As filed with the Securities and Exchange Commission on October 18, 2002
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under the Securities Act of 1933
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WORLD OMNI AUTO RECEIVABLES TRUSTS
(Issuer of the securities)
WORLD OMNI AUTO RECEIVABLES LLC
(Grantor of the trusts described herein)
(Exact name of registrant as specified in its charter)
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Delaware 52-2184798
(Registrant's State or other jurisdiction of (Registrant's I.R.S. Employer
incorporation or organization) Identification No.)
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World Omni Auto Receivables LLC Patrick C. Ossenbeck
190 Jim Moran Blvd. World Omni Auto Receivables LLC
Deerfield Beach, Florida 33442 190 Jim Moran Blvd.
(954) 429-2200 Deerfield Beach, Florida 33442
(Address, including zip code, and telephone number, (954) 429-2200
including area code, of registrant's principal executive offices) (Name, address, including zip code, and telephone
number, including area code, of agent for service)
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Copies to:
Jeffrey O'Connor Reed Auerbach
Kirkland & Ellis McKee Nelson LLP
200 East Randolph Drive 5 Times Square, 35th Floor
Chicago, Illinois 60601 New York, New York 10036
(312) 861-2000 (917) 777-4200
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Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this registration statement as determined
by the registrant in light of market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum Amount of
Amount to be Aggregate Price Aggregate Registration
Title of Securities to be Registered Registered Per Unit(1) Offering Price(1) Fee(2)
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Auto Receivables Asset Backed Securities $1,000,000 100% $1,000,000 $92
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(1)Estimated solely for purposes of calculating the registration fee.
(2) The registrant has a $320,755.38 credit to its account as a result of a
refund in connection with its registration statement number 333-69732. The
registrant requests that the Commission apply $92.00 of that credit to the
registration fee for this registration statement.
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED OCTOBER 18, 2002
PROSPECTUS
Auto Receivables Backed Notes and Certificates (Issuable in Series)
WORLD OMNI AUTO RECEIVABLES LLC
Seller
You should carefully consider the risk factors beginning on page 3 of this
prospectus.
The notes are obligations of the trust that issued those notes and are backed
only by the assets of the trust. The notes are not obligations of World Omni
Auto Receivables LLC, World Omni Financial Corp., any of their affiliates or
any governmental agency.
This prospectus may not be used to consummate sales of the offered securities
unless accompanied by a prospectus supplement.
The Trusts:
1. a new trust will be formed to issue each series
of securities.
2. each trust will consist primarily of:
. retail installment sale contracts secured by
new and used automobiles and light-duty
trucks; and
. other assets as described in this prospectus
and to be specified in the related prospectus
supplement.
The Securities:
1. will be asset backed securities sold
periodically in one or more series and each
series will be secured by the assets of the
trust or will evidence beneficial ownership
interests in the trust;
2. will be offered in separate series;
3. if specified in the related prospectus
supplement, all of the classes may not be
offered in a particular series;
4. of a series may be divided into two or more
classes, which may have different interest rates
and which may receive principal payments in
differing proportions and at different times;
5. will consist of:
. notes (which will be treated as indebtedness
of the trust) and/or
. certificates (which will represent an
undivided ownership interest in the trust); and
6. of any series are not obligations of World Omni
Auto Receivables LLC, World Omni Financial Corp.
or any of their affiliates, and neither the
securities nor the underlying receivables are
insured or guaranteed by any governmental agency.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the offered securities or determined
if this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
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No secondary market will exist for a series of securities prior its
offering. We cannot assure you that a secondary market will develop for the
securities of any series or, if it does develop, that it will continue.
The date of this prospectus is , 2002
TABLE OF CONTENTS
Section Page
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Risk Factors................................. 3
You May Rely For Repayment Only Upon
the Trust's Assets, Which May Not Be
Sufficient to Make Full Payments on
Your Securities........................... 3
You May Experience Reduced Returns and
Delays on Your Securities Resulting from
Changes in Delinquency Levels and
Losses.................................... 3
You May Experience Reduced Returns on
Your Securities Resulting from
Prepayments............................... 3
You May Experience Reduced Returns on
Your Securities Resulting from
Distribution of Amounts in the Pre-
Funding Account........................... 4
Interests of Other Persons in the
Receivables and Financed Vehicles Could
Be Superior to the Trust's Interest, Which
May Result in Reduced Payments on
Your Securities........................... 5
Receivables that Fail to Comply with
Consumer Protection Laws May Result in
Losses on Your Investment................. 6
Prospectus Supplement........................ 8
The Issuers.................................. 9
The Trust Assets............................. 9
The Receivables Pool......................... 9
Receivables Pools........................... 9
Pre-Funding Accounts........................ 10
The Receivables............................. 11
Delinquencies, Repossessions and Net
Losses.................................... 11
Maturity and Prepayment
Considerations............................ 11
The Seller................................... 11
World Omni Financial Corp.................... 12
World Omni Financial Corp.'s Automobile
Finance Business........................... 12
Underwriting................................ 13
Risk Based Pricing.......................... 14
Servicing................................... 14
Insurance................................... 15
Pool Factors................................. 15
Use of Proceeds.............................. 16
The Trustee.................................. 16
Section Page
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Description of the Securities............ 16
General Payment Terms of Securities..... 17
Book-Entry Registration................. 18
Definitive Securities................... 20
Reports to Securityholders.............. 21
Description of the Trust Documents....... 21
Sale and Assignment of Receivables...... 22
Accounts................................ 22
The Servicer............................ 23
Servicing Procedures.................... 24
Payments on Receivables................. 24
Servicing Compensation.................. 25
Distributions........................... 25
Credit and Cash Flow Enhancements....... 25
Evidence as to Compliance............... 26
Servicer Resignation and Servicer
Indemnification....................... 26
Servicer Termination Event.............. 27
Rights upon Servicer Termination Event.. 27
Waiver of Past Defaults................. 28
Amendments.............................. 28
Termination............................. 28
Voting Rights; Controlling Securities... 28
Description of the Notes................. 29
Principal and Interest on the Notes..... 29
The Indenture........................... 30
Description of the Certificates.......... 33
Distributions of Principal and Interest. 33
Some Legal Aspects of the Receivables.... 33
Interests in the Receivables............ 34
Security Interests in the Financed
Vehicles.............................. 34
Repossession............................ 35
Notice of Sale; Redemption Rights....... 35
Deficiency Judgments and Excess Proceeds 36
Consumer Protection Laws................ 36
Other Limitations....................... 37
Federal Income Tax Consequences.......... 37
FASITs.................................. 38
Treatment of Trusts..................... 38
Tax Consequences to Holders of the Notes 39
Tax Consequences to Holders of the
Certificates.......................... 43
Trusts Treated as Grantor Trusts........ 47
Trusts Treated as Disregarded Entities.. 52
ERISA Considerations..................... 52
Plan of Distribution..................... 52
Financial Information.................... 53
Incorporation of Certain Information by
Reference.............................. 53
Legal Matters............................ 54
Glossary of Terms to the Prospectus...... 55
2
RISK FACTORS
You should carefully consider the following risks and the risks described
under "Risk Factors" in the prospectus supplement for the securities before
making an investment decision. In particular, distributions on your
securities will depend on payments received on and other recoveries with
respect to the receivables. Therefore, you should carefully consider the risk
factors relating to the receivables and the financed vehicles.
Your investment could be materially and adversely affected if any of the
following risks are realized.
You must rely for repayment only upon the trust's Your securities are either secured by or represent
assets, which may not be sufficient to make full beneficial ownership interests solely in the assets of
payments on your securities. the related trust. Your securities will not present an
interest in or obligation of the seller, the trustee,
World Omni Financial Corp., or any other person.
The seller or another entity may have a limited
obligation to repurchase some receivables under
some circumstances as described in the agreements
relating to a particular series. Distributions on any
class of securities will depend solely on the amount
and timing of payments and other collections in
respect of the related receivables. The seller cannot
assure you that these amounts, together with other
payments and collections in respect of the related
receivables, will be sufficient to make full and timely
distributions on any offered securities. The offered
securities and the receivables will not be insured or
guaranteed, in whole or in part, by the United States
or any governmental entity or by any provider of
credit enhancement unless specified in the related
prospectus supplement.
You may experience reduced returns and delays There can be no assurance that the historical levels of
on your securities resulting from changes in delinquencies and losses experienced by World Omni
delinquency levels and losses. Financial Corp. on its loan portfolio will be
indicative of the performance of the receivables
included in the trust or that the levels will continue in
the future. Delinquencies and losses could increase
significantly for various reasons, including changes
in the local, regional or national economies or due to
other events.
.
You may experience reduced returns on your You may receive payment of principal on the
securities resulting from prepayments. securities earlier than you expected for the reasons
set forth below. You may not be able to reinvest the
principal paid to you earlier than you expected at a
rate of return that is equal to or greater than the rate
of return on the securities. Prepayments on the
receivables by the related obligors and purchases of
the receivables by the seller and the servicer will
shorten the life of the securities to an extent that
cannot be fully predicted. Any reinvestment risks
resulting from a faster or slower incidence of
prepayment of receivables will be borne entirely by
you.
3
All of the receivables
are prepayable at any
time. The rate of
prepayments on the
receivables may be
influenced by a variety
of economic, social and
other factors, including:
. other events which
have the same effect
as prepayments in full
of receivables,
including liquidations
due to default, as
well as receipts of
proceeds from
insurance policies and
repurchases of
receivables;
. repurchases of
receivables by World
Omni Financial Corp.
as a result of
breaches of
representations and
warranties, and/or
breaches of particular
covenants;
. the application of any
remaining amounts on
deposit in any
pre-funding accounts
not applied to the
purchase of additional
receivables; and
. the purchase by the
servicer or the other
entity specified in
the related prospectus
supplement of the
receivables when the
aggregate principal
balance thereof is 10%
or less of the initial
aggregate principal
balance.
The rate of prepayments
of receivables cannot be
predicted and therefore,
no assurance can be given
as to the level of
prepayments that a trust
will experience.
You may experience A trust may have a
reduced returns on your pre-funding account. If
securities resulting from it does, the seller will
distribution of amounts purchase receivables from
in the pre-funding World Omni Financial
account. Corp. and then sell the
receivables to the trust.
The trust will purchase
the receivables with
funds on deposit in the
pre-funding account.
You will receive as a
prepayment of principal
to you on the date
specified in the
prospectus supplement any
amounts remaining in the
pre-funding account that
have not been used to
purchase receivables.
This prepayment of
principal could have the
effect of shortening the
weighted average life of
the securities of the
related series. The
inability of the seller
to obtain receivables
meeting the requirements
for sale to the trust
will increase the
likelihood of a
prepayment of principal.
In addition, you will
bear the risk that you
may be unable to reinvest
any principal prepayment
at yields at least equal
to the yield on the
securities.
4
Interests of other Many federal and state
persons in the laws, including the
receivables and financed Uniform Commercial Code,
vehicles could be govern the transfer of
superior to the trust's the receivables by World
interest, which may Omni Financial Corp. to
result in reduced the seller and by the
payments on your seller to the trust, the
securities. perfection of the
security interests in the
receivables and the
enforcement of security
interests in the financed
vehicles.
Upon the origination of a
receivable, World Omni
Financial Corp. will take
a security interest in
the financed vehicle by
placing a lien on the
title to the financed
vehicle. In connection
with each sale of
receivables, World Omni
Financial Corp. will
assign its security
interests in the financed
vehicles to the seller,
and the seller will
assign its interests to
the trust. Due to the
administrative burden and
expense of retitling each
of the financed vehicles,
neither World Omni
Financial Corp. nor the
seller will amend or
reissue the certificates
of title to the financed
vehicles to reflect the
assignments. In the
absence of an amendment
or reissuance, the trust
may not have a perfected
security interest in the
financed vehicles
securing the receivables
in some states. World
Omni Financial Corp. will
be obligated to
repurchase any receivable
sold to a trust which did
not have a perfected
security interest in the
name of World Omni
Financial Corp. in the
financed vehicle on the
closing date. World Omni
Financial Corp. will also
be obligated to purchase
any receivable sold to a
trust as to which it
failed to maintain a
perfected security
interest in the name of
World Omni Financial
Corp. in the financed
vehicle securing the
receivable. All
repurchases by World Omni
Financial Corp. are
limited to breaches that
materially and adversely
affect the receivable,
subject to the expiration
of the applicable cure
period. If the security
interest of World Omni
Financial Corp. is
perfected, the trust
generally will have a
prior claim over
subsequent purchasers of
the financed vehicle and
holders of subsequently
perfected security
interests.
Due to, among other
things, liens for repairs
of a financed vehicle or
for unpaid taxes of an
obligor, the trust could
lose the priority of its
security interest in a
financed vehicle. Neither
World Omni Financial
Corp. nor the servicer
will have any obligation
to purchase a receivable
if these liens result in
the loss of the priority
of the security interest
in the financed vehicle
after the issuance of
securities by the trust.
Generally, no action will
be taken to perfect the
rights of the trustee in
proceeds of any insurance
policies covering
individual financed
vehicles or obligors.
Therefore, the rights of
a third party with an
interest in the proceeds
could prevail against the
rights of the
5
trust prior to the time
the proceeds are
deposited by the servicer
into an account
controlled by the
trustee. We refer you to
"Some Legal Aspects of
the Receivables-Security
Interests in the Financed
Vehicles."
The servicer will
maintain possession of
the original contracts
for each of the
receivables. If the
servicer sells or pledges
and delivers the original
contracts for the
receivables to another
party, in violation of
its obligations under the
documents for the
securities, this party
could acquire an interest
in the receivable having
a priority over the
trust's interest.
Furthermore, if the
servicer becomes
insolvent, competing
claims to ownership or
security interests in the
receivables could arise.
These claims, even if
unsuccessful, could
result in delays in
payments on the
securities. If
successful, the attempt
could result in losses or
delays in payment to you
or an acceleration of the
repayment of the
securities.
Receivables that fail to Federal and state
comply with consumer consumer protection laws
protection laws may impose requirements on
result in losses on your creditors in connection
investment. with extensions of credit
and collections of retail
installment loans. These
laws may also make an
assignee of a loan, such
as the trust, liable to
the obligor for any
violation by the lender.
To the extent specified
herein and in the related
prospectus supplement,
World Omni Financial
Corp. will be obligated
to repurchase any
receivable that fails to
comply with these legal
requirements from the
trust. We refer you to
"Some Legal Aspects of
the Receivables--Consumer
Protection Laws."
In some circumstances,
the Soldiers' and
Sailors' Civil Relief Act
of 1940, as amended, and
similar state legislation
may limit the interest
payable on a receivable
during an obligor's
active military duty.
This legislation could
adversely affect the
ability of the servicer
to collect full amounts
of interest on these
receivables as well as to
foreclose on an affected
receivable during the
obligor's period of
active military duty.
This legislation may thus
cause delays and losses
in payments to holders of
the securities.
World Omni Financial
Corp. will sell
receivables to the seller
which in turn will sell
the receivables to the
trust. However if World
Omni Financial Corp. or
the seller become
bankrupt, a court could
conclude that
the receivables sold to
the trust are not owned
by the trust, but rather
are part of the
bankruptcy estate of
6
the seller or World Omni
Financial Corp. either
because the court
concludes that the sale
of the receivables from
the bankrupt party was
not really a sale but
rather a secured
financing or because the
court concludes that the
bankrupt party 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 securities as a
result of:
. the "automatic stay"
provisions of the U.S.
Bankruptcy Code, which
prevent secured
creditors from
exercising remedies
against a debtor in
bankruptcy and
provisions of the U.S.
Bankruptcy Code that
permit substitution of
collateral in certain
circumstances;
. certain tax or
government liens on
World Omni Financial
Corp.'s or the
seller'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 the securities; 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
Financial Corp. at the
time a bankruptcy
proceeding begins.
On the date of the
issuance of the
securities the rating
agencies will rate the
securities. A rating is
not a recommendation to
purchase, hold or sell
securities, and it does
not comment as to market
price or suitability for
a particular investor.
The ratings of the
securities address the
likelihood of the payment
of principal and interest
on the securities
pursuant to their terms.
There is no assurance
that a rating will remain
for any given period of
time or that a rating
agency rating the
securities will not lower
or withdraw its rating if
in its judgment
circumstances in the
future so warrant.
7
PROSPECTUS SUPPLEMENT
The prospectus supplement for each series of securities to be offered will
describe, among other things, with respect to the series of securities:
. a description of structural features of each class of securities;
. the identity of each class within the series;
. the initial aggregate principal amount, the interest rate or the method
for determining the rate and the authorized denominations of each class
of offered securities;
. certain information concerning the receivables relating to the series,
including the principal amount, type and characteristics of the
receivables on the cutoff date;
. the existence and material terms of any pre-funding account for the
purchase of additional receivables;
. additional information with respect to any credit enhancement and, if
the holder of the securities will be materially dependent upon any
provider of credit enhancement for timely payment of interest and/or
principal, information regarding the provider or counterparty;
. the order of the application of principal and interest payments to each
class of offered securities and the allocation of principal to be so
applied;
. the extent of subordination of any subordinate securities;
. the payment date for the securities;
. information regarding the servicer for the receivables;
. the circumstances, if any, under which the offered securities are
subject to redemption prior to maturity;
. the trustee for the securities;
. information regarding tax considerations; and
. additional information with respect to the method of distribution of the
securities.
8
THE ISSUERS
With respect to each series of securities, the seller will establish a
separate trust that will issue the securities.
THE TRUST ASSETS
To the extent specified in the prospectus supplement for a trust, the assets
of a trust will include:
. a pool of retail installment sale contracts secured by new and used
automobiles and light-duty trucks;
. moneys received under the receivables after the applicable cutoff date;
. amounts that from time to time may be held in one or more trust accounts
established and maintained on behalf of the trust by a trustee;
. the rights of the seller under the purchase agreement pursuant to which
the seller purchases the receivables from World Omni Financial Corp. and
all of the rights of the trust under the sale and servicing agreement or
pooling and servicing agreement pursuant to which seller sold the
receivables to the trust and the servicer services the receivables on
behalf of the trust;
. security interests in the financed vehicles;
. the rights of the seller to receive any proceeds with respect to the
receivables from claims on certain insurance policies covering the
financed vehicles or the obligors;
. any credit enhancement, including any interest rate and currency
protection agreements, provided for the benefit of holders of the
securities of the trust; and
. any and all proceeds of the foregoing.
If so provided in the related prospectus supplement, the property of a trust
may also include a pre-funding account, into which the seller will deposit cash
which will be used by the trust to purchase receivables from the seller during
a specified period. Any receivables so conveyed to a trust will also be assets
of the trust.
The receivables comprising the trust assets will be, as specifically
described in the related prospectus supplement:
. originated by various dealers and acquired by World Omni Financial Corp.,
. acquired by World Omni Financial Corp. from other originators or owners
of receivables, or
. originated by World Omni Financial Corp.
The underwriting criteria applicable to the receivables included in any
trust is described under "World Omni Financial Corp.'s Automobile Finance
Business--Underwriting," and also in the related prospectus supplement.
THE RECEIVABLES POOL
Information with respect to the receivables pool will be described in the
related prospectus supplement.
Receivables Pools
On or prior to each closing date, World Omni Financial Corp. will sell and
assign to the seller, without recourse, its entire interest in the receivables
pool, together with its security interests in the financed vehicles, pursuant
to a purchase agreement between World Omni Financial Corp. and the seller.
9
In each sale and servicing agreement or pooling and servicing agreement,
World Omni Financial Corp. will represent and warrant to the seller, among
other things, that:
. the information provided with respect to the receivables is correct in
all material respects as of the applicable cutoff date;
. at the origination date of the receivable, physical damage insurance
covering each financed vehicle is in effect in accordance with World Omni
Financial Corp.'s normal requirements;
. at the closing date each of the related receivables are free and clear of
all security interests, liens, charges, encumbrances and, to the best of
World Omni Financial Corp.'s knowledge, mechanics' liens, and no offsets,
defenses, or counterclaims against dealers have been asserted or, to its
knowledge, threatened;
. to the best of World Omni Financial Corp.'s knowledge, no default,
breach, violation or event permitting acceleration under the terms of any
receivable has occurred and no continuing condition that with notice or
the lapse of time would constitute a default, breach, violation or event
permitting acceleration under the terms of any receivable has arisen; and
World Omni Financial Corp. has not waived and, except as permitted in the
related trust documents, shall not waive any of the foregoing;
. at the closing date each of the receivables is secured by a
first-priority perfected security interest in the financed vehicle in
favor of World Omni Financial Corp. or all necessary and appropriate
actions have been commenced that would result in the valid perfection of
a first priority security interest in the financed vehicle in favor of
World Omni Financial Corp.; and
. to the best of World Omni Financial Corp.'s knowledge, each receivable,
the sale of the financed vehicle and the sale of any related insurance
policies complied at origination, and complies in all material respects
at the closing date with applicable federal, state and local laws,
including consumer credit, truth in lending, equal credit opportunity and
disclosure laws.
Upon discovery by or notice to the seller and World Omni Financial Corp. of
a breach of any representation or warranty that materially and adversely
affects a receivable, unless the breach is cured by the last day of the month
following the month in which the discovery or notice of the breach is made,
World Omni Financial Corp. will purchase the receivable from the trust as of
that last day for a purchase amount equal to the unpaid principal balance owed
by the obligor plus accrued and unpaid interest and interest thereon at the
respective annual percentage rate to that last day. World Omni Financial Corp.
may at its option exercise its repurchase obligation on the last day of either
the first or second month following discovery or notice of the breach. The
repurchase obligation will constitute the sole remedy against World Omni
Financial Corp. for any uncured breach.
To the extent indicated in the related prospectus supplement, the seller or
the trust may purchase the receivables from warehouse facilities or structured
commercial paper issuers.
Pre-Funding Accounts
If the related prospectus supplement indicates, the property of a trust will
include cash in an amount specified in the related prospectus supplement. The
seller will deposit this pre-funded amount into a pre-funding account. During
the period specified in the related prospectus supplement, the trust will use
this cash to purchase additional receivables; the seller will be obligated to
sell additional receivables to the related trust, subject only to the
availability of additional receivables. It is expected that the additional
receivables will have an aggregate principal balance approximately equal to the
pre-funded amount. Subject to the satisfaction of conditions specified in the
prospectus supplement, the trust will purchase the additional receivables from
time to time during the funding period specified in the prospectus supplement.
Any funds on deposit in the pre-funding account and not yet invested in
additional receivables will be invested in eligible investments. If the
pre-funded amount is not fully utilized by the end of the funding period, the
remaining pre-funded amount will be applied to prepay securities.
We refer you to "Description of the Trust Documents--Sale and Assignment of
Receivables."
Any conveyance of additional receivables to a trust is subject to the
satisfaction of the conditions precedent and conditions subsequent specified in
the related prospectus supplement. If any of these conditions are not met
10
with respect to any additional receivables within the time period specified in
the related prospectus supplement, World Omni Financial Corp. will be required
to repurchase the additional receivables from the related trust at the
specified purchase amounts.
The characteristics of the entire receivables pool included in any trust may
vary from those described in the related prospectus supplement as additional
receivables are conveyed to the trust from time to time during the funding
period. As specified in the related prospectus supplement, the characteristics
of the additional receivables are not expected to be materially different from
the receivables included in the trust as of the closing date. The related
prospectus supplement will indicate any restrictions on the characteristics of
the additional receivables.
The Receivables
As specified in the related prospectus supplement, the receivables consist
of Simple Interest Receivables. Simple Interest Receivables provide for the
amortization of the amount financed under the receivable over a series of fixed
level monthly payments. Each monthly payment consists of an installment of
interest, which is calculated on the basis of the outstanding principal balance
of the receivable multiplied by the stated annual percentage rate and further
multiplied by the period elapsed (as a fraction of a calendar year) since the
preceding payment of interest was made. As payments are received under a Simple
Interest Receivable, the amount received is applied first to interest accrued
to the date of payment and the balance is applied to reduce the unpaid
principal balance. Accordingly, if an obligor pays a fixed monthly installment
before its scheduled due date, the portion of the payment allocable to interest
for the period since the preceding payment was made will be less than it would
have been had the payment been made as scheduled, and the portion of the
payment applied to reduce the unpaid principal balance will be correspondingly
greater. Conversely, if an obligor pays a fixed monthly installment after its
scheduled due date, the portion of the payment allocable to interest for the
period since the preceding payment was made will be greater than it would have
been had the payment been made as scheduled, and the portion of the payment
applied to reduce the unpaid principal balance will be correspondingly less. In
either case, the obligor pays a fixed monthly installment until the final
scheduled payment date, at which time the amount of the final installment is
increased or decreased as necessary to repay the then outstanding principal
balance.
Delinquencies, Repossessions and Net Losses
Certain information relating to World Omni Financial Corp.'s delinquency,
repossession and net loss experience with respect to receivables it has
originated or acquired will be described in each prospectus supplement. This
information may include, among other things, the experience with respect to all
receivables in World Omni Financial Corp.'s portfolio during some specified
periods. There can be no assurance that the delinquency, repossession and net
loss experience with respect to any trust will be comparable to World Omni
Financial Corp.'s prior experience.
Maturity and Prepayment Considerations
Prepayment of receivables, together with accelerated payments resulting from
defaults or required repurchases of receivables will shorten the weighted
average life of the related pool of receivables and the weighted average life
of the related securities. A variety of economic, financial and other factors
may influence the rate of prepayments on the receivables. Any reinvestment
risks resulting from a faster or slower amortization of the related securities
that results from prepayments will be borne entirely by you.
The related prospectus supplement may describe some additional information
with respect to the maturity and prepayment considerations applicable to a
particular pool of receivables and the related series of securities.
THE SELLER
World Omni Auto Receivables LLC was formed as a Delaware limited liability
company on April 13, 1999. World Omni Financial Corp. holds all of the
outstanding membership interests of the seller and is the managing member of
the seller. The principal executive offices of the seller are located at 190
Jim Moran Blvd.,
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Deerfield Beach, Florida 33442, and its telephone number is (954) 429-2200. The
Managing Member is located at 190 Jim Moran Blvd., Deerfield Beach, Florida
33442.
The seller was organized solely for the purpose of acquiring receivables and
associated rights, issuing securities and engaging in related transactions. The
seller's limited liability company agreement limits the activities of the
seller to the foregoing purposes and to any activities incidental to and
necessary for these purposes.
WORLD OMNI FINANCIAL CORP.
World Omni Financial Corp. is a Florida corporation and a wholly owned
subsidiary of JMFE. JMFE, through its subsidiaries, provides a full range of
automotive-related distribution and financial services to Toyota dealerships in
the Five-State Area. Financial services are also provided to other dealerships
throughout the United States.
World Omni Financial Corp. provides installment contract and lease contract
financing to retail customers of automotive dealers within and outside the Five
State Area. World Omni Financial Corp. services auto related receivables for
its own account and for others. World Omni Financial Corp. also provides
wholesale floorplan financing and capital and mortgage loans to some dealers of
Southeast Toyota Distributors, LLC, a Delaware limited liability company and a
World Omni Financial Corp. affiliate, as well as to other automotive dealers
within and outside the Five State Area.
Southeast Toyota Distributors LLC is the exclusive distributor of Toyota
cars and light-duty trucks, parts and accessories in the Five State Area.
Southeast Toyota Distributors LLC distributes Toyota vehicles pursuant to a
distributor agreement, which first was entered into in 1968 and has been
renewed through October 2004, with Toyota Motor Sales, USA, Inc., a California
corporation. Since March 1996, World Omni Financial Corp. has provided
substantially all financial services to certain Toyota dealers in the
Five-State Area under the name "Southeast Toyota Finance."
World Omni Financial Corp. initiated operations in 1982, and as of June 30,
2002, December 31, 2001, December 31, 2000, December 31, 1999, December 31,
1998 and December 31, 1997, World Omni Financial Corp. and its affiliates had
approximately 184,654, 172,477, 142,821, 106,337, 76,883 and 56,442 retail
installment sale contracts outstanding, respectively. The aggregate outstanding
principal balances of retail installment sale contracts at the above dates,
including retail installment sale contracts that were sold but are still being
serviced by World Omni Financial Corp., were approximately $2,307 million,
$2,125 million, $1,713 million, $1,235 million, $818 million and $608 million,
respectively.
WORLD OMNI FINANCIAL CORP.'S AUTOMOBILE FINANCE BUSINESS
World Omni Financial Corp. purchases retail installment sale contracts
primarily in the Five State Area and currently, to a limited extent, in other
states in which it conducts business, from dealers pursuant to existing dealer
agreements in the ordinary course of business. We refer you to "World Omni
Financial Corp." The contracts were originated by participating dealers in
accordance with World Omni Financial Corp.'s requirements and were purchased in
accordance with World Omni Financial Corp.'s underwriting standards, which
emphasize among other things, the prospective purchaser's ability to make
timely payments and creditworthiness.
World Omni Financial Corp. purchases retail installment sale contracts from
a network of participating dealers. Pursuant to written agreements with World
Omni Financial Corp., each dealer offers automobile and light-duty truck
financing pursuant to World Omni Financial Corp. approved terms and a World
Omni Financial Corp. supplied or approved form of retail motor vehicle
installment sale contract and disclosure statement. Each dealer is responsible
for obtaining credit-related information about a prospective purchaser and for
forwarding the information for review and credit evaluation to World Omni
Financial Corp.'s office in Deerfield Beach,
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Florida. At the Deerfield Beach office, each application is reviewed, evaluated
and "scored" as described under "--Underwriting" below, and the results of this
computer-based evaluation are then given a final review and credit evaluation.
The purchase office then advises the dealer if the applicant is acceptable to
World Omni Financial Corp. If a prospective buyer is accepted, the dealer will
prepare all necessary paperwork to sell the vehicle from its inventory to the
customer, including entering into a retail installment sale contract with its
customer. The dealer then verifies the existence of insurance and thereafter
sells the contract to World Omni Financial Corp. The Deerfield Beach office
verifies that all documents supplied by a dealer with respect to a retail
installment sale contract conform with World Omni Financial Corp.'s
requirements. For further information regarding the underwriting of retail
installment sale contracts, see "--Underwriting" below.
A service center located in Mobile, Alabama services World Omni Financial
Corp.'s retail installment sale contracts. The Mobile center handles collection
activities, operational accounting and dealer and customer inquiries for World
Omni Financial Corp.
The principal executive offices of World Omni Financial Corp. are located at
190 Jim Moran Blvd., Deerfield Beach, Florida 33442 and its telephone number is
(954) 429-2200.
