World Omni will lend 100% of the "Black Book"
value of the used Vehicle. In some circumstances, the Black Book
value includes the value of additional equipment on the Vehicle.
. In situations other than those described above, World Omni will
finance up to 80% of the wholesale value of the Vehicle as defined in
the NADA Official Used Car Guide's "Average Trade In" column.
In asset based floorplan financing programs, World Omni generally permits
the Dealer to draw an amount up to the aggregate of 100% of the invoice price
of all new Vehicles securing the Receivables and a portion of the value of all
used Vehicles securing the Receivables. The value of used Vehicles is typically
limited to the wholesale value of the Vehicle as defined in the NADA Official
Used Car Guide's "Average Trade In" column.
12
Used Vehicles represented approximately 9.00% and 10.52% of the total
dollar amount of Receivables outstanding as December 31, 2000, and December 31,
1999, respectively.
Credit Approval and Credit Guidelines
World Omni's floorplan programs are administered by its Commercial
Operations Department located in Deerfield Beach.
World Omni provides floorplan financing to Dealers pursuant to pre-
established credit guidelines. World Omni must approve each prospective Dealer
before that Dealer signs a dealer financing agreement. Each dealer financing
agreement generally includes a security agreement, a personal guaranty by the
principal owner of the Dealer and, when necessary, an intercreditor agreement.
The collateral subject to the security agreement always includes the Vehicles
and may include:
. inventory, equipment and other property of the Dealer, including
parts inventory, furniture, fixtures and tools;
. additions, accessories and accessions;
. intangibles, instruments, chattel paper and accounts arising out of
the sale or lease of the foregoing;
. substitutions, returned and repossessed items; and
. proceeds thereof, including insurance proceeds.
Prior to providing floorplan financing to a Dealer, the Commercial
Operations Department performs an analytical and investigative review to
evaluate the character and credit of the principal owners of a prospective
Dealer and to determine whether the Dealer's capital structure is adequate to
support the business. In conducting its review, representatives of the
Commercial Operations Department will conduct interviews with Dealer
principals, check credit references, obtain dealership and personal financial
statements and review the business history of dealership management and
existing business plans.
The key process in approving a floorplan financing request is the
completion of a financial statement review of the prospective borrower. In some
cases, this review will be based on pro forma statements and projections
completed by the prospective Dealer. In its review, World Omni focuses mainly
on the financial strength, integrity and past history of the dealership's
operations and its guarantors. In addition, World Omni analyzes the Dealer's
location, paying particular attention to the market area and the Dealer's
potential to sell Vehicles. When available, World Omni uses state vehicle
registration data to evaluate a Dealer's primary market area and to help
determine the retail penetration ability of a new Dealer. In addition, Dealers
who sell Toyotas generally sign a release letter which enables World Omni to
access Southeast Toyota Distributors' files on those Dealers. World Omni
derives a wide array of financial information and trend analysis from Southeast
Toyota Distributors' files.
When a Dealer requests a floorplan financing program, World Omni conducts
a search of the appropriate records of the filing office or offices to
determine if there are other creditors of the Dealer with current security
interest filings. Prior filings are given particular attention by World Omni
management, especially if they relate to Vehicles or if the wording is broad
enough to indicate a possible conflict with World Omni's security interest. In
those instances, World Omni works with the particular Dealer to eliminate any
conflicts. Steps taken include executing an intercreditor agreement with any
other creditor and/or arranging for the filing of amendments to any prior
financing statements. World Omni may approve the Dealer's request for a
floorplan financing program but will not advance any funds to the Dealer until
all conflicts are resolved.
13
If a prospective Dealer is approved by World Omni, the Dealer and World
Omni enter into a dealer financing agreement. The principal owner of the
dealership is generally required to guarantee the Dealer's obligations to World
Omni and to subordinate its loans to the dealership to the Dealer's
indebtedness to World Omni.
Pursuant to the dealer financing agreement, in order to secure all
indebtedness of the Dealer to World Omni, the Dealer grants to World Omni a
first priority security interest in its inventory of Vehicles and, in many
cases, to other assets, such as parts and equipment.
World Omni is, in most cases, the exclusive source of Vehicle financing
for a Dealer. When a Dealer has an additional source of Vehicle financing, the
other financier generally takes a security interest in collateral which
overlaps with World Omni's. In these situations, World Omni will not advance
funds until it has entered into an intercreditor agreement with the other
financier in which each of World Omni and the other financier subordinates its
lien on any Vehicle financed by the other party, and the proceeds thereof, to
the lien of the financing party.
Each Dealer is required by its dealer financing agreement to obtain
physical damage insurance covering all Vehicles, with the Servicer being named
as an additional loss payee. World Omni arranges this insurance for some
Dealers with insurance companies that have acceptable ratings from A.M. Best
Company, Inc., a nationally recognized insurance rating agency. An affiliate of
World Omni handles claims adjustments under these policies. As to Dealers who
elect to make other coverage arrangements, World Omni's Commercial Department
maintains a follow-up system, which includes:
. coverage verification;
. tracking of policy expiration dates;
. renewal follow-up; and
. verification that World Omni is properly identified as a loss payee.
As a matter of practice, World Omni does not, however, require that
payments from the insurer under these policies be paid to it so long as a
Dealer is not "out of trust"; that is, so long as the Dealer does not sell a
Vehicle and use the sale proceeds thereof for its own separate purposes.
During the initial 120-day period after the signing of a dealer financing
agreement, World Omni generally conducts monthly floorplan audits, verifying
the purchase and sale of all Vehicles. At the end of 180 days, World Omni
completes a "Financial Statement Review" and updates the Dealer's initial risk
classification. Dealer credit ratings range from one to six, with one being the
most financially sound. This risk classification determines the floorplan audit
and credit review frequency and is important in setting the Dealer's credit
limit.
. "Class I Dealers" are Dealers that are determined to be low risk due
to their excellent financial condition and performance.
. "Class II Dealers" are Dealers that are determined to be of
acceptable risk due to their good financial condition and
performance.
. "Class III Dealers" are Dealers that are determined to have fair
financial condition and performance with some negative trend.
. "Class IV Dealers" are Dealers that are determined to have weak
financial condition and performance with negative trend. Dealers for
which a check has been returned within the previous twelve months
for reason of insufficient funds will not be rated stronger than
Class IV.
14
. "Class V Dealers" are Dealers that are determined to be high-risk.
Class V Dealers generally include those Dealers with poor audit
histories and inadequate or negative working capital, net worth and
profits.
. "Class VI Dealers" are Dealers that have sold Vehicles "out of
trust."
The following tables provides (1) the number of Accounts in each class of
Dealers, (2) the number of Accounts in each class of Dealers as a percentage of
the total number of Accounts in the Wholesale Portfolio, and (3) the principal
balance of Receivables in each class of Dealers as a percent of the total
principal balance of Receivables in the Wholesale Portfolio, each as of
December 31, 2000.
Percentage
Number of Percentage of Principal
Accounts of Accounts Balance
--------- ----------- ------------
Class I Dealers.............................. 125 52% 58%
Class II Dealers............................. 49 20 18
Class III Dealers............................ 30 13 10
Class IV Dealers............................. 26 11 9
Class V Dealers.............................. 5 2 4
Class VI Dealers............................. 5 2 1
World Omni establishes a base inventory guideline to provide floorplan
financing adequate for Dealers' normal vehicle sales. Typically, Dealers are
granted credit lines based on a 75-day sales rate for new Vehicles and a 45-day
sales rate for used Vehicles. These credit lines are monitored on a daily basis
and adjustments are made upon appropriate credit approval or disapproval.
If World Omni determines that a specific Dealer's inventory is excessive,
the Dealer may be placed on finance hold status. In addition, a Dealer may be
placed on finance hold if the dealer financing agreement is violated, a check
is returned unpaid or a Dealer requests controlled Vehicle releases. In these
circumstances, World Omni assumes control of Vehicle releases to the Dealer and
specifically approves the releases on a unit-by-unit basis. Dealers are also
placed on finance hold status if World Omni determines that the Dealer has sold
"out of trust." Finance hold status on a particular Dealer will remain until
World Omni determines that the circumstances have been remedied.
Payment Terms
Receivables related to non-asset based floorplan financing of new
Vehicles are due on demand, but generally must be paid upon the earlier of (a)
one to ten days (averaging four days) following the sale or other disposition
of the Vehicle, (b) within one business day of the Dealer being funded by the
buyer of the Vehicle or by the buyer's financing source and (c) a fixed period
after the Vehicle's initial acquisition by the Dealer. Although dealer
financing agreements may vary as to the precise measurement of the fixed
period, generally the principal balance of the Receivable must be paid down 10%
per month beginning April 1 of the year following the model year of the
underlying Vehicle, and must be paid in full by the next October, unless the
Vehicle is recategorized as a used Vehicle. In very limited cases, World Omni
offers a delayed payment privilege program to select Dealers to finance fleet
sales. Under this program, Receivables must generally be paid in full on the
earlier of (1) the 20th day after delivery to the end user or (2) receipt of
payment from the end user.
Receivables relating to non-asset based floorplan financing of used
Vehicles are generally stated to be due on demand or on the earlier of (1) one
to ten days (averaging four days) following the sale of the Vehicle, (2) within
one business day of the Dealer being funded by the buyer or the buyer's funding
source or (3) 90 days after the Vehicle is first financed by World Omni. World
Omni, in its sole discretion, may generally grant one extension for a period of
30 days if a principal payment of 10% of the unpaid principal balance is made
by the Dealer prior to the extension.
15
Receivables related to asset based floorplan financings are due on
demand. In addition, the Dealer must pay all or a portion of these Receivables
to the extent that the outstanding balance exceeds a specified percentage of
the value of the Vehicles securing the Receivables.
World Omni currently charges interest monthly on Receivables based on the
prime rate or the London interbank offered rate ("LIBOR"). As of December 31,
2000, Receivables secured by new Vehicles based on the prime rate and LIBOR
were accruing interest at an annual rate averaging the prime rate + (0.35%) and
LIBOR + 2.03%, respectively. Receivables secured by used Vehicles based on the
prime rate and LIBOR were accruing interest at an annual rate averaging the
prime rate + 0.27% and LIBOR + 2.01%, respectively. Upon agreement with the
Dealers, World Omni may change the rate mechanism, the rate to which the
Receivables are tied or the interest rate premium in any manner.
Some Dealers maintain funds with World Omni under an inventory cash
escrow agreement ("Floor Plan Equity Program"), pursuant to which funds are
held for cash management, liquidity and working capital purposes. The Dealers
can withdraw these funds so long as the Dealer has not defaulted under its
floorplan agreements with World Omni. Generally, interest on the prepaid funds
is offset against interest due from the Dealer on the Receivables. For purposes
of the Trust, funds deposited by Dealers with World Omni will be treated by
World Omni as Principal Collections of Receivables, and withdrawals by Dealers
will be treated by World Omni as creating new Receivables.
Billing and Collection Procedures
A statement setting forth interest and other billing and account
information is prepared by World Omni and distributed on a monthly basis to
each Dealer. Each Dealer's bills are generated on approximately the first or
second business day of the month, and payments are due on the tenth day of the
month in which they are billed. Interest is billed retroactively and Dealers
make payments by check or electronic funds transfer. Dealers are required to
make principal payments on Receivables when due by check or electronic funds
transfer.
Dealer Monitoring
World Omni produces a daily accounting of the balance outstanding under
each credit line. All exposures above established credit lines require approval
by World Omni's Commercial Operations Department on a monthly basis. A monthly
status report is provided to World Omni senior management. This report is an
all-inclusive summary of the monthly and ongoing developments relating to
Dealer credits. A review of all existing credit lines (the "Financial Statement
Review") is completed at least once a year and is not limited to financial
statement and ratio analysis, but is designed to provide an overview of the
entire operation as it relates to World Omni. A security interest search is
conducted on an annual basis in conjunction with the formal review of the
Dealer to ensure that there are no conflicts with World Omni's security
interests.
The Commercial Operations Department follows a procedure (the "Book
Review") to verify the validity of new Dealer financial statements. It is World
Omni's intention to complete a Book Review with most new Dealers. The process
mirrors the Financial Statement Review, but includes an actual review and
verification of the Dealer's records. Upon completion, the results are
discussed with the Dealer principals and guarantors. Any deficiencies are
addressed and action plans implemented with a timetable for resolution.
Wholesale floorplan audits are generally completed at least once per
quarter at all Dealers and in most cases monthly, based on the Dealer risk
profile and the prior audit experience of the Dealer. The audit includes a
physical verification of every floorplanned Vehicle. If a Vehicle cannot be
located, the Dealer must provide an explanation that is satisfactory to World
Omni's management and must provide the related manufacturer's statement of
origin or title.
16
World Omni's daily reporting of Dealer exposures and Dealer payments is
intended to provide the Commercial Operations Department with early warning
signs of potential problems. If the results of the Dealer monitoring process
show that a particular Dealer is suffering financial difficulties, World Omni's
Commercial Operations Department will closely monitor the Dealer while working
with the Dealer to improve its financial condition. Floorplan audit frequency
may be increased and a Book Review may be performed with the results being
discussed with the Dealer and principals or guarantors. Operating trends are
generally reviewed, including the Dealer's cash and net working capital
position. Finally, a meeting may be held between World Omni and the Dealer
resulting in the implementation of a plan of action and a corresponding
timetable in which the plan is to be completed.
These risk management procedures could also be activated in the event a
routine audit reveals a shortage in a Dealer's Vehicle inventory, a Dealer
check is returned for which there are insufficient funds or a Dealer
specifically requests assistance. Dealers who demonstrate these or other
problems may be placed on finance hold, which would result in approval on a per
unit basis or cash-on-delivery terms. World Omni also works to protect the
dealership by providing auditing advice, cash flow management and credit
relationship assistance in order to maintain the value of the dealership as an
ongoing entity. However, further deterioration may result in the seizure and
liquidation of Vehicle inventory. The Wholesale Portfolio, and those
Receivables arising from the Wholesale Portfolio which are transferred to the
Trust, may sometimes include Receivables arising in Accounts with Dealers which
were previously placed by World Omni on finance hold or which were otherwise
non-performing for a period of time.
If World Omni's review reveals that a Dealer has diverted proceeds from
Vehicle sales due to World Omni to other uses, the Commercial Operations
Department suspends the Dealer's credit lines and sends a demand for payment of
the delinquent obligation. The Dealer's manufacturers will be informed by World
Omni of the change in status. Cash-on-delivery terms may be approved depending
on the severity of the situation. At this point a demand may also be made on
the guarantor(s).
If, after exhausting all possible options, the Dealer is unable to pay
amounts owed to World Omni, World Omni may terminate the dealer financing
agreement in accordance with its terms and applicable state law. Generally, in
these circumstances the Dealer's new Vehicle inventory will be resold to the
manufacturer, which generally pays the repurchase price to World Omni for
credit against the aggregate amount of outstanding Receivables owed by the
Dealer to World Omni. If the Dealer resists termination, World Omni will
declare the Dealer in default of its obligations, demand payment in full of its
Dealer note and all Receivables created thereunder and foreclose on its
collateral by taking possession of the Dealer's Vehicle inventory and any other
Collateral Security. If necessary, World Omni may also obtain a court order
requiring foreclosure. Used Vehicles are auctioned off to the highest bidder.
All proceeds are applied against the relevant Dealer liabilities. World Omni
will generally pursue any uncollected amounts from the Dealer's guarantors.
Once World Omni has commenced liquidation of the Dealer's Vehicle inventory, it
writes off any amounts it determines are uncollectible. During the course of a
liquidation of a Dealer's Vehicle inventory, World Omni may recognize
additional losses or recoveries.
Intercreditor Agreement for Security Interests in Vehicles and Non-Vehicle
Collateral Security
As stated above, the agreements constituting the financing arrangements,
including the Accounts, provide for a security interest in the Vehicles in
favor of World Omni, which security interest World Omni represents is a first
priority security interest. The security interests in the Vehicles in favor of
World Omni have been assigned by World Omni to the Transferor pursuant to the
Receivables Purchase Agreement and then by the Transferor to the Trust pursuant
to the Trust Sale and Servicing Agreement. In its other lending activities,
World Omni may have made capital loans, real estate loans or other advances to
Dealers that are also secured by a security interest in the Vehicles. In these
instances, World Omni has agreed in the Receivables Purchase Agreement not to
exercise its security interest in any Vehicle until the Trust shall have been
paid in full in respect of the Receivables secured by the Trust's security
interest in that Vehicle. In addition, in connection
17
with other loans or advances made by World Omni to a Dealer, World Omni may
also have a security interest in Collateral Security other than a Vehicle
("Non-Vehicle Collateral Security"), such as personal guarantees, if any,
securing the amounts owed by the Dealer. In these cases, World Omni, in its
sole discretion, may realize on the Non-Vehicle Collateral Security for its own
benefit in respect of its loans or advances before the Trust is permitted to
realize upon the Non-Vehicle Collateral Security. Because of the subordinate
position of the Trust in respect of Non-Vehicle Collateral Security, there is
no assurance that the Trust will realize any proceeds in respect of any Non-
Vehicle Collateral Security.
Participation Agreements
From time to time, World Omni may enable other financing sources to
participate in certain of its financing arrangements ("Participations").
Pursuant to a typical Participation, the documentation for the underlying loan
will remain in the name of World Omni as lender. In the financing agreement or
in a separate contractual arrangement with World Omni, the participant will
agree to provide a portion of the funding of such loan in exchange for an
agreed upon interest rate. Occasionally fees and other charges may also be
shared with the participant. The Receivables to be sold by World Omni to the
Transferor and in turn by the Transferor to the Trust, may include the non-
participated portion of receivables from accounts which have been participated.
In addition, subject to substantially the same limitations that apply to the
removal of Accounts, the Transferor may cause the Trust to transfer an interest
in certain Receivables to the Transferor, which may thereafter transfer such
interest to another party in the form of a Participation.
Participation Interests Purchased by World Omni
In certain circumstances, World Omni may participate in financing
arrangements of a third party similar to Participations. In these cases, the
receivables are originated and, in some cases, will be serviced by such third
party. The Receivables sold by World Omni to the Transferor and in turn by the
Transferor to the Trust may include World Omni's participation interest in such
receivables ("Purchased Participation Receivables") provided that the Rating
Agency Condition has been satisfied with respect to the addition of those
Purchased Participation Receivables to the Trust.
Relationship with Affiliates
In July 1995, World Omni and its insurance and warranty affiliates
instituted, a program (the "SuperWrap Program") to encourage Dealers in the
Southeast Toyota Distributors network who finance floorplan Vehicles with World
Omni to purchase other financial products sold by World Omni and its insurance
and warranty affiliates. Under the SuperWRAP Program, World Omni and its
affiliates pay participating Dealers specified amounts based on a pricing grid
and, in most cases, these payments are assigned by the Dealers to World Omni
and applied automatically by World Omni to reduce interest payments on the
Receivables. The Dealers remain obligated to pay the full interest payments on
the Receivable in the event World Omni or its affiliates fail to make the
SuperWRAP Program payments to the Dealers. All Dealers in the Southeast Toyota
Distributors' network who have floorplan accounts with World Omni are eligible
to participate under the SuperWRAP Program. Approximately $938,489, $1,176,361,
$1,887,944, $2,342,698, and $882,136 in payments were made by World Omni and
its affiliates to Dealers under the SuperWRAP Program for the years ended
December 31, 2000, 1999, 1998, 1997, and 1996, respectively.
18
THE ACCOUNTS
The Receivables arise in the Accounts. The Accounts have been selected
from all the accounts in World Omni's portfolio that were Eligible Accounts at
the time of selection (the "Wholesale Portfolio"). Commercial finance
receivables similar to the current Accounts which meet the criteria set forth
in the Trust Sale and Servicing Agreement may be added to the Trust in the
future. In order to be included in the Trust, each Account must be an account
established or acquired by World Omni in the ordinary course of business and
meet the other criteria provided in the Trust Sale and Servicing Agreement. See
"The Transfer and Servicing Agreements--Representations and Warranties by
Transferor." World Omni may at anytime and without notice or consent of any
third party modify the rates being charged Dealers under the floorplan
financing agreements or asset based financing agreements.
Under the Trust Sale and Servicing Agreement, the Transferor has the
right and, in some circumstances, is obligated, subject to the limitations and
conditions, if any, in its other financing arrangements and agreements to
designate additional qualifying accounts to be included as Accounts. It may
also sell to the Transferor, in the case of World Omni, and convey to the
Trust, in the case of the Transferor, the Receivables of the Additional
Accounts, including Receivables created from the Additional Accounts. These
accounts must meet the eligibility criteria set forth above as of the date the
accounts are designated as Additional Accounts. World Omni will generally sell
to the Transferor the Receivables then existing or thereafter created under the
Additional Accounts, and the Transferor will in turn convey them to the Trust.
See "The Transfer and Servicing Agreements--Addition of Accounts." In addition,
as of any Additional Cut-Off Date in respect of Additional Accounts and the
date any new Receivables are generated unless such Receivable arose in an
Additional Account prior to the applicable Addition Date, World Omni will
represent and warrant to the Transferor, and the Transferor will represent and
warrant to the Trust, that the Receivables meet the eligibility requirements
set forth in the Trust Sale and Servicing Agreement. See "The Transfer and
Servicing Agreements--Conveyance of Receivables and Collateral Security." Under
the circumstances specified in the Trust Sale and Servicing Agreement, the
Transferor has the right to remove Eligible Accounts, and the Receivables
arising from such Eligible Accounts, from the Trust and is required to remove
Ineligible Accounts, and Receivables arising from such Ineligible Accounts,
from the Trust. Interest collections received after an Account has been
designated for removal will be allocated to the Trust or the Transferor, as
applicable, until the principal balance on the date the Account was so
designated has been reduced to zero. See "The Transfer and Servicing
Agreements--Removal of Accounts; Transfers of Participations." Throughout the
term of the Trust, the Accounts from which the Receivables arise will be the
same Accounts transferred by the Transferor on the Initial Closing Date plus
any Additional Accounts, minus any Accounts removed from the Trust.
Information regarding the Accounts will be set forth in the prospectus
supplement.
THE NOTES
General
The Notes may be issued in one or more series, each series with one or
more classes. Each series of Notes will be issued pursuant to the terms of the
Indenture (the "Indenture") and a Series Supplement to the Indenture for that
series (each, a "Series Supplement"), each between the Trust and the Indenture
Trustee. Forms of the Indenture and the Series Supplement have been filed as
exhibits to the registration statement of which this prospectus forms a part.
The Transferor will provide a copy of the Indenture and relevant Series
Supplement (each without exhibits) upon request of a Noteholder. The following
summary does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all of the provisions of the Notes, the Indenture
and the applicable Series Supplement. Where particular provisions or terms used
in the Indenture or a Series Supplement are referred to, the actual provisions,
including definition of terms, are incorporated by reference as part of this
summary.