Underwriting
The World Omni Financial Corp. underwriting standards are intended to
evaluate a prospective buyer's credit standing and repayment ability.
Generally, a prospective buyer is required by the dealer to complete a credit
application on a form prepared or approved by World Omni Financial Corp. As
part of the description of the applicant's financial condition, the applicant
is required to provide current information enumerating, among other things:
. employment history;
. residential status; and
. annual income.
Upon receipt by the applicable office, all application data is entered into
a centralized computer network owned and operated by JMFE. The computer network
automatically obtains an independent credit bureau report and then "scores" the
application with the use of a scorecard. The scorecard enables World Omni
Financial Corp. to review an application and establish the probability that the
proposed installment contract will be paid in accordance with its terms. The
credit scores rank-order applications according to credit risk, which
represents the likelihood that the account will be delinquent or the related
vehicle will be repossessed. World Omni Financial Corp. also evaluates the
application against a "cutoff score" it has established as the minimum
acceptable score to purchase an installment contract. The cutoff score is
revised from time to time depending on current economic conditions or changes
in World Omni Financial Corp.'s installment contract portfolio.
Each of these numerical scoring models is intended to provide a means of
analysis to assist in decision making, but the final decision rests with World
Omni Financial Corp.'s credit specialists. Under World Omni Financial Corp.'s
guidelines, a credit specialist may not override the scorecard analysis of
applications above or below the cutoff score by more than a limited percentage
of those applications. World Omni Financial Corp. tracks the total number of
overrides granted to insure the statistical validity of the scoring models.
World Omni Financial Corp. reports in detail on all aspects of the numerical
scoring model to track the performance of its retail automobile and light-duty
truck installment sales contract portfolio. This enables World Omni Financial
Corp. to fine tune the scoring models according to statistical indications to
continually assure the statistical validity. In limited circumstances, World
Omni Financial Corp. may pre-approve potential and existing
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customers with established World Omni Financial Corp. credit histories for new
installment sales contracts based on a credit bureau score and other credit
criteria without the use of a custom scorecard. World Omni Financial Corp. may
also automatically approve or deny applicants based on a credit bureau score,
custom score and other credit criteria. Applicants not automatically approved
will be reviewed by a credit specialist and may be subsequently approved.
World Omni Financial Corp. originates retail installment sale contracts
under a lease termination program where it offers to obligors who lease
vehicles from World Omni Financial Corp. or its affiliates the option of
financing the purchase of the leased vehicle on or prior to lease expiration.
These retail installment sale contracts are originated primarily through the
Mobile center. The "lease-to-retail" loan origination process relies, in large
part, on the applicant's past payment history and credit bureau score and
potential residual value exposure under the lease. In the past, lease obligors
could qualify for pre-approval based on payment history and other credit
criteria. In 1999, the pre-approval process was changed, with lower credit
criteria applied to leases with higher potential residual value exposure. All
lease-to-retail applicants not pre-approved are required to go through the
credit approval process at the Mobile center. This process is generally the
same as used at the Deerfield Beach office, though credit criteria may be
relaxed in cases of increased potential residual value exposure.
Historically, the credit bureau scores for lease-to-retail originations have
approximated credit bureau scores booked on World Omni Financial Corp.'s
overall portfolio of used retail installment contracts.
Risk Based Pricing
World Omni Financial Corp. uses risk based pricing. This includes a
tier-based system of interest rates and loan to value ratios representing the
varying degrees of credit risk assigned to different ranges of credit scores.
The amount of a retail installment sale contract secured by a new vehicle or
used vehicle generally will not exceed 120% of the dealer invoice cost of the
related vehicle or 120% of clean black book value, respectively, plus select
accessories at the dealer cost, for new vehicles only, sales tax, title and
registration fees, any insurance premiums for credit life and credit disability
insurance, and certain fees for extended service contracts. However, the amount
advanced may be less, or in limited circumstances more, than the maximum
permissible amount due to a number of factors, including, but not limited to,
down payment and trade-in equity.
Servicing
World Omni Financial Corp. makes collection efforts in its capacity as
servicer. In most cases, collection efforts are enhanced by the use of an
automated dialing system. While World Omni Financial Corp.'s collection efforts
are centralized, independent contractors handle all repossessions locally.
World Omni Financial Corp.'s guidelines for retail installment sale contract
collection and repossession of the related financed vehicles most often include
the following:
Number of
Days
Delinquent Action
- ---------- ------
10-17... The obligor automatically is mailed a past due notice
10-24... Telephone contact with the obligor may be initiated, based on
behavioral scoring
50-120.. Specialized manual account calling regarding collection is made
75...... The average number of days when a vehicle is normally
repossessed
On average, after a contract is 75 days delinquent, the related financed
vehicle is repossessed, although under some circumstances repossession may
occur prior or later than this time. Repossessions are conducted by independent
contractors who are engaged in the business of repossessing vehicles.
Generally, repossessed vehicles are disposed of by auction. Upon repossession
and disposition of the financed vehicle, to the extent permitted by state law,
any remaining deficiency is pursued by World Omni Financial Corp. to the extent
the obligor is deemed to have sufficient assets to cover the deficiency. We
refer you to "Some Legal Aspects of the Receivables--Deficiency Judgments and
Excess Proceeds."
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World Omni Financial Corp. follows detailed procedures with respect to
rescheduling of delinquent accounts and extensions of contracts. Generally a
rescheduling or an extension requires the demonstration of financial
difficulties, an ability to repay and approval by management. The legal
documents for the securities will
permit the servicer to reschedule or extend a receivable, or grant a rebate or
other adjustment, only in accordance with the customary procedures of the
servicer and otherwise in accordance with these agreements. We refer you to
"Description of the Trust Documents--Servicing Procedures."
World Omni Financial Corp. from time to time implements a payment extension
program whereby obligors meeting the eligibility criteria specified below may
be permitted, at the option of the related obligor, to defer one month's
payment of principal during the December/January holiday period or July/August
summer period. In connection with the payment extension program, the obligor
must pay an amount calculated generally at the annual percentage rate of the
related retail installment sale contract for the month in which the contract is
extended. As a result, the obligor would pay the equivalent of an additional
interest payment in exchange for receiving a non-credit related extension.
The criteria for making an extension pursuant to the payment extension
program generally include the following:
. the obligor is not currently 20 days or more delinquent and never has
been more than 60 days past due;
. the obligor has made six or more scheduled monthly payments and has more
than six remaining scheduled monthly payments;
. fewer than ten percent in number of the obligor's payments have been
greater than 30 days past due;
. the obligor cannot have extended the contract during the previous 90 days;
. the receivable must have a certain annual percentage rate; and
. the obligor must not currently be in bankruptcy or litigation status.
The agreement will provide that no receivable can be extended more than six
times during the life of the receivable, excluding payment extension programs,
or extended beyond the month immediately preceding the month in which the final
scheduled payment date occurs and that all related extension fees must be
deposited into the collection account within two business days of receipt by
the servicer.
Insurance
World Omni Financial Corp. requires each obligor under a receivable to
obtain comprehensive and collision insurance with respect to the related
financed vehicle and requires the selling dealer to verify the existence of the
insurance before it will purchase the contract from the dealer. Following the
purchase, World Omni Financial Corp. performs no ongoing verification of
insurance coverage. Commencing in August 1998, World Omni Financial Corp.
stopped maintaining vendor's single interest physical damage insurance with
respect to newly originated retail installment sale contracts.
World Omni Financial Corp. does not require obligors to maintain credit
disability or life or credit health insurance or other similar insurance
coverage which provides for payments to be made on the automobile and
light-duty truck retail installment sale contracts that it purchases on behalf
of the obligors in the event of disability or death. To the extent that any
insurance coverage is obtained on behalf of an obligor, payments received in
respect of coverage may be applied to payments on the related receivable to the
extent that the obligor's beneficiary chooses to do so.
POOL FACTORS
The pool factor for each class of securities will be a seven-digit decimal,
which the servicer will compute prior to each distribution with respect to the
class of securities, indicating the remaining outstanding principal balance of
the class of securities as of the applicable payment date, as a fraction of the
initial outstanding principal balance of the class of securities. Each pool
factor will be initially 1.0000000, and thereafter will decline to reflect
reductions in the outstanding principal balance of the applicable class of
securities. A
15
securityholder's portion of the aggregate outstanding principal balance of the
related class of securities is the product of:
(1) the original aggregate purchase price of the securityholder's
securities; and
(2) the applicable pool factor.
As more specifically described in the related prospectus supplement,
securityholders will receive reports on or about each payment date concerning
the payments received on the receivables, the principal balance of the
receivables pool, each pool factor and various other items of information. In
addition, securityholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date permitted
by law.
USE OF PROCEEDS
As further specified in the related prospectus supplement, the trust will
use the net proceeds from the sale of the securities of a series to purchase
the receivables from the seller and to make the deposit of any pre-funded
amount to the pre-funding account and make any other required deposits to trust
accounts. The seller will in turn use its net proceeds to purchase the
receivables pool from World Omni Financial Corp. World Omni Financial Corp. may
use all or a portion of the proceeds to reacquire the receivables from
affiliates of World Omni Financial Corp. or from warehouse facilities or
structured commercial paper issuers who in turn will repay indebtedness secured
by the receivables. World Omni Financial Corp. will use any remainder of the
proceeds for general corporate purposes.
THE TRUSTEE
The trustee or trustees for each series of securities will be specified in
the related prospectus supplement. The trustee's liability in connection with
the issuance and sale of the related securities is limited solely to the
express obligations of the trustee described in the trust agreement related to
the securities.
With respect to each series of securities, the procedures for the
resignation or removal of the trustee and the appointment of a successor
trustee will be specified in the related prospectus supplement.
DESCRIPTION OF THE SECURITIES
The securities will be issued in series. The trust may issue securities in
one or more classes. Each class of securities will either evidence beneficial
interests in a segregated pool of assets or will represent debt of the trust
secured by the trust assets. The following summaries, together with additional
summaries under "Description of the Trust Documents" below, describe all
material terms and provisions common to all securities. The summaries do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the documentation for the related
securities and the related prospectus supplement.
All of the securities offered pursuant to this prospectus and the related
prospectus supplement will be rated in one of the four highest rating
categories by one or more nationally recognized statistical rating agencies.
Each series or class of securities offered pursuant to this prospectus may
have a different interest rate, which may be a fixed or adjustable interest
rate. The related prospectus supplement will specify the interest rate for each
series or class of securities described in the related prospectus supplement,
or the initial interest rate and the method for determining subsequent changes
to the interest rate.
16
A series may include one or more classes of "strip securities," which are
securities that are entitled to:
(1) principal distributions, with disproportionate, nominal or no
interest distributions; or
(2) interest distributions, with disproportionate, nominal or no
principal distributions.
In addition, a series of securities may include two or more classes of
securities that differ as to timing, sequential order, priority of payment,
interest rate or amount of distribution of principal or interest or both.
Distributions of principal or interest or both on any class also may be made
upon the occurrence of specified events, in accordance with a schedule or
formula, or on the basis of collections from designated portions of the
receivables pool. Any series may include one or more classes of "accrual
securities," which are securities for which all or some of the interest is
added to the principal balance instead of currently distributed.
If so provided in the related prospectus supplement, a series may include
one or more other classes of securities that are senior to one or more other
classes of subordinate securities in respect of distributions of principal and
interest and allocations of losses on receivables.
In addition, some classes of senior or subordinate securities may be senior
to other classes of senior or subordinate securities in respect of
distributions or losses.
General Payment Terms of Securities
As described in the related prospectus supplement, the trust will make
payments to holders of the securities on specified payment dates. Payment dates
with respect to the securities will occur monthly, quarterly or semi-annually,
as described in the related prospectus supplement. For example, in the case of
quarterly-pay securities, the payment date would be a specified day of every
third month. The related prospectus supplement will describe the record date
preceding the payment date, as of which the trustee or its paying agent will
fix the identity of the securityholders for the purpose of receiving payments
on the next succeeding payment date.
The prospectus supplement will specify a collection period preceding each
payment date. For example, in the case of monthly-pay securities, the
collection period would be the calendar month preceding the month of the
relevant payment date. The servicer will remit collections received on or with
respect to the related receivables held by a trust during a collection period
to the related trustee prior to the related payment date. These amounts will
fund payments to securityholders on the payment date. As may be described in
the related prospectus supplement, the trustee may apply all or a portion of
the payments collected on or with respect to the related receivables to acquire
additional receivables during a specified period rather than be used to fund
payments of principal to securityholders during the period. In this case, the
related securities will possess an interest-only period, also commonly referred
to as a revolving period, which will be followed by an amortization period.
These interest only or revolving periods may terminate prior to the scheduled
date and result in an early amortization of the related securities. The
retention and temporary investment by the trustee of the collected payments:
. slows the amortization rate of the related securities relative to the
installment payment schedule of the related receivables; or
. attempts to match the amortization rate of the related securities to an
amortization schedule established at the time the securities are issued.
Any of these features may terminate prior to the scheduled date and result
in distributions to the securityholders and an acceleration of the amortization
of the securities.
If specified in the related prospectus supplement, the trustee may retain
all or a portion of the collected payments, which will be held in specified
types of eligible investments, including receivables, for a specified period
prior to being used to fund payments of principal to securityholders. In
addition, the related prospectus
17
supplement may provide that for purposes of determining payments on the
securities, specified portions of principal payments on indicated receivables
will be deemed interest payments on those receivables.
Eligible investments are generally limited to investments acceptable to the
rating agencies rating the securities as being consistent with the rating of
the securities. We refer you to "Description of the Trust Documents--Accounts."
Neither the securities nor the underlying receivables will be guaranteed or
insured by any governmental agency or instrumentality or any other person
unless specifically described in the related prospectus supplement.
Book-Entry Registration
Holders of securities may hold their securities through DTC in the United
States or Clearstream or Euroclear in Europe if they are participants of the
system, or indirectly through organizations that are participants in the
systems. Clearstream and Euroclear will hold omnibus positions on behalf of the
Clearstream participants and the Euroclear participants, respectively, through
customers' securities accounts in Clearstream's and Euroclear's names on the
books of their respective depositories which in turn will hold the positions in
customers' securities accounts in the depositories' names on the books of DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and to facilitate the clearance and settlement
of securities transactions between participants through electronic computerized
book-entries, thereby eliminating the need for physical movement of securities.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations. Indirect access to the DTC system also is available to
others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly.
Transfers between DTC participants will occur in accordance with DTC rules.
Transfers between Clearstream participants and Euroclear participants will
occur in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly through Clearstream participants or
Euroclear participants, on the other, will be effected in DTC in accordance
with DTC rules on behalf of the relevant European international clearing system
by its Depository; however, the cross-market transactions will require delivery
of instructions to the relevant European international clearing system by the
counterparty in the system in accordance with its rules and procedures. If the
transaction complies with all relevant requirements, Euroclear or Clearstream,
as the case may be, will then deliver instructions to the Depository to take
action to effect final settlement on its behalf.
Because of time-zone differences, credits of securities in Clearstream or
Euroclear as a result of a transaction with a DTC participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and the credits or any transactions in the
securities settled during the processing will be reported to the relevant
Clearstream participant or Euroclear participant on the same business day. Cash
received in Clearstream or Euroclear as a result of sales of securities by or
through a Clearstream participant or a Euroclear participant to a DTC
participant will be received with value on the DTC settlement date but will be
available in the relevant Clearstream or Euroclear cash account only as of the
business day following settlement in DTC.
The holders of securities that are not participants or indirect participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, securities may do so only through participants and indirect
participants. In addition, holders of securities will receive all distributions
of principal and interest from the trustee through the participants who in turn
will receive them from DTC. Under a book-entry format, holders of
18
securities may experience some delay in their receipt of payments, since the
payments will be forwarded by the trustee to Cede & Co., as nominee for DTC.
DTC will forward the payments to its participants, which thereafter will
forward them to indirect participants or beneficial owners of securities.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers of securities
among participants on whose behalf it acts with respect to the securities and
to receive and transmit distributions of principal of, and interest on, the
securities. Participants and indirect participants with which the holders of
securities have accounts with respect to the securities similarly are required
to make book-entry transfers and receive and transmit the payments on behalf of
their respective holders of securities. Accordingly, although the holders of
securities will not possess the securities, DTC rules provide a mechanism by
which participants will receive payments on securities and will be able to
transfer their interest.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and some banks, the ability of a holder of
securities to pledge the securities to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to the
securities, may be limited due to the lack of a physical certificate for the
securities.
DTC has advised the seller that it will take any action permitted to be
taken by a holder of a security only at the direction of one or more
participants to whose accounts with DTC the securities are credited. DTC may
take conflicting actions with respect to other undivided interests to the
extent that the actions are taken on behalf of participants whose holdings
include undivided interests.
Clearstream is incorporated under the laws of Luxembourg as a professional
depository. Clearstream holds securities for its participating organizations
and facilitates the clearance and settlement of securities transactions between
Clearstream participants through electronic book-entry changes in accounts of
Clearstream participants, thereby eliminating the need for physical movement of
securities. 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. Indirect access to Clearstream
is also available to others, like banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Clearstream
participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear system and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment, thereby eliminating the need for physical movement of certificates and
any risk from lack of simultaneous transfers of securities and cash. Euroclear
includes various other services, including securities lending and borrowing,
and interfaces with domestic markets in several countries. The Euroclear System
is owned by Euroclear Clearance System Public Limited Company (ECSplc) and
operated through a license agreement by Euroclear Bank S.A./N.V., a bank
incorporated under the laws of the Kingdom of Belgium, the "Euroclear
Operator." 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 others that clear through or maintain a custodial relationship
with Euroclear participant, either directly or indirectly.
The Euroclear Operator is regulated and examined by the Belgian Banking and
Finance Commission and the National Bank of Belgium.
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
19
applicable Belgian law. These laws and procedures govern transfers of
securities and cash within Euroclear, withdrawal 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 securities to specific securities clearance accounts. The Euroclear
Operator acts under the Terms and Conditions only on behalf of Euroclear
participants and has no record of or relationship with Persons holding through
Euroclear participants.
Although DTC, Euroclear and Clearstream have implemented the foregoing
procedures in order to facilitate transfers of interests in book-entry
securities among participants of DTC, Euroclear and Clearstream, they are under
no obligation to perform or to continue to comply with the procedures, and the
procedures may be discontinued at any time. None of the seller nor any other
person will have any responsibility for the performance by DTC, Euroclear or
Clearstream or their respective direct or indirect participants of their
respective obligations under the rules and procedures governing their
operations. The information herein concerning DTC, Clearstream and Euroclear
and their book-entry systems has been obtained from sources believed to be
reliable, but the seller takes no responsibility for the accuracy or
completeness of the information.
Definitive Securities
Unless the related prospectus supplement provides otherwise, the securities
will be issued in fully registered, certificated form as definitive securities
to the securityholders of a given series or their nominees, only if:
. the related administrator in respect of the related series advises in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to the securities, and the
related administrator is unable to locate a qualified successor;
. the related administrator, at its option, elects to terminate the
book-entry system through DTC; or
. after the occurrence of an event of default under the related indenture
or a default by the servicer under the related sale and servicing
agreement or pooling and servicing agreement, securityholders
representing at least a majority of the outstanding principal amount of
the securities advise DTC in writing that the continuation of a
book-entry system through DTC or its successor is no longer in the
securityholders' best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the related administrator will be required to notify all the
securityholders through participants of the availability of definitive
securities. Upon surrender by DTC of the definitive securities representing the
securities and receipt of instructions for re-registration, the applicable
trustee will reissue the securities as definitive securities to the
securityholders.
Distributions of principal of, and interest on, the securities will
thereafter be made by the applicable trustee in accordance with the procedures
described in the related indenture, pooling and servicing agreement or trust
agreement directly to holders of definitive securities in whose names the
definitive securities were registered at the close of business on the
applicable record date.
The distributions will be made by check mailed to the address of the holder
as it appears on the register maintained by the applicable trustee. The final
payment on any security, however, will be made only upon presentation and
surrender of the security at the office or agency specified in the notice of
final distribution to the applicable securityholder.
Definitive securities in respect of a given series of securities will be
transferable and exchangeable at the offices of the applicable trustee or of a
certificate registrar named in a notice delivered to holders of the definitive
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securities. No service charge will be imposed for any registration of transfer
or exchange, but the applicable trustee may require payment of a sum sufficient
to cover any tax or other governmental charge imposed.
Reports to Securityholders
On each payment date, the applicable trustee will include with each
distribution to each securityholder as of the related record date a statement
generally setting forth the following:
(1) the amount of the distribution allocable to principal of each class of
securities;
(2) the amount of the distribution allocable to interest on each class of
securities;
(3) the principal balance of the receivables pool as of the last day of the
related collection period;
(4) the aggregate principal balance of, and the pool factor for, each class
of securities as of the last day of the preceding collection period,
after giving effect to payments of principal under (1) above;
(5) the amount of the servicing fee paid to the servicer with respect to the
related collection period, the amount of any unpaid servicing fees and
the change in the amount from that of the prior payment date; and
(6) the number and the aggregate purchase amount of receivables repurchased
by World Omni Financial Corp. or purchased by the servicer.
DTC will supply these reports to securityholders in accordance with its
procedures. The report will also indicate each amount described under
subclauses (1) and (2) above in the aggregate and as a dollar amount per $1,000
of original principal balance of a security.
After the end of each calendar year, the applicable trustee will mail, to
each person who was a securityholder during the year, a statement (prepared by
the servicer) containing certain information needed in the preparation of
federal income tax returns.
DESCRIPTION OF THE TRUST DOCUMENTS
The following summary describes the material terms of the documents used to
create a trust and issue the related securities. The trust documents for a
series of notes or a series of notes and certificates will generally consist of:
(1) a purchase agreement, generally between World Omni Financial Corp., as
seller, and World Omni Auto Receivables LLC, as purchaser;
(2) a sale and servicing agreement, generally between the trust, as issuer,
World Omni Auto Receivables LLC, as seller, and World Omni Financial
Corp., as servicer;
(3) an indenture, generally between the trust and the applicable trustee; and
(4) a trust agreement, generally between the seller and the applicable
trustee.
The trust documents for a series of certificates will generally consist of:
(1) a purchase agreement, generally between World Omni Financial Corp., as
seller, and World Omni Auto Receivables LLC, as purchaser; and
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(2) a pooling and servicing agreement or a trust agreement between the
seller, World Omni Financial Corp., as servicer, and the trustee.
The prospectus supplement for a given series will specify the trust
documents utilized for that series of securities. We have filed forms of the
trust documents as an exhibit to the registration statement of which this
prospectus forms a part. This summary does not purport to be complete.
Sale and Assignment of Receivables
On or prior to the closing date for each series of securities, World Omni
Financial Corp. will sell and assign to the seller, without recourse, except
for repurchases as a result of certain breaches, representations and
warranties, its entire interest in the receivables to be included in the trust,
together with its security interests in the financed vehicles. At the time of
issuance of the securities, the seller will transfer the receivables to a trust
pursuant to a sale and servicing agreement or a pooling and servicing agreement.
As more fully described in the related prospectus supplement, World Omni
Financial Corp. will purchase from the related trust any receivable transferred
to a trust if the interest of the securityholders in that receivable is
materially adversely affected by a breach of any representation or warranty
made by World Omni Financial Corp. with respect to that receivable, which
breach has not been cured following the discovery by or notice to World Omni
Financial Corp. of the breach. In addition, if so specified in the related
prospectus supplement, World Omni Financial Corp. may from time to time
reacquire receivables or substitute other receivables for any defective
receivables.
Pending sale to the seller, World Omni Financial Corp. may finance the
receivables in warehouse facilities provided to affiliates of World Omni
Financial Corp. On or prior to the closing date, for each series of securities,
these affiliates or any related warehouse provider will transfer the
receivables to World Omni Financial Corp. for sale to the seller. To the extent
indicated in a prospectus supplement for a series, these World Omni Financial
Corp. affiliates or any related warehouse provider may sell the receivables
directly to the seller. In all cases, World Omni Financial Corp. will make the
representations and warranties with respect to the receivables as described in
"The Receivables Pools--Receivables Pools" in this prospectus.
Accounts
With respect to each series of securities, the servicer will establish and
maintain with the applicable trustee one or more accounts, in the name of the
trustee on behalf of the related securityholders. The servicer will deposit all
payments made on or with respect to the related receivables into a collection
account. The trustee will deposit amounts released from the collection account
and any reserve account or other credit enhancement for distribution to the
securityholders into a distribution account. The trustee will make
distributions to the securityholders from the distribution account.
If the related prospectus supplement so provides, the trustee will maintain
a pre-funding account solely to hold funds to pay to the seller for additional
receivables transferred during the funding period. Monies on deposit in the
pre-funding account will not be available to cover losses on or in respect of
the receivables. On the closing date, the seller will deposit into the
pre-funding account the initial pre-funded amount received from the sale
proceeds of the securities.
If the related prospectus supplement so provides, the seller will establish
and maintain the reserve account in the name of the applicable trustee on
behalf of the securityholders. On the closing date, the seller will deposit
cash in the reserve account. On payment dates specified in the related
prospectus supplement, the trustee will withdraw funds on deposit in the
reserve account in excess of the required amount and will deposit such funds in
the distribution account for distribution.
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The related prospectus supplement will describe any other accounts to be
established with respect to a trust, including any other reserve account or
yield supplement account.
Funds in the Trust Accounts will be invested in eligible investments.
Eligible investments are generally limited to investments acceptable to the
rating agencies rating the securities as being consistent with the rating of
the securities. Subject to certain conditions, eligible investments may include
securities issued by the servicer or its affiliates or other trusts created by
World Omni Financial Corp. or its affiliates. Eligible investments must
generally mature before the related payment date. To the extent specified in
the prospectus supplement, funds in the Trust Accounts may be invested in
securities that will mature after the next payment date and will not be sold to
meet any shortfalls. Thus, the amount of cash in any Trust Account at any time
may be less than the balance of the Trust Account. If required withdrawals from
any Trust Account exceed the amount of cash in the Trust Account, a temporary
shortfall in the amounts distributed to the related securityholders could
result. The average life of the securities could then increase. The trustee
will deposit investment earnings on funds in the Trust Accounts as specified in
the related prospectus supplement.
If so provided in the prospectus supplement, on or before the applicable
payment date, the servicer will deposit into the related collection account as
an advance an amount equal to the amount of interest that would have been due
on the receivables related to a series at their respective annual percentage
rates for the related collection period minus the amount of interest actually
received on the receivables during the related collection period. The servicer
will not be required to make any advances to the extent that it does not expect
to recoup the advance from subsequent collections or recoveries. If the
servicer makes an advance that becomes a non-recoverable advance, the trust
will pay the servicer an amount equal to the non-recoverable advance prior to
paying the holders of securities. Unless otherwise specified in the prospectus
supplement, the servicer will make no advances of principal on the receivables.
The Trust Accounts may be maintained as either:
(1)a segregated trust account in the corporate trust department of the
applicable trustee; or
(2)a segregated account in a depository institution or trust company
organized under the laws of the United States or any one of the states
thereof, or the District of Columbia (or any domestic branch of a
foreign bank), which at all times maintains:
. a long-term unsecured debt rating, or a certificate of deposit rating
acceptable to the applicable rating agencies; and
. its deposits insured by the FDIC.
Unless otherwise specified in the related prospectus supplement, the Trust
Accounts will be maintained with the applicable trustee so long as they satisfy
the requirements above.
The Servicer
World Omni Financial Corp. will be the servicer under each sale and
servicing agreement or pooling and servicing agreement. Any servicer may
delegate its servicing responsibilities to one or more subservicers, but will
not be relieved of its liabilities with respect thereto.
The servicer will make representations and warranties regarding its
authority to enter into, and its ability to perform its obligations under, the
related sale and servicing agreement or pooling and servicing agreement and
regarding its ability to service the receivables and maintain the security
interests of the applicable trustee in the receivables. If an uncured breach of
one of those representations or warranties materially and adversely affects any
receivables, the servicer will be required to purchase such receivable.
Following any purchase of a receivable by the servicer, the receivable will be
released from the trust and conveyed to the servicer.
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Servicing Procedures
The servicer will service, administer and make reasonable efforts to collect
all amounts due on or in respect of the receivables. The servicer will, in a
manner consistent with the trust documents, service the receivables generally
in accordance with procedures used by the servicer in respect of retail
installment sale contracts secured by new and used automobiles and light-duty
trucks serviced for its own account. Consistent with its normal procedures, the
servicer may, in its sole discretion, grant extensions, rebates or adjustments
on a receivable. The sale and servicing agreement or pooling and servicing
agreement generally will provide that no more than six extensions may be
granted and will provide for the timing of the extensions. The servicer
generally may not modify the day of the month on which payment is due or change
the method under which scheduled payments of interest on a receivable are
computed. If the servicer violates those restrictions and the related
receivable is materially and adversely affected by the violation, or the
servicer extends the date for final payment by the obligor of a receivable
beyond the final maturity date of the offered securities, the servicer must
purchase the receivable. Following any purchase of a receivable by the
servicer, the receivable will be released from the trust and conveyed to the
servicer. The servicer may, consistent with its customary servicing procedures,
repossess or otherwise convert the ownership of any financed vehicle securing
any receivable as to which the servicer shall have determined that eventual
payment in full is unlikely. The servicer may sell the financed vehicle
securing a defaulted receivable, if any, at a public or private sale, or take
any other action permitted by applicable law. We refer you to "Some Legal
Aspects of the Receivables."
Payments on Receivables
Obligors will generally make payments on the receivables by mail for deposit
into a lock box account maintained by the servicer. The servicer will deposit
all payments it receives on or in respect of the receivables into the
collection account not later than two business days after receipt of payment
and related payment information regarding where to allocate the payment.
Notwithstanding the foregoing, the related prospectus supplement may provide
for less frequent deposits into the collection account if the following
conditions are met:
(1) World Omni Financial Corp. remains the servicer, except in connection
with an annual transfer, under the sale and servicing agreement or
pooling and servicing agreement;
(2) no default by the servicer has occurred and is continuing;
(3) World Omni Financial Corp. receives notice from the rating agencies that
the cessation of daily deposits will not result in a reduction or
withdrawal of the then current rating of the securities; and
(4) World Omni Financial Corp. either:
. maintains a short-term debt rating of at least A-1 by Standard &
Poor's, Prime-1 by Moody's Investor's Service, Inc. and F1 by Fitch,
Inc.;
. 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 that is
acceptable in form and substance to each rating agency; or
. otherwise satisfies the rating agencies,
In that event World Omni Financial Corp. need not deposit collections into the
collection account by the second business day after receipt, but may use for
its own benefit all of those collections until the payment date, whether or not
such funds will be distributed to securityholders, retained in the collection
account or deposited in another account on such payment date, at which time
World Omni Financial Corp. 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 set forth above not been satisfied.