19
The Notes of each series will evidence fixed obligations of the Trust.
The Notes will be secured by the assets of the Trust allocated to that series
and will represent the right to receive Collections and other amounts from
those assets allocated to that series up to the amounts required to make
payments of interest on and principal of the Notes of that series as described
in the related prospectus supplement.
Each series of Notes will initially be represented by one or more Notes
registered in the name of the nominee of DTC (together with any successor
depository selected by the Trust, the "Depository") in the United States, or
Clearstream Banking or Euroclear in Europe, except as set forth below. Notes
will generally be available for purchase in denominations of $1,000 and
integral multiples thereof in book-entry form only. The Transferor has been
informed by DTC that DTC's nominee will be Cede & Co. Accordingly, Cede & Co.
is expected to be the holder of record (the "Noteholder") of the Notes.
Unless and until Definitive Notes are issued under the limited
circumstances described in this prospectus or in the related prospectus
supplement, no Noteholder will be entitled to receive a physical certificate
representing a Note. All references herein to actions by Noteholders refer to
actions taken by DTC upon instructions from its participants. All references
herein to distributions, notices, reports and statements to Noteholders refer
to distributions, notices, reports and statements to DTC or Cede & Co., as the
registered holder of the Notes, as the case may be, for distribution to
Noteholders in accordance with DTC's procedures. See "--Book-Entry
Registration" and "--Definitive Notes."
Principal and interest on the Notes will generally be paid on the 15th
day of the month or, if that day is not a business day, the next business day
(each, a "Payment Date") as set forth in the related prospectus supplement.
Interest
Interest on the principal balance of the Notes of a series or class will
accrue at the rate specified in or determined in the manner specified in the
related prospectus supplement. Interest will be payable to the Noteholders of a
series or class as and on the dates specified in the related prospectus
supplement ("Interest Payment Dates"). The prospectus supplement for a series
or class of Notes may provide that the interest rate and the Interest Payment
Dates applicable to each Note of that series or class may be subject to
adjustment from time to time, including as a result of a decline in the
interest rate of the Receivables.
Non-Principal Collections and other amounts allocable to the Notes of a
series generally will be used to make interest payments to Noteholders of that
series on each Interest Payment Date. If Interest Payment Dates occur less
frequently than monthly, (1) the Non-Principal Collections or other amounts
allocable to that class will be deposited in a trust account (an "Interest
Funding Account") and will be used to make interest payments to Noteholders of
that series or class on the next Interest Payment Date and (2) during an Early
Amortization Period, interest will be distributed to the Noteholders monthly on
each Payment Date (each a "Special Payment Date"). If a series has more than
one class of Notes, each class may have a separate Interest Funding Account.
Principal
The timing and priority of payment, seniority and amount of or method of
determining payments of principal on each class of Notes will be described in
the related prospectus supplement. Generally, the Notes of each series will
have a revolving period during which no principal payments are required to be
made on the Notes (the "Revolving Period"). The Revolving Period for a series
or class will begin on the date specified in the related prospectus supplement
and end on the earlier of (a) the close of business of the day immediately
preceding the Accumulation Period Commencement Date or the Amortization Period
Commencement Date for that series and (b) the close of business of the business
day immediately preceding the day on which an Early Amortization Event or an
Investment Event occurs for that series. See "The Transfer and Servicing
20
Agreements--Investment Events and Early Amortization Events" for a discussion
of the events that might lead to the early termination of the Revolving Period
and the recommencement of the Revolving Period. If a series of Notes has more
than one class, each class may have a different Revolving Period.
During the Revolving Period, Principal Collections and other specified
amounts allocable to the Notes of a series will not be paid to the Noteholders,
but rather will be used to repay the principal amount of another class or
series of Notes, deposited to the Excess Funding Account or paid to the holders
of the Certificates (the "Certificateholders").
If the principal of the Notes of a series or class is scheduled to be
paid in full on a date specified in the related prospectus supplement (the
"Expected Principal Payment Date"), the Notes will have an accumulation period
(the "Accumulation Period"). The Accumulation Period will begin at the close of
business on the day immediately preceding the date specified in or determined
in the manner specified in the related prospectus supplement (the "Accumulation
Period Commencement Date") and will end on the earliest of (a) the commencement
of an Investment Period or an Early Amortization Period for that series and (b)
payment in full of the outstanding principal amount of the Notes of that
series.
During an Accumulation Period, Principal Collections and other specified
amounts allocable to the Notes of a series will be deposited into a trust
account established for the benefit of the Noteholders of that series (a
"Principal Funding Account") and used to make principal distributions to the
Noteholders of that series when due. The amount to be deposited in the
Principal Funding Account for any series of Notes with respect to any Payment
Date may be limited to an amount (the "Controlled Deposit Amount") specified in
the related prospectus supplement. If a series has more than one class of
Notes, each class may have a different Accumulation Period and a separate
Principal Funding Account and Controlled Deposit Amount, and the related
prospectus supplement will describe any priorities among the classes of a
series for deposits of principal into the Principal Funding Accounts.
In addition, in the event that the Notes of a series are to be redeemed,
the redemption price for that redemption shall be deposited into the Principal
Funding Account for such series.
If the principal of the Notes of a series is scheduled to be paid in
installments commencing on a date specified in the related prospectus
supplement (the "Principal Commencement Date"), the Notes will have an
amortization period (the "Amortization Period"). The Amortization Period will
begin at the close of business on the day immediately preceding the date
specified in the related prospectus supplement (the "Amortization Period
Commencement Date") and will end on the earliest of (a) the commencement of an
Investment Period or an Early Amortization Period for that series and (b)
payment in full of the outstanding principal amount of the Notes of that
series.
During an Amortization Period, Principal Collections and other specified
amounts allocable to the Notes of a series will be used on each Payment Date to
make principal distributions to any class of Noteholders of that series then
scheduled to receive distributions. The amount to be distributed to Noteholders
of any series of Notes on any Payment Date may be limited to an amount (the
"Controlled Amortization Amount") for that series specified in the related
prospectus supplement. If a series has more than one class of Notes, each class
may have a different Amortization Period and a separate Controlled Amortization
Amount, and the related prospectus supplement will describe any priorities
among the classes of a series for distributions.
The payment of principal of the Notes of a series or class may commence
earlier than the applicable Expected Principal Payment Date or Principal
Commencement Date, and the final principal payment for the Notes of a series or
class may be made earlier or later than the applicable Expected Principal
Payment Date or other expected date if an Early Amortization Event occurs for
that series or class or under the circumstances described in this prospectus or
in the related prospectus supplement.
21
If the related prospectus supplement so specifies, the Notes of a series
may have an investment period (the "Investment Period"). The Investment Period
for a series of Notes will begin on the day (the "Investment Period
Commencement Date") on which an Investment Event for that series has occurred
and will end on the earliest of (a) the commencement of an Early Amortization
Period for that series, (b) the recommencement of the Revolving Period for that
series, and (c) payment of the outstanding principal amount of the Notes of
that series in full. The Investment Events for a series will be set forth in
the related prospectus supplement and Series Supplement.
During an Investment Period, Principal Collections and other specified
amounts allocable to the Notes of a series will be deposited on or before each
Payment Date in a Principal Funding Account and used to make principal
distributions to the Noteholders of that series when due. The amount to be
deposited in a Principal Funding Account for any series of Notes on any Payment
Date will not be limited to any Controlled Deposit Amount or Controlled
Amortization Amount. If a series has more than one class of Notes, each class
may have a separate Principal Funding Account, and the related prospectus
supplement will describe any priorities among the classes of a series for
deposits of principal into the Principal Funding Accounts.
After the date on which the amount on deposit with the Indenture Trustee
for a series of Notes is sufficient to pay and discharge the entire unpaid
principal of and accrued interest on the Notes of that series and the
satisfaction of any other conditions specified in the related Series Supplement
(the "Fully Funded Date"), Noteholders of that series will no longer have any
interest in the Receivables and all the representations and covenants of the
Transferor and the Servicer relating to the Receivables, as well as other
specified provisions of the Indenture, and all remedies for breaches of those
representations and warranties will no longer accrue to the benefit of the
Noteholders of that series, in each case unless the Revolving Period for that
series recommences. In addition, upon the occurrence of the Fully Funded Date
for a series, no Non-Principal Collections, Principal Collections, Defaulted
Receivables or Miscellaneous Payments will be allocated to that series unless
the Revolving Period for that series recommences. See "The Transfer and
Servicing Agreements--Termination; Fully Funded Date."
During the period (the "Early Amortization Period") beginning on the day
on which an Early Amortization Event has occurred for a series of Notes and
ending on the earliest of (1) the payment in full of the outstanding principal
balance of the Notes of that series, (2) the recommencement of the Revolving
Period for that series and (3) the Termination Date for that series, the
Revolving Period, the Investment Period, the Amortization Period or the
Accumulation Period, as the case may be, for that series will terminate. See
"The Transfer and Servicing Agreements--Investment Events and Early
Amortization Events" for a description of events that might result in the
commencement of an Early Amortization Period for a series of Notes.
During the Early Amortization Period for a series of Notes, Principal
Collections and other specified amounts allocable to the Notes of a series will
be distributed as principal payments to the applicable Noteholders monthly on
each Payment Date beginning with the first Special Payment Date. During the
Early Amortization Period for a series of Notes, distributions of principal to
Noteholders of that series will not be limited to any Controlled Deposit Amount
or Controlled Amortization Amount. In addition, to the extent provided in the
related Series Supplement, any funds on deposit in the Principal Funding
Account for that series will be paid to the Noteholders of the relevant class
or series.
Funds on deposit in any Principal Funding Account established for a class
or series of Notes will be invested in Eligible Investments and may be subject
to a guarantee or other mechanism specified in the related prospectus
supplement intended to assure a minimum rate of return on the investment of
those funds. In order to enhance the likelihood of the payment in full of the
principal amount of a series or class of Notes at the end of the related
Accumulation Period, that series or class may be subject to a maturity
liquidity facility or other similar mechanism specified in the related
prospectus supplement. A maturity liquidity facility is a financial contract
that generally provides that sufficient principal will be available to retire
the Notes at a specified date.
22
Notes of a series or class may also be subject to purchase generally at
their respective principal amounts in connection with a remarketing thereof if
so specified in the related prospectus supplement. A purchase of Notes of a
series or class may result in a decrease in the outstanding principal amount of
the series or class prior to the commencement of any related Amortization
Period or Early Amortization Period. The prospectus supplement for any series
of Notes subject to purchase will describe the conditions to and procedures for
any purchase. The proceeds of any purchase would be paid to the holders of the
Notes purchased.
The Indenture and the Series Supplements
The Indenture contains provisions that generally apply to all series of
Notes. Each Series Supplement will contain provisions that generally apply only
to the series of Notes issued under that Series Supplement.
Modification of Indenture or Series Supplement Without Noteholder
Consent. The Trust and the Indenture Trustee may, without consent of the
Noteholders but with prior notice to the Rating Agencies, enter into one or
more supplemental indentures or amendments to any Series Supplement for any of
the following purposes:
(1) to correct or amplify the description of the collateral or add
additional collateral;
(2) to provide for the assumption of the Notes and the Indenture
obligations by a permitted successor to the Trust;
(3) to add additional covenants for the benefit of the Noteholders
of one or more series of Notes;
(4) to convey, transfer, assign, mortgage or pledge any property
to or with the Indenture Trustee;
(5) to cure any ambiguity or correct or supplement any provision
in the Indenture or in any Series Supplement or supplemental indenture
which may be inconsistent with any other provision of the Indenture or
of any Series Supplement or supplemental indenture;
(6) to provide for the acceptance of the appointment of a
permitted successor Indenture Trustee or to add to or change any of the
provisions of the Indenture or any Series Supplement as may be necessary
and permitted to facilitate the administration by more than one trustee;
(7) to modify, eliminate or add to the provisions of the Indenture
or any Series Supplement in order to comply with the Trust Indenture Act
of 1939; and
(8) to add any provisions to change in any manner or eliminate any
of the provisions of the Indenture or modify in any manner the rights of
Noteholders under the Indenture or a Series Supplement; provided that
any action specified in this clause (8) does not adversely affect in any
material respect the interests of any Noteholder unless the Noteholder
consent is obtained as described below.
Modification of Indenture or Series Supplement With Noteholder Consent.
With the consent of the holders of a majority in principal amount of the
Controlling Class of each series of Notes affected in any material respect
thereby and prior written notice to the Rating Agencies, the Trust and the
Indenture Trustee may execute a supplemental indenture to add provisions to,
change in any manner or eliminate any provisions of the Indenture or a Series
Supplement, or modify in any manner the rights of the related Noteholders.
"Controlling Class" means, with respect to a series of Notes, (1) if there is
only one class of Notes in that
23
series, all the Notes of that series, and (2) if there is more than one class
of Notes outstanding in that series, the class or classes with the highest
rating.
Without the consent of the holder of each outstanding Note affected
thereby, however, no supplemental indenture will:
(1) change the due date of any installment of principal of or
interest on any Note or reduce the principal amount thereof, the
applicable interest rate, unless specifically permitted under the terms
of the Note, or the redemption price for a Note or change any place of
payment where or the coin or currency in which any Note or any interest
thereon is payable or modify any of the provisions of the Indenture in a
manner that would affect the calculation of the amount of any payment of
interest or principal due on any Note on any Payment Date;
(2) impair the right to institute suit for the enforcement of
specified provisions of the Indenture regarding payment;
(3) reduce the percentage of the aggregate principal amount of the
outstanding Notes, the consent of the holders of which is required for
any specified supplemental indenture or the consent of the holders of
which is required for any waiver of compliance with specified provisions
of the Indenture or of specified defaults under the Indenture and their
consequences as provided for in the Indenture;
(4) modify or alter the provisions of the Indenture regarding the
voting of Notes held by the Trust, any other obligor on the Notes, the
Transferor or an affiliate of any of them;
(5) reduce the percentage of the aggregate outstanding principal
amount of the Notes the consent of the holders of which is required to
direct the Indenture Trustee to sell or liquidate the Trust Estate if
the proceeds of the sale would be insufficient to pay the principal
amount and accrued but unpaid interest on the outstanding Notes;
(6) decrease the percentage of the aggregate outstanding principal
amount of the Notes required to amend the sections of the Indenture
which specify the applicable percentage of aggregate outstanding
principal amount of the Notes necessary to amend the Indenture; or
(7) permit the creation of any lien ranking prior to or on a
parity with the lien of the Indenture on any part of the Trust Estate
or, except as otherwise permitted or contemplated in the Indenture,
terminate the lien of the Indenture on the Trust Estate or deprive the
holder of any Note of the security afforded by the lien of the
Indenture.
Events of Default; Rights Upon Event of Default. "Events of Default" for
a series of Notes, in addition to any specified under the applicable Series
Supplement, will consist of:
(1) any failure to pay interest on the Notes as and when the same
becomes due and payable, which failure continues unremedied for five
days;
(2) any failure to make any required payment of principal on the
Notes, other than the final payment, which failure continues unremedied
for five days after the giving of written notice of the failure (a) to
the Servicer by the Indenture Trustee or (b) to the Servicer and the
Indenture Trustee by the holders of not less than 25% of the aggregate
outstanding principal amount of the related Notes;
(3) any failure to observe or perform in any material respect any
other covenants or agreements in the Indenture, which failure materially
and adversely affects the rights of related
24
Noteholders, and which failure in either case continues for 30 days
after the giving of written notice of the failure (a) to the Trust and
the Transferor (or the Servicer, as applicable) by the Indenture Trustee
or (b) to the Trust, the Transferor (or the Servicer, as applicable) and
the Indenture Trustee by the holders of not less than 25% of the
aggregate outstanding principal amount of the related Notes;
(4) failure to pay the unpaid principal balance of any series or
class of Notes by the final payment date for that series or class, if
any, set forth in the prospectus supplement for that series; and
(5) specified events of bankruptcy, insolvency or receivership
relating to the Trust.
The amount of principal required to be paid to Noteholders under the
Indenture will generally be limited to amounts available to be deposited in the
Principal Funding Account for such series. Therefore, the failure to pay
principal on a series or class of Notes generally will not result in the
occurrence of an Event of Default until the applicable final payment date, if
any, for that series or class.
If an Event of Default should occur and be continuing with respect to any
series of Notes, the Indenture Trustee or the holders of a majority in
principal amount then outstanding of the Controlling Class for that series, may
declare the principal of those Notes to be immediately due and payable. This
declaration will constitute an Early Amortization Event for that series and
may, under specified circumstances, be rescinded by the holders of a majority
in principal amount of the Controlling Class. See "The Transfer and Servicing
Agreements--Investment Events and Early Amortization Events."
If the Notes of any series are declared due and payable following an
Event of Default with respect to that series, the Indenture Trustee may
institute proceedings to:
(1) collect amounts due or foreclose on Trust property;
(2) exercise remedies as a secured party;
(3) if the Event of Default relates to the failure to make any
required payment of interest or principal and the principal amount of
those Notes has been declared due and payable, sell the portions of the
related Trust Estate allocated to that series as described in the
prospectus supplement for that series; or
(4) elect to have the Trust maintain possession of the portions of
the Trust Estate allocated to that series and continue to apply
Collections as if there had been no declaration of acceleration
(although the Early Amortization Period commenced by that declaration
will continue unless the declaration is rescinded).
The Indenture Trustee, however, is prohibited from selling or liquidating
an interest in the Trust Estate following an Event of Default, unless:
(1) the holders of all the outstanding Notes of the affected
series consent to the sale;
(2) the proceeds of the sale are sufficient to pay in full the
principal of and the accrued interest on the outstanding Notes of the
affected series at the date of the sale; or
(3) in specified cases, the Indenture Trustee determines that the
Trust Estate is reasonably unlikely to provide sufficient funds on an
ongoing basis to make all payments on the affected series as those
payments would have become due if the affected series had not been
declared due and payable, and the Indenture Trustee obtains the consent
of the holders of a majority of the aggregate outstanding principal
amount of the Controlling Class of that series.
25
Following a declaration that the Notes of any series are immediately due
and payable:
(1) Noteholders will be entitled to pro rata repayment of
principal on the basis of their respective unpaid principal balances;
and
(2) repayment in full of the accrued interest on and unpaid
principal balances of the Notes of that series will be made prior to any
further distribution on the subordinated portion of the Certificates.
Subject to the provisions of the Indenture regarding the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with respect
to the Notes of any series or class, the Indenture Trustee will be under no
obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the holders of the Notes, if the Indenture
Trustee reasonably believes it will not be adequately indemnified against the
costs, expenses and liabilities which might be incurred by it in complying with
that request. Subject to the provisions for indemnification and limitations
specified in the Indenture, the holders of a majority in aggregate principal
amount of the outstanding Notes of the Controlling Class of a series will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Indenture Trustee for that series. The holders of a
majority in aggregate principal amount then outstanding of the Controlling
Class, may, in specified cases, waive any default with respect to that series,
except a default in the payment of principal or interest or a default in
respect of a covenant or provision of the Indenture or the applicable Series
Supplement that cannot be modified without the waiver or consent of all of the
holders of the Notes of that series.
No holder of a Note of any series will have the right to institute any
proceeding under the Indenture, unless:
(1) the holder's Note is in the Controlling Class;
(2) the holder previously has given to the Indenture Trustee
written notice of a continuing Event of Default;
(3) the holders of not less than 25% in aggregate principal amount
of the outstanding Notes of the Controlling Class, have made written
request of the Indenture Trustee to institute a proceeding in its own
name as Indenture Trustee;
(4) the holder or holders have offered the Indenture Trustee
reasonable indemnity;
(5) the Indenture Trustee has for 60 days failed to institute a
proceeding; and
(6) no direction inconsistent with the written request has been
given to the Indenture Trustee during the 60-day period by the holders
of a majority in aggregate principal amount of outstanding Notes.
If an Event of Default occurs and is continuing with respect to any
series of Notes and if it is known to the Indenture Trustee, the Indenture
Trustee will mail notice of the Event of Default to each Noteholder of that
series within 60 days after the Event of Default becomes known to the Indenture
Trustee. Other than in the case of a failure to make any required payment of
principal or interest on any Note, the Indenture Trustee may withhold the
notice beyond the 60-day period if and so long as it determines in good faith
that withholding the notice is in the interests of the Noteholders of the
related series.
In addition, the Indenture Trustee and each Noteholder and Note Owner, by
accepting a Note (or interest in a Note), will covenant that they will not, for
a period of one year and one day after the termination
26
of the Indenture, institute against the Trust or Transferor any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
Neither the Indenture Trustee in its individual capacity nor the Owner
Trustee in its individual capacity, nor any holder of a Certificate, including
the Transferor, nor any of their respective owners, beneficiaries, agents,
officers, directors, employees, affiliates, successors or assigns will, in the
absence of an express agreement to the contrary, be personally liable for the
payment of the principal of or interest on the Notes or for the agreements of
the Trust contained in the Indenture or in any Series Supplement.
Certain Covenants. The Indenture provides that the Trust may not
consolidate with or merge into any other entity, unless, among other things:
(1) the entity formed by or surviving the merger or the
consolidation is organized under the laws of the United States, any
state or the District of Columbia;
(2) the entity expressly assumes the Trust's obligation to make
due and punctual payments on the Notes and the performance or observance
of every agreement and covenant of the Trust under the Indenture and
each Series Supplement;
(3) no Event of Default shall have occurred and be continuing
immediately after the merger or consolidation;
(4) the Rating Agency Condition has been satisfied with respect to
the merger or consolidation;
(5) any action necessary to maintain the lien and security
interest created by the Indenture has been taken; and
(6) the Trust has received a Tax Opinion regarding the merger or
consolidation.
The Trust will not, among other things, except as expressly permitted by
the Indenture, the Series Supplements or the Transfer and Servicing Agreements
(collectively, the "Related Documents"):
(1) sell, transfer, exchange or otherwise dispose of any of the
assets of the Trust;
(2) claim any credit on or make any deduction from the principal
or interest payable in respect of the Notes (other than amounts withheld
under the U.S. Internal Revenue Code or applicable state law) or assert
any claim against any present or former holder of the Notes because of
the payment of taxes levied or assessed upon any part of the Trust
Estate;
(3) dissolve or liquidate in whole or in part;
(4) 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 thereby;
(5) 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 Estate or any part thereof, or any
interest therein or the proceeds thereof; or
(6) permit the lien of the Indenture not to constitute a valid
first priority security interest in the Trust Estate.
27
Except as specified in the related prospectus supplement, the Trust may
not engage in any activity other than as described above under "The Trust."
The Trust will not incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the Notes, the Indenture, or otherwise in
accordance with the Transfer and Servicing Agreements.