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Servicing Compensation
The trust generally will pay to the servicer a servicing fee on each payment
date equal to the product of one-twelfth of the specified percentage per annum
and the principal balance of the receivable pool as of the close of business on
the first day of the related collection period. With respect to the first
payment date, the servicing fee will be based on the principal balance, as of
the cutoff date, of the receivables pool. The related prospectus supplement
will describe the servicing fee. The servicer will also collect and retain, as
additional servicing compensation, any late fees, prepayment charges, and other
administrative fees or similar charges allowed by applicable law with respect
to the receivables that are part of the trust. The servicer will also be
entitled to reimbursement from the trust for certain liabilities. The servicer
will allocate the payments by or on behalf of obligors to scheduled payments,
late fees and other charges and principal and interest in accordance with the
servicer's normal practices and procedures. The trust will pay the servicing
fee out of collections from the receivables prior to distributions to
securityholders.
The servicing fee and additional servicing compensation will compensate the
servicer for performing the functions of a third party servicer of automotive
receivables as an agent for the trust. Servicing duties include collecting and
posting all payments, making advances, responding to inquiries of obligors on
the receivables, investigating delinquencies, sending payment coupons to
obligors, reporting tax information to obligors and disposing of financed
vehicles after default. The servicing fee also compensates the servicer for
administering the receivables, including accounting for collections and
furnishing monthly and annual statements as required with respect to a series
of securities regarding distributions and generating federal income tax
information.
As long as World Omni Financial Corp. believes that sufficient collections
will be available from interest collections on one or more future payment dates
to pay the servicing fee, World Omni Financial Corp. may, as servicer, elect to
defer all or a portion of the servicing fee with respect to the related
collection period, without interest. If World Omni Financial Corp. elects to
defer all of the servicing fee, the servicing fee for the related collection
period will be deemed to equal zero for all purposes of the trust documents.
Distributions
Beginning on the payment date specified in the related prospectus
supplement, the trust will make distributions of principal and/or interest on
each class of securities to the holders of notes and certificates of the
series. The prospectus supplement will describe the timing, amount, priorities
and other specifics of distributions to each class of noteholders and
certificateholders of each series.
On each payment date the trustee will transfer collections on the related
receivables from the collection account to the distribution account for
distribution to securityholders. To the extent described in the related
prospectus supplement, distributions in respect of principal of a class of
securities of a given series may be subordinate to distributions in respect of
interest on the class, and distributions in respect of the certificates of the
series may be subordinate to payments in respect of the notes of the series.
Credit and Cash Flow Enhancements
The related prospectus supplement will describe the amounts and types of
credit enhancement arrangements and any provider of credit enhancement with
respect to each class of securities of a given series. This credit enhancement
may consist of:
(1) financial guaranty insurance policies or surety bonds;
(2) subordination of one or more classes of securities or
overcollateralization, letters of credit, credit or liquidity facilities;
25
(3) reserve funds, third party payments, guaranteed cash deposits; or
(4) other arrangements as may be described in the related prospectus
supplement or any combination of two or more of the foregoing.
Credit enhancement for a class of securities may cover one or more other
classes of securities of the same series. Credit enhancement for a series of
securities may cover one or more other series of securities.
Credit enhancement increases the likelihood of receipt by the relevant
securityholders of their full amount of principal and interest and decreases
the likelihood that these securityholders will experience losses. Credit
enhancement may not provide protection against all risks of loss and may not
guarantee repayment of the entire principal balance and interest thereon. If
losses exceed the amount covered by any credit enhancement or are not covered
by any credit enhancement, the relevant securityholders will bear their
allocable share of deficiencies, as described in the related prospectus
supplement. If credit enhancement covers more than one series of securities,
securityholders of any series will be subject to the risk that the credit
enhancement will be exhausted by the claims of securityholders of other series.
To the extent provided in the related prospectus supplement, cash flow
enhancement may be in the form of swaps, including without limitation currency
swaps and other interest rate protection agreements, repurchase obligations,
including without limitation put options, yield supplement agreements, other
agreements with respect to third party payments or other support or other
arrangements.
Evidence as to Compliance
Annually, the servicer will furnish to the related trust and trustee a
statement from a firm of independent public accountants as to the compliance by
the servicer during the preceding twelve months with standards relating to the
servicing of receivables.
The servicer will also deliver to the related trust and the trustee an
officer's certificate stating that to the best of such officer's knowledge the
servicer has fulfilled its obligations under the sale and servicing agreement
or pooling and servicing agreement throughout the preceding twelve months. If
there has been a default in the fulfillment of any of these obligations, the
officer's certificate will describe the default. The servicer also will agree
to give the trustee notice of defaults by the servicer under the related sale
and servicing agreement or pooling and servicing agreement.
Securityholders may obtain copies of the statements and certificates by
written request addressed to the trustee.
Servicer Resignation and Servicer Indemnification
The servicer may not resign from its obligations and duties under any sale
and servicing agreement or pooling and servicing agreement unless it determines
that its duties are no longer permissible under applicable law or regulations.
No resignation will become effective until the applicable trustee or a
successor servicer has assumed the servicer's obligations and duties under the
applicable sale and servicing agreement or pooling and servicing agreement. The
servicer may not assign the sale and servicing agreement or pooling and
servicing agreement or any of its rights, powers, duties or obligations under
the applicable sale and servicing agreement or pooling and servicing agreement
except as otherwise provided or except in connection with a permitted
consolidation, merger, conveyance or transfer of its properties and assets
substantially as an entirety.
Neither the servicer nor any of its directors, officers, employees or agents
will be liable to the trust or the securityholders for taking any action or for
refraining from taking any action pursuant to the sale and servicing
26
agreement or pooling and servicing agreement, or for errors in judgment. This
provision will not protect the servicer or any of these persons against any
liability imposed by reason of negligence, willful misfeasance or bad faith.
The servicer is under no obligation to appear in, prosecute, or defend any
legal action that is not incidental to its servicing responsibilities under the
applicable sale and servicing agreement or pooling and servicing agreement and
that, in its opinion, may cause it to incur any expense or liability.
Any entity into which the servicer may be merged or consolidated, or any
entity resulting from merger or consolidation or any entity succeeding to the
business of the servicer will succeed the servicer under the applicable sale
and servicing agreement or pooling and servicing agreement.
Servicer Termination Event
Except as otherwise provided in the related prospectus supplement, a
servicer termination event under the related trust documents will include,
among others:
(1) any failure by the servicer to deliver to the applicable trustee for
deposit in any of the related Trust Accounts any required payment or to
direct the trustee to make any required distributions therefrom, which
failure continues unremedied for more than five business days after
written notice from the trustee is received by the servicer or after
discovery by the servicer;
(2) any failure by the servicer or, if the servicer is an affiliate of the
seller, the seller duly to observe or perform in any material respect
any other covenant or agreement of the servicer or seller, as
applicable, in the trust documents which materially and adversely
affects the rights of the related securityholders and which continues
unremedied for more than sixty days after written notice of the failure:
. to the servicer by the applicable trustee, or
. to the servicer, and to the applicable trustee by holders of the
controlling securities evidencing not less than 50% of the voting
rights of the controlling securities; and
(3) events of financial insolvency, readjustment of debt, marshaling of
assets and liabilities, or similar proceedings with respect to the
servicer or, if the servicer is an affiliate of the seller, the seller.
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 clause (2) for a period of ninety business days shall not constitute a
servicer termination event 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 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
documents and the servicer shall provide the applicable trustee and the holders
of the securities prompt notice of such failure or delay by it, together with a
description of its efforts to so perform its obligations.
Rights upon Servicer Termination Event
Except as otherwise provided in the related prospectus supplement, as long
as a servicer termination event under the related trust documents remains
unremedied, the applicable trustee or holders of the controlling securities
evidencing not less than 50% of the voting rights of the controlling securities
may terminate all the rights and obligations of the servicer, if any, under the
sale and servicing agreement or pooling and servicing agreement, whereupon a
successor servicer appointed by the trustee or the trustee will become servicer
under the trust documents. If the servicer termination event is the result of
the bankruptcy, or other similar event, of the servicer or the appointment of a
bankruptcy trustee, or similar official, the bankruptcy trustee or official may
have the power to prevent the trustee or the securityholders from effecting a
transfer of servicing.
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Waiver of Past Defaults
With respect to the trust, except as otherwise provided in the prospectus
supplement, the holders of the controlling securities evidencing not less than
50% of the voting rights of the controlling securities may, on behalf of all
securityholders of the related securities, waive any default by the servicer in
the performance of its obligations under the related trust documents and its
consequences, except a default in making any required deposits to or payments
from any of the Trust Accounts in accordance with the trust documents. No
waiver will impair the securityholders' rights with respect to subsequent
defaults.
Amendments
The requirements of amending the indenture may be found in "Description of
the Notes-The Indenture." Unless otherwise specified in the related prospectus
supplement, generally each of the other trust documents may be amended by the
parties to that agreement without the consent of the indenture trustee or the
holders of the offered securities for the purpose of curing any ambiguity or
correcting or supplementing any of the provisions of those trust documents or
of adding, changing, modifying or eliminating any of the provisions of those
trust documents. These amendments require:
. a confirmation from each rating agency then rating the related securities
(other than Moody's, but with prior notice to Moody's) that the amendment
will not result in a reduction or withdrawal of its rating on the
securities of that class; and
. the delivery by the servicer of an officer's certificate stating that the
amendment will not materially and adversely affect the interest of any
holder of the affected securities.
In addition, unless otherwise specified in the related prospectus
supplement, the seller, the servicer, the issuer and the applicable trustee,
with the consent of the holders of the controlling securities evidencing not
less than 50% of the voting rights of the controlling securities may amend any
of the trust documents other than the indenture for the purpose of adding,
changing, modifying or eliminating any of the provisions of the trust
documents. The consent of all holders of the offered securities is required for
any amendment that:
. increases or reduces the amount or priority of, or accelerates or delays
the timing of, collections of payments on the related receivables or
distributions to holders of the offered securities; or
. reduces the required percentage of the offered securities which are
required to consent to these amendments.
Termination
With respect to each trust, the obligations of the servicer, World Omni
Financial Corp., and the applicable trustee pursuant to the related trust
documents will terminate upon the earlier to occur of:
. all amounts required to be paid to the securityholders pursuant to the
trust documents have been paid or set aside for payment; and
. all monies or other property or proceeds of the trust have been
distributed in accordance with the related trust documents.
Unless otherwise specified in the related prospectus supplement, any
outstanding securities of the related series will be redeemed concurrently with
the events specified above. The resulting distribution to the related
securityholders of proceeds may affect the prepayment rate of the securities.
Voting Rights; Controlling Securities
Voting rights will be exercised by the holders of the controlling securities
as identified in the related prospectus supplement. If specified in the related
prospectus supplement, holders of senior securities may be the controlling
securities until they are repaid in full.
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DESCRIPTION OF THE NOTES
With respect to each trust that issues notes, one or more classes of notes
of the related series will be issued pursuant to the terms of an indenture, the
form of which has been filed as an exhibit to the registration statement of
which this prospectus forms a part. This summary does not purport to be
complete.
Principal and Interest on the Notes
The timing and priority of payment, seniority, allocations of losses,
interest rate and amount of, or method of determining, payments of principal
and interest with respect to each class of notes of a series will be described
in the related prospectus supplement. The right of holders of any class of
notes of a series to receive payments of principal and interest may be senior
or subordinate to the rights of holders of any other class or classes of notes
of such series, as described in the related prospectus supplement. Unless
otherwise provided in the related prospectus supplement, payments of interest
on the notes of the related series will be made prior to payments of principal.
To the extent provided in the related prospectus supplement, a series may
include one or more classes of strip notes entitled to:
. principal payments with disproportionate, nominal or no interest
payments; or
. interest payments with disproportionate, nominal or no principal payments.
Each class of notes may have a different interest rate, which may be a
fixed, variable or adjustable interest rate, and which may be zero for some
classes of strip notes, or any combination of the foregoing. The related
prospectus supplement will specify the interest rate for each class of notes of
a series or the method for determining the interest rate. One or more classes
of notes of a series may be redeemable in whole or in part under the
circumstances specified in the related prospectus supplement, including at the
end of the funding period, if any, or as a result of the servicer's exercising
its option to purchase the related receivables pool.
To the extent specified in any prospectus supplement, one or more classes of
notes of a given series may have fixed principal payment schedules. Noteholders
of the notes would be entitled to receive as payments of principal on any given
payment date the applicable amounts set forth on the schedule with respect to
the notes, in the manner and to the extent set forth in the related prospectus
supplement. The aggregate initial principal amount of the notes and
certificates, if any, of a series may, after giving effect to the purchase of
all additional receivables, if any, be greater or less than the aggregate
initial principal balance of the receivables in that series.
To the extent specified in the related prospectus supplement, payments of
interest to holders of two or more classes of notes within a series may have
the same priority. Under some circumstances, the amount available for the
payments could be less than the amount of interest payable on the notes on any
of the dates specified for payments in the related prospectus supplement, in
which case the holders of the classes of notes will receive their ratable
share, based upon the aggregate amount of interest due to the noteholders, of
the aggregate amount available to be distributed in respect of interest on the
notes.
In the case of a series of notes that includes two or more classes of notes,
the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination of the order and priority of the payment, of each class will be
set forth in the related prospectus supplement. Payments in respect of
principal and interest of any class of notes will be made on a pro rata basis
among all the noteholders of the class. A series with notes may provide for a
revolving period, during which collections of principal in respect of the
receivables are not applied to payments of principal of the notes, or may
provide for a liquidity facility or similar arrangement that permits one or
more classes of notes to be paid in planned amounts on scheduled payment dates.
29
The Indenture
Events of Default; Rights upon Event of Default
Unless otherwise specified in the prospectus supplement, Events of Default
under the indenture will consist of:
. a default for five business days or more in the payment of any interest
on any note;
. a default in the payment of the principal of or any installment of the
principal of any such note when the same becomes due and payable, to the
extent funds are available therefor, and on the related final scheduled
payment date;
. a material default in the observance or performance of any covenant or
agreement of the trust, subject to notice and cure provisions;
. any representation or warranty made by the trust being materially
incorrect as of the date it was made, subject to notice and cure
provisions; or
. some events of bankruptcy, insolvency, receivership or liquidation of the
trust.
Unless otherwise specified in the applicable prospectus supplement, the
indenture generally entitles noteholders to principal only to the extent of
amounts deposited in the distribution account. Therefore, the failure to pay
principal on a class of notes generally will not result in the occurrence of an
Event of Default until the final scheduled payment date for the class of notes.
If an Event of Default should occur and be continuing with respect to the
notes, the indenture trustee or holders of the controlling securities
evidencing not less than 50% of the voting rights of the controlling securities
may immediately declare the notes due and payable. This declaration of
acceleration may, under some circumstances, be rescinded by the holders of the
controlling securities evidencing not less than 50% of the voting rights of the
controlling securities.
If the notes are due and payable following an Event of Default, the
indenture trustee may, or at the direction of holders of the controlling
securities evidencing not less than 50% of the voting rights of the controlling
securities shall, institute proceedings to collect amounts due or foreclose on
the trust assets, exercise remedies as a secured party, sell the receivables
included or elect to have the trust maintain possession of the receivables and
continue to apply collections on such receivables as if there had been no
declaration of acceleration. The indenture trustee is generally prohibited from
selling the receivables following an Event of Default unless:
. the holders of all the outstanding notes consent to such sale;
. the proceeds of such sale are sufficient to fully pay the outstanding
notes; or
. the indenture trustee determines that the future collections on the
receivables would be insufficient to make payments on the notes and the
indenture trustee obtains the consent of the holders of the controlling
securities evidencing not less than 66 2/3% of the voting rights of the
controlling securities.
As further specified in the applicable prospectus supplement, if an Event of
Default occurs and is continuing with respect to the notes, the indenture
trustee is generally under no obligation to exercise any of its rights or
powers at the request or direction of any of the holders of such notes, if the
indenture trustee reasonably believes it will not be adequately indemnified
against any resulting costs, expenses and liabilities. Subject to the
provisions for indemnification and some limitations contained in the indenture,
the holders of the controlling securities evidencing not less than 50% of the
voting rights of the controlling securities will have the right to direct the
time, method and place of conducting any proceeding or any remedy available to
the indenture trustee. Holders of the controlling securities evidencing not
less than 50% of the voting rights of the controlling securities may,
generally, waive any default with respect to the notes, except a default in the
payment of principal or interest or a default with respect to a covenant or
provision which cannot be modified without the consent of each holder.
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Unless otherwise specified in the applicable prospectus supplement, no
holder of a note will have the right to institute any proceeding with respect
to the indenture, unless:
. the holder previously has given to the indenture trustee written notice
of a continuing Event of Default;
. the holders of the controlling securities evidencing not less than 25% of
the voting rights of the controlling securities have made a written
request to the indenture trustee to institute such proceeding in its own
name as indenture trustee;
. the holder or holders have offered such indenture trustee reasonable
indemnity;
. the indenture trustee has for 60 days failed to institute such
proceeding; and
. no direction inconsistent with the written request has been given to the
indenture trustee during the 60-day period by the holders of the
controlling securities evidencing not less than 50% of the voting rights
of the controlling securities.
In addition, the indenture trustee and the holders of notes, by accepting
such notes, will covenant that they will not at any time institute against the
trust any bankruptcy, reorganization or other proceeding under any federal or
state bankruptcy or similar law.
If an Event of Default shall occur, to the extent the Indenture Trustee has
a conflicting interest including, without limitation, affiliation with any
underwriter of a series as described in the Trust Indenture Act of 1939, as
amended, the Indenture Trustee shall resign as required thereby.
Material Covenants
A trust may not consolidate with or merge into any other entity, unless the
trust meets specific conditions, including that the rating of the notes then in
effect would not be reduced or withdrawn by the rating agencies rating the
notes as a result of such merger or consolidation.
Each trust will make negative covenants. Unless otherwise specified in the
related prospectus supplement, these covenants generally provide that a trust
will not:
. sell, transfer, exchange or otherwise dispose of any of the trust assets,
except as expressly permitted by the trust documents or some related
documents with respect to the trust;
. claim any credit on or make any deduction from the principal and interest
payable in respect of the notes, other than amounts withheld under the
Internal Revenue Code or applicable state law, or assert any claim
against any present or former holder of such notes because of the payment
of taxes levied or assessed upon the trust;
. dissolve or liquidate in whole or in part;
. permit the validity or effectiveness of the indenture to be impaired or
permit any person to be released from any covenants or obligations with
respect to the notes under the indenture except as may be expressly
permitted by the indenture;
. permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance to be created on or extend to or otherwise arise upon
or burden the trust assets or any part of the trust assets, or any
interest in the trust assets or the proceeds of the trust assets, except
for certain permitted liens; or
. permit the lien of the indenture not to constitute a valid first priority
security interest, except for certain permitted liens.
Each trust will engage only in the activities specified in this prospectus.
A trust will not incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the notes, the indenture or other related
documents.
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Annual Compliance Statement
The indenture requires the trust to file annually with the indenture trustee
a written statement as to the fulfillment of its obligations under the
indenture.
Indenture Trustee's Annual Report
The indenture requires the indenture trustee, if required by the Trust
Indenture Act of 1939, to mail each year to all noteholders a brief report
relating to its eligibility and qualification to continue as indenture trustee
under the indenture, any amounts advanced by it under the indenture, the
amount, interest rate and maturity date of some indebtedness owing by the trust
to the indenture trustee in its individual capacity, the property and funds
physically held by such indenture trustee as such and any action taken by it
that materially affects the notes and that has not been previously reported.
Modification of Indenture
Unless otherwise specified in the applicable prospectus supplement, the
trust and the indenture trustee may, with the consent of the holders of the
controlling securities evidencing not less than 50% of the voting rights of the
controlling securities, execute a supplemental indenture to add provisions to,
change in any manner or eliminate any provisions of, the indenture, or modify
in any manner the rights of the noteholders, except as provided below.
Unless otherwise specified in the applicable prospectus supplement, the
consent of each holder of outstanding notes affected thereby will generally be
required to:
. change the due date of any installment of principal of or interest on any
such note, reduce its principal amount, interest rate or the redemption
price;
. impair the right to institute suit for the enforcement of some provisions
of the indenture regarding payment or otherwise terminate or impair the
lien of the indenture trustee on the trust assets;
. reduce the percentage of the aggregate amount of the outstanding notes
required to consent to supplemental indentures or to waive compliance or
defaults;
. liquidate the receivables when the proceeds of such sale would be
insufficient to fully pay outstanding notes; or
. terminate the lien of the indenture on any collateral or deprive the
holder of the security afforded by the lien of the indenture.
Unless otherwise specified in the applicable prospectus supplement, the
trust and the indenture trustee may also enter into supplemental indentures,
without obtaining the consent of the noteholders for the purpose of, among
other things, adding any provisions to or changing in any manner or eliminating
any of the provisions of the indenture or of modifying in any manner the rights
of such noteholders; provided that, except with respect to amendments which
merely amplify descriptions of property, evidence succession of the issuer, add
to the covenants of the issuer, convey or transfer property to the indenture
trustee, cure any ambiguity or inconsistency in the indenture, evidence and
provide for a successor trustee or modify provisions necessary under applicable
law, which amendments only require prior notice to each rating agency, such
action will not materially and adversely affect the interest of any such
noteholder as evidenced by an officer's certificate to that effect and
confirmation from each rating agency then rating the related notes (other than
Moody's, but with prior notice to Moody's) that the amendment will not result
in a reduction in or withdrawal of its rating.
Satisfaction and Discharge of Indenture
An indenture will be discharged with respect to the trust assets securing a
series of notes upon the delivery to the indenture trustee for cancellation of
all such notes or, with some limitations, upon deposit with such indenture
trustee of funds sufficient for the payment in full of all such notes.
The Indenture Trustee
The indenture trustee may resign at any time, in which event the servicer
will appoint a successor trustee. The issuer may also remove any indenture
trustee if that indenture trustee ceases to be eligible to continue as an
32
indenture trustee under the indenture or if that indenture trustee becomes
insolvent. In those circumstances, the issuer will appoint a successor trustee
for the notes. Any resignation or removal of the indenture trustee and
appointment of a successor trustee does not become effective until acceptance
of the appointment by the successor trustee.
DESCRIPTION OF THE CERTIFICATES
With respect to each trust that issues certificates, one or more classes of
certificates of the related series will be issued pursuant to the terms of a
pooling and servicing agreement or trust agreement, the forms of which have
been filed as exhibits to the registration statement of which this prospectus
forms a part. This summary does not purport to be complete.
Distributions of Principal and Interest
The timing and priority of distributions, seniority, allocations of losses,
interest rate and amount of or method of determining distributions with respect
to principal and interest of each class of certificates will be described in
the related prospectus supplement. Distributions of interest on the
certificates will be made on the dates specified in the related prospectus
supplement and will be made prior to distributions with respect to principal of
the certificates. To the extent provided in the related prospectus supplement,
a series may include one or more classes of strip certificates entitled to:
. distributions in respect of principal with disproportionate, nominal or
no interest distributions; or
. interest distributions with disproportionate, nominal or no distributions
in respect of principal.
Each class of certificates may have a different interest rate, which may be
a fixed, variable or adjustable interest rate, and which may be zero for some
classes of certificates or any combination of the foregoing. The related
prospectus supplement will specify the interest rate for each class of
certificates of a series or the method for determining the interest rate.
Unless otherwise provided in the related prospectus supplement, distributions
in respect of the certificates of a series that includes notes may be
subordinate to payments in respect of the notes as more fully described in the
related prospectus supplement. Distributions in respect of interest on and
principal of any class of certificates will be made on a pro rata basis among
all the certificateholders of such class.
In the case of a series of certificates which includes two or more classes
of certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal, and any schedule or formula
or other provisions applicable to the determination of the order, priority of
payment or amount of each class shall be as set forth in the related prospectus
supplement. A series with certificates may provide for a revolving period,
during which collections of principal on the receivables are not applied to
distributions on the related securities, or may provide for a liquidity
facility or similar arrangement that permits one or more classes of the related
securities to be paid in planned amounts on scheduled distribution dates. The
aggregate initial principal amount of the certificates and the notes, if any,
of a series may, after giving effect to the purchase of all additional
receivables, if any, for a series be greater or less than the aggregate initial
principal balance of the receivables in that series.
SOME LEGAL ASPECTS OF THE RECEIVABLES
The transfer of receivables by World Omni Financial Corp. to the seller, and
by the seller to the trust, the perfection of the security interests in the
receivables and the enforcement of rights to realize on the financed vehicles
as collateral for the receivables are subject to a number of federal and state
laws, including the Uniform Commercial Code as in effect in various states.
33
Interests in the Receivables
The trust will appoint the servicer as custodian of the receivables and all
related documents. The servicer will not physically segregate the receivables
from the servicer's other receivables or other receivables that the servicer
services for others. However, Uniform Commercial Code financing statements
reflecting the sale and assignment of the receivables by World Omni Financial
Corp. to the seller and by the seller to the trust will be filed, and the
respective accounting records and computer files of World Omni Financial Corp.
and the seller will reflect the sale and assignment. The receivables will
remain in the possession of the servicer and will not be stamped or otherwise
marked to reflect the assignment to the trustee. If, through inadvertence or
fraud, a third party purchases, including the taking of a security interest in,
a receivable for new value in the ordinary course of its business, without
actual knowledge of the trust's interest, and takes possession of a receivable,
this purchaser would acquire an interest in the receivable superior to the
interest of the trust.
The seller will take no action to perfect the rights of the trustee in
proceeds of any insurance policies covering individual financed vehicles or
obligors. Therefore, the rights of a third party with an interest in the
proceeds could prevail against the rights of the trust prior to the time the
proceeds are deposited by the servicer into a Trust Account.
Security Interests in the Financed Vehicles
In states in which retail installment sale contracts evidence the credit
sale of financed vehicles by dealers to obligors, the contracts also constitute
personal property security agreements and include grants of security interests
in the vehicles under the applicable Uniform Commercial Code. Perfection of
security interests in the financed vehicles is generally governed by the motor
vehicle registration laws of the state in which the vehicle is located. In all
states in which the receivables have been originated, a security interest in
financed vehicles is perfected by obtaining the certificate of title to the
financed vehicle or notation of the secured party's lien on the vehicle's
certificate of title.
Unless the related prospectus supplement specifies otherwise, each
receivable will name World Omni Financial Corp. as obligee or assignee and as
the secured party. World Omni Financial Corp. also takes all actions necessary
under the laws of the state in which the financed vehicle is located to perfect
World Omni Financial Corp.'s security interest in the financed vehicle,
including, where applicable, having a notation of its lien recorded on the
vehicle's certificate of title. The obligors on the receivables will not be
notified of the sale from World Omni Financial Corp. to the seller, or the sale
from the seller to the trust, and no action will be taken to record the
transfer of the security interest from World Omni Financial Corp., directly or
indirectly, to the seller or from the seller to the trust by amendment of the
certificates of title for the financed vehicles or otherwise.
Perfection
World Omni Financial Corp. will transfer and assign its security interest in
the related financed vehicles to the seller, and the seller will transfer and
assign its security interest in the financed vehicles to the related trust.
However, because of the administrative burden and expense, neither World Omni
Financial Corp. nor the seller will amend the certificates of title of the
financed vehicles to identify the related trust as the new secured party.
In most states, these assignments are an effective conveyance of a security
interest without amendment of any lien noted on a vehicle's certificate of
title, and the assignee succeeds to the assignor's rights as secured party.
However, by not identifying the trust as the secured party on the certificate
of title, the security interest of the trust in the vehicle could be defeated
through fraud or negligence.
Continuation of Perfection
Under Article 9 of the Uniform Commercial Code, if a vehicle owner applies
for a new certificate of title for the vehicle in a state other than the state
in which the vehicle is initially titled, the security interest in the vehicle
would generally continue to be perfected against a subsequent purchaser for
value until the earlier of four months after the date the owner applies for the
new certificate of title in the new state or until the termination of
34
perfection in the state in which the vehicle was initially titled. A majority
of states generally require surrender of a certificate of title to re-register
a vehicle. Accordingly, a secured party must surrender possession if it holds
the certificate of title to the vehicle. In the case of a vehicle registered in
a state providing for the notation of a lien on the certificate of title but
not possession by the secured party, the secured party will receive notice of
surrender if the security interest is noted on the certificate of title. Thus,
the secured party will have the opportunity to re-perfect its security interest
in the vehicle in the state of relocation. In states that do not require a
certificate of title for registration of a motor vehicle, re-registration could
defeat perfection. Under each sale and servicing agreement or pooling and
servicing agreement, the servicer will be obligated to take appropriate steps,
at the servicer's expense, to maintain perfection of security interests in the
financed vehicles and will be obligated to purchase the related receivable if
it fails to do so.
Priority of Certain Liens Arising by Operation of Law
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected security
interest in a financed vehicle. For example, federal tax liens may have
priority over the lien of a secured party. The laws of some states and federal
law permit the confiscation of vehicles by government authorities under some
circumstances if used in unlawful activities, which may result in the loss of a
secured party's perfected security interest in the confiscated vehicle.
Repossession
In the event of default by vehicle purchasers, the holder of the motor
vehicle retail installment sale contract has all the remedies of a secured
party under the Uniform Commercial Code, except where specifically limited by
other state laws. Among the Uniform Commercial Code remedies, the secured party
has the right to perform self-help repossession unless the act would constitute
a breach of the peace. Unless the financed vehicle is voluntarily surrendered,
self-help is the most likely method to be used by the servicer and is
accomplished by retaking possession of the financed vehicle. Some jurisdictions
require that the obligor be notified of the default and be given a time period
within which he may cure the default prior to repossession. Generally, the
right of reinstatement may be exercised on a limited number of occasions in any
one-year period. In cases where the obligor objects or raises a defense to
repossession, or if otherwise required by applicable state law, a court order
must be obtained from the appropriate state court, and the vehicle must then be
repossessed in accordance with that order.