Annual Compliance Statement. The Trust will be required 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 Trustee will be
required to mail each year to all Noteholders, to the extent required under
the Trust Indenture Act of 1939, a brief report relating to:
(1) its eligibility and qualification to continue as Indenture
Trustee under the Indenture;
(2) any amounts advanced by it under the Indenture;
(3) the amount, interest rate and maturity date of specified
indebtedness owing by the Trust to the Indenture Trustee in its
individual capacity;
(4) the property and funds physically held by the Indenture
Trustee as trustee; and
(5) any action taken by it that materially affects the Notes and
that has not been previously reported.
Satisfaction And Discharge of Indenture. The Indenture will be
discharged with respect to the Notes of any series upon the delivery of all
the Notes of that series to the Indenture Trustee for cancellation or upon
deposit of funds sufficient for the payment in full of all of the Notes of
that series with the Indenture Trustee.
Excluded Series
A series of Notes may be designated as an excluded series (an "Excluded
Series") with respect to a series of Notes previously issued by the Trust as
to which the Accumulation Period or Amortization Period has commenced (the
previously issued series being the "Paired Series").
Each Excluded Series will be prefunded with an initial deposit to a
prefunding account in an amount equal to the initial principal balance of the
Excluded Series and primarily from the proceeds of the offering of the
Excluded Series. The prefunding account will be held for the benefit of the
Excluded Series and not for the benefit of the Paired Series. As funds are
accumulated in the Principal Funding Account for the Paired Series or are
distributed to holders of Notes of the Paired Series, an equal amount of funds
on deposit in any prefunding account for the prefunded Excluded Series will be
released (which funds are expected to be distributed to the
Certificateholders). Until the Paired Series is paid in full, no Non-Principal
Collections, Principal Collections, Defaulted Amounts or Miscellaneous
Payments will be allocated to the Excluded Series. In addition, it is expected
that any Excluded Series will be excluded from the calculation of the Required
Pool Balance until the Invested Amount of the Paired Series is zero.
Collection Account
The Servicer has established and will maintain an Eligible Deposit
Account for the benefit of the Noteholders in the name of the Indenture
Trustee (the "Collection Account") into which the Servicer will deposit
collections as described in "--Allocation of Collections; Deposits in
Collection Account."
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"Eligible Deposit Account" means either
(a) a segregated account with an Eligible Institution or
(b) a segregated trust account with the corporate trust department
of a depository institution organized under the laws of the United
States or any one of the states thereof, including the District of
Columbia (or any domestic branch of a foreign bank), having corporate
trust powers and acting as trustee for funds deposited in such account,
so long as any of the securities of the depository institution has a
credit rating from each Rating Agency in one of its generic rating
categories which signifies investment grade.
"Eligible Institution" means
(a) the corporate trust department of the Indenture Trustee or
(b) a depository institution organized under the laws of the
United States or any one of the states thereof, or the District of
Columbia (or a domestic branch of a foreign bank), which at all times:
(1) has either:
(x) a long-term unsecured debt rating of Aa2 or better
by Moody's Investors Service, Inc. ("Moody's"), AA or better
by Standard & Poor's Ratings Services ("Standard & Poor's")
and, if rated by Fitch, Inc. ("Fitch") and so long as Fitch
is a Rating Agency, AA or better by Fitch or such other
rating as is acceptable to each Rating Agency or
(y) a certificate of deposit rating of P-1 by Moody's,
A-1+ by Standard & Poor's and, if rated by Fitch and so long
as Fitch is a Rating Agency, F-1+ by Fitch or such rating as
is acceptable to each Rating Agency
and
(2) is a member of the Federal Deposit Insurance
Corporation.
Funds in the Collection Account generally will be invested in Eligible
Investments.
"Eligible Investments" will be specified in the Trust Sale and Servicing
Agreement and will be limited to investments that meet the criteria of the
Rating Agencies from time to time as consistent with the then-current rating of
each series and class of Notes then being rated by the Rating Agencies.
"Rating Agency" means any nationally recognized rating organization
selected by the Transferor in the related Series Supplement or otherwise then
rating the Notes of a series.
"Rating Agency Condition" means that each Rating Agency (other than
Moody's) shall have given its written approval that the contemplated action
will not result in a reduction or withdrawal of the rating of any outstanding
series or class of Notes then rated by that Rating Agency and, if Moody's is a
Rating Agency, prior written notice to Moody's.
Any earnings (net of losses and investment expenses) on funds in the
Collection Account will be credited to the Collection Account. The Servicer
will have the revocable power to instruct the Indenture Trustee to make
withdrawals and payments from the Collection Account for the purpose of
carrying out its duties under
29
the Indenture. The Servicer may select an appropriate agent as representative
of the Servicer for the purpose of designating investments.
Excess Funding Account
The Servicer has established and will maintain an Eligible Deposit
Account for the benefit of the Noteholders in the name of the Indenture Trustee
(the "Excess Funding Account") into which available amounts will be deposited
so that the Pool Balance will not be less than the Required Pool Balance.
On each day, available amounts, including Principal Collections allocated
to each series during the Revolving Period for such series, will be deposited
in the Excess Funding Account to the extent that the Required Pool Balance
exceeds the Pool Balance on such date. Generally, no funds will be deposited in
the Excess Funding Account during an Early Amortization, Amortization,
Accumulation or Investment Period for a series or for any other period
specified in the Series Supplement for that series.
In addition, as described in the prospectus supplement for that series,
the net proceeds from any increase in the principal amount of any series of
Notes shall be deposited into the Excess Funding Account in an amount equal to
the excess of the Required Pool Balance over the Pool Balance. In addition, all
or a portion of net proceeds from the issuance of a new series may be deposited
in the Excess Funding Account as described below. See "--New Issuances."
The remainder of such funds may be distributed to the Certificateholders
or, at any Certificateholder's direction, deposited in the Excess Funding
Account. In addition, any Certificateholder may direct the Servicer, Owner
Trustee and Indenture Trustee to deposit any amounts otherwise distributable to
such Certificateholder into the Excess Funding Account.
Funds on deposit in the Excess Funding Account will be invested by the
Indenture Trustee at the direction of the Servicer generally in Eligible
Investments. Any earnings (net of losses and investment expenses) on funds in
the Excess Funding Account will be deposited in the Collection Account and
shall be Investment Proceeds when so deposited.
Funds on deposit in the Excess Funding Account will be available for
distribution to the Certificateholders to the extent that the Pool Balance
exceeds the Required Pool Balance for such date. In addition, a portion of the
funds in the Excess Funding Account, if any, will be allocated to a series or
class of Notes which are in an Amortization, Accumulation, Early Amortization
or Investment Period in accordance with the related Series Supplement and as
described in the related prospectus supplement.
"Pool Balance" means, as of the time of determination, the aggregate
amount of Principal Receivables, excluding any Defaulted Receivable after the
Payment Date in which it became a Defaulted Receivable in the Trust at such
time, minus the aggregate balance in dealer accounts in World Omni's Floor Plan
Equity Program on that date.
"Principal Receivables" means, with respect to an Account, amounts shown
on the Servicer's records as Receivables (other than such amounts which
represent Non-Principal Receivables) payable by the related Dealer plus the
amount of any Purchased Participation Receivable or interest therein; provided,
that if a Participation has been created in respect of such Account, the
amounts so payable by the related Dealer that are allocable to such
Participation shall not be a part of the "Principal Receivables" with respect
to such Account.
"Required Pool Balance" shall mean, on any day, an amount equal to (a)
the sum of the amounts for each series (other than any series or portion
thereof which is designated as being an Excluded Series until the Invested
Amount of the Paired Series is zero) obtained by multiplying the Required
Participation Percentage (as specified in the related prospectus supplement) by
the Invested Amount for such series at such time plus
30
(b) the sum of the Available Subordinated Amount (as specified in the related
prospectus supplement) for each series.
Allocation Percentages
Allocations Among Series. Pursuant to the Indenture, during each
Collection Period the Servicer will allocate to each outstanding series its
share of Non-Principal Collections, Principal Collections, Defaulted Amount and
Miscellaneous Payments based on the applicable Series Allocable Non-Principal
Collections, Series Allocable Principal Collections, Series Allocable Defaulted
Amount and Series Allocable Miscellaneous Payments.
"Invested Amount" means, for a series on any date, the amount
specified in the related Series Supplement. The Invested Amount for any
series may be increased or decreased from time to time as specified in
the related Series Supplement.
"Miscellaneous Payments" means, for any date, the sum of
Adjustment Payments and Transfer Deposit Amounts deposited into the
Collection Account on that date available to be treated as Miscellaneous
Payments.
"Reset Date" means the last day of a Collection Period and any
other day specified as a Reset Date in a Series Supplement.
"Series Adjusted Invested Amount" means, for any series on any
date, unless otherwise set forth in the Series Supplement for that
series, an amount equal to the sum of (a) the Invested Amount of that
series on the most recent Reset Date (or, during or Early Amortization
Period for that series, the Invested Amount as of the close of business
on the date immediately preceding the date on which such Early
Amortization Period began) and (b) the Available Subordinated Amount for
that series on the most recent Reset Date.
"Series Allocable Non-Principal Collections," "Series Allocable
Principal Collections," and "Series Allocable Miscellaneous Payments"
mean, for any series for any day, the product of the Series Allocation
Percentage for that series for that day and the amount of Non-Principal
Collections, Principal Collections and Miscellaneous Payments,
respectively, for that day.
"Series Allocable Defaulted Amount" means, for any series for any
Collection Period, the product of the weighted average Series Allocation
Percentage for that series for that Collection Period and the Defaulted
Amount for that Collection Period.
"Series Allocation Percentage" means, for a series on any date,
the percentage equivalent of a fraction, the numerator of which is the
Series Adjusted Invested Amount as of such day and the denominator of
which is the Trust Adjusted Invested Amount as of such day.
"Trust Adjusted Invested Amount" means, for any day, the sum of
the Series Adjusted Invested Amounts for all outstanding series.
Allocation Between the Noteholders and the Certificateholders. The
Servicer will allocate amounts initially allocated to each series between the
Notes and the Certificates for each day and for each Collection Period as
described in the related prospectus supplement. If a series of Notes consists
of more than one class, the amounts allocated to the Notes of that series will
be allocated between the classes as described in the prospectus supplement for
that series.
31
Excess Principal Collections for All Series. Principal Collections
allocated to the Notes of a series will first be allocated to make required
deposits for the benefit of or payments to the Noteholders of that series or a
class of that series, in each case if and to the extent specified in the Series
Supplement for that series. The Servicer will determine for each day the amount
of available noteholder principal collections for each series remaining after
the required deposits and payments, if any ("Excess Principal Collections").
The Servicer will allocate Excess Principal Collections to cover any deposits
for the benefit of or payments to Noteholders of any series which are either
scheduled or permitted and which have not been covered out of Principal
Collections and other specified amounts allocated to that series ("Principal
Shortfalls"). Excess Principal Collections will not be used to cover unreversed
receivable charge-offs ("Investor Charge-Offs") for any series. If Principal
Shortfalls exceed Excess Principal Collections for any day, Excess Principal
Collections generally will be allocated pro rata among the applicable series
based on the relative amounts of Principal Shortfalls. To the extent that
Excess Principal Collections exceed Principal Shortfalls, the balance will be
first, deposited into the Excess Funding Account to the extent the Required
Pool Balance exceeds the Pool Balance and second, distributed to the
Certificateholders in accordance with the Trust Agreement.
Allocation of Collections; Deposits in Collection Account
The Servicer, no later than two business days after the processing date,
will deposit all Collections received with respect to the Receivables
(excluding portions allocable to the Certificateholders) in each calendar month
(each, a "Collection Period") into the Collection Account. Notwithstanding the
foregoing requirement for daily deposits, for so long as:
(1) World Omni remains the Servicer under the Trust Sale and
Servicing Agreement;
(2) no Servicing Default has occurred and is continuing; and
(3) World Omni either (a) maintains a short-term debt rating of at
least A-1 by Standard & Poor's and P-1 by Moody's, (b) arranges for and
maintains a letter of credit or other form of Enhancement for the
Servicer's obligations to make deposits of collections on the
Receivables in the Collection Account, which letter of credit or
Enhancement is acceptable in form and substance to each Rating Agency or
(c) otherwise satisfies the Rating Agency Condition, then, subject to
any limitations imposed by the Rating Agencies,
World Omni need not deposit collections into the Collection Account on the day
indicated in the preceding sentence but may use for its own benefit all of
those collections until the Payment Date (whether or not such funds will be
distributed to Noteholders, retained in the Collection Account or deposited in
another account on such Payment Date), at which time World Omni will make the
deposits in an amount equal to the net amount of the deposits and withdrawals
which would have been made had the conditions of this sentence not applied;
provided, however, that prior to ceasing daily deposits the Rating Agency
Condition shall have been satisfied.
In addition, during any Collection Period, the Servicer will generally be
required to deposit Collections into the Collection Account only up to the
aggregate amount of Collections required to be deposited into any deposit,
trust, reserve or similar account maintained for the benefit of Noteholders of
any series or, without duplication, distributed on the related Payment Date to
Noteholders (whether or not such funds will be distributed to Noteholders,
retained in the Collection Account or deposited in another account on such
Payment Date), to any agent or to any Enhancement Provider pursuant to the
terms of any Series Supplement or enhancement agreement with respect to the
related Collection Period and if, at any time prior to that Payment Date, the
amount of Collections deposited in the Collection Account exceeds the amount
required to be deposited, the Servicer will be permitted to withdraw the excess
from the Collection Account.
32
On any date on which Collections are deposited in the Collection Account,
the Servicer will distribute to the Certificateholders in accordance with the
Trust Agreement the portion allocated to the Certificateholders of the
Collections allocable to each series as specified in the related Series
Supplement and described in the related prospectus supplement.
Subordination of Certificate; Enhancements
Subordination of Certificates. The Certificates will be subordinated to
the rights of Noteholders of each series of Notes to the extent described in
the related prospectus supplement. The amount of the subordination for any
series of Notes is referred to herein as the "Available Subordinated Amount"
for that series. The Available Subordinated Amount for any series of Notes will
be subject to decrease and increase if and to the extent provided in the
related Series Supplement and described in the related prospectus supplement.
The prospectus supplement for each series of Notes will describe the manner in
which Collections attributable to the Available Subordinated Amount for that
series may be drawn upon to make payments to or for the benefit of the holders
of Notes of that series. If so provided in the related Series Supplement, the
Available Subordinated Amount for a series of Notes may be structured so as to
be available to more than one series of Notes.
Enhancements. In addition to the subordination described above, for any
series of Notes, Enhancements may be provided for one or more classes of Notes.
These Enhancements may include a letter of credit, surety bond, cash collateral
account, spread account, guaranteed rate agreement, swap or other interest
protection agreement, repurchase obligation, cash deposit or another form of
credit enhancement described in the related prospectus supplement or any
combination of the foregoing. Enhancements may also be provided to a series or
class or classes of a series by subordination provisions which require that
distributions of principal and/or interest be made with respect to the Notes of
that series, class or classes before distributions are made to one or more
other series or classes. If so specified in the related prospectus supplement,
any form of Enhancement may be structured so as to be available to more than
one class or series to the extent described therein.
If Enhancement is provided for a series of Notes, the related prospectus
supplement will include a description of:
. the amount payable under that Enhancement;
. any conditions to payment thereunder not otherwise described herein;
. the conditions under which the amount payable under that Enhancement
may be reduced and the conditions under which that Enhancement may be
terminated or replaced; and
. any material provisions of any agreement applicable relating to that
Enhancement.
Additionally, in specified cases, the related prospectus supplement may
set forth information for the applicable Enhancement Provider, including:
. a brief description of its principal business activities;
. its principal place of business, place of organization and the
jurisdiction under which it is chartered or licensed to do business;
. if applicable, the identity of regulatory agencies which exercise
primary jurisdiction over the conduct of its business; and
. its total assets, and its stockholders' equity or policyholders'
surplus, if applicable, as of a date specified in the related
prospectus supplement.
33
Limitations on Subordination And Enhancements. The presence of an
Available Subordinated Amount or Enhancement for a series or class of Notes is
intended to enhance the likelihood of receipt by Noteholders of that series or
class of the full amount of principal of and interest on that series or class
and to decrease the likelihood that the Noteholders will experience losses.
However, neither subordination of the Certificates nor the Enhancement for
that series or class will provide protection against all risks of loss or will
guarantee repayment of the entire principal balance of and interest on the
Notes. If losses occur which exceed the amount covered by the subordination or
Enhancement or which are not covered by the subordination or Enhancement,
Noteholders will bear their allocable share of deficiencies. In addition, if
specific Enhancement is provided for the benefit of more than one class or
series, Noteholders of that class or series will be subject to the risk that
the Enhancement will be exhausted by the claims of Noteholders of other
classes or series.
Distributions
Payments to Noteholders of a series or a class will be made from the
Collection Account and any accounts established for the benefit of Noteholders
of that series or class as described in the related prospectus supplement.
New Issuances
The Indenture provides that the Trust may issue additional series of
Notes pursuant to one or more Series Supplements, which shall specify, among
other things, for any series of Notes:
(1) its name or designation;
(2) its initial principal amount (or method for calculating its
initial principal amount);
(3) its interest rate (or the method for determining its interest
rate);
(4) a date on which it will begin its Accumulation Period or
Amortization Period; if any,
(5) the method for allocating principal and interest to the
Noteholders of that series;
(6) the percentage used to calculate monthly servicing fees;
(7) the issuer and terms of any Enhancement for that series or the
level of subordination provided by the Certificates;
(8) the terms on which the Notes of the series may be exchanged
for Notes of another series, be subject to repurchase, optional
redemption or mandatory redemption or be remarketed by any remarketing
agent;
(9) the final payment date for that series; and
(10) any other terms permitted by the Indenture (all the foregoing
terms, the "Principal Terms" of that series).
The Transferor may offer any series of Notes to the public under a
prospectus or other disclosure document (a "Disclosure Document") in
transactions either registered under the Securities Act of 1933 or exempt from
registration, directly or through one or more underwriters or placement
agents. There is no limit to the number of series of Notes that may be issued
under the Indenture.
34
The Indenture provides that the Transferor may specify Principal Terms of
a new series of Notes that differ substantially from any other series. Further,
one or more series of Notes may be in their Investment Periods, Early
Amortization Periods, Amortization Periods or Accumulation Periods while other
series are not. Thus, some series of Notes may be amortizing or accumulating
principal, while other series are not. Moreover, different series of Notes may
have the benefits of different forms of Enhancement issued by different
entities. Under the Indenture, the Indenture Trustee will hold each form of
Enhancement only on behalf of the series of Notes (or a particular class within
a series) to which it relates. The Indenture also provides that the Transferor
may specify different rates and Monthly Servicing Fees for each series of Notes
(or a particular class within a series). In addition, the Transferor has the
option under the Indenture to vary among series of Notes (or classes within a
series) the terms upon which that series (or classes within a series) may be
repurchased by the Transferor.
Under the Indenture and pursuant to a Series Supplement, a new series of
Notes may be issued only upon the satisfaction of specified conditions.
However, the terms of any new series will not be subject to prior review by or
consent of the Noteholders of any previously issued series of Notes. The
Transferor may cause the issuance of a new series by notifying the Indenture
Trustee and other parties at least five business days in advance of the
applicable Series Issuance Date. The notice shall state the designation of any
series of Notes (and classes within a series, if any). The Indenture provides
that the Indenture Trustee will issue a new series only upon satisfaction of
the Rating Agency Condition (including receipt of written confirmation by
Moody's) and delivery to it of the following:
(1) a Series Supplement in form satisfactory to the Indenture
Trustee signed by the Owner Trustee on behalf of the Trust and
specifying the Principal Terms of the series;
(2) any Enhancement and related agreement, signed by the Owner
Trustee on behalf of the Trust and the Servicer, as applicable; and
(3) an opinion of counsel to the effect that, for federal income
tax purposes, the issuance will not adversely affect the
characterization of the Notes of any outstanding series or class of
Notes as debt, the issuance will not cause a taxable event to any
Noteholders, the Trust will not be an association or publicly traded
partnership taxable as a corporation (an opinion of counsel to the
effect referred to in the three prior clauses with respect to any action
is referred to herein as a "Tax Opinion") and the new series of Notes
will be characterized as debt.
Each new issuance is also subject to the condition that the Transferor
shall have represented and warranted that the issuance shall not, in the
reasonable belief of the Transferor, cause an Early Amortization Event or
Investment Event to occur for any outstanding series or class of Notes.
Upon satisfaction of all the foregoing conditions, the Indenture Trustee
will issue the new series of Notes.
After the issuance of a new series of Notes, the Transferor shall make
all deposits to be made by it pursuant to the Series Supplement. If, after
giving affect to all withdrawals, deposits and allocations to be made on the
day a new series is issued, the Pool Balance would be less than the Required
Pool Balance, the Transferor shall deposit such deficit into the Excess Funding
Account or such other account. After making the deposits set forth above, the
Transferor may deposit into the Excess Funding Account, any Principal Funding
Account or any other account all or a portion of the remaining net proceeds
from a new issuance to the extent such funds would otherwise be retained by, or
distributed to, the Certificateholders.
35
The Indenture Trustee
BNY Midwest Trust Company (as successor-in-interest to the corporate
trust administration of Harris Trust and Savings Bank), an Illinois banking
corporation, serves as trustee under the Indenture (the "Indenture Trustee").
The principal executive offices of the Indenture Trustee are located at 2
North LaSalle Street, 10th Floor, Floor, Chicago, Illinois 60602, and its
telephone number is (312) 461-6030.
The Indenture Trustee may give notice of its intent to resign at any
time, in which event the Trust will be obligated to appoint a successor
trustee. The Trust may also remove the Indenture Trustee if the Indenture
Trustee ceases to be eligible to continue as Indenture Trustee under the
Indenture, becomes insolvent, or otherwise becomes incapable of acting. In
these circumstances, the Trust will be obligated to appoint a successor
trustee. The holders of a majority of the aggregate principal amount of the
outstanding Notes will also be entitled to remove the Indenture Trustee and
appoint a successor. 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.
Reports to Noteholders
On or prior to each Payment Date for a series or class of Notes, the
Servicer will prepare and provide to the Indenture Trustee a statement to be
delivered to the related Noteholders on the Payment Date. For each series of
Notes, the statement will include the following information as to the Notes
with respect to that Payment Date, the period since the previous Payment Date
or the related Collection Period, as applicable:
(1) the total amount distributed to Noteholders;
(2) the amount, if any, of the distribution allocable to principal
on each series or class of Notes;
(3) the amount, if any, of the distribution allocable to interest on
each series or class of Notes;
(4) the aggregate outstanding principal balance for each series or
class of Notes, after giving effect to all payments reported under (2)
above on that date;
(5) the amount of the Monthly Servicing Fee paid to the Servicer
with respect to the related Collection Period or Periods, as the case may
be;
(6) the interest rate applicable for the next Interest Payment Date
for any series or classes of Notes with variable or adjustable rates, if
determinable prior to such date;
(7) the amount of Receivables that became Defaulted Receivables
during the related Collection Period;
(8) the accumulated interest and Principal Shortfalls, if any, on
each series or class of Notes and the change in each of such amounts from
the preceding Payment Date;
(9) the balance of the Excess Funding Account on the last day of the
related Collection Period after giving effect to changes therein or
distributions therefrom on such date; and
(10) with respect to each series of Notes, the items set forth in
the applicable Series Supplement.