Notice of Sale; Redemption Rights
Article 9 of the Uniform Commercial Code requires the secured party to
provide the debtor, secondary obligors and certain other secured parties with
reasonable notice prior to any disposition of the collateral. For consumers,
this notice must:
. describe the collateral, the debtor and the secured party;
. state the method of disposition;
. describe the debtor's right to an accounting of the unpaid debt;
. state the time and place of a disposition or the time after which a
disposition is to be made;
. describe how the debtor may be liable for a deficiency; and
. provide a contact where the debtor may receive additional information or
learn the amount that must be paid to redeem the collateral.
Other state laws may have additional requirements. For example, in
California a secured party must give at least 15 days' notice to anyone liable
on the retail installment contract prior to selling the collateral. Any person
liable on the contract can reinstate the contract within 15 days if certain
conditions are satisfied. This right to reinstate the contract can be exercised
once in any 12 month period and twice during the term of the contract. The
35
obligor has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation plus, in most
jurisdictions, reasonable expenses for repossessing, holding and preparing the
collateral for disposition and arranging for its sale, plus reasonable
attorneys' fees and legal expenses, to the extent provided by agreement and not
prohibited by law, or, in some states, by payment of delinquent installments or
the unpaid balance.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of the vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. Some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness. Other states do not prohibit or limit deficiency judgments.
However, a deficiency judgment is a personal judgment against the obligor for
the shortfall, and a defaulting obligor likely has little capital or sources of
income available following repossession. Therefore, in many cases, deficiency
judgments will provide little or no recoveries.
Courts have applied general equitable principles to secured parties pursuing
repossession and litigation involving deficiency balances. These equitable
principles may have the effect of relieving an obligor from some or all of the
legal consequences of a default.
Occasionally, after resale of a vehicle and payment of all expenses and all
indebtedness, a surplus of funds exist. In that case, the Uniform Commercial
Code requires the creditor to remit the surplus to any other lienholder, with
respect to the vehicle. If no lienholder exists or there are remaining funds,
the Uniform Commercial Code requires the creditor to remit the surplus to the
former owner of the vehicle.
Consumer Protection Laws
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. The application of these laws to particular circumstances is often
unclear and some courts and regulatory authorities have adopted new
interpretations of these often unclear laws. These laws include the
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade
Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the
Fair Debt Collection Procedures Act, the Magnuson-Moss Warranty Act, the
Federal Reserve Board's Regulations B and Z, the Soldiers' and Sailors' Civil
Relief Act of 1940, state adoptions of the National Consumer Act and the
Uniform Consumer Credit Code, state motor vehicle retail installment sales
acts, retail installment sales acts and other similar laws. Also, state laws
impose finance charge ceilings and other restrictions on consumer transactions
and require contract disclosures in addition to those required under federal
law. These requirements impose specific statutory liabilities upon creditors
who fail to comply with their provisions. In some cases, this liability could
affect an assignee's ability to enforce consumer finance contracts or result in
the imposition of penalties in excess of amounts owing on the receivables. If
the trust were obligated to pay any damages, its assets would be directly
reduced, resulting in a potential loss to the securityholders.
Under the laws of some states, finance charges with respect to motor vehicle
retail installment contracts may include the additional amount, if any, that a
purchaser pays as part of the purchase price for a vehicle solely because the
purchaser is buying on credit rather than for cash, which is sometimes referred
to as a cash sale differential. If a dealer charges a differential, applicable
finance charge ceilings could be exceeded.
The "holder-in-due-course rule" of the Federal Trade Commission subjects an
assignee of a seller of goods in a consumer credit transaction and some related
creditors to all claims and defenses that the obligor in the transaction could
assert against the seller of the goods. Other state laws may duplicate the
effect of the holder-in-due-course rule. The holder-in-due-course rule limits
liability to the amounts paid by the obligor under the contract. The holder of
the contract may also be unable to collect any balance remaining due from the
obligor.
36
The holder-in-due-course rule applies to most of the receivables.
Accordingly, the purchaser of the applicable financed vehicle may assert the
same claims or defenses against the related trust as holder of the related
receivables that the purchaser may assert against the seller of the financed
vehicle. The maximum liability under these claims equals the amounts paid by
the obligor on the receivable. If an obligor were successful in asserting any
claim or defense, the claim or defense would constitute a breach of World Omni
Financial Corp.'s warranties under the related purchase agreement and would
create an obligation of World Omni Financial Corp. to repurchase the receivable
unless the breach is cured. We refer you to "Description of the Trust
Documents--Sale and Assignment of Receivables."
In several cases, consumers have asserted that the self-help remedies of
secured parties under the Uniform Commercial Code and related laws violate the
due process protections provided under the 14th Amendment to the Constitution
of the United States. Courts have generally upheld the notice provisions of the
Uniform Commercial Code and related laws as reasonable or have found that the
repossession and resale by the creditor do not involve sufficient state action
to afford constitutional protection to borrowers.
Most state vehicle dealer licensing laws require sellers of vehicles to have
a license to sell vehicles at retail sale. In addition, with respect to used
vehicles, the Federal Trade Commission requires that all sellers of used
vehicles prepare, complete and display a "buyer's guide" which explains the
warranty coverage for the vehicles. Furthermore, federal odometer regulations
promulgated under the Motor Vehicle Information and Cost Savings Act and the
motor vehicle title laws of most states require that all sellers of used
vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. The obligor may be able to assert a defense
against the seller of the financed vehicle if a seller is not properly licensed
or a seller failed to provide a buyer's guide or odometer disclosure statement
to the purchaser of a financed vehicle. If an obligor on a receivable were
successful in asserting any claim or defense, the servicer could pursue on
behalf of the related trust any reasonable remedies against the seller or the
manufacturer of the vehicle.
Under each purchase agreement, World Omni Financial Corp. will have
represented and warranted that each receivable complies with all requirements
of law in all material respects. Accordingly, if an obligor has a claim against
a trust for violation of any law and the claim materially and adversely affects
the trust's interest in a receivable, the violation would constitute a breach
of the warranties of World Omni Financial Corp. and would create an obligation
of World Omni Financial Corp. to repurchase the receivable unless the breach is
cured.
Other Limitations
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or to enforce a deficiency judgment. For example, in
a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a vehicle and, as part of the rehabilitation plan,
may reduce the amount of the secured indebtedness to the market value of the
vehicle at the time of bankruptcy, leaving the creditor as a general unsecured
creditor for the remainder of the indebtedness. A bankruptcy court may also
reduce the monthly payments due under a contract or change the rate of interest
and time of repayment of the indebtedness. In addition, the Soldiers' and
Sailors' Civil Relief Act of 1940, as amended, and similar state legislation
may limit the interest payable on a receivable during an obligor's active duty
in the military. We refer you to "Risk Factors--Receivables that fail to comply
with consumer protection laws may result in losses on your investment" in this
prospectus.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax consequences
of the purchase, ownership and disposition of the securities. However, the
summary does not purport to deal with federal income tax consequences
applicable to all categories of holders, some of which may be subject to
special rules. For example,
37
it does not discuss the tax treatment of noteholders or certificateholders that
are insurance companies, regulated investment companies or dealers in
securities. This discussion is directed to prospective purchasers who purchase
securities in the initial distribution and who hold the securities as "capital
assets" within the meaning of Section 1221 of the Internal Revenue Code of
1986, as amended. Prospective investors are urged to consult their own tax
advisors in determining federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the
securities.
The following summary is based upon current provisions of the Internal
Revenue Code, the Treasury regulations promulgated thereunder, judicial
authority, and ruling authority, all of which are subject to change, which
change may be retroactive. Each trust will be provided with an opinion of
Kirkland & Ellis, special federal tax counsel to the trust, regarding federal
income tax matters discussed below. An opinion of federal tax counsel, however,
is not binding on the IRS or the courts. Moreover, there are no cases or IRS
rulings on similar transactions involving both debt and equity interests issued
by a trust with terms similar to those of the securities. As a result, the IRS
may disagree with all or a part of the discussion below. No ruling on any of
the issues discussed below will be sought from the IRS. Furthermore,
legislative, judicial or administrative changes may occur, perhaps with
retroactive effect, which could affect the accuracy of the statements and
conclusions set forth herein as well as the tax consequences to holders of the
securities. For purposes of the following summary, references to the trust, the
securities and related terms, parties and documents shall be deemed to refer,
unless otherwise specified, to each trust and the securities and related terms,
parties and documents applicable to the trust.
The federal income tax consequences to certificateholders will vary
depending on whether the trust is treated as a partnership, a grantor trust, or
a disregarded entity. The prospectus supplement for each series of certificates
will specify whether the trust will be treated as a partnership, a grantor
trust, or a disregarded entity.
FASITS
Sections 860H through 860L of the Internal Revenue Code provide for the
creation of FASITs. These provisions were effective as of September 1, 1997 and
Treasury regulations were proposed on February 4, 2000, but many technical
issues concerning FASITs remain. To qualify as a FASIT, an entity must meet
certain requirements under Section 860L of the Internal Revenue Code and must
elect such treatment. The applicable sale and servicing agreement or pooling
and servicing agreement and indenture, if applicable, may provide for a FASIT
election with respect to the trust, or be amended in accordance with the
provisions thereof to provide that the seller and trustee will cause a FASIT
election to be made for the trust if the seller delivers to the trustee or the
indenture trustee and, if applicable, the insurer, an opinion of counsel to the
effect that, for federal income tax purposes:
(1) the deemed issuance of FASIT regular interests occurring in connection
with such election will not adversely affect the federal income tax
treatment of the securities;
(2) following such election such trust will not be deemed to be an
association, or publicly traded partnership, taxable as a corporation;
and
(3) such election will not cause or constitute an event in which gain or
loss would be recognized by any securityholder or the trust.
Treatment of Trusts
Tax Characterization of the Trust
A trust which is not treated as a grantor trust and which does not
affirmatively elect to be treated as a corporation will be treated as a
partnership under applicable Treasury regulations as long as there are two or
more beneficial owners and will be ignored as a separate entity where there is
a single beneficial owner of all equity classes of the related series,
including any class of notes treated as equity for federal income tax purposes.
38
Federal tax counsel will deliver its opinion that a trust will not be an
association, or publicly traded partnership, taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption that
the terms of the sale and servicing agreement or pooling and servicing
agreement and indenture and related documents will be complied with, including
the making of no affirmative election to be treated as a corporation. Such
counsel's opinion will also conclude that the nature of the income of the trust
will exempt it from the rule that certain publicly traded partnerships are
taxable as corporations.
If the trust were taxable as a corporation for federal income tax purposes,
the trust would be subject to corporate income tax on its taxable income. The
trust's taxable income would include all its income on the receivables,
possibly reduced by its interest expense on the notes. Any corporate income tax
could materially reduce cash available to make payments on the notes and
distributions on the securities, and certificateholders could be liable for any
tax that is unpaid by the trust.
Tax Consequences to Holders of the Notes
Treatment of the Notes as Indebtedness
The seller will agree, and the noteholders will agree by their purchase of
notes, to treat the notes as debt for federal, state and local income and
franchise tax purposes. Prior to the sale of securities by the related trust,
federal tax counsel will deliver its opinion to the trust with respect to each
series of notes that either:
. the notes of the series will be characterized as debt for federal income
tax purposes; or
. the notes of the series should be characterized as debt for federal
income tax purposes, but if the notes are not characterized as debt, the
notes will be characterized as interests in a partnership.
Except as described below under the heading "--Possible Alternative
Treatment of the Notes," the discussion below assumes that the characterization
of the notes as debt for federal income tax purposes is correct.
Original Issue Discount
The discussion below assumes that all payments on the notes are denominated
in U.S. dollars, and that the notes are not "interest only" or "principal only"
notes. To the extent we offer these notes, the related prospectus supplement
will describe the relevant federal income tax consequences. Moreover, the
discussion assumes that the interest formula for the notes meets the
requirements for "qualified stated interest" under Treasury regulations
relating to debt instruments issued with OID. Finally, the discussion assumes
that any OID on the notes, that is any excess of the principal amount of the
notes over their issue price, is de minimis, or less than 1/4% of their
principal amount multiplied by the weighted average maturity of the notes, all
within the meaning of the OID regulations. If these conditions are not
satisfied with respect to any given series of notes and as a result the notes
are treated as issued with OID, a noteholder would be required to include OID
in 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, to the extent OID has accrued as of the date of
the interest distribution and is not allocated to prior distributions, each
cash distribution would be treated as an amount already included in income 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. 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.
Interest Income on the Notes
Based on the above assumptions, except as discussed below, the notes will
not be considered issued with OID. The stated interest thereon generally will
be taxable to a noteholder as ordinary interest income when received or accrued
in accordance with the noteholder's method of tax accounting. Under the OID
regulations, a
39
holder of a note issued with a de minimis amount of OID generally must include
OID in income, on a pro rata basis, as principal payments are made on the note.
Any prepayment premium paid as a result of a mandatory redemption will be
taxable as ordinary income when it becomes fixed and unconditionally payable. A
purchaser who buys a note for more or less than its principal amount will
generally be subject, respectively, to the premium amortization or market
discount rules of the Internal Revenue Code.
A holder of a Short-Term Note may be subject to special rules. Under the OID
regulations, all stated interest will be treated as OID. An accrual basis
holder of a Short-Term Note and some cash basis holders, including regulated
investment companies, as described in Section 1281 of the Internal Revenue Code
generally would be required to report interest income as OID accrues on a
straight-line basis over the term of each interest period. Cash basis holders
of a Short-Term Note would, in general, be required to report interest income
as interest is paid, or, if earlier, upon the taxable disposition of the
Short-Term Note. However, a cash basis holder of a Short-Term Note reporting
interest income as it is paid may be required to defer a portion of any
interest expense otherwise deductible on indebtedness incurred to purchase or
carry the Short-Term Note until the taxable disposition of the Short-Term Note.
A cash basis taxpayer may elect under Section 1281 of the Internal Revenue Code
to accrue interest income on all nongovernment debt obligations with a term of
one year or less, in which case the taxpayer would include OID on the
Short-Term Note in income as it accrues, but would not be subject to the
interest expense deferral rule referred to in the preceding sentence. Certain
special rules apply if a Short-Term Note is purchased for more or less than its
principal amount.
Market Discount
Whether or not the notes are issued with OID, a subsequent purchaser, that
is a purchaser who acquires a note not at the time of original issue, of a note
at a discount will be subject to the "Market Discount Rules" of Sections 1276
through 1278 of the Internal Revenue Code. In general, these rules provide that
if the holder of a note purchases the note at a market discount, which is a
discount from its original issue price plus any accrued OID that exceeds a de
minimis amount specified in the Internal Revenue Code, and thereafter
recognizes gain upon a disposition or receives a principal payment, the lesser
of:
. the gain or the principal payment; or
. the accrued market discount not previously included in income
will be taxed as ordinary income.
Generally, the accrued market discount for each interest accrual period will
be the total market discount, not previously included in income, on the note
multiplied by a fraction, the numerator of which is the interest or OID, if the
note was issued with more than de minimis OID, for such period and the
denominator of which is the total interest or OID from the beginning of such
period to the maturity date of the note. The holder may elect, however, to
determine accrued market discount under the constant yield method. The adjusted
basis of a note subject to the election will be increased to reflect market
discount included in gross income, thereby reducing any gain or increasing any
loss on a subsequent sale or taxable disposition. Holders should consult with
their own tax advisors as to the effect of making this election.
Limitations imposed by the Internal Revenue Code, which are intended to
match deductions with the taxation of income, may defer deductions for interest
on indebtedness incurred or continued, or short-sale expenses incurred, to
purchase or carry a note with accrued market discount. A noteholder who elects
to include market discount in gross income as it accrues, however, is exempt
from this rule.
Notwithstanding the above rules, market discount on a note will be
considered to be zero if it is less than a de minimis amount, which is 0.25% of
the remaining principal balance of the note multiplied by its expected weighted
average remaining life. If market discount is de minimis, the actual amount of
discount must be allocated to the remaining principal distributions on the
note, and when the distribution is received, capital gain will be recognized
equal to discount allocated to the distribution.
40
Amortizable Bond Premium
In general, if a subsequent purchaser acquires a note at a premium, that is
an amount in excess of the amount payable upon the maturity of the note, the
noteholder will be considered to have purchased the note with "amortizable bond
premium" equal to the amount of the excess. A noteholder may elect to deduct
the amortizable bond premium as it accrues under a constant yield method over
the remaining term of the note. Accrued amortized bond premium may only be used
as an offset against qualified stated interest income when the income is
included in the holder's gross income under the holder's normal accounting
method.
Election to Treat All Interest as Original Issue Discount
A holder may elect to include in gross income all interest that accrues on a
note using a constant yield method. For purposes of this election, interest
includes stated interest, OID, de minimis OID, market discount, de minimis
market discount and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium. In applying the constant yield method to a note
with respect to which this election has been made, the issue price of the note
will equal the electing holder's adjusted basis in the note immediately after
its acquisition, the issue date of the note will be the date of its acquisition
by the electing holder, and no payments on the note will be treated as payments
of qualified stated interest. This election, if made, may not be revoked
without the consent of the IRS. Holders should consult with their own tax
advisors as to the effect of making this election in light of their individual
circumstances.
Sale or Other Disposition
If a noteholder sells a note, the holder will recognize gain or loss in an
amount equal to the difference between the amount realized on the sale and the
holder's adjusted tax basis in the note. The adjusted tax basis of a note to a
particular noteholder will equal the holder's cost for the note, increased by
any market discount, OID and gain previously included by the noteholder in
income with respect to the note and decreased by the amount of premium, if any,
previously amortized and by the amount of principal payments previously
received by the noteholder with respect to the note. Any gain or loss will be
capital gain or loss, except for gain representing accrued interest and accrued
market discount not previously included in income. Capital losses generally may
be used by a corporate taxpayer only to offset capital gains, and by an
individual taxpayer only to the extent of capital gains plus $3,000 of other
income. Capital gains realized by individual taxpayers from the sale or
exchange of capital assets held for more than one year are subject to
preferential rates of tax.
Non-U.S. Holders
Interest paid or accrued to a noteholder who is a Non-U.S. Person generally
will be considered "portfolio interest," and generally will not be subject to
United States federal income tax and withholding tax if the interest is not
effectively connected with the conduct of a trade or business within the United
States by the Non-U.S. Person and the Non-U.S. Person:
. is not actually or constructively a "10 percent shareholder" of the trust
or the seller, including a holder of 10% of the outstanding certificates,
or a "controlled foreign corporation" with respect to which the trust or
the seller is a "related person" within the meaning of the Internal
Revenue Code; and
. provides the trustee or other person who is otherwise required to
withhold U.S. tax with respect to the notes with an appropriate statement
on Form W-8BEN or a similar form signed under penalties of perjury,
certifying that the beneficial owner of the note is a foreign person and
providing the foreign person's name and address.
If the information provided in this statement changes, the Non-U.S. Person
must inform the trust within 30 days of the change. If a note is held through a
securities clearing organization or some other financial institutions, the
organization or institution may provide the relevant signed statement to the
withholding agent; in that case,
41
however, the signed statement must be accompanied by a W-8BEN or substitute
form provided by the Non-U.S. Person that owns the note. If the interest is not
portfolio interest, then it will be subject to United States federal income and
withholding tax at a rate of 30%, unless reduced or eliminated pursuant to an
applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a Non-U.S. Person will be exempt from United
States federal income and withholding tax; provided that:
. the gain is not effectively connected with the conduct of a trade or
business in the United States by the Non-U.S. Person; and
. in the case of an individual Non-U.S. Person, the Non-U.S. Person is not
present in the United States for 183 days or more in the taxable year.
If the interest, gain or income on a note held by a Non-U.S. Person is
effectively connected with the conduct of a trade or business in the United
States by the Non-U.S. Person, the holder, although exempt from the withholding
tax previously discussed if an appropriate statement is furnished, generally
will 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 Internal Revenue Code for the taxable year, as adjusted for certain
items, unless it qualifies for a lower rate under an applicable tax treaty.
Backup Withholding
Each holder of a note, other than an exempt holder such as a corporation,
tax-exempt organization, qualified pension and profit-sharing trust, individual
retirement account or nonresident alien who provides certification as to status
as a nonresident, will be required to provide, under penalties of perjury, a
certificate containing the holder's name, address, correct federal taxpayer
identification number and a statement that the holder is not subject to backup
withholding. Should a nonexempt noteholder fail to provide the required
certification, the trust will be required to withhold 30% for payments made
during 2002 and 2003 (decreasing to 29% during 2004 and 2005, and 28% during
2006 and thereafter) of the amount otherwise payable to the holder and remit
the withheld amount to the IRS as a credit against the holder's federal income
tax liability.
Possible Alternative Treatment of the Notes
In the opinion of federal tax counsel, in the event that any series of notes
were not treated as debt for federal income tax purposes, the series of notes
would be characterized for federal income tax purposes as interests in a
partnership. If any series of the notes did constitute interests in a
partnership, it is expected that stated interest payments on the notes would be
treated either as guaranteed payments under section 707(c) of the Internal
Revenue Code or as a preferential allocation of net income of the trust, with
all other items of trust income, gain, loss, deduction and credit being
allocated to the holders of the securities. Although the federal income tax
treatment of the notes for most accrual basis taxpayers should not differ
materially under the characterization from the treatment of the notes as debt,
the characterization could result in adverse effects for some holders of notes.
For example, holders of notes treated as interests in a partnership could be
subject to tax on income equal to the entire amount of the stated interest
payments on the notes, plus possibly some other items, even though the trust
might not have sufficient cash to make current cash distributions of the
amount. Thus, cash basis holders would in effect be required to report income
in respect of the notes on the accrual basis and holders of the notes could
become liable for taxes on trust income even if they have not received cash
from the trust to pay the taxes. Moreover, income allocable to a holder of a
note treated as a partnership interest that is a pension, profit-sharing,
employee benefit plan, or other tax-exempt entity, including an individual
retirement account, could constitute "unrelated debt-financed income" generally
taxable to a holder under the Internal Revenue Code. In addition, foreign
persons holding the notes could be subject to withholding or required to file a
U.S. federal income tax return and to pay U.S. federal income tax, and, in the
case of a corporation, branch profits tax, on their share of accruals of
guaranteed payments and trust income, and individuals holding the notes might
be subject to some limitations on their ability to deduct their share of trust
expenses.
42
Tax Consequences to Holders of the Certificates
Treatment of the Trust as a Partnership
With respect to each series of certificates identified in the related
prospectus supplement as representing interests in a partnership, the seller
and the servicer will agree, and the certificateholders will agree by their
purchase of certificates, to treat the trust as a partnership for purposes of
federal and state income tax, franchise tax and any other tax measured in whole
or in part by income, with the assets of the partnership being the assets held
by the trust, the partners of the partnership being the certificateholders,
including the seller in its capacity as recipient of distributions from the
Spread Account and any other account specified in the related prospectus
supplement in which the seller has an interest, and the notes being debt of the
partnership. However, the proper characterization of the arrangement involving
the trust, the certificates, the notes, the seller and the servicer is not
clear because there is no authority on transactions closely comparable to those
contemplated herein.
A variety of alternative characterizations are possible. For example,
because the certificates may have some features characteristic of debt, the
certificates might be considered debt of the seller or the trust. Any
characterization should not result in materially adverse tax consequences to
certificateholders as compared to the consequences from treatment of the
certificates as equity in a partnership, described below. The following
discussion assumes that the certificates represent equity interests in a
partnership. The following discussion also assumes that all payments on the
certificates are denominated in U.S. dollars, none of the certificates are
strip securities and a series of certificates includes a single class of
certificates. If these conditions are not satisfied with respect to any given
series of certificates, additional tax considerations with respect to the
certificates will be disclosed in the applicable prospectus supplement.
Partnership Taxation
As a partnership, the trust will not be subject to federal income tax.
Rather, each certificateholder will be required to separately take into account
the holder's accruals of guaranteed payments, if any, from the trust and its
allocated share of other income, gains, losses, deductions and credits of the
trust. The trust's income will consist primarily of interest and finance
charges earned on the receivables, including appropriate adjustments for market
discount, OID and premium, and any gain upon collection or disposition of
receivables. The trust's deductions will consist primarily of interest accruing
with respect to the notes, guaranteed payments, if any, on the certificates,
servicing and other fees, and losses or deductions upon collection or
disposition of receivables.
Under the trust agreement, stated interest payments on the certificates,
including interest on amounts previously due on the certificates but not yet
distributed, will be treated as allocations of net interest income, or in other
words, interest income on the receivables less interest deductions on the
notes, and, to the extent distributions of the stated interest exceed the net
interest income, as "guaranteed payments" under Section 707(c) of the Internal
Revenue Code. Guaranteed payments are payments to partners for the use of their
capital and, in the present circumstances, are treated as deductible to the
trust and ordinary income to the certificateholders. The trust will have a
calendar year tax year and will deduct the guaranteed payments under the
accrual method of accounting. Certificateholders with a calendar year tax year
are required to include the accruals of net interest income and guaranteed
payments in income in their taxable year that corresponds to the year in which
the net income accrues or the trust deducts the guaranteed payments, and
certificateholders with a different taxable year are required to include the
amounts in income in their taxable year that includes the December 31 of the
trust year in which the net income accrues or the trust deducts the guaranteed
payments. It is possible that guaranteed payments will not be treated as
interest for all purposes of the Internal Revenue Code.
In addition, the trust agreement will provide, in general, that the
certificateholders will be allocated taxable income of the trust for each
collection period equal to the sum of:
. any trust income attributable to discount on the receivables that
corresponds to any excess of the principal amount of the securities over
their initial issue price;
. prepayment premium, if any, payable to the certificateholders for the
month; and
. any other amounts of income payable to the certificateholders for the
month.
43
The allocation will be reduced by any amortization by the trust of premium
on receivables that corresponds to any excess of the issue price of securities
over their principal amount. All remaining items of income, gain, loss and
deduction of the trust will be allocated to the seller.
Based on the economic arrangement of the parties, this approach for
allocating trust income and accruing guaranteed payments should be permissible
under applicable Treasury regulations, although no assurance can be given that
the IRS would not require a greater amount of income to be allocated to
certificateholders. Moreover, even under the foregoing method of allocation,
certificateholders may be subject to tax on income equal to the entire amount
of stated interest payments on the certificates plus the other items described
above even though the trust might not have sufficient cash to make current cash
distributions of the amount. Thus, cash basis holders will in effect be
required to report income from the certificates on the accrual basis and
certificateholders may become liable for taxes on trust income even if they
have not received cash from the trust to pay the taxes. In addition, because
tax allocations and tax reporting will be done on a uniform basis for all
certificateholders but certificateholders may be purchasing securities at
different times and at different prices, certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the trust.
Most of the taxable income and guaranteed payments allocated to a
certificateholder that is a pension, profit-sharing or employee benefit plan or
other tax-exempt entity, including an individual retirement account, will
constitute "unrelated debt-financed income" generally taxable to a holder under
the Internal Revenue Code.
An individual taxpayer may generally deduct miscellaneous itemized
deductions which do not include interest expense only to the extent they exceed
two percent of adjusted gross income, and certain additional limitations may
apply. An individual taxpayer's share of expenses of the trust, including fees
to the servicer but not interest expense, would be miscellaneous itemized
deductions. The deductions might be disallowed to the individual in whole or in
part and might result in the holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to the holder over the life of
the trust. It is not clear whether these rules would be applicable to a
certificateholder to the extent it received guaranteed payments.
The trust intends to make all tax calculations relating to income and
allocations to certificateholders on an aggregate basis. If the IRS were to
require that the calculations be made separately for each receivable, the trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on certificateholders.
Discount and Premium
The purchase price paid by the trust for the receivables may be greater or
less than the remaining principal balance of the receivables at the time of
purchase. If so, the receivables will have been acquired at a premium or
discount, as the case may be. As indicated above, the trust will make this
calculation on an aggregate basis, but might be required to recompute it on a
receivable-by-receivable basis.
If the trust acquires the receivables at a market discount or premium, the
trust will elect to include any discount in income currently as it accrues over
the life of the receivables or to offset any premium against interest income on
the receivables. As indicated above, a portion of the market discount income or
premium deduction may be allocated to certificateholders.
Disposition of Certificates
Generally, capital gain or loss will be recognized on a sale of certificates
in an amount equal to the difference between the amount realized and the
seller's tax basis in the certificates sold. A certificateholder's tax basis in
a certificate will generally equal the holder's cost increased by the holder's
share of trust income and accruals of guaranteed payments, includible in income
and decreased by any distributions received with respect
44
to the certificate. In addition, both the tax basis in the certificates and the
amount realized on a sale of a certificate would include the holder's share of
the notes and other liabilities of the trust. A holder acquiring certificates
at different prices may be required to maintain a single aggregate adjusted tax
basis in the
certificates, and, upon sale or other disposition of some of the certificates,
allocate a pro rata portion of the aggregate tax basis to the certificates sold
rather than maintaining a separate tax basis in each certificate for purposes
of computing gain or loss on a sale of that certificate.
Any gain on the sale of a certificate attributable to the holder's share of
unrecognized accrued market discount on the receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The trust does not expect to have any other assets that
would give rise to the special reporting requirements. Thus, to avoid those
special reporting requirements, the trust will elect to include market discount
in income as it accrues.
If a certificateholder is required to recognize an aggregate amount of
income, not including income attributable to disallowed itemized deductions
described above over the life of the certificates that exceeds the aggregate
cash distributions with respect thereto, the excess will generally give rise to
a capital loss upon the retirement of the certificates
Allocations Between Transferors and Transferees
In general, the trust's taxable income and losses will be determined monthly
and the tax items and accruals of guaranteed payments, if any, for a particular
calendar month will be apportioned among the certificateholders in proportion
to the principal amount of certificates owned by them as of the close of the
last day of the month. As a result, a holder purchasing certificates may be
allocated tax items and any accruals of guaranteed payments, which will affect
its tax liability and tax basis, attributable to periods before the actual
transaction.
The use of a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed, or only applies to
transfers of less than all of the partner's interest, taxable income or losses
and accruals of guaranteed payments of the trust might be reallocated among the
certificateholders. The trust's method of allocation between transferors and
transferees may be required to conform to a method permitted by future
regulations.
Section 754 Election
In the event that a certificateholder sells its certificates at a profit or
a loss, the purchasing certificateholder will have a higher or lower basis
respectively in the certificates than the selling certificateholder had. The
tax basis of the trust's assets will not be adjusted to reflect that higher or
lower basis unless the trust were to file an election under Section 754 of the
Internal Revenue Code. In order to avoid the administrative complexities that
would be involved in keeping accurate accounting records, as well as
potentially onerous information reporting requirements, the trust will not make
the election. As a result, certificateholders might be allocated a greater or
lesser amount of trust income than would be appropriate based on their own
purchase price for certificates.
Administrative Matters
The trustee is required to keep or have kept complete and accurate books of
the trust. The books will be maintained for financial reporting and tax
purposes on an accrual basis and the fiscal year of the trust will be the
calendar year. The trustee will file a partnership information return IRS Form
1065 for each taxable year of the trust and will report each
certificateholder's allocable share of items of trust income and expense and
accruals of guaranteed payments to holders and the IRS on Schedule K-1. The
trust will provide the Schedule K-1 information to nominees that fail to
provide the trust with the information statement described below and the
nominees will be required to forward the information to the beneficial owners
of the certificates. Generally, holders must file tax returns that are
consistent with the information return filed by the trust or be subject to
penalties unless the holder notifies the IRS of all the inconsistencies.
45
Under Section 6031 of the Internal Revenue Code, any person that holds
certificates as a nominee at any time during a calendar year is required to
furnish the trust with a statement containing some information on the nominee,
the beneficial owners and the certificates so held. The information includes:
(1) the name, address and taxpayer identification number of the nominee; and
(2) as to each beneficial owner:
. the name, address and taxpayer identification number of the person;
. whether the person is a U.S. Person, a tax-exempt entity or a foreign
government, an international organization, or any wholly-owned agency
or instrumentality of either of the foregoing; and
. some information on certificates that were held, bought or sold on
behalf of the person throughout the year.
In addition, brokers and financial institutions that hold certificates
through a nominee are required to furnish directly to the trust information as
to themselves and their ownership of certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any
information statement to the trust. The information referred to above for any
calendar year must be furnished to the trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the trust
with the information described above may be subject to penalties.
The seller will be designated as the tax matters partner in the trust
agreement and will be responsible for representing the certificateholders in
any dispute with the IRS. The Internal Revenue Code provides for administrative
examination of a partnership as if the partnership were a separate and distinct
taxpayer. Generally, the statute of limitations for partnership items does not
expire before three years after the date on which the partnership information
return is filed. Any adverse determination following an audit of the return of
the trust by the appropriate taxing authorities could result in an adjustment
of the returns of the certificateholders, and, under some circumstances, a
certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the trust. An adjustment could also result in an
audit of a certificateholder's returns and adjustments of items not related to
the income and losses of the trust.
Tax Consequences to Non-U.S. Certificateholders
Under recent amendments to the Internal Revenue Code it appears that the
trust would not be considered to be engaged in the conduct of a trade or
business in the United States for purposes of federal withholding taxes with
respect to Non-U.S. Persons, and, although there is no clear authority dealing
with that issue under facts substantially similar to those described here, the
trust intends to take the position that it is not engaged in the conduct of a
trade or business in the United States. Non-U.S. Persons that are partners in a
partnership that is not engaged in the conduct of a trade or business in the
United States are subject to U.S. withholding tax at a rate of 30 percent
assessed on a gross basis on certain items of fixed or determinable annual or
periodical gains, profits and income earned by the partnership from U.S.
sources that are allocable to the non-U.S. partners. To the extent that any
income earned by a partnership is allocable to partners that are Non-U.S.
Persons, the partnership is obligated to withhold the gross basis tax, unless
the tax is eliminated by an income tax treaty to which the United States is a
signatory or another exemption applies. It is not expected that interest earned
by the trust would qualify as "portfolio interest" that is not subject to U.S.
withholding tax to the extent allocable to a certificateholder that is a
Non-U.S. Person. Assuming then that the trust is not considered to be engaged
in the conduct of a trade or business in the United States, the trust would be
required to withhold U.S. tax on interest earned by the trust on the
receivables that is allocable to certificateholders that are Non-U.S. Persons,
unless the tax is eliminated by an income tax treaty. Non-U.S. Persons holding
certificates will therefore be required to provide to the trustee an IRS Form
W-8BEN or successor form establishing the non-U.S. certificateholder's
entitlement to benefits under an income tax treaty that eliminates U.S.
withholding tax on payments of interest from U.S. sources. Subsequent adoption
of Treasury regulations or the issuance of other administrative pronouncements
may require the trust to change its withholding procedures.
46
Backup Withholding
Distributions made on the certificates and proceeds from the sale of the
certificates will be subject to a "backup" withholding tax of 30% for payments
made during 2002 and 2003 (decreasing to 29% during 2004 and 2005, and 28%
during 2006 and thereafter) if, in general, the certificateholder fails to
comply with certain identification procedures, unless the holder is an exempt
recipient under applicable provisions of the Internal Revenue Code. We refer
you to "--Tax Consequences to Holders of the Notes--Backup Withholding."
Trusts Treated as Grantor Trusts
Tax Characterization of Grantor Trusts
If specified in the related prospectus supplement, Kirkland & Ellis will
deliver its opinion that the trust will not be classified as an association
taxable as a corporation and that such trust will be classified as a grantor
trust under subpart E, Part I of subchapter J of the Internal Revenue Code. In
this case, beneficial owners of grantor trust certificates will be treated for
federal income tax purposes as owners of a portion of the trust's assets as
described below. The certificates issued by a trust that is treated as a
grantor trust are referred to as grantor trust certificates.
If the IRS were to contend successfully that the trust is not a grantor
trust, the trust should be classified for federal income tax purposes as a
partnership which is not taxable as a corporation. The income reportable by the
holders of such certificates as partners could differ from the income
reportable by the holders of such certificates as grantors of a grantor trust.
However, it is not expected that such differences would be material.
Characterization of Certificates
Each grantor trust certificateholder will be treated as the owner of a pro
rata undivided interest in the interest and principal portions of the trust
represented by the grantor trust certificates and will be considered the
equitable owner of a pro rata undivided interest in each of the receivables in
the trust. Any amounts received by a grantor trust certificateholder in lieu of
amounts due with respect to any receivable because of a default or delinquency
in payment will be treated for federal income tax purposes as having the same
character as the payments they replace.
Each grantor trust certificateholder will be required to report on its
federal income tax return in accordance with such grantor trust
certificateholder's method of accounting its pro rata share of the entire
income from the receivables in the trust represented by grantor trust
certificates, including interest, OID, if any, prepayment fees, assumption
fees, any gain recognized upon an assumption and late payment charges received
by the servicer. Under Internal Revenue Code Section 162 or 212, each grantor
trust certificateholder will be entitled to deduct its pro rata share of
servicing fees, prepayment fees, assumption fees and late payment charges
retained by the servicer, provided that such amounts are reasonable
compensation for services rendered to the trust. Grantor trust
certificateholders that are individuals, estates or trusts will be entitled to
deduct their share of expenses only to the extent such expenses plus all other
miscellaneous itemized deductions exceed two percent of their respective
adjusted gross incomes. A grantor trust certificateholder using the cash method
of accounting must take into account its pro rata share of income and
deductions as and when collected by or paid to the servicer. A grantor trust
certificateholder using an accrual method of accounting must take into account
its pro rata share of income and deductions as they become due or are paid to
the servicer, whichever is earlier. If the servicing fees paid to the servicer
are deemed to exceed reasonable servicing compensation, the amount of such
excess could be considered as an ownership interest retained by the servicer,
or any person to whom the servicer assigned for value all or a portion of the
servicing fees, in a portion of the interest payments on the receivables. The
receivables would then be subject to the "coupon stripping" rules of the
Internal Revenue Code discussed below.
Stripped Bonds and Stripped Coupons
Although the tax treatment of stripped bonds is not entirely clear, based on
recent guidance by the IRS, it appears that each purchaser of a grantor trust
certificate that bears non-pro rata portions of the principal and
47
interest payment on the receivables will be treated as the purchaser of a
stripped bond or stripped coupon, which generally should be treated as a single
debt instrument issued on the day it is purchased for purposes of calculating
any OID. Generally, under Treasury regulations issued under Section 1286 of the
Internal Revenue Code, if the discount on a stripped bond is larger than a de
minimis amount, as calculated for purposes of the OID rules of the Internal
Revenue Code, such stripped bond will be considered to have been issued with
OID. For these purposes, OID is the excess of the "stated redemption price at
maturity," generally, principal and any interest which is not "qualified stated
interest" of a debt instrument over its issue price. We refer you to
"--Original Issue Discount" below. Based on the preamble to the Section 1286
Treasury Regulations, federal tax counsel is of the opinion that, although the
matter is not entirely clear, the interest income on the certificates at the
sum of the pass-through rate and the portion of the servicing fee rate that
does not constitute excess servicing will be treated as "qualified stated
interest" within the meaning of the Section 1286 Treasury Regulations and such
income will be so treated in the trustee's tax information reporting. It is
possible that the treatment described in this paragraph will apply only to that
portion of the receivables in a particular trust as to which there is "excess
servicing" and that the remainder of such receivables will not be treated as
stripped bonds, but as undivided interests as described above. As further
provided in the applicable prospectus supplement, it is not anticipated that
grantor trust certificates which are stripped bonds will be issued with greater
than de minimis OID. Stripped coupons will have OID equal to the excess of all
anticipated payments thereon over their issue price, and that OID will not be
de minimis.
Original Issue Discount
The rules of the Internal Revenue Code relating to OID, currently Sections
1271 through 1273 and 1275, will be applicable to a grantor trust
certificateholder that acquires an undivided interest in a stripped bond or
stripped coupon issued or acquired with OID, and this person must include in
gross income the sum of the "daily portions," as defined below, of the OID on
such stripped bond or stripped coupon for each day on which it owns a
certificate, including the date of purchase but excluding the date of
disposition. Because payments on such stripped bonds and stripped coupons may
be accelerated by prepayments on the underlying obligations, OID will be
determined as required under Internal Revenue Code Section 1272(a)(6). Pursuant
to Internal Revenue Code Section 1272(a)(6), OID accruals will be calculated
based on a constant interest method and a prepayment assumption indicated in
the prospectus supplement. In the case of an original grantor trust
certificateholder, the daily portions of OID generally would be determined as
follows. A calculation will be made of the portion of OID that accrues on the
stripped bond or stripped coupon during each successive monthly accrual period,
or shorter period in respect of the date of original issue or the final payment
date. This will be done, in the case of each full monthly accrual period, by
adding:
(1) the present value of all remaining payments to be received on the
stripped bond or stripped coupon under the prepayment assumption used in
respect of the grantor trust certificates; and
(2) any payments, other than qualified stated interest, received during such
accrual period, and subtracting from the total the "adjusted issue
price" of the stripped bond or stripped coupon at the beginning of such
accrual period.
No representation is made that the grantor trust certificates will prepay at
any prepayment assumption. The "adjusted issue price" of a stripped bond or
stripped coupon at the beginning of the first accrual period is its issue
price, as determined for purposes of the OID rules of the Internal Revenue
Code, and the "adjusted issue price" of a stripped bond or stripped coupon at
the beginning of a subsequent accrual period is the "adjusted issue price" at
the beginning of the immediately preceding accrual period plus the amount of
OID allocable to that accrual period and reduced by the amount of any payment,
other than qualified stated interest, made at the end of or during that accrual
period. The OID accruing during such accrual period will then be divided by the
number of days in the period to determine the daily portion of OID for each day
in the period. A subsequent grantor trust certificateholder will be required to
adjust its OID accrual to reflect its purchase price, the remaining period to
maturity and, possibly, a new prepayment assumption. The servicer will report
to all grantor trust certificateholders holding stripped bonds or stripped
coupons as if they were original holders.
48
With respect to the receivables, the method of calculating OID as described
above will cause the accrual of OID to either increase or decrease, but never
below zero, in any given accrual period to reflect the fact that prepayments
are occurring at a faster or slower rate than the prepayment assumption used in
respect of the receivables. Subsequent purchasers that purchase grantor trust
certificates at more than a de minimis discount should consult their tax
advisors with respect to the proper method to accrue such OID.
Market Discount
A grantor trust certificateholder that acquires an undivided interest in
receivables may be subject to the market discount rules of Sections 1276
through 1278 to the extent an undivided interest in a receivable or stripped
bond is considered to have been purchased at a "market discount." Generally,
the amount of market discount is equal to the excess of the portion of the
principal amount of such receivable allocable to such holder's undivided
interest over such holder's tax basis in such interest. Market discount with
respect to a grantor trust certificate will be considered to be zero if the
amount allocable to the grantor trust certificate is less than 0.25% of the
grantor trust certificate's stated redemption price at maturity multiplied by
the weighted average maturity remaining after the date of purchase. Treasury
regulations implementing the market discount rules have not yet been issued;
therefore, investors should consult their own tax advisors regarding the
application of these rules and the advisability of making any of the elections
allowed under Internal Revenue Code Section 1276 and 1278. The IRS may require
you to compute market discount on a receivable by receivable basis, based on
the allocation of your purchase price among the receivables based on their fair
market values. However, we will not furnish information to you on a receivable
by receivable basis. Accordingly, if you compute market discount on an
aggregate basis, you may be required by the IRS to recompute such market
discount on a receivable by receivable basis.
The Internal Revenue Code provides that any principal payment, whether a
scheduled payment or a prepayment, or any gain or disposition of a market
discount bond shall be treated as ordinary income to the extent that it does
not exceed the accrued market discount at the time of such payment. The amount
of accrued market discount for purposes of determining the tax treatment of
subsequent principal payments or dispositions of the market discount bond is to
be reduced by the amount so treated as ordinary income.
The Internal Revenue Code also grants the Treasury Department authority to
issue regulations providing for the computation of accrued market discount on
debt instruments, the principal of which is payable in more than one
installment. While the Treasury Department has not yet issued regulations,
rules described in the relevant legislative history will apply. Under those
rules, the holder of a market discount bond may elect to accrue market discount
either on the basis of a constant interest rate or according to one of the
following methods. If a grantor trust certificate is issued with OID, the
amount of market discount that accrues during any accrual period would be equal
to the product of:
(1) the total remaining market discount; and
(2) a fraction, the numerator of which is the OID accruing during the period
and the denominator of which is the total remaining OID at the beginning
of the accrual period.
For grantor trust certificates issued without OID, the amount of market
discount that accrues during a period is equal to the product of:
(1) the total remaining market discount; and
(2) a fraction, the numerator of which is the amount of stated interest paid
during the accrual period and the denominator of which is the total
amount of stated interest remaining to be paid at the beginning of the
accrual period.
For purposes of calculating market discount under any of the above methods
in the case of instruments, such as the grantor trust certificates, that
provide for payments that may be accelerated by reason of prepayments of
49
other obligations securing such instruments, the same prepayment assumption
applicable to calculating the accrual of OID will apply. Because the
regulations described above have not been issued, it is impossible to predict
what effect those regulations might have on the tax treatment of a grantor
trust certificate purchased at a discount or premium in the secondary market.
A holder who acquired a grantor trust certificate at a market discount also
may be required to defer a portion of its interest deductions for the taxable
year attributable to any indebtedness incurred or continued to purchase or
carry such grantor trust certificate purchased with market discount. For these
purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which such market discount is includible in income. If such holder elects to
include market discount in income currently as it accrues on all market
discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Premium
The price paid for a grantor trust certificate by a holder will be allocated
to such holder's undivided interest in each receivable based on each
receivable's relative fair market value, so that such holder's undivided
interest in each receivable will have its own tax basis. A grantor trust
certificateholder that acquires an interest in receivables at a premium may
elect to amortize such premium under a constant interest method. Amortizable
bond premium will be treated as an offset to interest income on such grantor
trust certificate. The basis for such grantor trust certificate will be reduced
to the extent that amortizable premium is applied to offset interest payments.
We cannot tell you whether a reasonable prepayment assumption should be used in
computing amortization of premium allowable under Section 171 of the Internal
Revenue Code. A grantor trust certificateholder that makes this election for a
grantor certificate that is acquired at a premium will be deemed to have made
an election to amortize bond premium with respect to all debt instruments
having amortizable bond premium that such grantor trust certificateholder
acquires during the year of the election or thereafter. We will not furnish
information to you on a receivable by receivable basis. Accordingly, if you
compute premium amortization on an aggregate basis, the IRS may require you to
recompute such premium.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a grantor trust certificate acquired at a premium
should recognize a loss if a receivable prepays in full. The loss is equal to
the difference between the portion of the prepaid principal amount of such
receivable that is allocable to the grantor trust certificate and the portion
of the adjusted basis of the grantor trust certificate that is allocable to
such receivable. If a reasonable prepayment assumption is used to amortize such
premium, it appears that such a loss would be available, if at all, only if
prepayments have occurred at a rate faster than the reasonable assumed
prepayment rate. It is not clear whether any other adjustments would be
required to reflect differences between an assumed prepayment rate and the
actual rate of prepayments.
Election to Treat All Interest as OID
The OID regulations permit a grantor trust certificateholder to elect to
accrue all interest, discount, including de minimis market discount or OID, and
premium in income as interest, based on a constant yield method. If such an
election were to be made with respect to a grantor trust certificate with
market discount, the certificateholder would be deemed to have made an election
to include in income currently market discount with respect to all other debt
instruments having market discount that such grantor trust certificateholder
acquires during the year of the election or thereafter. Similarly, a grantor
trust certificateholder that makes this election for a grantor trust
certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such grantor trust certificateholder owns or
acquires. We refer you to "--Premium" above. The election to accrue interest,
discount and premium on a constant yield method with respect to a grantor trust
certificate is irrevocable.
50
Sale or Exchange of a Grantor Trust Certificate
Sale or exchange of a grantor trust certificate prior to its maturity will
result in gain or loss equal to the difference, if any, between the amount
received and the owner's adjusted basis in the grantor trust certificate. Such
adjusted basis generally will equal the seller's purchase price for the grantor
trust certificate, increased by the OID and any market discount included in the
seller's gross income with respect to the grantor trust certificate, and
reduced by any market premium amortized by the seller and by principal payments
on the grantor trust certificate previously received by the seller. Such gain
or loss will be capital gain or loss to an owner for which a grantor trust
certificate is a "capital asset" within the meaning of Section 1221 of the
Internal Revenue Code, except in the case of gain attributable to accrued
market discount, as noted above under "--Market Discount," and, with respect to
noncorporate owners, will be short-term or long-term, depending on weather the
grantor trust certificate has been held for 12 months or less, or more than 12
months respectively. Long-term capital gain tax rates of noncorporate owners
provide a reduction as compared with short-term capital gains, which are taxed
at ordinary income tax rates.
Grantor trust certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1) of the Internal Revenue Code, so that gain or loss
recognized from the sale of a grantor trust certificate by a bank or a thrift
institution to which such section applies will be treated as ordinary income or
loss.
Non-U.S. Persons
Interest or OID paid to Non-U.S. Persons who own grantor trust certificates
will be treated as "portfolio interest" for purposes of United States
withholding tax. This interest, including OID, if any, attributable to the
underlying receivables will not be subject to the normal 30%, or any lower rate
provided for by an applicable tax treaty, withholding tax imposed on such
amounts provided that:
(1) the Non-U.S. Person is not a "10% shareholder" within the definition of
Section 871(h)(3) of any obligor on the receivables; and is not a
controlled foreign corporation within the definition of Section 957
related to any obligor on the receivables; and
(2) such certificateholder fulfills certain certification requirements.
Under these requirements, the certificateholder must certify, under penalty
of perjury, that it is not a U.S. person and must provide its name and address.
If, however, such interest or gain is effectively connected to the conduct of a
trade or business within the U.S. by such certificateholder, such owner will be
subject to U.S. federal income tax thereon at graduated rates. Potential
investors who are not U.S. persons should consult their own tax advisors
regarding the specific tax consequences of owning a certificate. See "Tax
Consequences to the Holders of the Notes--Non-U.S. Holders" above for a further
discussion of these rules.
Information Reporting and Backup Withholding
The servicer will furnish or make available, within a reasonable time after
the end of each calendar year, to each person who was a grantor trust
certificateholder at any time during such year, such information as the
servicer deems necessary or desirable to assist grantor trust
certificateholders in preparing their federal income tax returns, or to enable
holders to make such information available to beneficial owners or financial
intermediaries that hold grantor trust certificates as nominees on behalf of
beneficial owners. If a holder, beneficial owner, financial intermediary or
other recipient of a payment on behalf of a beneficial owner fails to supply a
certified taxpayer identification number or if the Secretary of the Treasury
determines that such person has not reported all interest and dividend income
required to be shown on its federal income tax return, 30% for payments made
during 2002 and 2003 (decreasing to 29% during 2004 and 2005, and 28% during
2006 and thereafter) backup withholding may be required with respect to any
payments. Any amounts deducted and withheld from a distribution to a recipient
would be allowed as a credit against such recipient's federal income tax
liability.
51
Trusts Treated as Disregarded Entities
With respect to certificates identified in the related prospectus supplement
as being entirely owned by the seller, the seller and the servicer will agree,
pursuant to the "check-the-box" Treasury Regulations, to treat the trust as a
division of the seller, and hence a disregarded entity, for federal income tax
purposes. In other words, for federal income tax purposes, the seller will be
treated as the owner of all the assets of the trust and the obligor of all the
liabilities of the trust. Under the "check-the-box" Treasury Regulations,
unless it is treated as a grantor 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. If the trust is
classified as a disregarded entity when all its equity interests are
wholly-owned by the seller and if certificates are then sold or issued in any
manner which results in there being more than one certificateholder, the trust
will be treated as a partnership.
If certificates are issued to more than one person, the seller 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, including the seller, and the notes
being debt of such partnership.
The federal tax discussion set forth above is included for general
information only and may not be applicable to your particular tax situation.
You should consult your tax advisor with respect to the tax consequences of the
purchase, ownership and disposition of securities, including the tax
consequences under state, local and foreign and other tax laws and the possible
effects of changes in federal or other tax laws.
ERISA CONSIDERATIONS
The prospectus supplement for each series of securities will summarize,
subject to the limitations discussed in each prospectus supplement,
considerations under Employee Retirement Income Security Act of 1974, as
amended, relevant to the purchase of the securities by employee benefit plans
and individual retirement accounts.
PLAN OF DISTRIBUTION
The securities offered hereby and by means of the related prospectus
supplements will be offered through one or more of the methods described below.
The prospectus supplement with respect to each series of securities will
describe the method of offering of the series of securities, including the
initial public offering or purchase price of each class of securities or the
method by which the price will be determined and the net proceeds to the seller
of the sale.
The offered securities will be offered through the following methods from
time to time and offerings may be made concurrently through more than one of
these methods, or an offering of a particular series of securities may be made
through a combination of two or more of these methods:
. by negotiated firm commitment underwriting and public reoffering by
underwriters specified in the applicable prospectus supplement;
. by placements by the seller with investors through dealers; and
. by direct placements by the seller with investors.
As more fully described in the prospectus supplement, if underwriters are
used in a sale of any offered securities, the securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices to be determined at the time of sale or at
the time of commitment of the sale. Firm commitment underwriting and public
reoffering by underwriters may be done through underwriting syndicates or
through one
52
or more firms acting alone. The specific managing underwriter or underwriters,
if any, with respect to the offer and sale of the offered securities of a
particular series will be described on the cover of the related prospectus
supplement and the members of the underwriting syndicate, if any, will be named
in the prospectus supplement. If so specified in the related prospectus
supplement, the offered securities will be distributed in a firm commitment
underwriting, subject to the terms and conditions of the underwriting
agreement, by the underwriters named in the underwriting agreement. The
prospectus supplement will describe any discounts and commissions to be allowed
or paid by the seller to the underwriters, any other items constituting
underwriting compensation and any discounts and commissions to be allowed or
paid to the dealers. The obligations of the underwriters will be subject to
certain conditions precedent. The underwriters with respect to a sale of any
class of securities will be obligated to purchase all the securities if any are
purchased.
The seller and World Omni Financial Corp. will agree to indemnify the
underwriters against certain civil liabilities, including liabilities under the
Securities Act of 1933, as amended, or will contribute to payments required to
be made in respect of the civil liabilities.
The place and time of delivery for any series of securities in respect of
which this prospectus is delivered will be described in the accompanying
prospectus supplement. To the extent specified in the prospectus supplement for
the related series, the seller or its affiliates may retain some of the classes
of securities.
FINANCIAL INFORMATION
Certain specified trust assets will secure each series of securities. No
trust will engage in any business activities or have any assets or obligations
prior to the issuance of the related series of securities. Accordingly, no
financial statements with respect to any trust assets will be included in this
prospectus or in the related prospectus supplement.
A prospectus supplement may contain the financial information or financial
statements of any provider of credit enhancement.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to incorporate by reference information that we file with
the SEC. This means that we 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 we file later with
the SEC that is incorporated by reference into 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 a prospectus supplement. Our Annual Report on Form 10-K for
the year ended December 31, 2001, and our Current Reports on Form 8-K filed
with the SEC on February 27, 2002, March 27, 2002, April 29, 2002, May 24,
2002, June 24, 2002, June 26, 2002, July 10, 2002, July 30, 2002, August 28,
2002 and September 27, 2002 are incorporated by reference into and made a part
of this prospectus. We also incorporate by reference into this prospectus any
future annual report, quarterly report, current report or proxy material we
file with the SEC prior to the termination of the offering of the securities
offered by this prospectus.
We will provide without charge to each person to whom a copy of this
prospectus is delivered, upon the written or oral request of the person, a copy
of any and all of the documents incorporated by reference in this prospectus,
not including the exhibits to the documents, unless the exhibits are
specifically incorporated by reference in the documents. Requests for the
copies should be directed to the office of the General Counsel, 190 Jim Moran
Blvd., Deerfield Beach, Florida 33442 (954) 429-2200.
This prospectus and the prospectus supplement for each series are parts of
our registration statement. This prospectus does not contain, and the related
prospectus supplement will not contain, all of the information in our
53
registration statement. For further information, please see our registration
statement and the accompanying exhibits which we have filed with the SEC. This
prospectus and any prospectus supplement may summarize contracts and/or other
documents. For further information, please see the copy of the contract or
other document filed as an exhibit to the registration statement. You can
obtain copies of the registration statement from the SEC upon payment of the
prescribed charges, or you can examine the registration statement free of
charge at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of the material can be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. You can obtain information on the operation of the Public
Reference Section by calling 1-800-732-0330. The SEC also maintains a site on
the World Wide Web at "http://www.sec.gov" at which users can view and download
copies of reports, proxy and information statements and other information filed
electronically through the EDGAR system. Copies of the trust documents relating
to a series of securities will be provided to each person to whom a prospectus
and the related prospectus supplement are delivered, upon written or oral
request directed to our offices at 190 Jim Moran Blvd., Deerfield Beach,
Florida 33442 (954) 429-2200.
LEGAL MATTERS
The validity of the securities offered hereby and certain federal income tax
matters will be passed upon for the seller by Kirkland & Ellis or by other
counsel identified in the related prospectus supplement.
54
GLOSSARY OF TERMS TO THE PROSPECTUS
The following are definitions of terms in this prospectus. References to the
singular form of defined terms in this prospectus include reference to the
plural and vice versa.
"Events of Default" has the meaning, unless otherwise set forth in the
prospectus supplement, set forth in "Description of the Notes-- The Indenture."
"FASIT" means a "financial asset securitization investment trust" created
pursuant to Section 860H through 860L of the Internal Revenue Code.
"Five State Area" means Alabama, Florida, Georgia, North Carolina and South
Carolina.
"JMFE" means JM Family Enterprises, Inc., a Delaware corporation.
"Non-U.S. Person" means a nonresident alien, foreign corporation or other
non-U.S. Person.
"Short-Term Note" means a note which has a fixed maturity date not more than
one year from the issue date of that note.
"Simple Interest Receivable" means a receivable that provides for the
allocation of payments between finance charges and principal based on the
actual date on which a payment is received.
"Trust Accounts" means the collection account, the distribution account, any
pre-funding account, any reserve account and other accounts so identified in
the related prospectus supplement.
"U.S. Person" means:
. a citizen or resident of the United States for U.S. federal income tax
purposes; or
. a corporation or partnership, except to the extent provided in applicable
Treasury regulations, created or organized in or under the laws of the
United States, any state or the District of Columbia, including an entity
treated as a corporation or partnership for U.S. federal income tax
purposes; or
. an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
. a trust if a court within the United States is able to exercise primary
supervision over the administration of such trust, and one or more such
U.S. Persons have the authority to control all substantial decisions of
such trust; or
. to the extent provided in applicable Treasury regulations, certain trusts
in existence on August 20, 1996, which are eligible to elect to be
treated as U.S. Persons.
55
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
[FORM OF PROSPECTUS SUPPLEMENT]
SUBJECT TO COMPLETION, DATED OCTOBER 18, 2002
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 200 .
$
WORLD OMNI AUTO RECEIVABLES TRUST 200 -
ISSUER
WORLD OMNI AUTO RECEIVABLES LLC
SELLER
WORLD OMNI FINANCIAL CORP.
SERVICER
We are offering the following classes of notes by
this prospectus supplement and the prospectus:
[Class A Notes
------------------------------------------------
Class B
Class A-1 Class A-2 Class A-3 Class A-4 Notes]
------------------------------------------------
Principal Amount $ $ $ $ $
Interest Rate % % % % %
Distribution Dates Monthly Monthly Monthly Monthly Monthly
First Payment Date
Final Scheduled Payment Date
Price to Public % % % % %
Underwriting Discount % % % % %
Proceeds to Seller $ $ $ $ $
Credit Enhancement
. A reserve account, with an initial balance of $ .
. Overcollaterization, which as of the closing date
equaled $ .
. The Class B Notes are subordinated to the Class A
Notes.
We will not list the notes on any national securities exchange or on any
automated quotation system of any registered securities association such as
NASDAQ.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Underwriters of the Class A Notes
Underwriters of the Class B Notes
The date of this Prospectus Supplement is , 200
You should carefully consider the risk factors beginning on page S-10 in
this prospectus supplement and on page 3 in the prospectus.
The notes are obligations of World Omni Auto Receivables Trust 200 - and
are backed only by the assets of the trust. The notes are not obligations of
World Omni Auto Receivables LLC, World Omni Financial Corp., any of their
affiliates or any governmental agency.
This prospectus supplement may be used to offer and sell the notes only if
accompanied by the prospectus.
Important Notice about Information Presented in this
Prospectus Supplement and the Accompanying Prospectus
Information about the notes is contained in two separate documents that
progressively provide more detail:
. the accompanying prospectus, which provides general information, some of
which may not apply to the notes; and
. this prospectus supplement, which describes the specific terms of the
notes.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with information that is different from that contained in this
prospectus supplement and the prospectus. The information in this prospectus
supplement is accurate only as of the date of this prospectus supplement.