36
Each amount set forth pursuant to clauses (1) and (2) above will be
expressed as a dollar amount per $1,000 of the initial principal balance of the
Notes.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during which any Notes are outstanding, the Indenture
Trustee shall furnish (or cause to be furnished) to each person or entity who
at any time during the preceding calendar year was a holder of record of Notes
and received any payment thereon, a statement containing such information as
may be required by the Code for the purpose of assisting the Noteholders in the
preparation of their federal income tax returns. As long as the holder of
record of the Notes is Cede, as nominee of DTC, beneficial owners of Notes will
receive tax and other information from Participants and Indirect Participants
rather than from the Indenture Trustee. See "Certain Federal Income Tax
Consequences" in this prospectus.
Book-Entry Registration
The Depository Trust Company ("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 pursuant to Section
17A of the Securities Exchange Act of 1934. DTC was created to hold securities
for its participating organizations ("Participants") and to facilitate the
clearance and settlement of securities transactions between Participants
through electronic book-entries, thereby eliminating the need for physical
movement of certificates. 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").
Owners of beneficial interest in Notes sold under this prospectus ("Note
Owners") that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of or interests in Notes
generally may do so only through Participants and Indirect Participants. In
addition, Note Owners will receive all distributions of principal and interest
through Participants. Under a book-entry format, Note Owners may experience
some delay in their receipt of payments since such payments will be forwarded
by the Indenture Trustee to Cede & Co. ("Cede"), as nominee for DTC. DTC will
forward such payments to Participants, which thereafter will forward them to
Indirect Participants or Note Owners. It is anticipated that the only
"Noteholder" of record will be Cede, as nominee of DTC. Note Owners will not be
recognized by the Indenture Trustee as Noteholders, as such term is used in the
Indenture, and Note Owners will be permitted to exercise the rights of
Noteholders only indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers of Notes among
Participants on whose behalf it acts with respect to the Notes and to receive
and transmit payments of principal of, and interest on, the Notes. Participants
and Indirect Participants with which Note Owners have accounts with respect to
the Notes similarly are required to make book-entry transfers and receive and
transmit such payments on behalf of their respective Note Owners. Accordingly,
although Note Owners will not possess Notes, these rules provide a mechanism by
which Note Owners will receive payments and will be able to transfer their
interests in Notes.
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 to
pledge Notes to persons or entities that do not participate in the DTC system,
or to otherwise act with respect to such Notes, may be limited due to the lack
of a physical certificate for such Notes.
DTC has advised the Transferor that it will take any action permitted to
be taken by a Noteholder under the Indenture or other Related Document only at
the direction of one or more Participants to whose accounts with DTC the Notes
are credited. DTC may take conflicting actions with respect to other undivided
37
interests to the extent that such actions are taken on behalf of Participants
whose holdings include such undivided interests.
In addition to holding Notes through Participants or Indirect
Participants of DTC in the United States as described above, holders of Notes
may hold their Notes through Clearstream or Euroclear in Europe if they are
participants of such systems, or indirectly through organizations which are
participants in such systems.
Clearstream and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in Clearstream's and
Euroclear's names on the books of their respective depositories which in turn
will hold such positions in customers" securities accounts in the depositories"
names on the books of DTC.
Transfers between the organization participating in the Clearstream
system (the "Clearstream Participants") and the Euroclear system (the
"Euroclear Participants") will occur in accordance with their respective rules
and operating procedures. Cross-market transfers between persons holding
directly or indirectly through DTC, on the one hand, and directly or indirectly
through Clearstream Participants or Euroclear Participants, on the other hand,
will be effected in DTC in accordance with DTC rules on behalf of the relevant
European international clearing systems by its depositary. Cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in accordance
with its rules and procedures and within its established deadlines (European
time). The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Clearstream Participants and Euroclear Participants may not deliver
instructions directly to the depositories.
Because of time-zone differences, credits of securities received in
Clearstream or Euroclear as a result of a transaction with a Participant will
be made during subsequent securities settlement processing and dated the
Business Day following the DTC settlement date. Such credits or any
transactions in such securities settled during such processing will be reported
to the relevant Euroclear or Clearstream Participants on such 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
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. For information with respect to tax
documentation procedures, see "Certain Federal Income Tax Consequences--Tax
Characterization and Treatment of Notes--Tax Consequences to Foreign
Noteholders."
Clearstream is incorporated under the laws of Luxembourg as a
professional depository. Clearstream holds securities for the Clearstream
Participants 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 certificates. Transactions may be settled in
Clearstream in any of 28 currencies, including United States dollars.
Clearstream provides to Clearstream Participants, among other things, services
for safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. Clearstream interfaces
with domestic markets in several countries. As a professional depository,
Clearstream is subject to regulation by the Luxembourg Monetary Institute.
Clearstream Participants are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and other organizations and may include the
underwriters of the Notes. Indirect access to Clearstream is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Clearstream Participant, either
directly or indirectly.
38
Euroclear was created in 1968 to hold securities for the Euroclear
Participants and to clear and settle transactions between Euroclear
Participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash.
Transactions may now be settled in any of 29 currencies, including United
States dollars. Euroclear includes various other services, including securities
lending and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of
Morgan Guaranty Trust Company of New York (the "Euroclear Operator"), under
contract with Euro-clear Clearance Systems S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for Euroclear on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the underwriters. Indirect access to Euroclear is also
available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it
is regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operating Procedures of the Euroclear System and the applicable
Belgian law. These terms and conditions govern transfers of securities and cash
with Euroclear, withdrawals of securities and cash from Euroclear, and receipts
of payments with respect to securities in Euroclear. All securities in
Euroclear are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear Operator
acts under these terms and conditions only on behalf of Euroclear Participants,
and has no record of or relationship with persons holding through Euroclear
Participants.
Distributions with respect to Notes held through Clearstream or Euroclear
will be credited to the cash accounts of Clearstream Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its depositary. Such distributions will be subject to
tax reporting in accordance with relevant United States tax laws and
regulations. See "Certain Federal Income Tax Consequences--Tax Characterization
and Treatment of Notes--Information Reporting and Backup Withholding."
Clearstream or the Euroclear Operator, as the case may be, will take any other
action permitted to be taken by a Noteholder under the Indenture or other
Related Document on behalf of a Clearstream Participant or Euroclear
Participant only in accordance with its relevant rules and procedures and
subject to its depositary's ability to effect such actions on its behalf
through DTC.
Although DTC, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Notes among participants of DTC,
Clearstream and Euroclear, they are under no obligation to perform or continue
to perform such procedures and such procedures may be discontinued at any time.
Except as required by law, neither the Administrator, the Owner Trustee
nor the Indenture Trustee will have any liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of
the Notes of any series held by Cede, as nominee for DTC, by Clearstream or by
Euroclear in Europe, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
39
Definitive Notes
Notes generally will be issued in fully registered, certificated form
("Definitive Notes") to Noteholders or their nominees, rather than to the
Depository or its nominee, only if;
(1) the Administrator advises the Indenture Trustee in writing that
the Depository is no longer willing or able to discharge properly its
responsibilities with respect to the Notes and the Trust is unable to
locate a qualified successor;
(2) the Administrator, at its option, advises the Indenture Trustee
in writing that it elects to terminate the book-entry system through the
Depository; or
(3) after the occurrence of an Event of Default or a Servicing
Default, Note Owners representing beneficial interests aggregating at
least a majority of the outstanding principal amount of the Notes advise
the appropriate trustee through the Depository in writing that the
continuation of a book-entry system through the Depository (or a
successor thereto) is no longer in the best interest of such Note Owners.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Depository will notify the Note Owners and the Indenture
Trustee in writing of such occurrence and of the availability of Definitive
Notes. Upon surrender by the Depository of the definitive certificates
representing the Notes accompanied by registration instructions, the Indenture
Trustee will reissue the related Notes as Definitive Notes to holders thereof.
Payments of principal of, and interest on, the Definitive Notes will
thereafter be made in accordance with the procedures set forth in the
Indenture directly to holders of Definitive Notes in whose names the
Definitive Notes were registered at the close of business on the last day of
the preceding month. Such payments will be made by check mailed to the address
of such holder as it appears on the register maintained by the Indenture
Trustee. The final payment on any Definitive Note, however, will be made only
upon presentation and surrender of such Definitive Note at the office or
agency specified in the notice of final payment to the holders thereof.
Definitive Notes will be transferable and exchangeable at the offices of
the appropriate trustee or of a registrar named in a notice delivered to
holders of Definitive Notes. No service charge will be imposed for any
registration of transfer or exchange, but the appropriate trustee may require
payment of a sum sufficient to cover any tax or other governmental charge
imposed in connection therewith.
THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes terms of:
(1) the Receivables Purchase Agreement under which the Transferor
purchased Receivables from World Omni;
(2) the Trust Sale and Servicing Agreement under which the Trust
acquired those Receivables from the Transferor and the Servicer agreed to
service the Receivables;
(3) the Trust Agreement under which the Trust was created and
Certificates were issued; and
(4) the Administration Agreement, dated as of the Initial Closing
Date, among the Owner Trustee, the Indenture Trustee and World Omni as
Administrator (as amended from time to time, the
40
"Administrative Agreement"), under which World Omni, as administrator,
has agreed to undertake specified administrative duties for the Trust.
Collectively, these four agreements are referred to as the "Transfer and
Servicing Agreements."
Forms of the Transfer and Servicing Agreements have been filed as
exhibits to the registration statement of which this prospectus forms a part.
The Transferor will provide a copy of the Transfer and Servicing Agreements
(without exhibits) upon request of a Noteholder. This summary does not purport
to be complete and is subject to, and is qualified in its entirety by
reference to, all of the provisions of the Transfer and Servicing Agreements.
Where particular provisions or terms used in the Transfer and Servicing
Agreements are referred to, the actual provisions are incorporated by
reference as part of the summary.
Receivables Purchase Agreement
Sale of Receivables. Pursuant to the Receivables Purchase Agreement,
World Omni sold and transferred to the Transferor all of its right, title and
interest in and to all of the Receivables, related Collateral Security and
certain other property. As described herein, pursuant to the Trust Sale and
Servicing Agreement, the Transferor transferred to the Trust all of its right,
title and interest in and to the Receivables Purchase Agreement. All new
Receivables arising under the Accounts during the term of the Trust, including
certain Purchased Participation Receivables, will be sold to the Transferor
and transferred by the Transferor to the Trust. Accordingly, the aggregate
amount of Receivables in the Trust will fluctuate from day to day as new
Receivables are generated and as existing Receivables are collected, charged
off as uncollectible or otherwise adjusted.
In connection with the sale of Receivables to the Transferor, World Omni
has indicated in its computer files that the Receivables were sold to the
Transferor and that the Receivables have been transferred by the Transferor to
the Trust. In addition, World Omni delivered to the Transferor a list
specifying all of the Receivables, identifying the principal balances of the
Receivables as of the Initial Closing Date and delivered to the Transferor all
documents, if any, evidencing the Receivables which constitute "instruments"
(as defined in the Uniform Commercial Code). As a precautionary measure, World
Omni has filed financing statements for the Receivables meeting the
requirements of Florida state law. Otherwise, however, World Omni retains all
records relating to Receivables and does not segregate those records from the
records relating to other accounts. Further, World Omni will not stamp or mark
the physical records to reflect the transfer of the Receivables to the Trust
which may affect the priority of the security interest of the Trust. See "Risk
Factors--Receivables May be Uncollectible due to Superior Interests" and
"Certain Legal Aspects of the Receivables--Transfer of Receivables."
Representations And Warranties. World Omni has represented to the
Transferor as of the Initial Closing Date and each Series Issuance Date that,
among other representations, it was duly incorporated and in good standing and
has the authority to consummate the transactions contemplated by the
Receivables Purchase Agreement.
World Omni also represents to the Transferor regarding the Receivables
that:
(1) each Receivable and all Collateral Security existing on the
Initial Closing Date or, in the case of Additional Accounts, on the
applicable Addition Date, and on each Transfer Date, has been conveyed
to the Transferor free and clear of any lien (other than the lien held
by World Omni or, with respect to a participation interest, the interest
of the other participants);
(2) with respect to each Receivable and all Collateral Security
existing on the Initial Closing Date or, in the case of Additional
Accounts, on the applicable Addition Date, and on each Transfer Date,
all consents, licenses, approvals or authorizations of or registrations
or declarations with any
41
governmental authority required to be obtained, effected or given by
World Omni in connection with the conveyance of such Receivable or
Collateral Security to the Transferor have been duly obtained, effected
or given and are in full force and effect;
(3) on the Initial Cut-Off Date and the Initial Closing Date, each
Initial Account is an Eligible Account or in the case of an Additional
Account, on the applicable Additional Cut-Off Date and Addition Date,
each Account or Additional Account is an Eligible Account;
(4) on the Initial Closing Date, in the case of the Initial
Accounts, and, in the case of the Additional Accounts, on the applicable
Additional Cut-Off Date, and on each Transfer Date, each Receivable
conveyed to the Transferor on such date is an Eligible Receivable,
subject to certain exceptions provided in the Receivables Purchase
Agreement; and
(5) each Participation Agreement, if any, relating to Receivables
conveyed by World Omni permits the transfer of such Receivables to the
Transferor and the Trust and provides that the undivided interest of
such participant is generally pari passu with the remaining undivided
interest in the related Receivables.
In the event of a breach of representation in the preceding paragraph
results in a Disqualified Receivable and the requirement that the Transferor
accept retransfer of that Disqualified Receivable pursuant to the Trust Sale
and Servicing Agreement, then World Omni will repurchase that Disqualified
Receivable from the Transferor on the date of the retransfer. The purchase
price for the Disqualified Receivables will be the face amount of the
Disqualified Receivable, of which at least the amount of any cash deposit
required to be made by the Transferor under the Trust Sale and Servicing
Agreement for the retransfer of the Disqualified Receivables will be paid in
cash.
World Omni also represents to the Transferor that as of the Initial
Closing Date and each Series Issuance Date, as applicable:
(1) the execution and delivery of, the performance of the
transactions contemplated in and the fulfillment of the terms of the
Receivables Purchase Agreement will not conflict with, result in any
breach of any of the material terms and provisions of, or constitute
(with or without notice or lapse of time or both) a material default
under, any indenture, contract, agreement, mortgage, deed of trust, or
other instrument to which World Omni is a party or by which it or its
properties are bound;
(2) the execution and delivery of, the performance of the
transactions contemplated by and the fulfillment of the terms applicable
to World Omni of the Receivables Purchase Agreement will not conflict
with or violate any material requirements of law applicable to World
Omni;
(3) there are no proceedings or, to the best knowledge of World
Omni, investigations, pending or threatened against World Omni, before
any governmental authority with respect to certain matters, other than
those disclosed in the Receivables Purchase Agreement;
(4) all appraisals, authorizations, consents, orders, approvals or
other actions of any person or of any governmental body or official
required in connection with the execution and delivery of, the
performance of the transactions contemplated by, and the fulfillment of
the terms of the Receivables Purchase Agreement have been obtained;
(5) the Receivables Purchase Agreement constitutes a legal, valid
and binding obligation of World Omni;
42
(6) the schedule of various Accounts attached to the Receivables
Purchase Agreement is an accurate and complete listing in all material
respects of all Accounts as of specified dates; and
(7) the Receivables Purchase Agreement or, in the case of
Additional Accounts, the related assignment constitutes a valid sale,
transfer and assignment to the Transferor of all right, title and
interest of World Omni in the Receivables and the Collateral Security
and the proceeds thereof and, upon the taking of certain actions, the
Transferor shall have a first priority perfected ownership interest in
such property.
If the breach of any of the representations and warranties set forth
above results in the obligation of the Transferor to redeem the Notes pursuant
to the Trust Sale and Servicing Agreement and the Indenture, World Omni shall
repurchase the Receivables and the Collateral Security and pay to the
Transferor an amount of cash equal to the amount the Transferor is required to
deposit into the Principal Funding Account.
Covenants of World Omni. In the Receivables Purchase Agreement, World
Omni agrees to perform its obligations under the agreements relating to the
Receivables and the Accounts in conformity with its then-current policies and
procedures relating to the Receivables and the Accounts.
World Omni also agrees that, except for the transactions occurring
pursuant to the Transfer and Servicing Agreements (including the conveyance of
Participation Interests pursuant to any Participation Agreements), World Omni
will not sell, pledge, assign or transfer any interest in the Receivables to
any other person or grant, create, incur, assume or suffer to exist any lien on
any Receivable or Account, other than a Note or Certificate. In the event World
Omni is unable to transfer Receivables in an Account to the Transferor, World
Omni also agrees to allocate payments to such Account to the oldest Receivables
and have such payments applied as collections.
World Omni will pay the Servicer all collections received by World Omni
in respect of the Receivables promptly, but in no event later than two business
days after receipt by World Omni.
In addition, World Omni will notify certain parties after becoming aware
of any lien and will comply in all material respects with all requirements of
law applicable to it.
Termination. The Receivables Purchase Agreement will terminate
immediately after the Trust terminates. In addition, if World Omni becomes
party to any bankruptcy or similar proceeding (other than as a claimant), World
Omni will immediately cease to sell or transfer Receivables to the Transferor
and will promptly give notice of that event to the Transferor, the Trust and
the Indenture Trustee. World Omni may, however, resume sales upon satisfying
specified conditions.
Conveyance of Receivables and Collateral Security
On the Initial Closing Date, the Transferor transferred and assigned to
the Trust all of its right, title and interest in and to the Receivables and
the related Collateral Security as of the Initial Cut-Off Date, all Receivables
thereafter created in the Accounts and its interests in the related Collateral
Security and the Receivables Purchase Agreement, the proceeds of all of the
foregoing and certain other property.
As contemplated above and as described below under "--Addition of
Accounts," the Transferor has the right, subject to certain limitations and
conditions, and in some circumstances is obligated, to designate from time to
time additional accounts to be included as Additional Accounts, to purchase
from World Omni the Receivables then existing or thereafter created in such
Additional Accounts and to convey such Receivables to the Trust. Each such
Additional Account must be an Eligible Account. In respect of any conveyance of
Receivables in Additional Accounts, the Transferor will follow the procedures
set forth below, except the list
43
will show information for such Additional Accounts as of the date such
Additional Accounts are identified and selected (the "Addition Cut-Off Date").
The Transferor is required to provide to the Trust and to the Indenture
Trustee a true and complete list showing for each Account, as of the Initial
Cut-Off Date or the applicable Additional Cut-Off Date:
. its account number; and
. the aggregate amount of Principal Receivables in the Account.
"Addition Date" means, for an Additional Account, the date from and after
which Additional Accounts are to be included as Accounts pursuant to the Trust
Sale and Servicing Agreement.
"Additional Cut-Off Date" means, for an Additional Account, the date
specified in the notice of addition delivered with respect to such Additional
Account.
"Representation Date" means:
(1) for each Account, each Series Cut-Off Date and Series Issuance
Date;
(2) for each Additional Account, the applicable Additional Cut-Off
Date and Addition Date;
(3) for each Receivable in an Account, each Series Cut-Off Date and
the Transfer Date for the Receivable; and
(4) for each Receivable in an Additional Account, the applicable
Transfer Date.
"Series Cut-Off Date" means, for a series of Notes, the date designated
as the Series Cut-Off Date in the related prospectus supplement.
"Series Issuance Date" means, with respect to any series, the date on
which the Notes of such series are to be originally issued in accordance with
the Indenture and the applicable Series Supplement.
"Transfer Date" means, for a Receivable arising after the Initial Cut-Off
Date, the date on which the Receivable is originated, unless the Receivable
arose in an Additional Account prior to the applicable Addition Date, in which
case "Transfer Date" means the Addition Date.
Representations and Warranties by the Transferor
The Transferor represents to the Trust relating to the Accounts, the
Receivables and the Collateral Security that:
(1) for each Account, including each Additional Account, as of each
of the applicable Representation Dates, the Account or Additional Account
was an Eligible Account;
(2) for each Receivable in an Account, including each Receivable in
an Additional Account, the Receivable is an Eligible Receivable or, if
the Receivable is not an Eligible Receivable, the Receivable is conveyed
to the Trust as described below under "--Ineligible Receivables and
Excess Receivables;"
(3) each Receivable and all Collateral Security conveyed to the
Trust on the Transfer Date, and all of the Transferor's right, title and
interest in the Receivables Purchase Agreement, have been
44
conveyed to the Trust free and clear of any liens (other than liens
contemplated by the Transfer and Servicing Agreement); and
(4) all appropriate consents and governmental authorizations
required to be obtained by the Transferor in connection with the
conveyance of each Receivable or Collateral Security have been duly
obtained.
If the Transferor breaches any representation described in the preceding
paragraph and the breach remains uncured for 30 days or such longer period as
may be agreed to by the Indenture Trustee, after the earlier to occur of the
discovery of the breach by the Transferor or the Servicer or receipt of written
notice of the breach by the Transferor or the Servicer, and the breach has a
materially adverse effect on the interest of the Noteholders in the Receivable
or, in the case of a breach relating to an Account, all Receivables in the
related Account ("Disqualified Receivables") will be reassigned to the
Transferor on the terms and conditions set forth below and the Account shall no
longer be included as an Account.
Each such Disqualified Receivable shall be reassigned to the Transferor
on or before the end of the Collection Period in which the reassignment
obligation arises. The Transferor shall direct the Servicer to deduct the
principal balance of such Disqualified Receivable from the Pool Balance. In the
event that the deduction would cause the Pool Balance to be less than the
Required Pool Balance, on the date on which the reassignment is to occur the
Transferor will be obligated to make a deposit into the Collection Account in
immediately available funds in an amount equal to the amount by which the Pool
Balance would be less than the Required Pool Balance (the amount of the deposit
being referred to herein as a "Transfer Deposit Amount"), provided that if the
Transfer Deposit Amount is not so deposited, the principal balance of the
related Receivables will be deducted from the Pool Balance only to the extent
the Pool Balance is not reduced below the Required Pool Balance and any
principal balance not so deducted will not be reassigned and will remain part
of the Trust; provided that the failure to remove Receivables pursuant to the
previous proviso shall not limit the obligation of the Transferor to deposit
the portion of the Transfer Deposit Amount not deposited. Upon reassignment of
any such Receivable, but only after payment by the Transferor of the Transferor
Deposit Amount, if any, the Trust shall automatically transfer, without
recourse, representation or warranty, all of the right, title and interest of
the Trust in and to such Receivable, all Collateral Security and all monies due
or to become due with respect thereto and all proceeds thereof to the
Transferor. The reassignment of the Receivable to the Transferor and the
payment of any related Transfer Deposit Amount will be the sole remedy for any
breach of the representations and warranties described in the preceding
paragraph with respect to the Receivable available to Noteholders or the
Indenture Trustee on behalf of Noteholders.
The Transferor will also represent to the Trust, among other
representations, that as of each Series Issuance Date:
(a) it is duly organized and in good standing, it has the
authority to consummate the transactions contemplated by the Trust Sale
and Servicing Agreement and the Trust Sale and Servicing Agreement
constitutes a valid, binding and enforceable agreement of the
Transferor; and
(b) the Trust Sale and Servicing Agreement or, in the case of
Additional Accounts, the related assignment constitutes a valid sale,
transfer and assignment to the Trust of all right, title and interest of
the Transferor in the Receivables and the Collateral Security and the
proceeds thereof and, upon the taking of certain actions, the Transferor
shall have an ownership or a first priority perfected security interest
in such property (other than certain liens in favor of World Omni
contemplated by the intercreditor provisions of the Receivables Purchase
Agreement or, with respect to a participation interest, the interest of
the other participants).
In the event that the breach of any representation made by the Transferor
has a materially adverse effect on the Noteholders, and the holders of Notes
evidencing not less than a majority of the aggregate unpaid
45
principal amount of Notes, by written notice to the Transferor and the
Servicer (and to the Indenture Trustee and the issuer or provider of any
Enhancement (an "Enhancement Provider") have exercised their right to have the
Notes redeemed pursuant to the Indenture, the Transferor shall deposit in the
Principal Funding Account an amount equal to the sum of the amounts specified
therefor with respect to each outstanding series in the related Series
Supplement. The obligation of the Transferor to make the deposit into the
Principal Funding Account will constitute the sole remedy respecting a breach
of the representations and warranties available to Noteholders or the
Indenture Trustee on behalf of the Noteholders.
Eligible Accounts and Eligible Receivables
An "Eligible Account" is defined to mean each individual wholesale
financing revolving line of credit extended by World Omni to a Dealer pursuant
to a dealer financing agreement, asset based lending financing agreement or
purchased participation financing agreement or which has been acquired by
World Omni, which line of credit, as of the date of determination thereof:
(1) is established or acquired by World Omni in the ordinary
course of business;
(2) is in favor of a Dealer which is an eligible dealer (which
excludes dealers subject to voluntary or involuntary bankruptcy
proceedings or voluntary or involuntary liquidation);
(3) is in existence and maintained and serviced by World Omni (or
a successor Servicer) or relates to Non-Serviced Participation
Receivables for which the Rating Agency Condition has been satisfied,
including receipt of written confirmation by Moody's; and
(4) for which no amounts have been charged off as uncollectible.
An "Eligible Receivable" is defined to mean each Receivable:
(1) which was originated or acquired by World Omni in the ordinary
course of business;
(2) which arose under an Account that at the time was an Eligible
Account;
(3) which is owned by World Omni at the time of sale by World Omni
to the Transferor;
(4) which represents the obligation of a Dealer to repay an
advance made to or on behalf of the Dealer (a) to finance the
acquisition of Vehicles or (b) in connection with the asset based
lending business;
(5) which, at the time of creation and at the time of transfer to
the Trust, except at the Initial Closing Date for Receivables relating
to Vehicles that have already been sold, is secured by a perfected first
priority security interest in the Vehicles or assets relating thereto;
(6) which was created in compliance in all respects with all
requirements of law applicable thereto and pursuant to a dealer
financing agreement, asset based lending financing agreement or
purchased participation financing agreement which complies in all
respects with all requirements of law applicable to any party thereto;
(7) with respect to which all material consents and governmental
authorizations required to be obtained by World Omni or the Transferor
in connection with the creation of the Receivable or the transfer
thereof to the Trust or the performance by World Omni of the dealer
financing agreement, asset based lending financing agreement or
purchased participation financing agreement pursuant to which the
Receivable was created, have been duly obtained;
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(8) as to which at all times following the transfer of the
Receivable to the Trust, the Trust will have good and marketable title
thereto free and clear of all liens other than Participations arising
prior to the transfer or arising at any time, other than liens permitted
pursuant to the Trust Sale and Servicing Agreement;
(9) which has been the subject of a valid transfer and assignment
from the Transferor to the Trust of all the Transferor's right, title
and interest therein (including any proceeds thereof);
(10) which will at all times be the legal, valid, binding and
assignable payment obligation of the Dealer relating thereto,
enforceable against the Dealer in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy or other similar
laws;
(11) which at the time of transfer to the Trust is not subject to
any right of rescission, setoff, counterclaim or any other defense
(including defenses arising out of violations of usury laws) of the
Dealer;
(12) as to which, at the time of transfer of the Receivable to the
Trust, World Omni and the Transferor have satisfied all their respective
obligations relating to that Receivable required to be satisfied at that
time;
(13) as to which, at the time of transfer of the Receivable to the
Trust, neither World Omni nor the Transferor has taken or failed to take
any action which would impair the rights of the Trust, the
Certificateholders or the Noteholders therein;
(14) which constitutes an "instrument," "account," "chattel paper"
or a "general intangible" as defined in Article 9 of the Uniform
Commercial Code as then in effect in the State of Florida;
(15) which was transferred to the Trust with all applicable
governmental authorization; and
(16) which is payable in U.S. dollars.
It is not required or anticipated that the Trust or the Indenture
Trustee will make any initial or periodic general examination of the
Receivables or any records relating to the Receivables for the purpose of
establishing the presence or absence of defects, compliance with
representations and warranties of the Transferor or for any other purpose. In
addition, it is not anticipated or required that the Trust or the Indenture
Trustee will make any initial or periodic general examination of the Servicer
for the purpose of establishing the compliance by the Servicer with its
representations or warranties, the observation of its obligations under the
Trust Sale and Servicing Agreement or for any other purpose.
Ineligible Receivables and Excess Receivables
For the purpose of facilitating the administration and reporting
requirements of the Servicer under the Trust Sale and Servicing Agreement, all
Receivables that are not Eligible Receivables ("Ineligible Receivables")
arising in an Eligible Account shall be transferred to the Trust. As a result
of the inclusion of Ineligible Receivables in the Trust, and to account for
the inclusion of Receivables in the Trust in excess of specified limits with
respect to Dealer concentrations, manufacturer concentrations, Asset Based
Receivables concentrations and other limits, and the inclusion in the Trust of
Receivables that arose in Eligible Accounts that are no longer Eligible
Accounts, the Trust will have a Trust Incremental Subordinated Amount. The
Trust Incremental Subordinated Amount will be allocated to each series of
Notes (the "Incremental Subordinated Amount" for that series) and included in
Available Subordinated Amount for that series as provided in the Series
Supplement and described in the prospectus supplement for that series. See
"The Notes--Allocation of
47
Collections; Deposits in Collection Account" and "--Subordination of
Certificate; Enhancements--Subordination of Certificates."
"Trust Incremental Subordinated Amount" for any Determination Date will
equal the sum of (a) the amount of Excess Receivables as of that Determination
Date, (b) the Overconcentration Amount as of that Determination Date and (c)
the amount of Ineligible Receivables included in the Trust on the last day of
the preceding Collection Period (the "Ineligible Amount").
"Excess Receivables" means, on any Determination Date, an aggregate
amount equal to the sum, without duplication, of:
(1) the aggregate amount by which Principal Receivables relating
to used Vehicles exceeds 25% of the aggregate amount of the Principal
Receivables included in the Trust, calculated as of the last day of the
preceding Collection Period;
(2) the aggregate amount of Principal Receivables as of the last
day of the preceding Collection Period in Eligible Accounts that are on
"finance hold" for credit reasons by World Omni as of the last day of
such preceding Collection Period; and
(3) the aggregate amount by which Principal Receivables arising in
Eligible Accounts under World Omni's "Delayed Payment Privilege Program
Delayed Payment Privilege Program" exceeds 2% of the aggregate amount of
Principal Receivables included in the Trust as of the last day of the
preceding Collection Period.
The percentages and dollar limits may be increased from time to time
upon satisfaction of the Rating Agency Condition.
"Overconcentration Amount" means, on any Determination Date, an amount
equal to the sum, without duplication, of:
(1) the aggregate of the amounts by which the Principal
Receivables of a group of affiliated Dealers exceeds the dealer
concentration limit for such Dealer group, which is 8% of the Pool
Balance for two Dealer groups, 6% for four Dealer groups, 4% for two
Dealer groups, 3% for seven Dealer groups and 2% for all other Dealer
groups;
(2) the aggregate of the amounts by which the Principal
Receivables related to a vehicle manufacturer exceeds the manufacturer
concentration limit for that manufacturer, which is 25% of the Pool
Balance for each of Ford, General Motors and DaimlerChrysler and 20% for
all other manufacturers other than Toyota, which has no limit;
(3) the aggregate amount of Asset Based Receivables that exceeds
3% of the Pool Balance;
(4) the aggregate of the amounts by which the Asset Based
Receivables of each Dealer group exceeds 1% of the Pool Balance; and
(5) with respect to the Principal Receivables of the Dealer groups
with concentration limits of more than 3%, the aggregate of the amounts
by which (a) the Principal Receivables of those Dealer groups related to
the three vehicle manufacturers (other than Toyota) with the highest
amount of Principal Receivables of those Dealer groups exceeds (b) one
half of the aggregate of all of the Principal Receivables of those
Dealer groups.
48
The percentages and dollar limits set forth in the definitions of Excess
Receivables and Overconcentration Amount may be increased periodically subject
to satisfaction of the Rating Agency Condition.
Addition of Accounts
Subject to the conditions described below, the Transferor has the right
to designate additional accounts, including accounts relating to Asset Based
Receivables and Purchased Participation Receivables, to be included as Accounts
(the "Additional Accounts"). A single Dealer may have multiple Additional
Accounts, one relating to Asset Based Receivables, one relating to Purchased
Participation Receivables and one relating to other Receivables. In addition,
if, as of the close of business on the last day of any Collection Period, the
Pool Balance on such day is less than the Required Pool Balance as of the last
day of that Collection Period (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on that Payment Date), the
Transferor shall, within five business days following the end of such
Collection Period, designate and transfer to the Trust the Receivables (and the
Collateral Security) of Additional Accounts of the Transferor to be included as
Accounts in a sufficient amount such that after giving effect to such addition,
the Pool Balance as of the close of business on the last day of the Collection
Period would have been at least equal to the Required Pool Balance as of that
last day. The failure of the Transferor to transfer Receivables to the Trust as
required in the prior sentence solely as a result of the unavailability of a
sufficient amount of Eligible Receivables will not constitute a breach of the
Trust Sale and Servicing Agreement; provided, however, that such failure may
result in the occurrence of an Early Amortization Event.
Any designation of Additional Accounts is subject to the following
conditions, among others:
(1) the Transferor shall have given timely notice of the addition
of such Additional Accounts to the Owner Trustee, the Indenture Trustee,
any agent, the Rating Agencies and any Enhancement Providers;
(2) each Additional Account must be an Eligible Account;
(3) the Transferor shall have delivered to the Owner Trustee a
duly executed written assignment and to the Owner Trustee and the
Indenture Trustee the computer file or microfiche or written list
required to be delivered pursuant to the Trust Sale and Servicing
Agreement;
(4) the addition of the Receivables arising in such Additional
Accounts shall not result in the occurrence of an Early Amortization
Event or Investment Event;
(5) the Transferor shall not use selection procedures in selecting
Additional Accounts that it reasonably believes is adverse to the
interests of the Noteholders or any Enhancement Provider;
(6) the Transferor shall deliver the required opinions of counsel
relating to the addition of the Additional Accounts to the Owner
Trustee, the Indenture Trustee, the Rating Agencies and any Enhancement
Provider;
(7) the Rating Agency Condition has been satisfied; and
(8) the Transferor shall have, to the extent required, deposited
all Collections with respect to Additional Accounts since the Additional
Cut-Off Date in the Collection Account.
Notwithstanding the foregoing, the Transferor may, at its sole
discretion, and subject only to the limitations specified in this paragraph,
voluntarily designate Additional Accounts (other than those that contain
Purchased Participation Receivables, Participations or Asset Based Receivables
unless the Rating Agency
49
Condition for that Account has been satisfied) to be included as Accounts and
transfer to the Trust the Receivables and the Collateral Security of such
Additional Accounts. (Additional Accounts designated in accordance with the
provisions described in this paragraph are referred to herein as "Automatic
Additional Accounts".) Unless the Rating Agency Condition has been satisfied,
the number of Automatic Additional Accounts designated for any calendar quarter
shall not exceed 15% of the number of Accounts as of the first day of the
calendar quarter, nor shall the number of Automatic Additional Accounts
designated during any calendar year exceed 20% of the number of Accounts as of
the first day of such calendar year. Within 30 days after the end of any
calendar quarter, or at such other time and for such other period as shall be
required by the Rating Agencies, in which Accounts are designated as Automatic
Additional Accounts, the Transferor will deliver to the Owner Trustee, the
Indenture Trustee and each Rating Agency an opinion of counsel with respect to
the Automatic Additional Accounts included as Accounts in such period,
confirming the validity and perfection of the transfer of such Automatic
Additional Accounts and such other matters as may be required by the Trust Sale
and Servicing Agreement. If such opinion is not delivered, the ability of the
Transferor to designate Automatic Additional Accounts will be suspended until
such time as the Rating Agency Condition has been satisfied. If the Transferor
is unable to deliver an opinion of counsel with respect to any Automatic
Additional Account, such inability will be a breach of the representation and
warranty with respect to the Receivables in such Automatic Additional Account.
Each Additional Account (including each Automatic Additional Account)
must be an Eligible Account at the time of its addition. However, since
Additional Accounts may not have been a part of the initial portfolio of World
Omni, the Additional Accounts may not be of the same credit quality as the
initial Accounts. Additional Accounts may have been originated by World Omni at
a later date using credit criteria different from those which were applied to
the initial Accounts or may have been acquired by World Omni from another
wholesale lender that had different credit criteria. In addition, the
Transferor will be permitted to designate as Additional Accounts any Accounts
which contain receivables that have been sold or pledged to third parties.
Removal of Accounts; Transfers of Participations
The Transferor shall have the right at any time to remove Eligible
Accounts from the Trust. To remove any Eligible Account, the Transferor (or the
Servicer on its behalf) shall, among other things:
(a) not less than five business days prior to the Removal
Commencement Date, furnish to the Owner Trustee, Indenture Trustee, any
agent, any Enhancement Provider and the Rating Agencies a written notice
(the "Removal Notice") specifying the Determination Date on which
removal of one or more Accounts will commence (a "Removal Commencement
Date") and the Accounts to be removed from the Trust (the "Designated
Accounts");
(b) determine on the Removal Commencement Date the aggregate
principal balance of Receivables in respect of each Designated Account
(the "Designated Balance") and deliver to the Indenture Trustee on the
Removal Commencement Date a computer file or microfiche or written list
containing a true and complete list of the Removed Accounts specifying
for each such Account its account number and the aggregate amount of
Receivables outstanding in such Account;
(c) from and after the Removal Commencement Date, cease to
transfer to the Trust any and all Receivables arising in the Designated
Accounts;
(d) from and after the Removal Commencement Date, allocate all
Principal Collections in respect of each Designated Account, first to
the oldest outstanding principal balance of the Designated Account,
until the Determination Date on which the Designated Balance in the
Designated Account is reduced to zero (the "Removal Date");
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(e) on each business day from and after the Removal Commencement
Date to and until the related Removal Date, allocate:
(1) to the Trust (to be further allocated pursuant to the
Trust Sale and Servicing Agreement), Non-Principal Collections in
respect of each Designated Account for Receivables in all
Designated Accounts transferred to the Trust, and
(2) to the Transferor the remainder of the Non-Principal
Collections in the Designated Accounts;
(f) represent and warrant that the removal of the Eligible Account
on any Removal Date shall not, in the reasonable belief of the
Transferor, cause an Early Amortization Event or Investment Event to
occur for any series of Notes;
(g) represent and warrant that no selection procedures believed by
the Transferor to be adverse to the interests of the Noteholders were
utilized in selecting the Designated Accounts;
(h) represent and warrant that the removal will not result in a
reduction or withdrawal of the rating of any outstanding series or class
of Notes by any applicable Rating Agency; and
(i) on or before the related Removal Date, deliver to the
Indenture Trustee and any Enhancement Provider an officers' certificate
confirming the items set forth in clauses (f), (g) and (h) above and
confirming that the Transferor reasonably believes that the removal of
the Removed Accounts will not result in the occurrence of an Early
Amortization Event or Investment Event.
No Designated Accounts shall be removed if the removal will result in a
reduction or withdrawal of the rating of any outstanding series or class of
Notes by any applicable Rating Agency.
On the fifth business day after any date on which an Account becomes an
Ineligible Account (which fifth business day will be deemed the Removal
Commencement Date for the Account), the Transferor will commence the removal of
the Receivable of such Ineligible Account from the Trust by taking each of the
actions specified above for the removal of Eligible Accounts.
Upon satisfaction of the above conditions, on the Removal Date for the
Designated Account, the Transferor will cease the allocation of collections of
Receivables from the Designated Account and the Designated Account shall be
deemed removed from the Trust for all purposes (a "Removed Account").
In addition to the removal rights described above, the Transferor shall
have the right at any time to remove certain Ineligible Accounts from the Trust
and, in connection therewith, repurchase the then existing Receivables in the
Accounts. To remove Accounts and repurchase the then existing Receivables in
the Ineligible Accounts, the Transferor (or the Servicer on its behalf) shall,
among other things:
(1) not less than five business days prior to the Removal and
Repurchase Date, furnish to the Trust and the Owner Trustee, the
Indenture Trustee, any agent, each Enhancement Provider and the Rating
Agencies a Removal Notice specifying the Designated Accounts which are
to be removed, and the then existing Receivables in the Designated
Accounts (the "Designated Receivables") which are to be repurchased from
the Trust and the date on which the removal of the Designated Accounts
and the purchase of the Designated Receivables will occur (a "Removal
and Repurchase Date");
(2) deliver to the Trust on the Removal and Repurchase Date a
computer file or microfiche or written list containing a true and
complete list of the Removed Accounts specifying for each such Account
its account number and the aggregate amount of Receivables outstanding
in such Account;
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(3) deposit into the Collection Account on the Removal and
Repurchase Date funds in an amount equal to the aggregate outstanding
balance of the Designated Receivables on such date (the "Repurchased
Receivables Purchase Price") which funds will be treated as Collections;
(4) represent and warrant that the removal of any such Ineligible
Account and the repurchase of the Receivables then existing in such
Account on any Removal and Repurchase Date shall not, in the reasonable
belief of the Transferor, cause an Early Amortization Event or
Investment Event to occur for any series of Notes or cause the Pool
Balance to be less than the Required Pool Balance;
(5) represent and warrant that no selection procedures believed by
the Transferor to be adverse to the interests of the Noteholders were
utilized in selecting the Designated Accounts;
(6) represent and warrant as of the Removal and Repurchase Date
that the list of Removed Accounts delivered pursuant to clause (2)
above, as of the Removal and Repurchase Date, is true and complete in
all material respects;
(7) represent and warrant that such removal and repurchase will
not result in a reduction or withdrawal of the rating of any outstanding
series or class of Notes by the applicable Rating Agencies; and
(8) deliver to the Indenture Trustee and any Enhancement Providers
an officers' certificate confirming the items set forth in clauses (4)
through (7) above and confirming that the Transferor reasonably believes
that the removal of the Removed Accounts and the repurchase of the
Repurchased Receivables will not result in the occurrence of an Early
Amortization Event or Investment Event.
Upon satisfaction of the above conditions, on the Removal and Repurchase
Date for any such Designated Account and Designated Receivables, such
Designated Account shall be deemed removed, and such Designated Receivables
("Repurchased Receivables") shall be deemed repurchased, from the Trust for all
purposes.
Any amounts deposited into the Collection Account from the payment by the
Transferor of the Repurchased Receivables Purchase Price will be treated as
Collections on the date deposited.
In addition to the foregoing provisions, the Transferor shall have the
right to remove certain Ineligible Accounts and reassign the then existing
Receivables in the Accounts ("Automatic Removed Accounts"), upon satisfaction
by the Transferor (or the Servicer on its behalf) of the following conditions:
(a) on or before the fifth business day immediately preceding the
Automatic Removal Date, the Transferor shall furnish to the Owner
Trustee, the Indenture Trustee, any agent, any Enhancement Providers and
the Rating Agencies a Removal Notice specifying the Automatic Removed
Accounts which are to be reassigned from the Trust to the Transferor and
the date on which such removal of Automatic Removed Accounts and
reassignment of such Receivables is to occur (the "Automatic Removal
Date");
(b) on or prior to the date that is five business days after the
Automatic Removal Date, the Transferor shall deliver to the Trust and
the Indenture Trustee a computer file or microfiche or written list
containing a true and complete list of the Automatic Removed Accounts
specifying for each such Account, as of the removal notice date, its
account number and the aggregate amount of Receivables outstanding in
such Account;
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(c) the Transferor shall represent and warrant as of each Automatic
Removal Date that the list of Automatic Removed Accounts delivered
pursuant to clause (b) above, as of the Automatic Removal Date, is true
and complete in all material respects; and
(d) if any of the Accounts to be removed is not liquidated and does
not have a zero balance:
(1) the Rating Agency Condition shall have been satisfied; and
(2) the Transferor shall deliver to the Owner Trustee, the
Indenture Trustee, any agent, and any Enhancement Providers an
officers' certificate, dated the Automatic Removal Date, to the
effect that the Transferor reasonably believes that such removal
will not cause an Early Amortization Event or Investment Event to
occur for any series of Notes.
Upon satisfaction of the above conditions, on the Automatic Removal Date
all the right, title and interest of the Trust in and to the Receivables
arising in the Automatic Removed Accounts, all monies due and to become due
and all amounts received with respect thereto and all proceeds thereof shall
be deemed removed from the Trust for all purposes.
The Certificates
The Transfer and Servicing Agreements provide that the Transferor may
exchange a portion of the certificate evidencing its interest in the Trust
(the "Transferor Certificate") for one or more additional certificates (each a
"Supplemental Certificate") for transfer or assignment to a person designated
by the Transferor upon the execution and delivery of a supplement to the Trust
Agreement (which supplement shall be subject to the amendment section of the
Trust Agreement to the extent that it amends any of the terms of the Trust
Agreement); provided that:
(a) the Transferor shall have delivered to the Owner Trustee, the
Indenture Trustee, the Rating Agencies and any Enhancement Provider a Tax
Opinion dated as of the date of such exchange (or transfer and exchange);
and
(b) the Rating Agency Condition has been satisfied.