This prospectus supplement begins with several introductory sections
describing the Series 200 - Notes and the trust in abbreviated form:
Summary of Terms, which gives a brief introduction of the key features of
the notes and a description of the receivables; and
Risk Factors, appearing on page S-10 of this prospectus supplement, which
describes risks that apply to the notes which are in addition to those
described in the prospectus with respect to the securities issued by the trust
generally.
This prospectus supplement and the accompanying prospectus include cross
references to sections in these materials where you can find further related
discussions. The "Tables of Contents" in this prospectus supplement and the
prospectus identify the pages where these sections are located.
You can find definitions of the capitalized terms used in this prospectus
supplement in the "Glossary of Terms to Prospectus Supplement" which appears at
the end of this prospectus supplement and in the "Glossary of Terms to
Prospectus" which appears at the end of the prospectus.
If you require additional information, the mailing address of our principal
executive offices is World Omni Auto Receivables LLC, 190 Jim Moran Blvd.,
Deerfield Beach, Florida 33442 and the telephone number is (954) 429-2200. For
other means of acquiring additional information about us or a series of
securities, see "Incorporation of Certain Information By Reference" beginning
on page 53 of the prospectus.
In this prospectus supplement, the terms "seller," "we," "us" and "our"
refer to World Omni Auto Receivables LLC.
S-2
TABLE OF CONTENTS
Section Page
------- ----
Summary of Terms............................ S-5
Risk Factors................................ S-10
Class B Notes are Subject to Greater Credit
Risk Because the Class B Notes are
Subordinated to the Class A Notes........ S-10
The Holders of Class B Notes May Not Be
Able to Direct the Indenture Trustee
upon an Event of Default under the
Indenture and May Have Limited Rights
upon Nonpayment of Interest.............. S-10
Payment Priorities Increase Risk of Loss or
Delay in Payment to Certain Class A
Notes.................................... S-11
The Notes Are Not Suitable Investments for
All Investors............................ S-11
Limited Assets of The Trust Could Result
in Losses on the Notes................... S-11
Proceeds of the Sale of Receivables May
Not Be Sufficient to Pay Your Notes in
Full; Failure to Pay Principal on Your
Notes Will Not Constitute an Event of
Default until Maturity................... S-11
Prepayment on Receivables Will Cause
Prepayments On Your Notes................ S-12
The Geographic Concentration and
Performance of the Receivables May
Increase the Risk of Loss on Your
Investment............................... S-12
You May Have Difficulty Selling Your
Notes and/or Obtaining Your Desired
Price Due to the Absence of a Secondary
Market................................... S-12
The Trust................................... S-13
General.................................... S-13
Capitalization of the Trust................ S-13
The Owner Trustee.......................... S-13
The Indenture Trustee...................... S-13
Section Page
------- ----
The Receivables Pool................. S-13
Delinquencies, Repossessions and Net
Losses............................ S-15
Prepayment and Yield Considerations.. S-17
Pool Factors and Other Information... S-24
Use of Proceeds...................... S-24
Description of the Notes............. S-24
General............................. S-24
Payments of Interest................ S-24
Payments of Principal............... S-25
Optional Redemption................. S-26
Registration of the Notes............ S-26
Book-Entry Registration............. S-26
Description of the Trust Documents... S-26
Sale and Assignment of Receivables.. S-27
Trust Accounts...................... S-27
Advances............................ S-28
Servicing Compensation.............. S-28
Distributions....................... S-28
Reserve Account..................... S-29
Overcollateralization............... S-30
Indenture........................... S-30
Reports to Noteholders.............. S-31
Description of the Certificates..... S-31
Federal Income Tax Consequences...... S-31
General............................. S-31
Discount and Premium................ S-32
Gain or Loss on Disposition......... S-32
Backup Withholding and Information
Reporting......................... S-33
Withholding Regulations Effective
January 1, 2001................... S-33
State and Local Tax Consequences..... S-33
ERISA Considerations................. S-34
Underwriting......................... S-35
Legal Matters........................ S-36
Glossary of Terms to the Prospectus
Supplement......................... S-37
S-3
[Intentionally Left Blank]
S-4
SUMMARY OF TERMS
The following summary is a short, concise description of the main terms of
the notes. For this reason, the summary does not contain all the information
that may be important to you. You will find a detailed description of the terms
of the notes following this summary and in the prospectus.
Parties and Dates
Issuer
The issuer of the notes is World Omni Auto Receivables Trust 200 - .
Seller
World Omni Auto Receivables LLC, a wholly-owned, special-purpose subsidiary of
World Omni Financial Corp.
The address and telephone number of the seller is:
190 Jim Moran Blvd.
Deerfield Beach, Florida 33442
(954) 429-2200
Servicer
World Omni Financial Corp.
Closing Date
On or about , 200 .
Cutoff Date
, 200 .
Indenture Trustee
Owner Trustee
The Notes
World Omni Auto Receivables Trust 200 - will issue the following securities:
.. % Asset-Backed Notes, Class A-1 in the aggregate original principal amount
of $ ;
.. % Asset-Backed Notes, Class A-2 in the aggregate original principal amount
of $ ;
.. % Asset-Backed Notes, Class A-3 in the aggregate original principal amount
of $ ;
.. % Asset-Backed Notes, Class A-4 in the aggregate original principal amount
of $ ; and
.. % Asset-Backed Notes, Class B in the aggregate original principal amount of
$ .
The aggregate original principal amount of the notes will be $ . The notes
will be issued in minimum denominations of $1,000 and integral multiples of
$1,000, in book-entry form only, through The Depository Trust Company,
Clearstream Banking, societe anonyme, and Euroclear. For more information, read
"Registration of Notes-Book Entry Registration" in this prospectus supplement
and "Description of the Securities-Book Entry Registration" in the prospectus.
Payment Dates
Payments on the notes will generally be made on the day of each month or,
if the day is not a business day, on the next business day. The first
payment date will be , 200 .
Interest
On each payment date, the indenture trustee will remit to the holders of record
of each class of notes, the noteholders as of the related record date, interest
at the interest rate specified on the cover page of this prospectus supplement
with respect to that class of notes on the outstanding principal amount of that
class of notes at the close of business on the preceding payment date. Interest
will accrue on the outstanding principal amount of the notes at the applicable
interest rate during the related interest accrual period, which is from and
including the
S-5
previous payment date to, but excluding, the current payment date. The interest
accrual period for the first payment date will be from and including the
closing date to, but excluding, . Interest on the notes, other than
the Class A-1 Notes, will be calculated on the basis of a 360-day year of
twelve 30-day months. Interest on the Class A-1 Notes will be calculated on the
basis of the actual number of days in the related interest accrual period and a
360-day year. On the initial payment date, the interest payable on each class
of notes will be based on the aggregate original principal amount of each class
of notes and the number of days from and including the closing date to but
excluding , 200 .
Interest payments on the Class A Notes all will have the same priority.
Interest payments on the Class B Notes will be subordinated to the payment of
interest on the Class A Notes. Under the limited circumstances described under
"Description of the Notes--Payment of Interest" in this prospectus supplement,
the Class A Notes will be entitled to receive certain payments of principal
before payments of interest are made on the Class B Notes. In addition, in the
event that the notes are declared to be due and payable due to the occurrence
of an event of default resulting from the failure to make a payment on the
notes, no interest will be payable on the Class B Notes until all principal of
and interest on the Class A Notes has been paid in full.
We refer you to "Description of the Notes--Payments of Interest" in the
prospectus supplement.
Principal
On each payment date, from the amounts allocated to the holders of the notes to
pay principal described in clauses (2) and (5) under "--Priority of Payments"
below, the trust will pay principal of the notes in the following order of
priority:
(1) to the Class A-1 Notes until they are paid in full;
(2) to the other Class A Notes, sequentially to the Class A-2 Notes, the Class
A-3 Notes and the Class A-4 Notes until each class is paid in full, the amount
required to reduce the aggregate principal balance of the Class A Notes to an
amount equal to % of the result of the principal balance of the
receivables as of the last day of the prior calendar month minus the
overcollateralization target amount for that payment date; and
(3) to the Class B Notes, the amount required to reduce the principal balance
of the Class B Notes to an amount equal to % of the result of the
principal balance of the receivables as of the last day of the prior calendar
month minus the overcollateralization target amount for that payment date.
If the notes are declared to be due and payable following the occurrence of an
event of default, the trust will remit 100% of the principal payable on the
notes to the holders of the Class A-1 Notes until paid in full. After the Class
A-1 Notes have been paid in full, the trust will remit 100% of the principal
payable on the notes to the holders of the other Class A Notes pro rata among
the other classes of the Class A Notes based upon their respective unpaid
principal balances until the Class A Notes have been paid in full. After the
Class A Notes are paid in full, the trust will remit 100% of the principal
payable on the notes to the holders of the Class B Notes until the Class B
Notes are paid in full.
All outstanding principal and interest with respect to a class of notes will be
payable in full on its final scheduled payment date. We refer you to
"Description of the Trust Documents--Distributions--Payments to Noteholders" in
this prospectus supplement.
Priority of Payments
On each payment date, funds available for distribution from the receivables
(after the deduction of servicing fees, unpaid servicing fees and reimbursement
of advances, in each case, paid to or retained by the servicer) will be
distributed in the following amounts and order of priority:
(1) interest on the Class A Notes;
(2) principal of the notes in an amount equal to the excess, if any, of (a) the
aggregate outstanding principal balance of the Class A Notes as of the day
immediately preceding that payment date over (b) the aggregate principal
balance of the receivables as of the last day of the prior calendar month;
S-6
(3) interest on the Class B Notes;
(4) to the reserve account, the amount, if any, necessary to fund the reserve
account up to its required amount;
(5) principal of the notes in an amount equal to the excess, if any, of (a) the
sum of the aggregate outstanding principal balance of the notes as of the day
immediately preceding that payment date and the overcollateralization target
amount for that payment date over (b) the aggregate principal balance of the
receivables as of the last day of the prior calendar month less any amounts
allocated to pay principal of the notes under clause (2) above;
(6) distributions to the certificates.
We refer you to "Description of the Trust Documents--Distributions--Payments to
Noteholders" in this prospectus supplement.
Controlling Securities
So long as the Class A Notes are outstanding, the Class A Notes will be the
controlling securities. As a result, holders of these securities generally vote
together as a single class under the indenture. Upon payment in full of the
Class A Notes, the Class B Notes will be the controlling securities.
Servicing
After the sale of the receivables to the trust, World Omni Financial Corp. will
continue to service the receivables. World Omni Financial Corp.'s
responsibilities as servicer will include, among other things, collection of
payments, realization on the receivables and the financed vehicles, monitoring
the performance of the receivables and advancing interest on delinquent
receivables. We refer you to "Description of the Trust Documents--Advances" in
this prospectus supplement for more information on advances. In return for
World Omni Financial Corp.'s services, the trust will pay a fee to World Omni
Financial Corp. out of collections received by the trust. We refer you to
"Description of the Trust Documents--Servicing Compensation" in this prospectus
supplement.
Optional Redemption
The servicer may, at its option, redeem the outstanding notes by purchasing all
the receivables. The servicer may only redeem the notes when the aggregate
principal balance of the receivables is equal to 10% or less of the aggregate
principal balance of the receivables as of the cutoff date. The redemption
price will at least equal the unpaid principal amount of the notes, plus
accrued and unpaid interest.
The Receivables
The primary assets of the trust will be a pool of fixed rate motor vehicle
retail installment sale contracts used to finance new and used automobiles and
light-duty trucks, including the rights to all payments received with respect
to the receivables after the cutoff date. We refer to these contracts as
"receivables."
The receivables in the trust will be sold by World Omni Financial Corp. to
World Omni Auto Receivables LLC, and then by World Omni Auto Receivables LLC to
the trust. The trust will grant a security interest in the receivables and the
other trust property to the indenture trustee on behalf of the noteholders. For
further information about the characteristics of the receivables as of the
cutoff date, see "The Receivables Pool" in this prospectus supplement.
General characteristics of the receivables as of the cutoff date:
Aggregate Principal Balance....................................................
Weighted Average Annual
Percentage Rate..........................................................
Weighted Average Remaining Term
to Maturity (months).....................................................
Weighted Average Original Term
to Maturity (months).....................................................
Latest Scheduled Maturity Date.................................................
Credit Enhancement
Reserve Account
The initial amount deposited in the reserve account on the closing date will be
$ , which
S-7
is % of the aggregate principal balance of the receivables as of the
cutoff date.
The indenture trustee will apply funds in the reserve account to make the
payments in clauses (1) through (3) of "--Priority of Payments" above that are
not covered by collections on the receivables. In addition, on and after the
final scheduled payment date for any class of notes, if any principal amount
remains outstanding, the indenture trustee will apply funds from the reserve
account to repay such class of notes in full.
The amount required to be on deposit in the reserve account is equal to the
lesser of $ and the aggregate outstanding principal balance of the notes.
The reserve account will be replenished, if necessary, to its required amount
with collections on the receivables remaining after making required allocations
of interest and principal payments on the notes.
Subordination of the Class B Notes
The subordination of the Class B Notes to the Class A Notes as described in
this prospectus supplement will provide additional credit enhancement to the
Class A Notes.
Overcollateralization
Overcollateralization represents the amount by which the aggregate principal
balance of the receivables exceeds the principal balance of the notes. The
aggregate principal balance of the receivables as of the cutoff date exceeded
the initial balance of the notes by approximately $ or % of the
aggregate principal balance of the receivables as of the cutoff date. In
general, the dollar amount of overcollateralization will decrease as the
aggregate principal balance of the receivables decreases. The application of
funds according to clause (5) of "--Priority of Payments" above is designed to
increase the level of overcollateralization to a target amount of % of the
aggregate principal balance of the receivables, but not less than $ , as a
result of the payment of more principal on the notes in the first several
months than is paid on the principal of the receivables during the related
period. The overcollateralization will be available to absorb losses on the
receivables that are not otherwise covered by excess collections for the
receivables, if any.
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. In accepting a note, each holder of that
note will agree to treat the note as indebtedness for federal income tax
purposes.
We refer you to "Federal Income Tax Consequences" in the prospectus and in this
prospectus supplement for additional information concerning the application of
federal tax laws to the trust and the notes and to "State and Local Tax
Consequences" in this prospectus supplement for additional information
concerning the application of state tax laws to the trust and the notes.
Erisa Considerations
Subject to the considerations discussed under "ERISA Considerations" in this
prospectus supplement, the notes are eligible for purchase by pension,
profit-sharing or other employee benefit plans, as well as individual
retirement accounts and some types of Keogh Plans.
By its acquisition of a note, each of these entities is deemed to represent
that its purchase and holding of a note will not give rise to a non-exempt
prohibited transaction.
We refer you to "ERISA Considerations" in the prospectus and in this prospectus
supplement.
Ratings of the Notes
It is a condition of issuance of all the notes that the Class A-1 Notes be
rated in the highest short-term rating category by at least two nationally
recognized rating agencies; the Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes be rated "AAA" (or its equivalent) by at least two nationally
recognized rating agencies; and the Class B Notes be rated at least "A" (or its
equivalent) by at least two nationally recognized rating agencies.
S-8
Eligibility of the Class A-1 Notes for Purchase by Money Market Funds
The Class A-1 Notes are structured to be eligible for purchase by money market
funds under Rule 2a-7 under the Investment Company Act of 1940, as amended.
Certificates
The trust will also issue certificates that represent the equity or residual
interest in the trust and the right to receive amounts that remain after the
trust makes full payment of interest on and principal of the notes payable on a
given payment date and required deposits to the reserve account on that payment
date. The seller will initially retain the certificates. This prospectus
supplement and the accompanying prospectus offer only the notes.
S-9
RISK FACTORS
Prospective investors in the notes should consider the following factors and
the additional factors discussed under "Risk Factors" in the prospectus.
Class B Notes are Subject to The Class B Notes bear greater risk than the Class A Notes because
Greater Credit Risk Because the payments of interest on and principal of the Class B Notes is
Class B Notes are Subordinated subordinated in priority to the payment of interest and principal due
to the Class A Notes. on the Class A Notes.
No interest will be paid on the Class B Notes on each payment date
until all accrued and unpaid interest on the Class A Notes has been
paid in full. Under the limited circumstances described under
"Description of the Notes--Payments of Interest" in this prospectus
supplement, the Class A Notes will be entitled to receive specified
payments of principal before payments of interest are made on the
Class B Notes. In addition, if the notes are declared to be due and
payable following the occurrence of an event of default under the
notes resulting from the failure to make a payment on the notes, no
interest will be paid on the Class B Notes until all principal and
interest on the Class A Notes has been paid in full.
No principal payments will be made on the Class B Notes until the
Class A-1 Notes have been paid in full and the required payments of
principal have been made on the other Class A Notes. In addition,
principal payments on the Class B Notes will be subordinated to the
payment in full of principal on the Class A Notes after the notes
have been declared to be due and payable following the occurrence
of an event of default.
This subordination could result in delays or reductions in the
payment of principal of and interest on the Class B Notes, and
investors in the Class B Notes may suffer a loss on their investment.
The Holders of Class B Notes If any event of default occurs under the indenture, only the holders
May Not Be Able to Direct the of the most senior class of notes outstanding, the Class A Notes, or
Indenture Trustee upon an Event after the Class A Notes have been paid in full, the Class B Notes,
of Default under the Indenture may waive the event of default, accelerate the maturity of the notes
and May Have Limited Rights or direct or consent to any action under the indenture or to waive or
upon Nonpayment of Interest. declare a servicer default. The holders of the Class B Notes will not
have any rights to direct or to consent to any action until the Class A
Notes have been paid in full.
The indenture also provides that the failure to pay interest when due
on the Class B Notes will not be an event of default under the
indenture unless and until the Class A Notes have been paid in full.
Until the Class A Notes have been paid in full, the Class B Notes
will not have any right to declare an event of default, cause the
maturity of the notes to be accelerated or to direct or consent to any
action under the indenture as a result of the failure to pay interest
when due on the Class B Notes.
S-10
Payment Priorities Increase Risk of Because the principal of each class of Class A Notes generally will
Loss or Delay in Payment to Certain be paid sequentially, classes of Class A Notes that have higher
Class A Notes. sequential numerical class designations will be outstanding longer
and therefore will be exposed to the risk of losses on the receivables
during periods after other classes of Class A Notes have been
receiving most or all amounts payable on their notes, and after which
a disproportionate amount of credit enhancement may have been
applied and not replenished.
Further, even if there is an event of default and subsequent
acceleration of the notes, principal payments will be made first on
the Class A-1 Notes until they have been paid in full and then pro
rata to the other Class A Notes and then to the Class B Notes. As a
result, the yields of the Class A-2 Notes, the Class A-3 Notes, and
the Class A-4 Notes will be relatively more sensitive to losses on the
receivables and the timing of such losses. If the actual rate and
amount of losses exceeds historical levels, and if the available
overcollateralization and amounts in the reserve account are
insufficient to cover the resulting shortfalls, the yield to maturity on
your notes may be lower than anticipated, and you could suffer a
loss.
The Notes Are Not Suitable The notes may not be a suitable investment if you require a regular
Investments for All Investors. or predictable schedule of payments or payment on any specific date.
The notes are complex investments that should be considered only
by investors who, either alone or with their financial, tax and legal
advisors, have the expertise to analyze the prepayment, reinvestment,
default and market risk, the tax consequences of an investment, and
the interaction of these factors.
Limited Assets of The Trust Could The trust will not have any significant assets or sources of funds to
Result in Losses on the Notes. make payments on the notes other than the receivables and the
reserve account. You must rely upon payments on the receivables
and amounts, if any, in the reserve account for repayment of your
notes. Although funds in the reserve account (1) may be available on
each payment date to cover shortfalls in distributions of interest and
certain distributions of principal on the notes and (2) may be
replenished with collections on the receivables remaining after
making required interest payments and certain principal payments on
the notes, the amounts available in the reserve account are limited. If
the reserve account becomes depleted, the trust will depend solely on
collections on the receivables to make payments on the notes. If
these funds are insufficient to cover shortfalls in payments of interest
and principal, you may suffer losses.
Proceeds of the Sale of Receivables If so directed by the requisite number of holders of the controlling
May Not Be Sufficient to Pay Your securities, following an acceleration of the notes upon an event of
Notes in Full; Failure to Pay Principal default, the indenture trustee will sell the receivables owned by the
on Your Notes Will Not Constitute an trust. However, we cannot assure you that the market value of those
Event of Default until Maturity. receivables will at any time be equal to or greater than the aggregate
outstanding principal amount of the notes. Therefore, upon an event
of default, there may not be sufficient funds available to repay you
S-11
in full. In addition, the amount of principal required to be paid to
you will be limited to amounts available in the collection account
(and the reserve account, if any). Therefore, the failure to pay
principal of your notes will not result in the occurrence of an event
of default until the final scheduled payment date for your notes.
Prepayment on Receivables Principal on each class of notes must be fully paid by the final
Will Cause Prepayments On scheduled payment date for that class of notes. However, because
Your Notes. some prepayments of the receivables are likely and some
receivables have terms to maturity that are shorter than the term to
maturity assumed in calculating each class's final scheduled
payment date, the actual payment of any class of notes may occur
earlier, and could occur significantly earlier, than the class's final
scheduled payment date. Nevertheless, we cannot assure you that
the final distribution of principal of any or all classes of notes will
be earlier than that class' final scheduled payment date. You may
not be able to reinvest any principal repaid to you earlier than you
expected at a rate of return that is equal to or greater than your
expected yield on your notes.
The Geographic Concentration Economic conditions in the states where obligors reside may affect
and Performance of the delinquencies, losses and prepayments on the receivables. The
Receivables May Increase the Risk following economic conditions, among others, may affect payments
of Loss on Your Investment. on the receivables:
. unemployment,
. interest rates,
. inflation rates, and
. consumer perceptions of the economy.
Adverse economic conditions in a state where a large number of
obligors are located could have a disproportionately significant
effect on the delinquency, loss or repossession experience of the
receivables. These negative conditions could also have an effect on
the timing and amount of principal and interest payments on your
notes and you may suffer a loss. As of the cutoff date, World Omni
Financial Corp.'s records indicate that the billing addresses of the
obligors of the receivables were concentrated in .
We refer you to "The Receivables Pool--Geographic Distribution
as of the Cutoff Date" in this prospectus supplement.
You May Have Difficulty The underwriters intend to make a secondary market for the notes,
Selling Your Notes And/or but are not obligated to do so. We cannot assure you that a market
Obtaining Your Desired Price will develop or, if one does develop, that it will provide you with
Due to the Absence of a liquidity of investment or continue for the life of your notes.
Secondary Market.
There have been times in the past when very few buyers of asset-
backed securities existed and there may be similar times in the
future. As a result, you may be unable to obtain the price that you
wish to receive for your notes or you may suffer a loss on your
investment.
S-12
THE TRUST
General
The trust is a business trust that will be formed under the laws of the
State of Delaware under a trust agreement between World Omni Auto Receivables
LLC, a Delaware limited liability company, and as owner
trustee. Before the sale and assignment of the trust assets to the trust, the
trust will have no assets or obligations or any operating history. The trust
will not engage in any business other than:
. acquiring, holding and managing the receivables, the other trust assets
and any proceeds from the receivables and other trust assets;
. issuing and making payments on the notes and certificates; and
. engaging in other activities to accomplish the above.
The trust will initially be capitalized with equity, which does not include
the amounts allocated in the reserve account, equal to $ , which is the
aggregate principal balance of the receivables as of the cutoff date less the
aggregate original principal amount of the notes. The certificates, evidencing
an undivided beneficial interest in the trust that is subordinate to the
interest of the holders of the notes, will be issued to and initially retained
by the seller and are not being offered by this prospectus supplement and
prospectus. The certificates represent the equity interest in the trust.
Capitalization of the Trust
The following table illustrates the capitalization of the trust as of the
cutoff date, as if the issuance and sale of the notes had taken place on that
date:
Class A-1 Notes.. $
Class A-2 Notes..
Class A-3 Notes..
Class A-4 Notes..
Class B Notes....
Certificates.....
--
Total..... $
==
The Owner Trustee
will be the owner trustee under the trust agreement. It is a ,
and its principal offices are located at . The owner trustee will perform
limited administrative functions under the trust agreement.
The Indenture Trustee
will be the indenture trustee under the indenture. It is a and
its corporate trust office is located at .
THE RECEIVABLES POOL
The pool of receivables had an aggregate principal balance of $ as of
the cutoff date. Each receivable is a simple interest receivable. World Omni
Financial Corp. originated or acquired the receivables from dealers in the
ordinary course of business. As of the cutoff date, no more than % of the
aggregate principal balance of the receivables were originated by World Omni
Financial Corp. under a program in which it finances the purchase of a vehicle
that was previously leased from World Omni Financial Corp. or its affiliates.
See "World Omni Financial Corp.'s Automobile Finance Business--Underwriting" in
the prospectus for more information
S-13
on this program. As of the cutoff date, the receivables met the criteria
described in the prospectus under "The Receivables Pool." In addition, as of
the cutoff date, each receivable:
. was secured by a new or used automobile or light-duty truck;
. was originated in the United States;
. provided for level monthly payments that fully amortize the amount
financed over its original term, except for minimal differences in the
first or last months;
. was originated on or prior to ;
. had an original term to maturity of to months and had a
remaining term to maturity of not less than months nor more than
months;
. provided for the payment of a finance charge at a stated annual percentage
rate ranging from % to %;
. did not have a scheduled payment for which $ or more was more than 30
days past due;
. was not due, to the best knowledge of World Omni Financial Corp., from any
obligor who was the subject of a bankruptcy proceeding or was bankrupt or
insolvent;
. was not secured by a financed vehicle that had been repossessed without
reinstatement of the related contract; and
. had a scheduled maturity date not later than .
The following table sets forth information regarding the composition of the
receivables pool as of the cutoff date. The "Weighted Average Annual Percentage
Rate of Receivables," the "Weighted Average Original Term to Maturity" and
"Weighted Average Remaining Term to Maturity" in the table are calculated based
on the principal balance of the receivables.
Composition of the Receivables Pool as of the Cutoff Date
Aggregate Principal Balance........................... $
Number of Receivables.................................
Average Principal Balance............................. $
Average Original Amount Financed...................... $
Range of Original Amount Financed..................... $ to $
Weighted Average Annual Percentage Rate of Receivables %
Range of Annual Percentage Rates...................... % to %
Weighted Average Original Term to Maturity............ months
Range of Original Terms to Maturity................... months to months
Weighted Average Remaining Term to Maturity........... months
Range of Remaining Terms to Maturity.................. months to months
As of the cutoff date, approximately % of the aggregate principal
balance of the receivables, constituting approximately % of the total
number of receivables, represented financings of new vehicles, and
approximately % of the aggregate principal balance of the receivables,
constituting approximately % of the total number of receivables,
represented financings of used vehicles.
The following table sets forth information regarding the geographic
distribution of the receivables as of the cutoff date for the states with the
largest concentrations of receivables. No other state accounts for more
than % of the aggregate principal balance of the receivables. The
breakdown by state is based on the billing address of the obligor on the
receivables. The percentages in the table may not add up to 100% because of
rounding.
S-14
Geographic Distribution of the Receivables as of the Cutoff Date
Percentage of
Percentage of Aggregate Aggregate
Number of Number of Principal Principal
State Receivables Receivables Balance Balance
----- ----------- ------------- --------- -------------
................. % $ %
.................
.................
.................
.................
All Others.......
---------- ------- -- -------
Total..... 100.00% $ 100.00%
========== ======= == =======
The following table sets forth information regarding the distribution of the
receivables by annual percentage rate as of the cutoff date. Percentages in the
table may not add up to 100% because of rounding.
Distribution of the Receivables by Annual Percentage Rate as of the Cutoff Date
Percentage of Percentage
Number of Number of Aggregate Principal of Aggregate
Annual Percentage Rate Range Receivables Receivables Balance Principal Balance
- ---------------------------- ----------- ------------- ------------------- -----------------
3.90-3.99%.......... % $ %
4.00-4.99%..........
5.00-5.99%..........
6.00-6.99%..........
7.00-7.99%..........
8.00-8.99%..........
9.00-9.99%..........
10.00-10.99%........
11.00-11.99%........
12.00-12.99%........
13.00-13.99%........
14.00-14.99%........
15.00-15.99%........
16.00-16.99%........
17.00-17.99%........
18.00%..............
---------- ------ -- ------
Total............ 100.00% $ 100.00%
========== ====== == ======
Delinquencies, Repossessions and Net Losses
The following tables set forth information concerning World Omni Financial
Corp.'s experience with respect to its portfolio of fixed rate motor vehicle
retail installment sale contracts similar to the receivables.
The delinquency figures reported in the tables are calculated as a
percentage of the total number of contracts at period end, but exclude
delinquent bankrupt contracts. As of June 30, 2002, the number of bankrupt
contracts greater than 60 days past due was 1,349. The period of delinquency
used in calculating the tables is based on the number of days payments are
contractually past due. "Repossessions as a Percentage of Average Number of
Contracts Outstanding" and "Net Repossession Losses as a Percentage of Average
Portfolio Outstanding" have been annualized. "Net Repossession Losses," which
include charged off amounts, equal the aggregate principal balances of all
contracts determined to be uncollectable in the period plus accrued but unpaid
interest earned through the point of charge-off, less any recoveries, but does
not include expenses incurred to dispose of vehicles.
S-15
The data presented in the following tables are for illustrative purposes
only. There is no assurance that World Omni Financial Corp.'s delinquency, net
loss and repossession experience with respect to fixed rate retail installment
sale contracts in the future, or the experience of the trust with respect to
the receivables, will be similar to that described below. Losses and
delinquencies are affected by, among other things, general and regional
economic conditions and the supply of and demand for automobiles and light-duty
trucks. The percentages in the tables below have not been adjusted to eliminate
the effect of the growth of World Omni Financial Corp.'s portfolio.
Accordingly, the repossession and net loss percentages would be expected to be
higher than those shown if a group of contracts were isolated for a period of
time and the repossession and net loss data showed the activity only for that
isolated group over the periods indicated.