Any subsequent transfer or assignment of a Supplemental Certificate is
also subject to the conditions described in clauses (a) and (b) in the
preceding sentence.
Defaulted Receivables and Recoveries
"Defaulted Receivables" on any Determination Date are:
(1) all Receivables which were charged off as uncollectible in
respect of the immediately preceding Collection Period in accordance with
the Servicer's customary and usual servicing procedures for servicing
Dealer floorplan receivables comparable to the Receivables which have not
been sold to third parties; and
(2) all Receivables which were Eligible Receivables when transferred
to the Trust on the Initial Closing Date or the related Addition Date or
on their respective Transfer Date, which arose in an Account which became
an Ineligible Account after the date of transfer of such Receivables to
the Trust and which remained outstanding for any six consecutive
Determination Dates (including the Determination Date on which such
determination is being made) after such Account became an Ineligible
Account.
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The "Defaulted Amount" for any Collection Period will be an amount equal
to the excess, if any, of:
(a) the principal amount of Receivables that became Defaulted
Receivables during the preceding Collection Period
over
(b) the sum of:
(1) the full amount of any Defaulted Receivables subject to
reassignment to the Transferor or purchase by the Servicer for such
Collection Period unless specified events of bankruptcy, insolvency
or receivership have occurred for either of the Transferor or the
Servicer, in which event the Defaulted Amount will not be reduced
for those Defaulted Receivables
and
(2) the Defaulted Amount Carryover for the prior Collection
Period.
"Defaulted Amount Carryover" means, for any Collection Period, an amount
equal to the excess, if any, of the amount specified in clause (b) of the
definition of Defaulted Amount over the amount specified in clause (a) of the
definition of Defaulted Amount.
If the Servicer adjusts downward the amount of any Principal Receivable
because of a rebate, refund, credit adjustment or billing error to a Dealer,
or because such Receivable was created in respect of inventory which was
refused or returned by a Dealer, then, in any such case, the Pool Balance will
automatically be reduced by the amount of the adjustment. Furthermore, if
following such a reduction, the Pool Balance would be less than the Minimum
Required Pool Balance on such day, then the Transferor shall be required to
pay an amount equal to such deficiency (up to the amount of such adjustment)
into the Collection Account within five business days after the day on which
such adjustment or reduction occurs (each such payment, an "Adjustment
Payment").
The "Minimum Required Pool Balance" for any day equals the Required Pool
Balance that would result if the Required Pool Balance was calculated as if
the Required Participation Percentage for each series of Notes (as specified
in the related prospectus supplement) was 100%.
If the Servicer adjusts downward the amount of interest otherwise payable
on any Receivable with respect to any Collection Period as a result of any
interest rebate program, the Servicer shall deposit into the Collection
Account on or prior to the Payment Date related to such Collection Period an
amount equal to the amount of such rebate (such payment, a "Rebate Payment").
Optional Repurchase
If so provided in a prospectus supplement relating to a series of Notes,
on any Payment Date occurring after the Invested Amount of the Notes of such
series is reduced to the percentage of the initial outstanding principal
amount of the Notes of such series specified therein, the Transferor will have
the option, subject to specified conditions, to repurchase the Notes of such
series. The purchase price will generally be equal to:
(1) the unpaid principal amount of such series on the Determination
Date preceding the Payment Date on which such repurchase will be made,
54
plus
(2) accrued and unpaid interest on the unpaid principal amount of
the Notes of such series at the applicable interest rate (together with
interest on overdue interest),
plus
(3) any other amounts specified in the related Series Supplement.
The purchase price will be deposited in the Collection Account in immediately
available funds on the Payment Date on which the Transferor exercises such
option. Following any such purchase, the Noteholders of such series will have
no further rights in any of the assets of the Trust, other than the right to
receive the final distribution on the Notes of that series. In the event that
the Transferor fails for any reason to deposit such purchase price, payments
will continue to be made to the Noteholders of such series as described in the
related prospectus supplement.
Investment Events and Early Amortization Events
An "Investment Event" refers to, for any series of Notes, any of the
events so defined in the Series Supplement relating to that series and
described in the related prospectus supplement. Upon the occurrence of any
event so defined, an Investment Event will be deemed to have occurred for such
series without any notice or other action on the part of any other party
immediately upon the occurrence of such event. The Investment Period for such
series will commence as of the close of business on the business day
immediately preceding the day on which the Investment Event is deemed to have
occurred.
An "Early Amortization Event" refers to, for any series of Notes, any of
the events so defined in the Series Supplement relating to the series and
described in the related prospectus supplement, as well as the following
events:
(1) a failure by the Transferor to convey Receivables in
Additional Accounts to the Trust within 15 business days after the day
on which it is required to convey such Receivables;
(2) the occurrence of specified events of bankruptcy, insolvency
or receivership relating to the Transferor or the Servicer;
(3) the occurrence of specified events of bankruptcy, insolvency
or receivership relating to World Omni or Toyota; and
(4) the Trust or the Transferor becomes an investment company
within the meaning of the Investment Company Act of 1940.
Immediately upon the occurrence of any event described above or in the
related Series Supplement and prospectus supplement for a series of Notes,
subject to applicable law and any other condition specified in the related
Series Supplement, and after the applicable grace period, if any, an Early
Amortization Event shall occur for such series without any notice or other
action on the part of any other party, solely with respect to the affected
series. The Early Amortization Period for such series will commence as of the
close of business on the business day immediately preceding the day on which
the Early Amortization Event is deemed to have occurred.
Notwithstanding the commencement of an Investment Period or an Early
Amortization Period for a series of Notes, such period may terminate and the
Revolving Period for such series and any class thereof may commence when the
event giving rise to the commencement of such Investment Period or Early
Amortization
55
Period no longer exists, whether as a result of the distribution of principal
to Noteholders of such series or otherwise, in each case if and to the extent
provided in the Series Supplement for such series.
In addition to the consequences of an Investment Event or an Early
Amortization Event for any series of Notes discussed above, if the Transferor
violates its covenant not to create any lien on any Receivable as provided in
the Trust Sale and Servicing Agreement, on the day of such violation, the
Transferor will (subject to the actions of the Noteholders) immediately cease
to transfer Receivables to the Trust and promptly give notice to the Indenture
Trustee of such violation, as applicable. Under the terms of the Trust Sale
and Servicing Agreement, within 15 days the Indenture Trustee will publish a
notice of such violation stating that the Indenture Trustee intends to sell,
liquidate or otherwise dispose of the Receivables in a commercially reasonable
manner and on commercially reasonable terms, unless within a specified period
of time holders of Notes of each outstanding series representing more than 50%
of the aggregate unpaid principal amount of the Notes of each such series (or,
for any series with two or more classes, the Notes of each such class) and
each person holding a Supplemental Certificate, instruct the Indenture Trustee
not to sell, dispose of or otherwise liquidate the Receivables and to continue
transferring Receivables as before such insolvency event or violation, as
applicable. If the portion of such proceeds allocated to the Notes and the
proceeds of any collections on the Receivables in the Collection Account
allocable to the Notes are not sufficient to pay the aggregate unpaid
principal balance of the Notes in full plus accrued and unpaid interest
thereon, Noteholders will incur a loss.
Termination; Fully Funded Date
Termination. The Indenture will terminate on the earlier to occur of:
(a) the outstanding Notes of all series either (1) have been
delivered to the Indenture Trustee for cancellation or (2) have or will
become due and payable or have been called for redemption and there has
been deposited with the Indenture Trustee an amount sufficient to pay and
discharge the entire unpaid principal of and accrued interest on such
Notes;
(b) the Indenture Trustee has been paid all amounts owed to it
pursuant to the Indenture; and
(c) the Indenture Trustee has received an officer's certificate, an
opinion of counsel and other specified documents to the effect that the
conditions precedent for satisfaction and discharge of the Indenture have
been met.
Upon termination of the Indenture, all right, title and interest in the
Receivables and other funds of the Trust (other than amounts in the Collection
Account, any Principal Funding Account, Interest Funding Account or other
account for the final distribution of principal and interest to Noteholders)
will be conveyed and transferred to the Trust.
In any event, the last payment of principal and interest on any series of
Notes will be due and payable no later than the date specified in the related
prospectus supplement (the "Series Termination Date").
Fully Funded Date. Following the occurrence of the Fully Funded Date for
any series of Notes, Noteholders of that series will no longer have any
interest in the Receivables and all the representations and covenants of the
Transferor and the Servicer relating to the Receivables, as well as other
specified provisions of the Indenture and all remedies for breaches thereof,
will no longer accrue to the benefit of the Noteholders of that series, in
each case, unless the Revolving Period for such series recommences as provided
in the related Series Supplement. Those representations, covenants and other
provisions include the conditions to the exchange of the Transferor
Certificate described under "The Transfer and Servicing Agreements--The
Certificates," the conditions to the issuance of a new series of Notes
described under "The Notes--New Issuances," the representations described
under "The Transfer and Servicing Agreements--Representations and Warranties
by the Transferor" to the extent they relate to the Receivables and the
Collateral Security, the
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limitations on additions and removals of Accounts described under "The Transfer
and Servicing Agreements-- Addition of Accounts" and "--Removal of Accounts,"
respectively, and the obligations of the Servicer to service the Receivables
described under "The Transfer and Servicing Agreements--Collection and Other
Servicing Procedures" and "--Servicer Covenants." In addition, upon the
occurrence of the Fully Funded Date for any series of Notes, no Non-Principal
Collections, Principal Collections, Defaulted Amount or Miscellaneous Payments
will be allocated to that series, unless the Revolving Period with respect
thereto recommences as described above.
Indemnification
The Trust Sale and Servicing Agreement provides that the Servicer will
indemnify the Trust for the benefit of the Certificateholders, the Noteholders,
any Enhancement Provider, the Owner Trustee and the Indenture Trustee from and
against taxes that may be asserted against them with respect to the
transactions contemplated by the Trust Sale and Servicing Agreement and any
loss, liability, expense, damage or injury suffered or sustained arising out of
any acts, omissions or alleged acts or omissions arising out of activities of
the Servicer pursuant to the Trust Sale and Servicing Agreement; provided,
however, the Servicer will not indemnify (a) if such acts, omissions or alleged
acts or omissions constitute fraud, gross negligence, breach of fiduciary duty
or willful misconduct by the Owner Trustee or the Indenture Trustee, (b) for
any liabilities, cost or expense of the Trust with respect to any action taken
by the Owner Trustee at the request of the Certificateholders, Noteholders or
Enhancement Providers to the extent the Owner Trustee is fully indemnified by
them for that action or (c) for any tax required to be paid by such party
arising out of (i) the sale of any Eligible Receivables to the Trust, (ii) the
issuance and original sale of any Notes or Certificates, (iii) ownership or
sale of any Eligible Receivables in the Accounts or the Notes and Certificates,
(iv) distributions or the receipt of payments on the Notes or Certificates or
(v) any fees or other compensation payable to such party other than the value-
based intangibles tax imposed by the State of Florida on the assets of the
Trust, if any.
The Trust Sale and Servicing Agreement provides that, except as described
above, and except for other specified exceptions, neither the Servicer nor any
of its directors, officers, employees or agents will be under any liability to
the Trust, the Owner Trustee, the Indenture Trustee, the Noteholders,
Enhancement Providers, any agent or any other person for taking any action, or
for refraining from taking any action, pursuant to the Trust Sale and Servicing
Agreement. However, neither the Servicer nor any of its directors, officers,
employees or agents will be protected against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or negligence
of any such person in the performance of their duties or by reason of reckless
disregard of their obligations and duties thereunder.
In addition, the Trust Sale and Servicing Agreement provides that the
Servicer is not under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its servicing responsibilities under
the Trust Sale and Servicing Agreement. The Servicer may, in its sole
discretion, undertake any such legal action which it may deem necessary or
desirable for the benefit of the Noteholders and the Certificateholders with
respect to the Trust Sale and Servicing Agreement and the rights and duties of
the parties thereto and the interest of the Certificateholders under the Trust
Agreement and the Noteholders under the Indenture.
Collection and Other Servicing Procedures
Pursuant to the Trust Sale and Servicing Agreement, the Servicer is
responsible for servicing, collecting and administering the Receivables and
charging off as uncollectible Receivables in accordance with customary and
usual procedures for servicing its own wholesale receivables comparable to the
Receivables, except where the failure to act in accordance with such procedures
would not materially and adversely affect the rights of the Trust, the
Noteholders, the Certificateholders or any Enhancement Provider. In certain
circumstances, the Trust will contain Purchased Participation Receivables. A
portion of the Purchased Participation Receivables will not be serviced by the
Servicer (the "Non-Serviced Participation
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Receivables") other than enforcing the rights of the Issuer pursuant to the
agreement that created the Non-Serviced Participation Receivable in order to
ensure that the Receivable is properly serviced and that all amounts due to the
Issuer under such agreement are received. However, it is anticipated that the
Servicer and each Rating Agency, prior to issuing written confirmation that the
inclusion of such Non-Serviced Participation Receivable will not result in the
reduction or withdrawal of the rating of any Notes, will review the practices
and policies of the party servicing such Non-Serviced Participation Receivable.
World Omni covenants that it may only change the terms and provisions
relating to the Accounts if, in the Servicer's reasonable judgment, no Early
Amortization Event or Investment Event will occur for any series of Notes as a
result of the change and none of the Certificateholders, Noteholders or
Enhancement Providers will be materially and adversely affected and the change
is made applicable to the comparable segment of the portfolio of wholesale
accounts with similar characteristics owned or serviced by World Omni and not
only to the Accounts; provided, however, that the Servicer may reduce the rate
of any finance charges if such reduction would not result in the weighted
average of the interest rates of the Receivables being less than the weighted
average of the sum of the interest rates of the Notes plus servicing fees.
Servicing activities to be performed by the Servicer include collecting
and recording payments, communicating with dealers, investigating payment
delinquencies, evaluating the increase of credit limits, and maintaining
internal records for each Account. Managerial and custodial services performed
by the Servicer on behalf of the Trust include providing assistance in any
inspections of the documents and records relating to the Accounts and
Receivables by the Trust and the Indenture Trustee pursuant to the Trust Sale
and Servicing Agreement and Indenture, maintaining the agreements, documents
and files relating to the Accounts and Receivables as custodian for the Trust
and providing related data processing and reporting services for Noteholders
and on behalf of the Trust and the Indenture Trustee.
Servicer Covenants
In the Trust Sale and Servicing Agreement the Servicer covenants that:
(1) it will duly satisfy all obligations on its part to be
fulfilled under or in connection with the Receivables and the Accounts,
will maintain in effect all qualifications required in order to service
the Receivables and the Accounts and will comply in all material
respects with all requirements of law in connection with servicing the
Receivables and the Accounts, the failure to comply with which would
have a materially adverse effect on the Noteholders of any outstanding
series, the Certificateholders or any Enhancement Provider;
(2) it will not permit any rescission or cancellation of a
Receivable except as ordered by a court of competent jurisdiction or
other government authority;
(3) it will do nothing to impair the rights of the Noteholders or
any Enhancement Provider in the Receivables or the Accounts;
(4) it will not reschedule, revise or defer payments due on any
Receivable except in accordance with its guidelines for servicing dealer
wholesale financing revolving line of credit loans; and
(5) it will not sell, pledge, assign or transfer to any person or
grant, create, incur, assume or suffer to exist any lien on any
Receivable sold or assigned to the Trust other than as contemplated by
the Related Documents.
Under the terms of the Trust Sale and Servicing Agreement, if the
Transferor or the Servicer discovers, or receives written notice, that any
covenant of the Servicer set forth in clauses (3) or (4) above has not been
58
complied with in any material respect and such noncompliance has not been cured
within 30 days thereafter (or such longer period as the Owner Trustee may agree
to) and has a materially adverse effect on the value of such Receivable, World
Omni, as Servicer, will purchase such Receivable or all Receivables in such
Account, as applicable. Such purchase will be made on the Determination Date
following the expiration of the 30-day cure period and the Servicer will be
obligated to deposit into the Collection Account an amount equal to the amount
of such Receivable plus accrued and unpaid interest thereon. The amount of such
deposit shall be deemed a Transfer Deposit Amount. The purchase by the Servicer
constitutes the sole remedy available to the Noteholders if such covenant or
warranty of the Servicer is not satisfied and the Trust's interest in any such
purchased Receivables shall be automatically assigned to the Servicer.
Servicing Compensation and Payment of Expenses
The Servicer's compensation for its servicing activities and
reimbursement for its expenses will be a monthly servicing fee (the "Servicing
Fee") in an amount payable in arrears on each Payment Date on or before the
Trust Termination Date equal to the sum of the Monthly Servicing Fees.
The Monthly Servicing Fee with respect to a series of Notes for any
Payment Date shall generally be equal to one-twelfth of the product of:
(1) the "Servicing Fee Rate" set forth in the related Series
Supplement; and
(2) the Pool Balance as of the last day of the second preceding
Collection Period (excluding the amount of Principal Receivables
relating to Non-Serviced Participation Receivables); and
(3) the Series Allocation Percentage for such series for the
second preceding Collection Period.
The "Monthly Servicing Fee" with respect to any series shall be payable
to the Servicer solely to the extent amounts are available for distribution
therefor in accordance with the terms of the Trust Sale and Servicing
Agreement. The share of the Monthly Servicing Fee allocable to the Noteholders
of a series (for each series, the "Noteholder Monthly Servicing Fee") shall
equal one-twelfth of the product of (a) the Servicing Fee Rate and (b) the
Invested Amount (as defined in the related prospectus supplement) for such
series as of the last day of the Collection Period second preceding such
Payment Date. The remainder of the Monthly Servicing Fee shall be paid by the
Certificateholders and, in no event, shall the Trust or the Noteholders be
liable for the share of the Monthly Servicing Fee to be paid by the
Certificateholders.
The Servicer will pay from its servicing compensation specified expenses
incurred in connection with servicing the Accounts and the Receivables
including payment of fees and disbursements of the Indenture Trustee, the Owner
Trustee, attorneys and independent accountants and all other fees and expenses
which are not expressly stated in the Trust Sale and Servicing Agreement to be
payable by the Trust, the Certificateholders, the Noteholders or the
Enhancement Providers other than federal, state and local income and franchise
taxes, if any, of the Trust or the Noteholders.
Certain Matters Regarding the Servicer
The Servicer may not resign from its obligations and duties under the
Trust Sale and Servicing Agreement, except upon (i) a determination that such
duties are no longer permissible under applicable law and there is no
reasonable action which the Servicer could take to make the performance of its
duties permissible under applicable laws, or (ii) satisfaction of the Rating
Agency Condition. No such resignation will become effective until the Indenture
Trustee or a successor to the Servicer has assumed the Servicer's
responsibilities and obligations under the Trust Sale and Servicing Agreement.
If the Indenture Trustee is unable within 120
59
days of the date of such determination to appoint a successor to the Servicer,
the Indenture Trustee will serve as the successor to the Servicer.
Any person into which, in accordance with the Trust Sale and Servicing
Agreement, the Servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which the Servicer is a party, or any
person succeeding to the business of the Servicer, will be the successor to the
Servicer under the Trust Sale and Servicing Agreement.
Servicing Default
In the event of any unremedied Servicing Default, the Indenture Trustee,
by written notice to the Servicer with a copy to the Owner Trustee, may
terminate all of the rights and obligations of the Servicer, as servicer, under
the Trust Sale and Servicing Agreement and in and to the Receivables and the
proceeds thereof and appoint a new Servicer (a "Service Transfer"). The
Indenture Trustee shall as promptly as possible appoint a successor Servicer,
subject to the consent of any Enhancement Provider, and if no successor
Servicer has been appointed by the Indenture Trustee and has accepted such
appointment by the time the Servicer ceases to act as Servicer, all rights,
authority, power and obligations of the Servicer under the Trust Sale and
Servicing Agreement shall automatically pass to and be vested in the Indenture
Trustee. Prior to any Service Transfer, the Indenture Trustee will review any
bids obtained from potential servicers meeting specified eligibility
requirements set forth in the Trust Sale and Servicing Agreement to serve as
successor Servicer for servicing compensation not in excess of the Servicing
Fee, plus specified excess amounts payable to the Transferor.
A "Servicing Default" refers to any of the following events:
(1) failure by the Servicer to make any payment, transfer or
deposit, or to give instructions to the Owner Trustee or the Indenture
Trustee to make such payment, transfer or deposit or to give notice to
the Owner Trustee or the Indenture Trustee as to be taken with respect
to any agreement relating to an Enhancement, on the date the Servicer is
required to do so under the Trust Sale and Servicing Agreement, which is
not cured within a five business day grace period;
(2) failure on the part of the Servicer duly to observe or perform
any other covenants or agreements of the Servicer in the Trust Sale and
Servicing Agreement which failure has a materially adverse effect on the
Noteholders of any outstanding series and which continues unremedied for
a period of 30 days after the date written notice of such failure,
requiring same to be remedied, shall have been given to the Servicer by
the Indenture Trustee or the Owner Trustee, or the Servicer delegates
its duties under the Trust Sale and Servicing Agreement, except as
specifically permitted thereunder;
(3) any representation, warranty or certification made by the
Servicer in the Trust Sale and Servicing Agreement or in any certificate
delivered pursuant to the Trust Sale and Servicing Agreement proves to
have been incorrect when made, has a materially adverse effect on the
rights of the Noteholders of any outstanding series, and which material
adverse effect continues for a period of 60 days after written notice
thereof shall have been given to the Servicer by the Indenture Trustee
or the Owner Trustee; or
(4) the occurrence of specified events of bankruptcy, insolvency
or receivership of the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (1) above for a period of ten business days or
referred to under clauses (2) or (3) for a period of 60 business days, shall
not constitute a Servicing Default if such delay or failure could not be
prevented by the exercise of reasonable diligence by the Servicer and was
caused by an act of God or other similar occurrence. Upon the occurrence of
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any such event, the Servicer shall not be relieved from using its best efforts
to perform its obligations in a timely manner in accordance with the terms of
the Trust Sale and Servicing Agreement and the Servicer shall provide the Owner
Trustee, Indenture Trustee, any agent, any Enhancement Provider, the Transferor
and the Noteholders prompt notice of such failure or delay by it, together with
a description of its efforts to so perform its obligations. The Servicer shall
immediately notify the Owner Trustee in writing of any Servicing Default.
Rights upon Servicing Default
As long as a Servicing Default under the Trust Sale and Servicing
Agreement remains unremedied, the Indenture Trustee may terminate all the
rights and obligations of the Servicer under such Trust Sale and Servicing
Agreement, whereupon such Indenture Trustee will succeed to all the
responsibilities, duties and liabilities of the Servicer under such agreement
and will be entitled to similar compensation arrangements.
If, however, a bankruptcy trustee or similar official has been appointed
for the Servicer, and no Servicing Default other than such appointment has
occurred, such trustee or official may have the power to prevent the Indenture
Trustee or the Owner Trustee or the Certificateholders from effecting a
transfer of servicing. In the event that the Indenture Trustee is unwilling or
unable to so act, it may appoint or petition a court of competent jurisdiction
for the appointment of any established institution with a net worth of at least
$100,000,000 and whose regular business includes the servicing of wholesale
receivables as successor. The Indenture Trustee may make such arrangements for
compensation to be paid, which in no event may be greater than the servicing
compensation to the Servicer under the Trust Sale and Servicing Agreement.
Waiver of Past Defaults
The holders of Notes evidencing at least a majority in principal amount
of the Notes (or, if the Notes have been paid in full, by the
Certificateholders whose Certificates evidence not less than a majority
interest in the Trust) then outstanding, voting as a single class, may, on
behalf of all such Noteholders and any Certificateholders, waive any default by
the Servicer in the performance of its obligations under the Trust Sale and
Servicing Agreement and the Receivables Purchase Agreement and its
consequences, except a Servicing Default in making any required distributions,
payments, transfers or deposits in accordance with the Trust Sale and Servicing
Agreement. No such waiver will impair the rights of the Indenture Trustee, the
Owner Trustee, or the Noteholders for subsequent defaults.
Reports
On the second business day preceding each Payment Date (each, a
"Determination Date"), the Servicer will calculate the amounts to be allocated
in respect of Collections on Receivables received with respect to the related
Collection Period to the Noteholders of each outstanding series and class of
Notes or to the Transferor and the holder of any Supplemental Certificate in
accordance with the Series Supplement and the Transfer and Servicing
Agreements.
On or before each Payment Date (including each Payment Date that
corresponds to an Interest Payment Date or any Special Payment Date), the
Indenture Trustee will forward to each Noteholder of record of any series a
statement (the "Payment Date Statement") prepared by the Servicer setting forth
information relating to the Trust and the Notes of such series, as specified in
the related Series Supplement and described in the related prospectus
supplement.
For each Interest Payment Date or Special Payment Date, the Payment Date
Statement for any series of Notes will include the following information for
the Notes of such series:
(a) the total amount distributed on the Notes of such series,
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(b) the amount of such distribution allocable to principal on the
Notes of such series; and
(c) the amount of such distribution allocable to interest on the
Notes of such series.
Within a reasonable time after the Servicer has provided the Indenture
Trustee with information required by the Indenture Trustee to furnish such
statement, the Indenture Trustee will furnish (or cause to be furnished) to
each person who at any time during the preceding calendar year was a
Noteholder of record a statement containing the information required to be
provided by an issuer of indebtedness under the U.S. Internal Revenue Code for
such preceding calendar year or the applicable portion thereof during which
such person was a Noteholder, together with such other customary information
as is required to be provided by an issuer of indebtedness under the U.S.
Internal Revenue Code and such other customary information as is necessary to
enable the Noteholders to prepare their tax returns. See "Certain Federal
Income Tax Consequences."
Evidence as to Compliance
The Trust Sale and Servicing Agreement provides that a firm of
independent public accountants will furnish to the Owner Trustee, the
Indenture Trustee, the Rating Agencies, each agent and any Enhancement
Provider on or before April 30 of each year, beginning on April 30, 2000, a
report to the effect that such firm has examined (a) the financial statements
of the Servicer in accordance with specified standards and (b) certain
documents and records of the Servicer relating to servicing. The report shall
include a statement that nothing caused such firm to believe that the Servicer
did not comply with the Trust Sale and Servicing Agreement during the
preceding twelve months ended December 31 (or in the case of the first such
statement, the period from the Initial Closing Date to December 31 of such
year).
The Trust Sale and Servicing Agreement also provides for delivery to the
Owner Trustee and the Indenture Trustee, the Rating Agencies, each agent and
any Enhancement Provider on or before April 30 of each year, beginning April
30, 2000, a certificate signed by an officer of the Servicer stating that the
Servicer has fulfilled in all material respects its obligations under the
Trust Sale and Servicing Agreement throughout the preceding twelve months
ended December 31 (or in the case of the first such certificate, the period
from the Initial Closing Date to December 31 of such year) or, if there has
been a material default in the fulfillment of any such obligation, describing
each such default and the status thereof. The Servicer agrees to give the
Owner Trustee notice of Servicing Defaults under the Trust Sale and Servicing
Agreement.
Copies of such statements and certificates may be obtained by
Noteholders by request in writing addressed to the Owner Trustee.
Amendments
Each of the Transfer and Servicing Agreements may be amended by the
parties thereto without the consent of the related Noteholders:
(1) to cure any ambiguity;
(2) to correct or supplement any provision therein that may be
defective or inconsistent with any other provision therein;
(3) to add or supplement any credit, liquidity or other
enhancement arrangement for the benefit of any Noteholders (provided
that if any such addition affects any series or class of Noteholders
differently than any other series or class of Noteholders, then such
addition will not, as evidenced by an officer's certificate, adversely
affect in any material respect the interests of any series or class of
Noteholders);
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(4) to add to the covenants, restrictions or obligations of the
Transferor, the Servicer, the Trust, the Owner Trustee or the Indenture
Trustee for the benefit of Noteholders; or
(5) to add, change or eliminate any other provision of such
agreement in any manner that will not, as evidenced by an officer's
certificate, adversely affect in any material respect the interests of
the Noteholders.
Each such Agreement may also be amended by the parties thereto with
either (a) the consent of the holders of at least a majority in principal
amount of the Controlling Class of each series of Notes adversely affected in
any material respect thereby or (b) satisfaction of the Rating Agency
Condition, except that no such amendment may:
(1) reduce in any manner the amount of, or accelerate or delay the
timing of, distributions or payments that are required to be made on any
Note or the amount available under any Enhancement without the consent
of the holder thereof;
(2) change the definition of or the manner of calculating the
interest of any Note without the consent of the holder thereof;
(3) adversely affect the rating of any series or class of Notes by
any Rating Agency without the consent of two-thirds of the principal
amount of the outstanding Notes of such series or class; or
(4) reduce the aforesaid percentage required to consent to any
such amendment without the consent of such aforesaid percentage of
Noteholders.
Intercreditor Arrangements
The agreements governing the Accounts provide for a security interest in
favor of World Omni in the Vehicles related to Receivables thereunder. For the
Receivables to be conveyed to the Trust, World Omni will represent in the
Receivables Purchase Agreement that the security interest in the related
Vehicles is a first priority perfected security interest. The security interest
in favor of World Omni in the Vehicles related to each Account the Receivables
of which are transferred to the Trust will be assigned by World Omni to the
Transferor pursuant to the Receivables Purchase Agreement and assigned to the
Trust by the Transferor pursuant to the Trust Sale and Servicing Agreement. In
its other lending activities, World Omni may have made capital loans, real
estate loans or other loans to Dealers that are also secured by a security
interest in such Vehicles. In the Receivables Purchase Agreement, World Omni
agrees that any security interests in such Vehicles that it may have in respect
of advances or loans to Dealers other than the related Receivables shall be
junior and subordinate to the security interests therein granted in connection
with the related Receivables and that it will not realize on any such
collateral in a manner materially adverse to the Transferor or the Trust and
the Noteholders until the Transferor and the Trust have been paid in full in
respect of their interests in the Receivables related to such Vehicles.
In addition, in connection with any such other loans or advances made by
World Omni to a Dealer, World Omni may also have a security interest in
property constituting Collateral Security other than Vehicles. In such cases,
World Omni, in its sole discretion, may realize on such other Collateral
Security for its own benefit in respect of such loans or advances before the
Trust or the Indenture Trustee, on behalf of any Noteholders, is permitted to
realize upon such other Collateral Security and the security interests of the
Trust and Indenture Trustee therein shall be junior and subordinate to the
security interests of World Omni granted in connection with such other loans
and advances. Because of the subordinate position of the Indenture Trustee in
respect of such other Collateral Security, there is no assurance that the Trust
or the Indenture Trustee will realize any proceeds in respect of any such other
Collateral Security.
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Administration Agreement
World Omni, in its capacity as administrator (the "Administrator"),
entered into the Administration Agreement, dated as of November 22, 1999 with
the Trust and the Indenture Trustee pursuant to which the Administrator agrees,
to the extent provided in such Administration Agreement, to provide the notices
and to perform other administrative obligations required by the Indenture. As
compensation for the performance of the Administrator's obligations under the
Administration Agreement and as reimbursement for its expenses related thereto,
the Administrator will be entitled to a monthly administration fee in an amount
equal to $1,500, which fee will be paid by the Servicer.
CERTAIN ADMINISTRATIVE AND LEGAL PROCEEDINGS
As part of the IRS's regular examination of the consolidated federal
income tax returns of JM Family Enterprises, Inc. ("JMFE") for certain prior
years, the IRS is reviewing the transactions relating to retail lease contracts
as well as other positions that were taken on the tax returns. Specifically,
the IRS is considering 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 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 the IRS has not yet formally proposed any changes to
those tax returns, and no assurances can be made, management believes that a
challenge by the IRS would be unsuccessful.
Management intends to vigorously defend its positions and believes that
the ultimate resolution of all of the issues will not have a material adverse
effect on 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, although no assurance can be
made, management believes that, even if the IRS were to prevail on all of these
issues it would not result in any material impairment of JMFE's or World Omni
Financial Corp.'s ability to perform its obligations and its duties.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
On the Initial Closing Date World Omni sold, and on each day thereafter
World Omni will sell, Receivables to the Transferor, and the Transferor will
immediately transfer the Receivables to the Trust, which the Trust will pledge
to the Indenture Trustee for the benefit of the Noteholders. The Transferor
represents that:
. the sale or transfer to the Trust constitutes a valid transfer and
assignment to the Trust of all right, title and interest of the
Transferor in, to and under the Receivables;
. under applicable Florida law, there exists a valid ownership or
perfected first priority security interest in the Receivables; and
. in the event the sale by the Transferor to the Trust is
recharacterized as a grant of a security interest instead of a true
sale, the Trust will have an enforceable first priority perfected
security interest in the Receivables following their transfer to the
Trust.
For a discussion of the Trust's rights arising from a breach of these
representations, see "The Transfer and Servicing Agreements--Representations
and Warranties of the Transferor."
64
Each of World Omni and the Transferor has represented that the
Receivables are "instruments," "accounts," "chattel paper" or "general
intangibles" for purposes of Florida's Uniform Commercial Code. Any dealer
promissory notes evidencing the Receivables which constitute "instruments"
under the Uniform Commercial Code have been and will continue to be transferred
by the Transferor, to the Trust and to the Indenture Trustee's office currently
located in Chicago, Illinois. However, if the Receivables are deemed to be
accounts, chattel paper or general intangibles and the transfer of the
Receivables by World Omni to the Transferor, by the Transferor to the Trust or
by the Trust to the Indenture Trustee is deemed either to be a sale or to
create a security interest, the Uniform Commercial Code or other applicable law
applies. In the case of chattel paper, the Indenture Trustee, as transferee,
would then have to take possession of the chattel paper or file an appropriate
financing statement or statements in order to perfect its interests in the
Receivables. As a precautionary measure, financing statements covering the
Receivables have been filed under the Florida Uniform Commercial Code by the
Transferor, the Trust and the Indenture Trustee to perfect their respective
interests in the Receivables and continuation statements will be filed, as
required, to continue the perfection of their interests in the Receivables.
There are limited circumstances under the Uniform Commercial Code and
applicable federal law in which prior or subsequent transferees of Receivables
could have an interest in the Receivables with priority over the Trust's and
the Indenture Trustee's interest. A purchaser of the Receivables who gives new
value and takes possession of the documents which evidence the Receivables in
the ordinary course of the purchaser's business may have priority over the
Trust's and the Indenture Trustee's interest in the Receivables. A tax or other
government lien on property of World Omni or the Transferor arising before a
Receivable is conveyed to the Trust or to the Indenture Trustee may also have
priority over the Trust's and the Indenture Trustee's interest in the
transferred Receivable. Under the Receivables Purchase Agreement, World Omni
represents to the Transferor, under the Trust Sale and Servicing Agreement the
Transferor represents to the Trust, and under the Indenture the Trust
represents to the Indenture Trustee that the Receivables have been transferred
free and clear of any third party lien. In addition, the Transferor agrees
under the Trust Sale and Servicing Agreement to deliver to the Trust, and the
Trust agrees under the Indenture to deliver to the Indenture Trustee any
necessary instruments, such as any promissory notes received from Dealers,
which evidence the Receivables. Each of World Omni, the Transferor and the
Trust also covenants that it will not transfer or grant any lien on any
Receivable other than to the Trust or the Indenture Trustee. In addition, while
World Omni is the Servicer, cash collections on the Receivables may, under
specified circumstances, be commingled with the funds of World Omni prior to
each Payment Date and, in the event of a World Omni bankruptcy, the Trust and
the Indenture Trustee may not have a perfected interest in the commingled
collections.
Certain Matters Relating to Bankruptcy
If World Omni were to become a debtor in a bankruptcy case, a creditor or
trustee in bankruptcy of World Omni or World Omni may attempt to characterize
the transfer of the Receivables from World Omni to the Transferor as a pledge
of the Receivables to secure a borrowing by World Omni rather than a true sale
of the Receivables. World Omni represents to the Transferor in the Receivables
Purchase Agreement that the sales of the Receivables by World Omni to the
Transferor are valid sales of the Receivables to the Transferor. In addition,
World Omni and the Transferor agree to treat these transfers as sales of the
Receivables to the Transferor, and World Omni will take all actions that are
required under Florida law to perfect the Transferor's ownership interest in
the Receivables. If these transfers are treated as sales, the Receivables would
not be part of World Omni's bankruptcy estate and would not be available to
World Omni's creditors.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993),
the United States Court of Appeals for the Tenth Circuit suggested that, even
where a transfer of accounts from a seller to a buyer constitutes a true sale,
the accounts would nevertheless constitute property of the seller's bankruptcy
estate in a bankruptcy of the seller. The Transferor has been advised by
counsel that the reasoning of the Octagon court appears to be inconsistent with
established precedent and the Uniform Commercial Code. In addition, the
Permanent Editorial Board of the Uniform Commercial Code has issued an official
commentary (P&B
65
Commentary No. 14) which characterizes the Octagon court's interpretation of
Article 9 of the Uniform Commercial Code as erroneous. Such commentary states
that nothing in Article 9 is intended to prevent the transfer of ownership of
accounts or chattel paper.
In addition, if World Omni were to become a debtor in a bankruptcy case,
a creditor or the bankruptcy trustee or World Omni itself might request that
World Omni be substantively consolidated with the Transferor. Delays or
reductions in payments on the Notes could occur while the court decides these
issues. In addition, should a court rule that the Receivables are part of World
Omni's bankruptcy estate, or that World Omni should be substantively
consolidated with the Transferor, additional reductions or delays in payments
on the Notes could result. See "Risk Factors--A Bankruptcy of World Omni or the
Transferor May Delay or Reduce Payments on the Notes."
If the Transferor were to become a bankrupt debtor, an Early Amortization
Event would occur which may result in a lack of funds available to make full
and timely payment on the Notes. The Transferor has attempted to reduce the
likelihood that it will file for bankruptcy. The Transferor's limited liability
company agreement provides that, under specified circumstances, the Transferor
is required to have two independent directors, as such term is defined in its
limited liability company agreement. The Transferor's limited liability company
agreement also provided that the Transferor will not file a voluntary
application for relief under the U.S. Bankruptcy Code without the affirmative
vote of its two independent directors. Under the Trust Sale and Servicing
Agreement, the Indenture Trustee, the Trust, the Owner Trustee, all the
Noteholders and any Enhancement Provider agree that they will not until one
year and one day after termination of the Indenture institute against the
Transferor any bankruptcy, reorganization or other proceedings under any
federal or state bankruptcy or similar law. The Transferor does not intend to
file a voluntary application for relief under the Bankruptcy Code or any
similar applicable state law regarding the Transferor so long as the Transferor
is solvent, and the Transferor does not foresee it becoming insolvent.
If World Omni or the Transferor filed for bankruptcy under the federal
bankruptcy code or any state insolvency laws, then World Omni or the Transferor
may be able to recover payments they made to the Trust to repurchase
Receivables. In general, World Omni or the Transferor might recover any
payments made by them to the Trust during the one-year period before the date
World Omni or the Transferor filed for bankruptcy. The one-year period may be
extended by the court if it determines that the bankrupt entity was insolvent
more than one year prior to filing its bankruptcy petition.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General
Set forth below is a discussion of the anticipated material United States
federal income tax consequences of the purchase, ownership and disposition of
the Notes offered by this prospectus. This discussion is based upon current
provisions of the U.S. Internal Revenue Code (the "Code"), existing and
proposed Treasury regulations, current administrative rulings, judicial
decisions and other applicable authorities. There are no cases or IRS rulings
on similar transactions involving debt issued by a trust with terms similar to
those of the Notes. As a result, there can be no assurance that the IRS will
not challenge the conclusions reached in this section, and no ruling from the
IRS has been or will be sought on any of the issues discussed below.
Furthermore, legislative, judicial or administrative changes may occur, perhaps
with retroactive effect, which could affect the accuracy of the statements and
conclusions set forth in this prospectus as well as the tax consequences to
Noteholders.
This discussion does not claim to deal with all aspects of federal income
taxation that may be relevant to the holders of Notes in light of their
personal investment circumstances nor, except for specific limited discussions
of particular topics, to Noteholders subject to special treatment under the
federal income tax laws,
66
such as financial institutions, broker-dealers, life insurance companies and
tax-exempt organizations. This information is directed only to prospective
purchasers who:
. purchase Notes in the initial distribution of the Notes;
. are citizens or residents of the United States, including domestic
corporations, limited liability companies and partnerships; and
. hold the Notes as "capital assets" within the meaning of Section 1221
of the U.S. Internal Revenue Code.
Prospective investors should consult with their tax advisors as to the federal,
state, local, foreign and any other tax consequences to them of the purchase,
ownership and disposition of Notes.
Tax Characterization and Treatment of Notes
Characterization as Debt. For each series of Notes, except for any series
which is specifically identified as receiving different tax treatment in the
related prospectus supplement, Kirkland & Ellis, special tax counsel to the
Transferor ("Tax Counsel"), will deliver its opinion to the effect that the
Notes will be treated as debt for federal income tax purposes. The Transferor,
the Servicer and each Noteholder, by acquiring an interest in a Note, will
agree to treat the Notes as indebtedness for federal, state and local income
and franchise tax purposes. See "--Tax Characterization of the Trust--Risks of
Alternative Characterization" below for a discussion of the potential federal
income tax consequences to Noteholders if the IRS were successful in
challenging the characterization of the Notes for federal income tax purposes.
Treatment of Stated Interest. Based on Tax Counsel's opinion that the
Notes will be treated as debt for federal income tax purposes, and assuming the
Notes are not issued with original issue discount ("OID"), the stated interest
on a Note will be taxable to a Noteholder as ordinary income when received or
accrued in accordance with each Noteholder's method of tax accounting. Interest
received on a Note may constitute "investment income" for purposes of some
provisions in the U.S. Internal Revenue Code limiting the deductibility of
investment interest expense.
Original Issue Discount. Except to the extent indicated in the related
prospectus supplement, no series of Notes will be issued with OID. In general,
OID is the excess of the "stated redemption price at maturity" of a debt
instrument over its "issue price," unless the OID is small enough to fall
within a statutorily defined de minimis exception. A Note's "stated redemption
price at maturity" is the total of all payments required to be made under the
Note through maturity except "qualified stated interest." "Qualified Stated
Interest" is generally interest that is unconditionally payable in cash or
property, other than debt instruments of the issuer, at fixed intervals of one
year or less during the entire term of the instrument at specified rates. The
"issue price" will be the initial price at which a substantial amount of the
Notes are sold, excluding sales to bond holders, brokers or similar persons
acting as underwriters, placement agents or wholesalers.
Although it is not anticipated, except to the extent indicated in the
related prospectus supplement, that any series of Notes will be issued at a
greater than de minimis discount, a series of Notes may nevertheless be deemed
to have been issued with OID. First, under Treasury regulations, interest
payments on a series of Notes may not be deemed "qualified stated interest" if
(i) reasonable legal remedies do not exist to compel timely payment or (ii) the
Notes do not otherwise provide terms and conditions that make the likelihood of
late payment (other than a late payment that occurs within a reasonable grace
period) or nonpayment a remote contingency. If a series of Notes does not pay
qualified stated interest, all of the taxable income thereon would be
includible in income as OID. Second, the IRS could take the position (under
regulations that have not yet been issued pursuant to Section 1272(a)(6) of the
Code) that a series of Notes has OID.
67
If a Note were treated as being issued with OID, a Noteholder would be
required to include OID in its income as interest over the term of the Note
under a constant yield method. In general, OID must be included in income in
advance of the receipt of cash representing that income. Thus, each cash
distribution would be treated as an amount already included in income (to the
extent OID has accrued as of the date of the interest distribution and is not
allocated to prior distributions), or as a repayment of principal. This
treatment would have no significant effect on Noteholders using the accrual
method of accounting. However, cash method Noteholders may be required to
report income with respect to the Notes in advance of the receipt of cash
attributable to such income. In this situation a Noteholder would have to rely
on other sources to pay the taxes on its OID income. Even if a note has OID
falling within the de minimis exception, the Noteholder must include such OID
in income proportionately as principal payments are made on such Note.
A holder of a Note which has a fixed maturity date not more than one year
from the issue date of such Note (a "Short-Term Note") will generally not be
required to include OID income on the Note as it accrues. However, the
foregoing rule may not apply if such holder holds the instrument as part of a
hedging transaction, or as a stripped bond or stripped coupon or if the holder
is:
. an accrual method taxpayer;
. a bank;
. a broker or dealer that holds the Note as inventory;
. a regulated investment company or common trust fund; or
. the beneficial owner of specified pass-through entities specified in
the U.S. Internal Revenue Code.
A holder of a Short-Term Note who is not required to include OID income
on the note as it accrues will instead include the OID accrued on the Note in
gross income upon a sale or exchange of the Note or at maturity, or if the
Short-Term Note is payable in installments, as principal is paid thereon. A
holder would be required to defer deductions for any interest expense on an
obligation incurred to purchase or carry the Short-Term Note to the extent it
exceeds the sum of any interest income and OID accrued on such Note. However, a
holder may elect to include OID in income as it accrues on all obligations
having a maturity of one year or less held by the holder in that taxable year
or thereafter, in which case the deferral rule of the preceding sentence will
not apply. For purposes of this paragraph, OID accrues on a Short-Term Note on
a straight-line basis, unless the holder irrevocably elects, under regulations
to be issued by the Treasury Department, to apply a constant interest method,
using the holder's yield to maturity and daily compounding.