Delinquency Experience
As of As of December 31,
June 30, -----------------------------------------
2002 2001 2000 1999 1998 1997
-------- ------- ------- ------- ------ ------
Ending Number of Contracts........ 184,654 172,477 142,821 106,337 76,883 56,442
Percentage of Delinquent Contracts
31-60 Days........................ 1.11% 1.30% 1.54% 1.39% 1.82% 1.99%
61-90 Days........................ 0.11% 0.16% 0.17% 0.13% 0.16% 0.25%
91 Days and Over.................. 0.02% 0.05% 0.03% 0.02% 0.02% 0.06%
------- ------- ------- ------- ------ ------
Total...................... 1.24% 1.51% 1.74% 1.54% 2.00% 2.30%
======= ======= ======= ======= ====== ======
Net Loss And Repossession Experience
(Dollars in Thousands)
As of As of December 31,
June 30, ------------------------------------------------------
2002 2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- -------- --------
Ending Net Receivables........... $2,306,952 $2,125,403 $1,712,983 $1,235,065 $818,488 $607,890
Ending Number of Contracts....... 184,654 172,477 142,821 106,337 76,883 56,442
Average Portfolio Outstanding
During the Period.............. $2,206,972 $1,899,790 $1,477,118 $ 985,303 $758,566 $495,091
Average Number of Contracts
Outstanding During the Period.. 178,373 157,390 124,669 88,807 72,772 50,210
Number of Repossessions.......... 1,407 2,695 1,916 1,335 1,300 1,178
Repossessions as a Percentage of
Average Number of Contracts
Outstanding.................... 1.58% 1.71% 1.54% 1.50% 1.79% 2.35%
Net Repossession Losses.......... $ 8,579 $ 18,366 $ 10,855 $ 5,223 $ 6,248 $ 6,293
Net Repossession Losses as a
Percentage of Average Portfolio
Outstanding.................... 0.78% 0.97% 0.73% 0.53% 0.82% 1.27%
S-16
PREPAYMENT AND YIELD CONSIDERATIONS
All of the receivables can be prepaid at any time without charge. For this
purpose, "prepayments" include prepayments in full, liquidations due to
default, as well as receipts of proceeds from physical damage, credit life and
credit accident and health insurance policies and receivables repurchased for
administrative reasons. A variety of economic, social, and other factors may
influence the rate of prepayments on the receivables. In addition, the
receivables may include contracts originated in conjunction with special
financing programs. No assurance can be given as to the prepayment rates on
contracts originated under those programs or otherwise. Noteholders will bear
all reinvestment risk resulting from a faster or slower incidence of prepayment
of receivables. The exercise by the servicer of its option to purchase the
receivables and cause a redemption of the notes under the conditions described
in "Description of the Notes--Optional Redemption" in this prospectus
supplement will also accelerate the payment of the notes.
Prepayments on motor vehicle receivables can be measured relative to a
prepayment standard or model. The absolute prepayment model used in this
prospectus supplement represents an assumed rate of prepayment each month
relative to the original number of contracts in a pool of contracts. The
absolute prepayment model further assumes that all the contracts are the same
size and amortize at the same rate and that each contract in each month of its
life will either be paid as scheduled or be prepaid in full. For example, in a
pool of contracts originally containing 10,000 contracts, a 1% absolute
prepayment model rate means that 100 contracts prepay each month. The absolute
prepayment model does not purport to be a historical description of prepayment
experience or a prediction of the anticipated rate of prepayment of any pool of
contracts, including the receivables.
The tables beginning on page S-19 have been prepared on the basis of the
characteristics of the receivables. Each absolute prepayment model table
assumes that (a) the receivables prepay in full at the specified constant
percentage of the absolute prepayment model monthly, with no defaults, losses
or repurchases, (b) each scheduled monthly payment on the receivables is made
on the last day of each month and each month has 30 days, (c) payments on the
notes are made on each payment date (and each payment date is assumed to be
the day of each applicable month), (d) an assumed settlement date
of and (e) the servicer exercises its option to redeem the outstanding
notes by purchasing all of the receivables when the aggregate principal balance
of the receivables is equal to 10% or less of the aggregate principal balance
of the receivables as of the cutoff date. For purposes of this table, the
receivables have an assumed cutoff date of . Each absolute prepayment
model table indicates the projected weighted average life of each class of
notes and sets forth the percent of the original principal amount of each class
of notes that is projected to be outstanding after each of the payment dates
shown at various constant absolute prepayment model percentages.
The absolute prepayment model tables also assume that (a) the receivables
have been aggregated into four hypothetical pools with the receivables in those
pools having the characteristics set forth below and (b) the level scheduled
monthly payment (which is based on each pool's principal balance, weighted
average annual percentage rate, weighted average original term to maturity and
weighted average remaining term to maturity as of the cutoff date) will be such
that each pool will be fully amortized by the end of its remaining term to
maturity.
Assumed Receivables Characteristics
Weighted Average Weighted Average
Aggregate Weighted Original Term to Remaining Term
Principal Average Annual Maturity (In to Maturity (In
Pool Balance Percentage Rate Months) Months)
---- --------- --------------- ---------------- ----------------
1.. $ %
2.. $ %
3.. $ %
4.. $ %
S-17
The information included in the following tables represents forward-looking
statements and involves risks and uncertainties that could cause actual results
to differ materially from the results hypothesized in the forward-looking
statements. The actual characteristics and performance of the receivables will
differ from the assumptions used in constructing each absolute prepayment model
table. The assumptions used are hypothetical and have been provided only to
give a general sense of how the principal cash flows might behave under varying
prepayment scenarios. For example, it is very unlikely that the receivables
will prepay at a constant level until maturity or that all of the receivables
will prepay at the same level. Moreover, the diverse terms of the receivables
could produce slower or faster principal distributions than indicated in each
absolute prepayment model table at the various constant absolute prepayment
model percentages specified, even if the weighted average remaining term to
maturity and the weighted average seasoning of the receivables are as assumed.
Any difference between these assumptions and the actual characteristics and
performance of the receivables, or actual prepayment experience, will affect
the percentages of initial balances outstanding over time and the weighted
average life of each class of notes.
S-18
Percentage of Original Class A-1 Principal Amount
at Various Absolute Prepayment Model Percentages:
Payment Date 0.50% 1.00% 1.50% 2.00%
------------ - ------ ------ ------ ------
Closing Date........ 100.00% 100.00% 100.00% 100.00%
Weighted Average Life (years)(1)
- --------
(1)The weighted average life of a note is determined by (a) multiplying the
amount of each principal payment of the note by the number of years from the
date of issuance of the note to the related payment date, (b) adding the
results and (c) dividing the sum by the original principal amount of the
note.
S-19
Percentage of Original Class A-2 Principal Amount
at Various Absolute Prepayment Model Percentages:
Payment Date 0.50% 1.00% 1.50% 2.00%
------------ - ------ ------ ------ ------
Closing Date........ 100.00% 100.00% 100.00% 100.00%
Weighted Average Life (years)(1)
- --------
(1)The weighted average life of a note is determined by (a) multiplying the
amount of each principal payment of the note by the number of years from the
date of issuance of the note to the related payment date, (b) adding the
results and (c) dividing the sum by the original principal amount of the
note.
S-20
Percentage of Original Class A-3 Principal Amount
at Various Absolute Prepayment Model Percentages:
Payment Date 0.50% 1.00% 1.50% 2.00%
------------ - ------ ------ ------ ------
Closing Date........ 100.00% 100.00% 100.00% 100.00%
Weighted Average Life (years)(1)
- --------
(1)The weighted average life of a note is determined by (a) multiplying the
amount of each principal payment of the note by the number of years from the
date of issuance of the note to the related payment date, (b) adding the
results and (c) dividing the sum by the original principal amount of the
note.
S-21
Percentage of Original Class A-4 Principal Amount
at Various Absolute Prepayment Model Percentages:
Payment Date 0.50% 1.00% 1.50% 2.00%
- ------------ - ------ ------ ------ ------
Closing Date........ 100.00% 100.00% 100.00% 100.00%
Weighted Average Life (years)(1)
- --------
(1)The weighted average life of a note is determined by (a) multiplying the
amount of each principal payment of the note by the number of years from the
date of issuance of the note to the related payment date, (b) adding the
results and (c) dividing the sum by the original principal amount of the
note.
S-22
Percentage of Original Class B Principal Amount
at Various Absolute Prepayment Model Percentages:
Payment Date 0.50% 1.00% 1.50% 2.00%
------------ - ------ ------ ------ ------
Closing Date........ 100.00% 100.00% 100.00% 100.00%
Weighted Average Life (years)(1)
- --------
(1)The weighted average life of a note is determined by (a) multiplying the
amount of each principal payment of the note by the number of years from the
date of issuance of the note to the related payment date, (b) adding the
results and (c) dividing the sum by the original principal amount of the
note.
S-23
POOL FACTORS AND OTHER INFORMATION
The pool factor with respect to any class of notes is a seven digit decimal
which the servicer will compute each month indicating the outstanding principal
amount of that class of notes as a fraction of the original principal amount of
that class of notes. The pool factor will be 1.0000000 as of the closing date;
thereafter, the pool factor will decline to reflect reductions in the principal
amount of the applicable class of notes. Therefore, if you are a holder of
Class A-1 Notes, your principal amount of the Class A-1 Notes is the product of
(1) the original denomination of your note and (2) the pool factor.
Under the indenture, DTC will receive monthly reports concerning the
payments received on the receivables, the pool factors and various other items
of information. DTC will supply these reports to noteholders in accordance with
its procedures. The indenture trustee will furnish to the noteholders of record
during any calendar year information for tax reporting purposes not later than
the latest date permitted by law. We refer you to "Description of the Trust
Documents--Reports to Noteholders" in this prospectus supplement.
USE OF PROCEEDS
World Omni Auto Receivables LLC will use the net proceeds of the sale of the
notes to purchase the receivables from World Omni Financial Corp.
DESCRIPTION OF THE NOTES
General
The notes will be issued under the terms of an indenture between the issuer
and the indenture trustee, and the certificates will be issued under the terms
of a trust agreement between World Omni Auto Receivables LLC, and the owner
trustee. We have filed forms of the indenture and the trust agreement as
exhibits to the registration statement.
Payments of Interest
Interest on the principal amounts of the classes of the notes will accrue at
the notes' respective per annum interest rates and will be payable to the
noteholders monthly on each payment date, commencing . Payments will be
made to the noteholders of record as of the business day immediately preceding
such payment date or, if definitive notes are issued, as of the day of the
preceding month. Interest will accrue on the outstanding principal amount of
the notes at the applicable interest rate during the related interest accrual
period, which is from and including the previous payment date to, but
excluding, the current payment date, which period will be assumed to be 30 days
for all notes other than the Class A-1 Notes. The interest accrual period for
the first payment date will be from and including the closing date to, but
excluding, . Interest on each class of the notes other than the Class A-1
Notes will be calculated on the basis of a 360-day year consisting of twelve
30-day months. Interest on the Class A-1 Notes will be calculated on the basis
of the actual number of days in the related interest accrual period and a
360-day year. The indenture trustee will generally apply the Available Funds
and any withdrawals from the reserve account to make interest payments on the
notes. We refer you to "Description of the Trust
Documents--Distributions--Payments to Noteholders" in this prospectus
supplement.
Interest payments on each series of the Class A Notes all will have the same
priority. Interest payments on the Class B Notes will be subordinated to the
payment of interest on the Class A Notes. Under the limited circumstances
described elsewhere in this prospectus supplement, the Class A Notes will be
entitled to receive certain payments of principal before payments of interest
are made on the Class B Notes. In addition, in the event that the notes are
declared to be due and payable due to the occurrence of an event of default
resulting from the failure to make a payment on the notes, no interest will be
paid on the Class B Notes until all principal of and
S-24
interest on the Class A Notes has been paid in full. Under some circumstances,
the amount available for interest payments could be less than the amount of
interest payable on the notes on any payment date. In this instance each holder
of Class A Notes will receive its ratable share--based upon the aggregate
amount of interest due to the holders of all Class A Notes--of the aggregate
amount available to be distributed in respect of interest on the notes until
interest on the Class A Notes has been paid in full and certain allocations of
principal of the Class A Notes have been made and then each holder of Class B
Notes will receive its ratable share of any remaining amount available to be
distributed in respect of interest on the notes until interest on the Class B
Notes has been paid in full. The failure to pay interest when due on the Class
B Notes will not be an event of default under the indenture unless and until
the Class A Notes have been paid in full.
Payments of Principal
The indenture trustee will remit principal payments to the noteholders on
each payment date in an amount generally equal to the excess, if any, of
. the sum of the aggregate outstanding principal balance of the notes as of
the day immediately preceding that payment date and the
overcollateralization target amount for that payment date over
. the aggregate outstanding principal balance of the receivables as of the
last day of the prior calendar month.
The indenture trustee generally will remit principal payments on the notes from
Available Funds, if any, remaining after the payment of interest on the notes.
Amounts in the reserve account are also available to make payments of principal
of a class of notes on the expected final payment date for that class of notes
and other payments of principal in certain limited circumstances. We refer you
to "Description of the Trust Documents--Distributions--Payments to Noteholders"
and "--Reserve Account" in this prospectus supplement.
On the business day immediately preceding each payment date, the servicer
shall determine the amount in the collection account for the calendar month
preceding such payment date. We refer to this period as the "collection
period." The collection period for the first payment date shall be from but
excluding the cutoff date to and including the day of . A business day
is a day other than a Saturday, a Sunday or a day on which banking institutions
or trust companies in the State of New York, the State of Florida, the State of
Delaware, the states in which the servicing offices of the servicer are located
or the state in which the corporate trust office of the indenture trustee is
located are required or authorized by law, regulation or executive order to be
closed.
On each payment date, from the amounts allocated to the holders of the notes
to pay principal described in clauses (2) and (5) in "Description of the Trust
Documents--Distributions--Allocations and Distributions," the trust will pay
principal of the notes in the following order of priority:
(1) to the Class A-1 Notes until they are paid in full;
(2) to the other Class A Notes, sequentially to the Class A-2 Notes, the
Class A-3 Notes and the Class A-4 Notes until each class is paid in full,
the amount required to reduce the aggregate principal balance of the Class A
Notes to an amount equal to % of the result of the principal balance of
the receivables as of the last day of the prior calendar month minus the
overcollateralization target amount for that payment date; and
(3) to the Class B Notes, the amount required to reduce the principal
balance of the Class B Notes to an amount equal to % of the result of
the principal balance of the receivables as of the last day of the prior
calendar month minus the overcollateralization target amount for that
payment date.
If the notes are declared to be due and payable following the occurrence of
an event of default, the indenture trustee will remit 100% of the principal
payable on the notes to the holders of the Class A-1 Notes until paid in full.
After the Class A-1 Notes have been paid in full, the indenture trustee will
remit 100% of the principal payable on the notes to the holders of the other
Class A Notes pro rata among those classes of Class A Notes based upon their
respective unpaid principal balances until the Class A Notes have been paid in
full. After the
S-25
Class A Notes are paid in full, the indenture trustee will remit 100% of the
principal payable on the notes to the holders of the Class B Notes until the
Class B Notes are paid in full.
On the final scheduled payment date for a class of notes, the principal
amount of that class of notes, to the extent not previously paid, will be due.
The final scheduled payment dates for each class of notes are as follows:
. the principal amount of the Class A-1 Notes, to the extent not previously
paid, will be due on ;
. the principal amount of the Class A-2 Notes, to the extent not previously
paid, will be due on the payment date;
. the principal amount of the Class A-3 Notes, to the extent not previously
paid, will be due on the payment date;
. the principal amount of the Class A-4 Notes, to the extent not previously
paid, will be due on the payment date; and
. the principal amount of the Class B Notes, to the extent not previously
paid, will be due on the payment date.
The actual date on which the aggregate outstanding principal amount of any
class of notes is paid in full may be earlier than the final scheduled payment
date for that class.
Optional Redemption
To avoid excessive administrative expense, the servicer may at its option
purchase all remaining receivables from the trust. The servicer may exercise
this option on or after the last day of any month during which the aggregate
principal balance of the receivables is reduced to 10% or less of the aggregate
principal balance of the receivables as of the cutoff date. The redemption
price will at least equal the aggregate of the unpaid principal amounts of the
notes plus accrued and unpaid interest as of such last day. Exercise of this
right will result in the early retirement of the notes. Upon declaration of an
optional redemption, the indenture trustee will give written notice of
termination to each noteholder of record. The final distribution to any
noteholder will be made only upon surrender and cancellation of each
noteholder's note at the office or agency of the indenture trustee specified in
the notice of termination.
REGISTRATION OF NOTES
Book-Entry Registration
The notes will initially be represented by notes registered in the name of
Cede & Co. as nominee of DTC, and will only be available in the form of
book-entries on the records of DTC and participating members of DTC in
denominations of $1,000.
DESCRIPTION OF THE TRUST DOCUMENTS
The following summary describes the material terms of the trust documents
which consist of the purchase agreement, the sale and servicing agreement, the
indenture and the trust agreement.
We have filed forms of the trust documents as exhibits to the registration
statement, but the form agreements do not describe the specific terms of the
notes. We will file a copy of the final trust documents with the SEC following
the issuance of the notes. Because this is a summary of the trust documents, it
does not contain all the information that may be important to you. You should
read the trust documents in their entirety if you require complete information
regarding their contents.
S-26
Sale and Assignment of Receivables
On or before the closing date, the seller will purchase from World Omni
Financial Corp. under the purchase agreement, without recourse, except as
provided in the purchase agreement, World Omni Financial Corp.'s entire
interest in the receivables, together with World Omni Financial Corp.'s
security interests in the related financed vehicles. At the time of issuance of
the notes, the seller will sell and assign to the trust, without recourse,
except as provided in the sale and servicing agreement, its entire interest in
the receivables, together with its security interests in the financed vehicles.
The owner trustee will, concurrently with such sale and assignment, execute,
and the indenture trustee will authenticate and deliver the notes and the
certificates to the seller in exchange for the receivables. The seller will
sell the notes to the underwriters. We refer you to "Underwriting" in this
prospectus supplement.
To assure uniform quality in servicing as well as to reduce administrative
costs, the indenture trustee will appoint the servicer as custodian of the
receivables and all documents related thereto. The receivables will not be
physically segregated from other motor vehicle retail installment sale
contracts of the servicer or those which the servicer services for others.
In the trust documents, World Omni Financial Corp. will make representations
and warranties concerning the receivables, as described under "The Receivables
Pool" in the prospectus. As of the last day of the second (or, if World Omni
Financial Corp. elects, the first) month following notice to the seller and
World Omni Financial Corp. or discovery by either of a breach of any
representation or warranty concerning a receivable that materially and
adversely affects the receivable, unless the breach is cured, World Omni
Financial Corp. will purchase such receivable from the trust for the Purchase
Amount. The repurchase obligation will constitute the sole remedy available to
the noteholders, the owner trustee or the indenture trustee for any such
uncured breach.
Trust Accounts
The indenture trustee will establish and maintain a collection account in
the name of the indenture trustee on behalf of the noteholders. Within two
business days of receipt of payment and related payment information, the
servicer will deposit collections into the collection account. Notwithstanding
the foregoing requirement, for so long as the four conditions listed below are
satisfied, World Omni Financial Corp. 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 business day before 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 Financial Corp. 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.
The four conditions that must be satisfied are as follows:
(1) World Omni Financial Corp. remains the servicer, other than in
connection with the Annual Transfer, under the sale and servicing agreement,
(2) no default by the servicer has occurred and is continuing,
(3) World Omni Financial Corp. receives notice from the rating agencies
that the cessation of daily deposits will not result in a reduction or
withdrawal of the then current rating of the notes, and
(4) World Omni Financial Corp. either:
. maintains a short-term debt rating of at least A-1 by Standard &
Poor's, Prime-1 by Moody's Investors Service, Inc. and F1 by Fitch,
Inc.,
. 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 that is
acceptable in form and substance to each rating agency, or
. otherwise satisfies the condition described in (3) above.
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The indenture trustee will also establish and maintain one or more
distribution accounts, in the name of the indenture trustee on behalf of the
noteholders, from which it will make all distributions with respect to the
notes.
Advances
The servicer will be obligated to make advances of 30 days of interest on
each payment date in respect of receivables delinquent for more than 30 days,
which is determined as of the last day of the related collection period, to the
extent it determines that the advance will be recoverable. The servicer will
recover advances from subsequent payments by or on behalf of the respective
obligor or, upon the servicer's determination that an advance is
nonrecoverable, from any collections made on other receivables.
Servicing Compensation
The servicing fee during a collection period for the servicer will be %
per annum of the principal balance of the receivables as of the first day of
the collection period or, in the case of the first payment date, as of the
cutoff date.
The servicing fee in respect of a collection period, together with any
portion of the servicing fee that remains unpaid from prior payment dates, will
be paid to the servicer on the payment date following the collection period out
of collections for the collection period before any amounts are made available
to make payments to the noteholders. The servicer may elect to defer all or a
portion of the servicing fee with respect to a collection period as discussed
in "Description of the Trust Documents--Servicing Compensation" in the
prospectus.
Distributions
Allocations and Distributions
On or before the business day immediately preceding each payment date,
subject to the subordination provisions with respect to the Class B Notes
described in this prospectus supplement, the servicer will instruct the
indenture trustee to make the following allocations and distributions, to the
extent of the Available Funds, in the following order of priority:
(1) allocate to the holders of the Class A Notes for distribution in
respect of interest on the Class A Notes as described under "--Payments to
Noteholders," from Available Funds, the Class A Noteholders' Interest
Distributable Amount;
(2) allocate to the holders of the notes for distribution in respect of
principal of the notes as described under "--Payments to Noteholders," from
Available Funds remaining after the application of clause (1), the
Noteholders' First Priority Principal Distributable Amount;
(3) allocate to the holders of the Class B Notes for distribution in
respect of interest on the Class B Notes as described under "--Payments to
Noteholders," from Available Funds remaining after application of clauses
(1) and (2), the Class B Noteholders' Interest Distributable Amount;
(4) allocate to the reserve account, from Available Funds remaining after
the application of clauses (1) through (3), the excess, if any, of the
Required Reserve Amount over the amount then on deposit in the reserve
account;
(5) allocate to the holders of the notes for distribution in respect of
principal of the notes as described under "--Payments to Noteholders," from
Available Funds remaining after the application of clauses (1) through (4),
an amount equal to the Noteholders' Principal Distributable Amount minus any
amounts allocated under clause (2) above; and
(6) distribute to the certificateholders, from Available Funds remaining
after the application of clauses (1) through (5), the remaining balance, if
any.
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In the event that Available Funds are not sufficient to make the entire
allocations required by clauses (1) through (3) above, the indenture trustee
shall apply the funds from the reserve account to complete the distributions
required by those clauses in the priority specified above.
Upon the distribution of any amounts to the certificateholders, the
noteholders will not have any rights in, or claims to, these amounts.
Payments to Noteholders
On each payment date:
(1) all amounts allocated to the holders of the Class A Notes in respect
of interest on the Class A Notes will be paid to the holders of the Class A
Notes pro rata based upon the aggregate amount of interest due to the
holders of such notes;
(2) all amounts allocated to the holders of the Class B Notes in respect
of interest on the Class B Notes will be paid to the holders of the Class B
Notes;
(3) all amounts allocated to the holders of the notes in respect of
principal of the notes will be paid to the holders of the notes in the
following order of priority:
. to the Class A-1 Notes until they are paid in full;
. to the other Class A Notes, sequentially to the Class A-2 Notes, the
Class A-3 Notes and the Class A-4 Notes until each class is paid in
full, the amount required to reduce the aggregate principal balance of
the Class A Notes to an amount equal to % of the result of the Pool
Balance minus the Overcollateralization Target Amount for that payment
date; and
. to the Class B Notes, the amount required to reduce the principal
balance of the Class B Notes to an amount equal to % of the result
of the Pool Balance minus the Overcollateralization Target Amount for
that payment date.
In addition, on and after the final scheduled payment date for any class of
notes, if any principal amount remains outstanding, the indenture trustee shall
apply funds from the reserve account to repay such class of notes in full.
The indenture trustee will remit payments to holders of record of the notes
as of the close of business on the record date applicable to the payment date.
The record date for a particular payment date generally will be the business
day immediately preceding that payment date.
If the notes are declared to be due and payable following the occurrence of
an event of default, the indenture trustee will remit 100% of the principal
payable on the notes to the holders of the Class A-1 Notes until paid in full.
After the Class A-1 Notes have been paid in full, the indenture trustee will
remit 100% of the principal payable on the notes to the holders of the other
Class A Notes pro rata among those classes of Class A Notes based upon their
respective unpaid principal balances until the Class A Notes have been paid in
full. After the Class A Notes are paid in full, the indenture trustee will
remit 100% of the principal payable on the notes to the holders of the Class B
Notes until the Class B Notes are paid in full.
Reserve Account
The reserve account will provide protection to the noteholders. The seller
will initially cause to be deposited into the reserve account cash or eligible
investments in the amount of $ , which is % of the aggregate principal
balance of the receivables as of the cutoff date. The trustee will deposit
investment earnings on funds in the reserve account, net of losses and
investment expenses, into the collection account.
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The indenture trustee will hold amounts allocated from time to time to the
reserve account for the benefit of noteholders. The servicer will instruct the
indenture trustee to apply funds in the reserve account to make the payments in
clauses (1) through (3) under "--Distributions--Allocations and Distributions"
above that are not covered by collections on the receivables. In addition, on
and after the final scheduled payment date for any class of notes, if any
principal amount remains outstanding, or, if the notes are accelerated as a
result of a payment default, the indenture trustee will apply funds from the
reserve account to repay such class or classes of notes in full.
On each payment date, the indenture trustee will deposit into the reserve
account up to the Required Reserve Amount, Available Funds remaining after
payment of the items specified in clauses (1) through (3) under
"--Distributions--Allocations and Distributions" above.
If the amount on deposit in the reserve account on any payment date (after
giving effect to all deposits therein or other withdrawals therefrom on such
payment date) is greater than the Required Reserve Amount for the related
payment date, the excess amount will be added to the Available Funds for that
payment date.
After the payment in full, or the provision for such payment, of (a) all
accrued and unpaid interest on the notes and (b) the outstanding principal
amount of the notes, the indenture trustee will distribute any remaining funds
in the reserve account to the certificateholders.
The reserve account is intended to enhance the likelihood of receipt by
noteholders of the full amount of principal and interest due them and to
decrease the likelihood that the noteholders will experience losses. However,
in some circumstances, the reserve account could be depleted. If the amount
required to be withdrawn from the reserve account to cover shortfalls in
collections on the receivables exceeds the amount then allocated to the reserve
account, noteholders could incur losses or a temporary shortfall in the amounts
distributed to the noteholders could result, which could, in turn, increase the
average lives of the notes.
Overcollateralization
Overcollateralization represents the amount by which the aggregate principal
balance of the receivables exceeds the principal balance of the notes. The
aggregate principal balance of the receivables as of the cutoff date exceeded
the initial balance of the notes by approximately $ or
approximately % of the aggregate principal balance of the receivables as
of the cutoff date. In general, the dollar amount of overcollateralization will
decrease as the Pool Balance decreases. The application of funds according to
clause (5) under "--Distributions--Allocations and Distributions" is designed
to increase the level of overcollateralization to a target amount of % of
the Pool Balance, but not less than $ , a result of the payment of more
principal on the notes in the first several months than is paid on the
principal of the receivables during the related period. The
overcollateralization will be available to absorb losses on the receivables
that are not otherwise covered by excess collections for the receivables, if
any.
Indenture
Notwithstanding the description of events of default under the indenture and
resulting rights of noteholders in the prospectus under the caption
"Description of the Notes--The Indenture--Events of Default; Rights upon Events
of Default," until the Class A Notes have been paid in full, the failure to pay
interest due on the Class B Notes will not be an event of default under the
indenture. Pursuant to the Trust Indenture Act of 1939, as amended, the
indenture trustee may be deemed to have a conflict of interest and be required
to resign as indenture trustee for either the Class A Notes or the Class B
Notes, as the case may be, if a default occurs under the indenture. In these
circumstances, the indenture will provide for one or more successor indenture
trustees to be appointed for the Class A Notes and/or the Class B Notes, in
order that there be a separate indenture trustee for each class of notes. So
long as any amounts remain unpaid with respect to the Class A Notes, only the
indenture trustee for the holders of the Class A Notes will have the right to
exercise remedies under the indenture, but the holders of the Class B Notes
will be entitled to their respective share of any proceeds of
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enforcement, subject to the subordination of the Class B Notes to the Class A
Notes as described in this prospectus supplement, and only the holders of the
Class A Notes will have the right to waive events of default under the
indenture or servicer defaults or direct or consent to any action to be taken,
including sale of the receivables, until the Class A Notes are paid in full.
Upon repayment of the Class A Notes in full, all rights to exercise remedies
under the indenture will transfer to the indenture trustee for the Class B
Notes. Any resignation of the original indenture trustee as described above
with respect to any class of notes will become effective only upon the
appointment of a successor indenture trustee for such class of notes and the
successor trustee's acceptance of that appointment.
Each of the holders of the Class B Notes, by accepting its respective
interest in a Class B Note, will be deemed to have consented to any such delay
in payment of interest on the Class B Notes and to have waived its right to
institute suit for enforcement of any such payment, in each case in the
circumstances and to the extent described above.
Reports to Noteholders
On each payment date, the indenture trustee will receive and forward to DTC
a statement prepared by the servicer as described in "Description of the
Securities--Reports to Noteholders" in the prospectus. DTC will supply these
reports to noteholders in accordance with its procedures.
In addition to the information specified in "Description of the
Securities--Reports to Securityholders" in the prospectus, the statement will
set forth the following:
(1) the Noteholders' First Priority Principal Distributable Amount, if
any, for the related payment date;
(2) the Noteholders' Principal Distributable Amount for the related
payment date;
(3) the amount of any interest and principal carryover shortfall on the
payment date;
(4) the balance of the reserve account after giving effect to deposits
and withdrawals to be made on that payment date; and
(5) the Overcollateralization Target Amount for the next payment date.
The report will indicate each amount described in clauses (1), (2) and (3)
above in the aggregate and as a dollar amount per $1,000 of original principal
balance of a security.
Description of the Certificates
The certificates will represent fractional undivided interests in the trust
and will be issued pursuant to the trust agreement. The certificates are not
being offered hereby and all of the certificates, representing 100% of the
equity in the trust, will initially be held by the seller, who may thereafter
sell the certificates. The certificates will not bear interest.
FEDERAL INCOME TAX CONSEQUENCES
General
Set forth below is a summary of certain United States federal income tax
considerations relevant to the beneficial owner of a note that holds the note
as a capital asset and, unless otherwise indicated below, is a U.S. Person (as
defined in the accompanying prospectus). This summary does not address special
tax rules which may apply to certain types of investors, and investors that
hold notes as part of an integrated investment. This summary supplements the
discussion contained in the accompanying prospectus under the heading "Federal
Income Tax Consequences," and supersedes that discussion to the extent that the
two discussions are not consistent. The authorities on which we based this
discussion are subject to change or differing interpretations, and any such
change or interpretation could apply retroactively. This discussion reflects
the applicable provisions of the Internal Revenue Code of 1986, as amended, as
well as regulations promulgated by the U.S. Department of Treasury. You should
consult your own tax advisors in determining the federal, state, local and any
other tax consequences of the purchase, ownership and disposition of the notes.
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Characterization of the Notes
There are no regulations, published rulings or judicial decisions addressing
the characterization for federal income tax purposes of securities with terms
that are substantially the same as those of the notes. A basic premise of
United States federal income tax law is that the economic substance of a
transaction generally will determine the federal income tax consequences of
such transaction. The determination of whether the economic substance of a loan
secured by an interest in property is instead a sale of a beneficial ownership
interest in such property has been made by the Internal Revenue Service and the
courts on the basis of numerous factors designed to determine whether the trust
has relinquished (and the investor has obtained) substantial incidents of
ownership in such property. Among those factors, the primary factors examined
are whether the investor has the opportunity to gain if the property increases
in value, and has the risk of loss if the property decreases in value. Based on
an assessment of these factors, in the opinion of Kirkland & Ellis, special tax
counsel to the seller, the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes and the Class B Notes will be treated as
indebtedness for federal income tax purposes and not as an ownership interest
in the receivables or an equity interest in the trust. The remainder of this
discussion assumes that the notes are debt for federal income tax purposes. For
a discussion of the treatment if the notes were not considered debt for federal
income tax purposes, see "Federal Income Tax Consequences--Tax Consequences to
Holders of the Notes--Possible Alternative Treatment of the Notes" in the
accompanying prospectus.
Classification of the Trust
In the opinion of Kirkland & Ellis, special tax counsel to the seller, the
trust will not be treated as an association taxable as a corporation or a
publicly traded partnership taxable as a corporation for federal income tax
purposes, but rather will be disregarded as a separate entity when there is a
single beneficial owner of the trust, or will be treated as a domestic
partnership when there are two or more beneficial owners of the trust.
Discount and Premium
For federal income tax reporting purposes, it is anticipated that the notes
will not be treated as having been issued with original issue discount. The
prepayment assumption that will be used in determining the rate of accrual of
original issue discount and of market discount and premium, if any, for federal
income tax purposes will be based on the assumption that subsequent to the date
of any determination the receivables will prepay at 1.5% absolute prepayment
model rate, and there will be no extensions of maturity for any receivable.
The IRS has issued regulations under Sections 1271 through 1275 of the
Internal Revenue Code generally addressing the treatment of debt instruments
issued with original issue discount. The original issue discount regulations
and Section 1272(a)(6) of the Internal Revenue Code do not adequately address
certain issues relevant to, or are not applicable to, securities such as the
notes. Prospective purchasers of the notes are advised to consult with their
tax advisors concerning the tax treatment of such notes.
Certain classes of the notes may be treated for federal income tax purposes
as having been issued at a premium. Whether any holder of such a class of notes
will be treated as holding notes with amortizable bond premium will depend on
such noteholder's purchase price and the payments remaining to be made on such
note at the time of its acquisition by such noteholder. You should consult your
own tax advisors regarding the possibility of making an election to amortize
such premium on such classes of notes.
Because the Class A-1 Notes have a maturity of less than one year from the
date of issuance, special rules may apply. We refer you to "Federal Income Tax
Consequences--Tax Consequences to Holders of the Notes--Interest Income on the
Notes" in the prospectus.
Gain or Loss on Disposition
If you sell a note, you must recognize gain or loss equal to the difference
between the amount realized from the sale and your adjusted basis in such note.
The adjusted basis generally will equal your cost of such note, increased by
any original issue discount included in your ordinary gross income with respect
to the note or accrued market discount previously reported as income, and
reduced (but not below zero) by any payments on
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the note previously received or accrued by you (other than qualified stated
interest payments) and any amortizable premium. When you sell a note or receive
a principal payment with respect to a note, your gain will be treated as
ordinary income to the extent of any accrued market discount not previously
reported as income. Upon a partial principal payment, your gain is equal to the
difference between the amount of the payment and the portion of your adjusted
basis in the note (as described above) allocable to such payment (generally on
a pro rata basis). You will not recognize a loss upon a partial principal
payment unless you are entitled to a bad debt deduction under the applicable
rules of the Internal Revenue Code. All loss upon a sale and any gain in excess
of accrued market discount will generally be a long-term capital gain or loss
if you held the note for more than one year.
Backup Withholding and Information Reporting
Payments of interest and principal, as well as payments of proceeds from the
sale of notes, may be subject to the "backup withholding tax" under Section
3406 of the Internal Revenue Code at a rate of 30% for payments made during
2002 and 2003 (decreasing to 29% during 2004 and 2005, and 28% during 2006 and
thereafter) if you fail to furnish to the trust certain information, including
your taxpayer identification number, or otherwise fail to establish an
exemption from such tax. Any amounts deducted and withheld from a payment
should be allowed as a credit against your federal income tax. Furthermore,
certain penalties may be imposed by the IRS on a recipient of payments that is
required to supply information but that does not do so in the proper manner.
We will report to noteholders and to the IRS for each calendar year the
amount of any "reportable payments" during such year and the amount of tax
withheld, if any, with respect to payments on the notes.
STATE AND LOCAL TAX CONSEQUENCES
A rule under the Florida Income Tax Code (the "Loan Rule") provides that a
"financial organization" earning or receiving interest from loans secured by
tangible property located in Florida will be deemed to be conducting business
or earning or receiving income in Florida, and will be subject to Florida
corporate income tax regardless of where the interest was received. A financial
organization is defined to include any bank, trust company, savings bank,
industrial bank, land bank, safe deposit company, private banker, savings and
loan association, credit union, cooperative bank, small loan company, sales
finance company or investment company. If the Loan Rule were to apply to the
notes, then a financial organization investing in the notes would be subject to
Florida corporate income tax on a portion of its income at a maximum rate of
5.5%, and would be required to file an income tax return in Florida, even if it
has no other Florida contacts. , special Florida counsel to the seller,
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 notes or the receipt of
interest on the notes by a financial organization with no other Florida
contacts. We urge you to consult your own tax advisor as to the applicability
of the Loan Rule to an investment in the notes and your ability to offset any
such Florida tax against any other state tax liabilities.
The State of Florida imposes a value-based intangibles tax on January 1 of
each year on certain intangibles owned, managed or controlled by Florida
domiciliaries or intangibles having a business situs in Florida. On the last
business day of each year, in an effort to minimize the impact of this
intangibles tax, the seller may transfer 99% of its right, title and interest
in, to and under the certificates owned by the seller as of such day, together
with all of its duties, rights and obligations under the sale and servicing
agreement and the administration agreement to a special purpose entity, which
is an affiliate of World Omni Financial Corp., located and managed
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outside the State of Florida (such transfer, the "Annual Transfer"). In the
event of such Annual Transfer, World Omni Financial Corp. shall transfer all of
its rights, obligations and duties under the sale and servicing agreement to
the special purpose entity. The trust will continue to maintain its first
priority perfected security interest in the receivables. Only 99% of the
seller's interest in the receivables, evidenced by the certificates, and its
duties, rights and obligations under the sale and servicing agreement and the
administration agreement together with World Omni Financial Corp.'s management
and control authority and obligations, will be transferred to the special
purpose entity, to be held in escrow and returned to the seller and World Omni
Financial Corp., respectively, on the first business day of the following year.
This Annual Transfer is consistent with Rule 12C-2.0061 of the Florida
Administrative Code, which rule delineates certain circumstances in which
intangible personal property would not have taxable situs in Florida, and is
intended to provide taxpayers with criteria under which intangible personal
property may not be taxable. As additional protection, the trust will be
indemnified by World Omni Financial Corp. with respect to any liability the
trust may incur for this intangibles tax. All investors having any Florida
contacts are urged to consult their own tax advisors regarding the possible
application of the intangibles tax to their investment in the notes. The
servicer has agreed in the sale and servicing agreement not to conduct any
servicing activities during the period of the Annual Transfer.
The discussion above does not address the tax treatment of the trust, the
securities or the security owners under any state or local tax law other than
Florida law to the extent set forth above. Prospective investors are urged to
consult their own tax advisors regarding the state and local tax treatment of
the trust and the securities, and the consequences of purchase, ownership or
disposition of the securities under any state or local tax law, if applicable.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended, and Section 4975 of the Internal Revenue Code prohibit a pension,
profit-sharing or other employee benefit plan within the meaning of Section
3(3) of ERISA, as well as an individual retirement account, a Keogh plan and
any other plan within the meaning of Section 4975 of the Internal Revenue Code
(each a "Benefit Plan"), from engaging in particular transactions with persons
that are "parties in interest" under ERISA or "disqualified persons" under the
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 Internal Revenue Code for such persons or
the fiduciaries of the Benefit Plan. In addition, Title I of ERISA also
requires fiduciaries of a Benefit Plan subject to ERISA to make investments
that are prudent, diversified and in accordance with the governing plan
documents.
Certain transactions involving the trust might be deemed to constitute
prohibited transactions under ERISA and the Internal Revenue Code with respect
to a Benefit Plan that purchased notes if assets of the trust were deemed to be
assets of the Benefit Plan. Under a regulation issued by the United States
Department of Labor (the "Regulation"), the assets of the trust would be
treated as plan assets of a Benefit Plan for the purposes of ERISA and the
Internal Revenue Code only if the Benefit Plan acquired an "equity interest" in
the trust and none of the exceptions contained in the Regulation was
applicable. An equity interest is defined under the Regulation as an interest
other than an instrument which is treated as indebtedness under applicable
local law and which has no substantial equity features. Although there is
little guidance on the subject, we believe that, at the time of their issuance,
the notes should be treated as indebtedness of the trust without substantial
equity features for purposes of the Regulation. This determination is based in
part upon the traditional debt features of the notes, including the reasonable
expectation of purchasers of notes that the notes will be repaid when due, as
well as the absence of conversion rights, warrants and other typical equity
features. The debt treatment of the notes for ERISA purposes could change if
the trust incurred losses.
However, without regard to whether the notes are treated as an equity
interest for purposes of the Regulation, the acquisition or holding of notes by
or on behalf of a Benefit Plan could be considered to give rise
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to a prohibited transaction if the trust, the seller, the servicer, the owner
trustee or the indenture trustee is or becomes a party in interest or a
disqualified person with respect to such Benefit Plan. Certain exemptions from
the prohibited transaction rules could be applicable to the purchase and
holding of notes by a Benefit Plan depending on the type and circumstances of
the plan fiduciary making the decision to acquire such notes. Included among
these exemptions are: Prohibited Transaction Class Exemption ("PTCE") 96-23,
regarding transactions effected by "in-house asset managers"; PTCE 95-60,
regarding investments by insurance company general accounts; PTCE 90-1,
regarding investments by insurance company pooled separate accounts;
PTCE 91-38, regarding investments by bank collective investment funds; and PTCE
84-14, regarding transactions effected by "qualified professional asset
managers." By acquiring a note, each initial purchaser, transferee and owner of
a beneficial interest will be deemed to represent that either (1) it is not
acquiring the notes with the assets of a Benefit Plan; or (2) the acquisition
and holding of the notes will not give rise to a nonexempt prohibited
transaction under Section 406(a) of ERISA or Section 4975 of the Internal
Revenue Code.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and some church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements; however, governmental plans may be
subject to comparable state law restrictions.
A plan fiduciary considering the purchase of notes should consult its legal
advisors regarding whether the assets of the trust would be considered plan
assets, the possibility of exemptive relief from the prohibited transaction
rules and other issues and their potential consequences.
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 200 among World Omni Financial Corp., the seller and
, as representative of the underwriters, the seller has agreed to
sell to the underwriters named below and each of the underwriters has severally
agreed to purchase, the principal amount of the notes described opposite its
name below:
Aggregate Principal Amount of Notes to be Purchased
-----------------------------------------------
Class A-1 Class A-2 Class A-3 Class A-4 Class B
Underwriter Notes Notes Notes Notes Notes
- ----------- --------- --------- --------- --------- -------
$ $ $ $ $
-- -- -- -- --
Total....... $ $ $ $ $
== == == == ==
The seller has been advised by the underwriters that they propose initially
to offer the notes to the public at the prices set forth on the cover page
hereof, and to dealers at these prices less a selling concession not in excess
of the percentage set forth below for each class of notes. The underwriters may
allow, and these dealers may reallow to other dealers, a subsequent concession
not in excess of the percentage set forth below for each class of notes. After
the initial public offering, the public offering price and such concessions may
be changed.
Selling Concession Reallowance
------------------ -----------
Class A-1 Notes % %
Class A-2 Notes
Class A-3 Notes
Class A-4 Notes
Class B Notes..
The underwriting agreement provides that the obligations of the underwriters
are subject to specified conditions precedent and that the underwriters will
purchase all the notes offered hereby if any of such notes are purchased.
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Each underwriter has represented and agreed that (a) it has not offered or
sold and, prior to the expiry of the period of six months from the closing
date, will not offer or sell any notes to persons in the United Kingdom except
to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments, as principal or agent, for the purposes
of their businesses or who it is reasonable to expect will acquire, hold,
manage or dispose of investments, as principal or agent, for the purposes of
their businesses, or otherwise in circumstances that have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning
of the Public Offers of Securities Regulations 1995, as amended, (b) it has
complied and will comply with all applicable provisions of the Financial
Services and Markets Act 2000, with respect to anything done by it in relation
to the notes in, from or otherwise involving the United Kingdom, (c) it is a
person of a kind described in Articles 19 or 49 of the Financial Services and
Markets Act 2000 (Financial Promotion) Order 2001, as amended, and (d) it has
only communicated or caused to be communicated, and will only communicate or
cause to be communicated, in the United Kingdom any document received by it in
connection with the issue of the notes to a person who is of a kind described
in Articles 19 or 49 of the Financial Promotion Order or who is a person to
whom such document may otherwise lawfully be communicated.
The notes are a new issue of securities with no established trading market.
World Omni Financial Corp. and the seller do not intend to apply for listing of
the notes on a national securities exchange. The underwriters have advised
World Omni Financial Corp. and the seller that they intend to act as market
makers for the notes. However, the underwriters are not obligated to do so and
may discontinue any market making at any time without notice. Accordingly, no
assurance can be given as to the liquidity of any trading market for the notes.
In connection with the offering of the notes, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the market price of
the notes. Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M, pursuant to which such person may bid
for or purchase the notes for the purpose of stabilizing their market price. In
addition, the underwriters may impose "penalty bids" whereby they may reclaim
from a dealer participating in the offering the selling concession with respect
to the notes that the dealer distributed in the offering but subsequently
purchased for the account of the underwriters in the open market. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the notes at a level above that which might otherwise prevail in the
open market. None of the transactions described in this paragraph is required,
and, if they are taken, may be discontinued at any time without notice.
World Omni Financial Corp. and the seller have agreed to indemnify the
underwriters against some liabilities, including civil liabilities under the
Securities Act of 1933, as amended, or contribute to payments which the
underwriters may be required to make in respect of some liabilities, including
civil liabilities under the Securities Act.
In the ordinary course of their respective businesses, the underwriters and
their affiliates have engaged and may engage in investment banking and/or
commercial banking transactions with World Omni Financial Corp. and its
affiliates. We refer you to "Use of Proceeds" in this prospectus supplement and
"Plan of Distribution" in the accompanying prospectus.
The following chart sets forth information on the aggregate proceeds to the
seller from the sale of the notes.
As Percent of Initial
Aggregate Principal Amount
of the notes
--------------------------
Sale of the Notes Proceeds.. $ %
Underwriting Discount....... $ %
Additional Offering Expenses $ %
Net Proceeds to Seller...... $ %
LEGAL MATTERS
Some legal matters relating to the securities will be passed upon for the
seller and the servicer by Kirkland & Ellis, Chicago, Illinois. Some legal
matters relating to the Loan Rule will be passed upon by . Some legal
matters relating to the notes will be passed upon for the underwriters by McKee
Nelson LLP.
S-36
GLOSSARY OF TERMS TO THE PROSPECTUS SUPPLEMENT
The following are definitions of terms used in this prospectus supplement.
References to the singular form of defined terms in this prospectus supplement
include references to the plural and vice versa.
"Annual Transfer" is defined on page S-34.
"Available Funds" means, generally, with respect to any payment date, the
sum of the following amounts with respect to the related collection period:
. all collections on the receivables;
. advances made by the servicer with respect to delinquent receivables;
. all proceeds of liquidated receivables, net of expenses incurred by the
servicer in connection with the liquidation and any amounts required by
law to be remitted to the obligor on the liquidated receivables and all
recoveries in respect of liquidated receivables that became liquidated
receivables in prior collection periods;
. the Purchase Amount of each receivable that was repurchased by the seller
or purchased by the servicer under an obligation that arose during the
related collection period;
. partial prepayments relating to refunds of any warranty or insurance
financed by the respective obligor as part of the original contract;
. amounts in the Reserve Account in excess of the Required Reserve Amount;
. investment earnings on funds on deposit in the collection account and the
Reserve Account; and
. redeposits into the collection account of amounts available for
distribution to certificateholders from the previous payment date, if any.
Available Funds for each payment date will be reduced by the servicing fee
for the payment date and any previously unpaid servicing fees, late fees, any
prepayment fees, administrative charges and reimbursements to the servicer of
advances.
"Benefit Plan" is defined on page S-34.
"Class A Noteholders' Interest Carryover Shortfall" means, with respect to
any payment date, the excess of the Class A Noteholders' Interest Distributable
Amount for the preceding payment date, over the amount in respect of interest
that was actually paid on the Class A Notes on the preceding payment date, plus
interest on the amount of interest due but not paid to holders of the Class A
Notes on the preceding payment date, to the extent permitted by law, at the
respective interest rates borne by each class of the Class A Notes for the
related interest accrual period.
"Class A Noteholders' Interest Distributable Amount" means, with respect to
any payment date, the sum of the Class A Noteholders' Monthly Interest
Distributable Amount for the payment date and the Class A Noteholders' Interest
Carryover Shortfall for the payment date.
"Class A Noteholders' Monthly Interest Distributable Amount" means, with
respect to any payment date, interest accrued for the related interest accrual
period on each class of Class A Notes at the respective interest rate for the
class on the outstanding principal amount of the notes of the class on the
immediately preceding payment date or, in the case of the first payment date,
on the closing date, after giving effect to all payments of principal to the
noteholders of the class on or prior to the preceding payment date.
"Class B Noteholders' Interest Carryover Shortfall" means, with respect to
any payment date, the excess of the Class B Noteholders' Interest Distributable
Amount for the preceding payment date, over the amount in
S-37
respect of interest that was actually paid on the Class B Notes on such
preceding payment date, plus interest on the amount of interest due but not
paid to holders of the Class B Notes on the preceding payment date, to the
extent permitted by law, at the respective interest rates borne by such class
of the notes for the related interest accrual period.
"Class B Noteholders' Interest Distributable Amount" means, with respect to
any payment date, the sum of the Class B Noteholders' Monthly Interest
Distributable Amount for such payment date and the Class B Noteholders'
Interest Carryover Shortfall for such payment date.
"Class B Noteholders' Monthly Interest Distributable Amount" means, with
respect to any payment date, interest accrued for the related interest accrual
period on the Class B Notes at the interest rate for such class on the
outstanding principal amount of the notes of such class on the immediately
preceding payment date or, in the case of the first payment date, on the
closing date, after giving effect to all payments of principal to the
noteholders of such class on or prior to such preceding payment date.
"Defaulted Receivable" means a receivable as to which (a) all or any part of
a monthly payment is 120 or more days past due and the servicer has not
repossessed the related financed vehicle or (b) the servicer has, in accordance
with its customary servicing procedures, determined that eventual payment in
full is unlikely and has either repossessed and liquidated the related financed
vehicle or repossessed and held the related financed vehicle in its
repossession inventory for 45 days, whichever occurs first. The principal
balance of any receivable that becomes a Defaulted Receivable will be deemed to
be zero as of the date it becomes a Defaulted Receivable.
"Loan Rule" is defined on page S-33.
"Noteholders' Distributable Amount" means, with respect to any payment date,
the sum of the Noteholders' Interest Distributable Amount and the Noteholders'
Principal Distributable Amount.
"Noteholders' First Priority Principal Distributable Amount" means, with
respect to any payment date, an amount equal to the excess, if any, of (a) the
aggregate outstanding principal balance of the Class A Notes as of the day
immediately preceding such payment date over (b) the Pool Balance for that
payment date.
"Noteholders' Interest Distributable Amount" means, with respect to any
payment date, the sum of the Class A Noteholders' Interest Distributable Amount
for such payment date and the Class B Noteholders' Interest Distributable
Amount for such payment date.
"Noteholders' Principal Distributable Amount" means, with respect to the
payment date, the excess, if any, of (a) the sum of the aggregate outstanding
principal balance of the notes as of the day immediately preceding that payment
date and the Overcollateralization Target Amount for that payment date over (b)
the Pool Balance for that payment date.
"Overcollateralization Target Amount" means, with respect to any payment
date, an amount equal to % of the Pool Balance for that payment date, but
not less than $ .
"Pool Balance" means, as of any payment date, the aggregate principal
balance of the receivables as of the last day of the related collection period
after giving effect to all payments of principal received from obligors and
Purchase Amounts to be remitted by the servicer or the seller, as the case may
be, for such collection period, and after reduction to zero of the aggregate
outstanding principal balance of any receivable that became a Defaulted
Receivable during the related collection period.
"PTCE" is defined on page S-35.
S-38
"Purchase Amount" means, with respect to a receivable, the amount, as of the
close of business on the last day of the collection period as of which that
receivable is purchased, required to prepay in full that receivable under the
terms thereof including all accrued and unpaid interest and interest to that
last day.
"Regulation" is defined on page S-34.
"Required Reserve Amount" means, with respect to any payment date, the
lesser of $ and the aggregate outstanding principal balance of the notes.
S-39
$
World Omni Auto Receivables Trust 200 -
Issuer
World Omni Auto Receivables LLC
Seller
World Omni Financial Corp.
Servicer
Auto Receivables Backed Notes
Series 200 -
-----------------
PROSPECTUS SUPPLEMENT
-----------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus and prospectus
supplement. You must not rely on any unauthorized information or
representations. This prospectus and prospectus supplement is an offer to sell
only the securities offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus and prospectus supplement is current only as of the date of this
prospectus supplement. Until ninety days after the date of this prospectus
supplement, all dealers effecting transactions in the offered securities,
whether or not participating in this distribution, may be required to deliver a
prospectus supplement and prospectus. This is in addition to the dealers'
obligation to deliver a prospectus supplement and prospectus when acting as
underwriters and with respect to an unsold allotment or subscription.
Underwriters of the Class A Notes
Underwriters of the Class B Notes
The date of this Prospectus Supplement is , 200
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses in connection with the
issuance and distribution of the securities being registered, other than
underwriting discounts and commissions. All such expenses will be paid by the
registrant.
SEC registration fee.......................... $ *
Accounting fees and expenses.................. *
Legal fees and expenses....................... *
Trustees' fees................................ *
Printing and engraving........................ *
Blue sky fees and expenses (including counsel) *
Rating Agency Fees............................ *
Miscellaneous................................. *
----
Total.................................. $ *
====
- --------
* To be completed by amendment.
Item 15. Indemnification of Directors and Officers
Section 18-108 of the Delaware Limited Liability Company Act (the "Act")
provides that, subject to the standards and restrictions, if any, as are
described in its limited liability company agreement, a limited liability
company may, and shall have the power to, indemnify and hold harmless any
member or manager or other person from and against any and all claims and
demands whatsoever.
The registrant was formed under the laws of Delaware. The limited liability
company agreement of the registrant provides, in effect, that, subject to
certain limited exceptions, it will indemnify its members, directors or
officers and may indemnify any employee or agent of the registrant who was or
is a party or is threatened to be made a party to a threatened, pending, or
completed action, suit, or proceeding (whether civil, criminal, administrative,
or investigative and whether formal or informal) other than an action by or in
the right of the registrant, where such person is a party because such person
is or was a member, director, officer, employee, or agent of the registrant.
The registrant's limited liability company agreement also provides that it will
generally indemnify its members and directors against expenses, including,
attorney fees, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by a director in connection with an action,
suit or proceeding relating to acts or omissions of that director regarding
specified items relating to bankruptcy and insolvency.
In general, the registrant will indemnify its members, directors or officers
and may indemnify its employees or agents against expenses, including attorneys
fees, judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with an action, suit or
proceeding. To the fullest extent permitted by law, the registrant will also
indemnify such member, director or officer and may indemnify such employee or
agent if the person acted in good faith and did not engage in willful
misconduct or gross negligence. With respect to a criminal action proceeding,
the person must have had no reasonable cause to believe his misconduct was
unlawful. Unless ordered by a court, certain indemnifications shall be made by
the registrant only as it authorizes in the specific case after (1) determining
that the indemnification is proper under the circumstances because the person
to be indemnified has met the applicable standard of conduct and (2) evaluating
the reasonableness of the expenses and of the amounts paid in settlement. This
determination and evaluation shall be made by a majority vote of the
disinterested members or, if there is only one member, by that
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member. However, no indemnification shall be provided to any member, director,
officer, employee or agent of the registrant for or in connection with (1) the
receipt of a financial benefit to which the person is not entitled; (2) voting
for or assenting to a distribution to members in violation of the limited
liability company agreement or the Act; (3) a knowing violation of law; or (4)
acts or missions of such person constituting willful misconduct or gross
negligence. To the extent that a member, director, officer, employee, or agent
of the registrant has been successful on the merits or otherwise in defense of
an action, suit, or proceeding or in defense of any claim, issue, or other
matter in such action, suit or proceeding, such person shall be indemnified
against actual and reasonable expenses, including reasonable attorney fees,
incurred by such person in connection with the action, suit, proceeding and any
action, suit or proceeding brought to enforce such mandatory indemnification.
In addition, no member, director or officer of the registrant shall be
liable to the registrant or any other person who has an interest in the
registrant for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such member, director or officer in good faith
on behalf of the registrant and in a manner reasonably believed to be within
the scope of the authority conferred on such member, director or officer by the
limited liability company agreement of the registrant, except that a member,
director or officer shall be liable for any such loss, damage or claim incurred
by reason of such member's director's or officer's willful misconduct or gross
negligence.
Insofar as indemnification by the registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
The registrant also maintains insurance providing for payment, subject to
certain exceptions, on behalf of officers, director and managers of the
registrant and its subsidiaries of money damages incurred as a result of legal
actions instituted against them in their capacities as such officers, directors
of managers (whether or not such person could be indemnified against such
expense, liability or loss under the Act).
Each underwriting agreement will provide that the underwriter will indemnify
the registrant against specified liabilities, including liabilities under the
Securities Act of 1933.
Item 16. Exhibits.
The exhibits to this registration statement are listed in the exhibit index
below.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, unless the information required to be included
in such post-effective amendment is contained in a periodic report filed
with or furnished to the SEC by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 and incorporated
herein by reference;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement, unless
the information required to be included in a post-effective amendment is
contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated herein by reference.
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(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section(b)(2) of the
Act.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
on its own behalf certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3, and reasonably believes
that the security rating requirement contained in Transaction Requirement B.5
of Form S-3 will be met by the time of the sale of the securities registered
hereunder and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, hereunto duly authorized, in the City of Deerfield
Beach, State of Florida, on October 18, 2002.
WORLD OMNI AUTO RECEIVABLES LLC
as grantor of the World Omni Auto
Receivables Trusts and Registrant
/S/ PATRICK C. OSSENBECK
By: __________________________________
Patrick C. Ossenbeck
Treasurer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Patrick C. Ossenbeck, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities (including
his capacity as a director and/or officer of World Omni Auto Receivables LLC),
to sign and file any and all amendments (including post-effective amendments)
to this registration statement or any registration statement relating to any
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
all other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and
necessary in connection with such matters as he might or could do in person and
hereby ratifying and confirming all that said attorney-in-fact and agent or his
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on October 18, 2002, by the following
persons in the capacities indicated.
Signatures Capacity
---------- --------
/S/ LOUIS R. FEAGLES President and Director
- --------------------------- (Principal executive officer)
Louis R. Feagles
/S/ PATRICK C. OSSENBECK Treasurer
- --------------------------- (Principal financial and accounting officer)
Patrick C. Ossenbeck
/S/ COLIN W. BROWN Director
- ---------------------------
Colin W. Brown
/S/ JEFFREY B. SHAPIRO Director
- ---------------------------
Jeffrey R. Shapiro
/S/ CHRISTOPHER C. WHEELER Director
- ---------------------------
Christopher C. Wheeler
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EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
1.1 Form of Underwriting Agreement (incorporated by reference to exhibit no. 1.1 of registration
statement no. 333-35542)
4.1 Limited Liability Company Agreement of registrant (incorporated by reference to exhibit no. 3.1 of
registration statement no. 333-35542)
4.2 Form of Trust Agreement and exhibits thereto (incorporated by reference to exhibit no. 4.1 of
registration statement no. 333-35542)
4.3 Form of Indenture and exhibits thereto (incorporated by reference to exhibit no. 4.2 of registration
statement no. 333-35542)
5.1** Opinion of Kirkland & Ellis with respect to legality
8.1** Opinion of Kirkland & Ellis with respect to certain tax matters
10.1 Form of Sale and Servicing Agreement (incorporated by reference to exhibit no. 10.1 of registration
statement no. 333-35542)
10.2 Form of Receivables Purchase Agreement (incorporated by reference to exhibit no. 10.2 of
registration statement no. 333-35542)
10.3 Form of Administration Agreement (incorporated by reference to exhibit no. 10.3 of registration
statement no. 333-69732)
23.1** Consent of Kirkland & Ellis (included in opinion filed as Exhibit 5.1)
24.1 Powers of Attorney (included in signature page).
25.1* Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of the Indenture Trustee.
- --------
* To be filed in accordance with Section 305(b)(2) of the Trust Indenture
Act of 1939.
** To be filed by amendment.
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