A holder who purchases a Note after its initial distribution at a
discount that exceeds a statutorily defined de minimis amount will be subject
to the "market discount" rules of the U.S. Internal Revenue Code, and a holder
who purchases a Note at a premium will be subject to the bond premium
amortization rules of the U.S. Internal Revenue Code.
Disposition of Notes. 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 the Note to a particular Noteholder will equal the
holder's cost for the Note, increased by any OID and market discount previously
included by such Noteholder in income with respect to the Note and decreased by
any bond premium previously amortized and any payments of principal and OID
previously received by such Noteholder with respect to such Note. Any gain or
loss on sale will be capital gain or loss if the Note was held as a capital
asset, except for gain representing accrued interest or accrued market discount
not previously included in income. Capital gain or loss will be long-term if
the Note was held by the holder for more than one year and otherwise will be
short-term. Any capital losses realized 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.
68
Notes Subject to Contingencies. The United States federal income tax
consequences to an owner or seller of Notes that provide for one or more
contingent payments will vary depending on the exact terms of the Notes and
related factors. The Notes may be subject to rules that differ from the general
rules discussed above. The United States federal income tax consequences to a
holder of Notes that provide for contingent payments will be summarized in the
related prospectus supplement.
Information Reporting And Backup Withholding. The Trustee will be
required to report annually to the IRS, and to each related Noteholder of
record, the amount of interest paid on the Notes, and any amount of interest
withheld for federal income taxes, for each calendar year, except as to exempt
holders (generally, corporations, tax-exempt organizations, qualified pension
and profit-sharing trusts, individual retirement accounts, or nonresident
aliens who provide certification as to their status). Each holder will be
required to provide to the Trustee, 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 Noteholder who is not exempt from backup withholding fail to provide
the required certification, the Trustee will be required to withhold, from
interest otherwise payable to the holder, 31% of the holder's interest income
and pay the withheld amount to the IRS as a credit against the holder's federal
income tax liability.
The IRS has issued new regulations governing the backup withholding and
information reporting requirements. The new regulations are generally effective
for payments made after December 31, 2000. Noteholders should consult their tax
advisors with respect to the impact, if any, of the new regulations.
Because the Transferor will, for federal income tax purposes, treat all
Notes as indebtedness issued by the Trust characterized as either a partnership
or a division of whichever entity owns all of its Certificates, the Transferor
will not comply with the tax reporting requirements that would apply under any
alternative characterization of the Trust.
Tax Consequences to Foreign Noteholders. If interest paid or accrued to a
Noteholder who is a nonresident alien, foreign corporation or other non-United
States person (a "Foreign Person") is not effectively connected with the
conduct of a trade or business within the United States by the foreign person,
the Note's interest generally will be considered "portfolio interest," and
generally will not be subject to United States federal income tax and
withholding. This exemption generally will apply only if the foreign person:
. is not actually or constructively a "10 percent shareholder" of the
Trust or the Transferor (including a holder of 10% of the outstanding
certificates of the Trust) or a "controlled foreign corporation" for
which the Trust or the Transferor is a "related person" within the
meaning of the U.S. Internal Revenue Code; and
. provides an appropriate statement, signed under penalties of perjury,
certifying that the beneficial owner of the Note is a foreign person
and providing that foreign person's name and address.
If the information provided in this statement changes, the foreign person
must inform the Indenture Trustee within 30 days of the change. If the interest
were not portfolio interest, then it would be subject to United States federal
income and withholding tax at a rate of 30 percent, unless such tax were
reduced or eliminated pursuant to an applicable tax treaty. Special rules apply
to partnerships, estates and trusts, and in certain circumstances
certifications as to foreign status and other matters may be required to be
provided by partners and beneficiaries thereof. Under new regulations governing
withholding, backup withholding and information reporting requirements,
withholding certificates or statements that were valid on December 31, 1999,
ceased to be effective on December 31, 2000.
69
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that:
. the gain is not effectively connected with the conduct of a trade or
business in the United States by the foreign person; and
. in the case of a foreign individual, the foreign person is not
present in the United States for 183 days or more in the taxable
year.
If the interest, gain or income on a Note held by a foreign person is
effectively connected with the conduct of a trade or business in the United
States by the foreign person, such holder, although exempt from the withholding
tax previously discussed if an appropriate statement is furnished, will
generally be subject to United States federal income tax on the interest, gain
or income at regular federal income tax rates. In addition, if the foreign
person is a foreign corporation, it may be subject to a branch profits tax
equal to 30 percent of its "effectively connected earnings and profits" within
the meaning of the U.S. Internal Revenue Code for the taxable year, subject to
adjustment, unless it qualifies for a lower rate under an applicable tax
treaty.
Tax Characterization of the Trust
Depending upon whether Certificates are owned by one or more persons, the
Trust will be treated as a division of the Transferor or as a partnership for
federal income tax purposes. The related prospectus supplement will specify the
treatment of the Trust for federal income tax purposes.
If the Trust issues Certificates only to the Transferor, the equity of
the Trust will be wholly-owned by the Transferor. In this case, under the
"check-the-box" Treasury regulations, the Trust will be treated as a division
of the Transferor and disregarded for federal income tax purposes. In other
words, for federal income tax purposes, the Transferor will be treated as the
owner of all the assets of the Trust and the obligor of all the liabilities of
the Trust. Accordingly, the Trust would not be directly liable for any federal
income taxes as it would be deemed not to exist for federal income tax
purposes. Under the "check-the-box" Treasury regulations, unless it is treated
as a trust for federal income tax purposes, an unincorporated domestic entity
with more than one equity owner is automatically classified as a partnership
for federal income tax purposes. Because it is a business trust, the Trust will
not qualify as a trust for federal income tax purposes, and accordingly, if
Certificates are sold or issued in any manner which results in there being more
than one equity owner, the Trust will be treated as a partnership.
If Certificates are issued to more than one person, the Transferor and
the Servicer will agree, and the applicable Certificateholders will agree by
their purchase, to treat the Trust as a partnership for purposes of federal,
state and local income and franchise tax purposes, with the partners of such
partnership being the Certificateholders and the Notes being debt of the
partnership. However, the proper characterization of the arrangement involving
the Certificates, the Transferor and the Servicer is not clear because there is
no authority on transactions closely comparable to that contemplated in this
prospectus.
Risk of Alternative Characterization. Under the U.S. Internal Revenue
Code and specified Treasury Regulations (the "PTP Regulations") a partnership
may be classified as a publicly traded partnership ("PTP") if equity interests
in the partnership are traded on an "established securities market" or are
"readily tradeable" on a "secondary market" or its "substantial equivalent."
For federal income tax purposes, a PTP is taxable as a corporation and subject
to corporate income tax. Any corporate income tax could materially reduce or
eliminate cash that would otherwise be distributable for the applicable Notes
and Certificates, and Certificateholders could be liable for any tax that is
unpaid by the Trust. However, the Trust will comply with available safe harbors
under the PTP Regulations to avoid PTP characterization. Furthermore, even if
the Trust were classified as a PTP, it would avoid taxation as a corporation if
90% or more of its annual income constituted "qualifying income" not derived in
the conduct of a "financial business." It is unclear whether the
70
Trust's income would be so classified. However, Tax Counsel will deliver its
opinion that the Trust will not be classified as a publicly traded partnership
taxable as a corporation.
STATE AND LOCAL TAX CONSEQUENCES
The State of Florida imposes a value-based intangibles tax on January 1
of each year at the rate of $1.00 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 Transferor intends to
transfer 99% of its right, title and interest in, to and under the Certificates
owned by the Transferor as of such day, together with all of its duties, rights
and obligations under the Trust Sale and Servicing Agreement to World Omni
Wholesale, Inc. ("WOWI"), a wholly-owned subsidiary of World Omni, located and
managed outside the State of Florida (such transfer, the "Annual Servicing
Transfer"). In connection with such Annual Servicing Transfer, the Servicer
shall transfer all of its rights, obligations and duties under the Trust Sale
and Servicing Agreement to WOWI. The Trust will continue to maintain its first
priority perfected security interest in the Receivables. Only the Transferor's
interest in the Certificates, together with the Servicer's management and
control authority and obligations will be transferred to WOWI, to be held in
escrow and returned to the Transferor and the Servicer, 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 with respect to any
liability for this intangibles tax. The Servicer has agreed in the Trust Sale
and Servicing Agreement not to conduct any servicing activities during the
period of the Annual Servicing Transfer.
The above discussion does not address the tax treatment of any series of
Notes or the holders of Notes under any state or local tax laws. The activities
to be undertaken by the Servicer in servicing and collecting the Receivables
will take place throughout the United States and, therefore, many different tax
regimes could apply to this transaction. Prospective investors are urged to
consult with their tax advisors regarding the state and local tax treatment of
the Trust as well as any state and local tax consequences to investors by
purchasing, holding and disposing of Notes.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the U.S. Internal Revenue Code
prohibit a pension, profit-sharing or other employee benefit plan, as well as
individual retirement accounts and Keogh Plans (each a "Benefit Plan"), from
engaging in specified transactions with persons that are "parties in interest"
under ERISA or "disqualified persons" under the U.S. Internal Revenue 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 U.S. Internal Revenue Code for such persons.
Some transactions involving the Trust might be deemed to constitute
prohibited transactions under ERISA and the U.S. Internal Revenue Code for 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 "Plan Assets Regulation"), the assets of the Trust
would be treated as plan assets of a Benefit Plan for the purposes of ERISA and
the U.S. Internal Revenue Code only if the Benefit Plan acquired an "equity
interest" in the Trust and none of the exceptions contained in the Plan Assets
Regulation was applicable. An equity interest is defined under the Plan Assets
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 Transferor
believes the Notes of the Trust should be treated as indebtedness
71
without substantial equity features for purposes of the Plan Assets Regulation.
Other exceptions, if any, from application of the Plan Assets Regulation
available for any Notes will be discussed in the related prospectus supplement.
However, disregarding whether Notes are treated as equity interests for
Plan Asset Regulation purposes, the acquisition or holding of Notes by or on
behalf of a Benefit Plan or a fund containing assets of a Benefit Plan could be
considered to give rise to a prohibited transaction if the Transferor, the
Servicer, the Trust or any of their respective affiliates is or becomes a party
in interest or a disqualified person with respect to such Benefit Plan. Limited
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 the Notes.
Included among these exemptions are:
. Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding
investments by insurance company pooled separate accounts;
. PTCE 91-38, regarding investments by bank collective investment
funds;
. PTCE 84-14, regarding transactions effected by qualified professional
asset managers;
. PTCE 95-60, regarding transactions by life insurance company general
accounts; and
. PTCE 96-23, regarding transactions effected by in-house asset
managers.
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.
A plan fiduciary considering the purchase of Notes should consult its tax
and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets and the possibility of exemptive relief from the
prohibited transaction rules as well as related issues and their potential
consequences.
PLAN OF DISTRIBUTION
The Transferor will sell each series of Notes offered for sale, on the
terms and conditions set forth in an underwriting agreement (each, an
"Underwriting Agreement"). For each offering, the Transferor will agree to sell
to each of the underwriters named in the Underwriting Agreement and in the
related Prospectus supplement and each of the underwriters will severally agree
to purchase from the Transferor, the principal amount of Notes set forth in the
Underwriting Agreement and in the related prospectus supplement.
In each Underwriting Agreement, the underwriters will agree, subject to
the terms and conditions set forth in the Underwriting Agreement, to purchase
all the Notes described in the Underwriting Agreement which are offered by this
prospectus and by the related prospectus supplement, if any of the Notes are
purchased. In the event of a default by any underwriter, each Underwriting
Agreement will provide that, in specified circumstances, purchase commitments
of the nondefaulting underwriters may be increased or the Underwriting
Agreement may be terminated.
Each prospectus supplement will either:
(1) set forth the price at which each series or class of Notes
being offered by the prospectus supplement will be offered to the public
and any concessions that may be offered to the dealers participating in
the offering of the Notes; or
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(2) specify that the Notes are to be resold by the underwriters in
negotiated transactions at varying prices to be determined at the time
of such sale.
After the initial public offering of any Notes, the public offering price and
such concessions may be changed.
The extent, if any, to which the closing of any series of Notes is
conditioned upon the closing of any other series of Notes will be set forth in
the related prospectus supplement.
Each Underwriting Agreement will provide that the Transferor will
indemnify the underwriters against specified liabilities, including liabilities
under the Securities Act of 1933.
The Indenture Trustee may invest the funds in the Eligible Deposit
Accounts in Eligible Investments acquired from the underwriters.
The place and time of delivery for the Notes for which this prospectus is
delivered will be set forth in the related prospectus supplement.
LEGAL OPINIONS
Certain legal matters relating to the Notes will be passed upon for the
Trust, the Transferor and World Omni by Kirkland & Ellis, special counsel to
the Trust, the Transferor and World Omni. Certain federal income tax matters
will be passed upon for the Trust, the Transferor and the Servicer by Kirkland
& Ellis.
WHERE YOU CAN FIND MORE INFORMATION
The Transferor, as originator of the Trust, filed a registration
statement relating to the Notes with the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933. This prospectus is part of the
registration statement, but the registration statement includes additional
information.
The Transferor will file with the SEC all required annual, monthly and
special SEC reports and other information about the Trust.
You may read and copy any reports, statements or other information filed
by the Transferor or the Registrant at the SEC's public reference room at 450
Fifth Street, Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please
call the SEC at (800) SEC-0330 for further information on the operation of the
public reference rooms. These SEC filings are also available to the public on
the SEC Internet site (http://www.sec.gov).
INCORPORATION BY REFERENCE
The SEC allows information filed with it to be "incorporated by
reference" into this prospectus, which means that the Registrant can disclose
important information to you by referring you to those documents. The
information incorporated by reference is considered to be part of this
prospectus. Information that the Transferor files with the SEC after the date
of this prospectus will automatically update the information in this
prospectus. In all cases, you should rely on the later information over
different information included in this prospectus or the prospectus supplement.
The Transferor incorporates by reference any future annual, monthly and
special reports and proxy materials filed by or on behalf of the Trust with the
SEC until the offering of the Notes is terminated. The
73
Transferor will not be required to file reports pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, except for the filing of monthly
Current Reports on Form 8-K. As of the date of this prospectus, the Transferor
had not filed any Current Reports on Form 8-K.
As a recipient of this prospectus, you may request a copy of any document
incorporated by reference into this prospectus, except exhibits to the
documents (unless the exhibits are specifically incorporated by reference), at
no cost, by writing or calling: World Omni Financial Corp., 190 N.W. 12th
Avenue, Deerfield Beach, Florida 33442, Attention: Corporate Secretary,
telephone: (954) 429-2200.
74
INDEX OF TERMS
The following is a list of the defined terms used in this prospectus and
any prospectus supplement and the pages on which the definitions of such terms
may be found in this prospectus.
Accounts.................................................................... 10
Accumulation Period......................................................... 21
Accumulation Period Commencement Date....................................... 21
Addition Cut-Off Date....................................................... 44
Addition Date............................................................... 44
Additional Accounts......................................................... 49
Additional Cut-Off Date..................................................... 44
Adjustment Payment.......................................................... 54
Administrative Agreement.................................................... 41
Administrator............................................................... 64
Amortization Period......................................................... 21
Amortization Period Commencement Date....................................... 21
Annual Servicing Transfer................................................... 71
Asset Based Receivables..................................................... 12
Automatic Additional Accounts............................................... 50
Automatic Removal Date...................................................... 52
Automatic Removed Accounts.................................................. 52
Available Subordinated Amount............................................... 33
Benefit Plan................................................................ 71
Book Review................................................................. 16
Cede........................................................................ 37
Certificateholders.......................................................... 21
Certificates................................................................ 11
Class I Dealers............................................................. 14
Class II Dealers............................................................ 14
Class III Dealers........................................................... 14
Class IV Dealers............................................................ 14
Class V Dealers............................................................. 15
Class VI Dealers............................................................ 15
Clearstream Participants.................................................... 38
Code........................................................................ 66
Collateral Security......................................................... 10
Collection Account.......................................................... 28
Collection Period........................................................... 32
Collections................................................................. 10
Controlled Amortization Amount.............................................. 21
Controlled Deposit Amount................................................... 21
Controlling Class........................................................... 23
Cooperative................................................................. 39
Dealers..................................................................... 10
Defaulted Amount............................................................ 54
Defaulted Amount Carryover.................................................. 54
Defaulted Receivables....................................................... 53
Definitive Notes............................................................ 40
Depository.................................................................. 20
Designated Accounts......................................................... 50
Designated Balance.......................................................... 50
Designated Receivables...................................................... 51
Determination Date.......................................................... 61
Disclosure Document......................................................... 34
Disqualified Receivables.................................................... 45
DTC......................................................................... 37
Early Amortization Event.................................................... 55
Early Amortization Period................................................... 22
Eligible Account............................................................ 46
Eligible Deposit Account.................................................... 29
Eligible Institution........................................................ 29
Eligible Investments........................................................ 29
Eligible Receivable......................................................... 46
Enhancement................................................................. 10
Enhancement Provider........................................................ 46
Euroclear Operator.......................................................... 39
Euroclear Participants...................................................... 38
Events of Default........................................................... 24
Excess Funding Account...................................................... 30
Excess Principal Collections................................................ 32
Excess Receivables.......................................................... 48
Excluded Series............................................................. 28
Expected Principal Payment Date............................................. 21
Financial Statement Review.................................................. 16
Fitch....................................................................... 29
Floor Plan Equity Program................................................... 16
Foreign Person.............................................................. 69
Fully Funded Date........................................................... 22
Incremental Subordinated Amount............................................. 47
Indenture................................................................... 19
Indenture Trustee........................................................... 36
Indirect Participants....................................................... 37
Ineligible Amount........................................................... 48
Ineligible Receivables...................................................... 47
Initial Closing Date........................................................ 10
Initial Cut-Off Date........................................................ 10
Insolvency Laws............................................................. 9
Interest Funding Account.................................................... 20
Interest Payment Dates...................................................... 20
Invested Amount............................................................. 31
Investment Event............................................................ 55
Investment Period........................................................... 22
Investment Period Commencement Date......................................... 22
Investor Charge-Offs........................................................ 32
JM Family Enterprises....................................................... 9
JMFE........................................................................ 64
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LIBOR....................................................................... 16
Minimum Required Pool Balance............................................... 54
Miscellaneous Payments...................................................... 31
Monthly Servicing Fee....................................................... 59
Moody's..................................................................... 29
Non-Principal Collections................................................... 10
Non-Serviced Participation Receivables...................................... 57
Non-Vehicle Collateral Security............................................. 18
Note Owners................................................................. 37
Noteholder.................................................................. 20
Noteholder Monthly Servicing Fee............................................ 59
Notes....................................................................... 11
OID......................................................................... 67
Overconcentration Amount.................................................... 48
Owner Trustee............................................................... 10
Paired Series............................................................... 28
Participants................................................................ 37
Participations.............................................................. 18
Payment Date................................................................ 20
Payment Date Statement...................................................... 61
Plan Assets Regulation...................................................... 71
Pool Balance................................................................ 30
Principal Collections....................................................... 10
Principal Commencement Date................................................. 21
Principal Funding Account................................................... 21
Principal Receivables....................................................... 30
Principal Shortfalls........................................................ 32
Principal Terms............................................................. 34
PTCE........................................................................ 72
PTP......................................................................... 70
PTP Regulations............................................................. 70
Purchased Participation Receivables......................................... 18
Qualified Stated Interest................................................... 67
Rating Agency............................................................... 29
Rating Agency Condition..................................................... 29
Rebate Payment.............................................................. 54
Receivables................................................................. 10
Receivables Purchase Agreement.............................................. 10
Related Documents........................................................... 27
Removal and Repurchase Date................................................. 51
Removal Commencement Date................................................... 50
Removal Date................................................................ 50
Removal Notice.............................................................. 50
Removed Account............................................................. 51
Representation Date......................................................... 44
Repurchased Receivables..................................................... 52
Repurchased Receivables Purchase Price...................................... 52
Required Pool Balance....................................................... 30
Reset Date.................................................................. 31
Revolving Period............................................................ 20
SEC......................................................................... 73
Series Adjusted Invested Amount............................................. 31
Series Allocable Defaulted Amount........................................... 31
Series Allocable Miscellaneous Payments..................................... 31
Series Allocable Non-Principal Collections.................................. 31
Series Allocable Principal Collections...................................... 31
Series Allocation Percentage................................................ 31
Series Cut-Off Date......................................................... 44
Series Issuance Date........................................................ 44
Series Supplement........................................................... 19
Series Termination Date..................................................... 56
Service Transfer............................................................ 60
Servicer.................................................................... 9
Servicing Default........................................................... 60
Servicing Fee............................................................... 59
Servicing Fee Rate.......................................................... 59
Short-Term Note............................................................. 68
Southeast Toyota Distributors............................................... 6
Special Payment Date........................................................ 20
Standard & Poor's........................................................... 29
SuperWrap Program........................................................... 18
Supplemental Certificate.................................................... 53
Tax Counsel................................................................. 67
Tax Opinion................................................................. 35
Transfer and Servicing Agreements........................................... 41
Transfer Date............................................................... 44
Transfer Deposit Amount..................................................... 45
Transferor.................................................................. 9
Transferor Certificate...................................................... 53
Trust....................................................................... 10
Trust Adjusted Invested Amount.............................................. 31
Trust Agreement............................................................. 10
Trust Estate................................................................ 10
Trust Incremental Subordinated Amount....................................... 48
Trust Sale and Servicing Agreement.......................................... 11
Underwriting Agreement...................................................... 72
Vehicles.................................................................... 10
Wholesale Portfolio......................................................... 19
World Omni.................................................................. 9
WOWI........................................................................ 71
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$300,000,000
World Omni Master Owner Trust
$277,000,000 Series 2001-1 Floating Rate Automobile Dealer Floorplan Asset
Backed Notes, Class A
$23,000,000 Series 2001-1 Floating Rate Automobile Dealer Floorplan Asset
Backed Notes, Class B
WODFI LLC
Transferor
World Omni Financial Corp.
Servicer
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PROSPECTUS SUPPLEMENT
-------------------------
Underwriters of the underwritten Class A Notes
Merrill Lynch & Co.
JPMorgan
Underwriter of the Class B Notes
Merrill Lynch & Co.
Until the expiration of 90 days after the date of this prospectus supplement,
all dealers selling the Class A Notes or Class B Notes, whether or not
participating in this distribution, will deliver a prospectus. This delivery
requirement is in addition to the obligation of dealers to deliver a prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
February 21, 2001
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