AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 2000
REGISTRATION NO. 333-35542
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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WORLD OMNI AUTO RECEIVABLES TRUSTS
(ISSUER OF THE SECURITIES)
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WORLD OMNI AUTO RECEIVABLES LLC
(ORIGINATOR OF THE TRUST DESCRIBED HEREIN)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 52-2184798
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
120 N.W. 12TH AVENUE JAMES R. FOSTER, TREASURER
DEERFIELD BEACH, FLORIDA 33442 120 N.W. 12TH AVENUE
(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 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
OFFICES) INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copy to:
RAY I. SHIRAZI
CADWALADER, WICKERSHAM & TAFT
100 MAIDEN LANE
NEW YORK, NEW YORK 10038
(212) 504-6376
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time on or after the effective date of this registration statement, as
determined by market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
PROPOSED
MAXIMUM OFFERING PROPOSED
TITLE OF OF SECURITIES AMOUNT TO BE PRICE PER MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) SECURITY* OFFERING PRICE* REGISTRATION FEE
Auto Receivables Backed Securities.. $1,650,000,000 100% $1,650,000,000 $395,736(1)
* Estimated solely for the purpose of calculating the registration fee.
(1) $264.00 previously paid.
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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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INTRODUCTORY NOTE
This Registration Statement contains (i) a form of prospectus relating to
the offering of series of Auto Receivables Backed Securities by various trusts
created from time to time by World Omni Auto Receivables LLC and (ii) forms of
prospectus supplement relating to series of Auto Receivables Backed Securities
described therein. The forms of prospectus supplement for the securities follow
immediately after this introductory note, followed thereafter by the base
prospectus.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until we deliver a final prospectus. This prospectus
is not an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MAY 23, 2000
PROSPECTUS
AUTO RECEIVABLES BACKED NOTES AND CERTIFICATES (ISSUABLE IN SERIES)
WORLD OMNI AUTO RECEIVABLES LLC
SELLER
THE TRUSTS:
1. A new trust will be formed to issue each series of
securities.
2. Each trust will consist primarily of:
o retail installment sale contracts secured by new and
used automobiles and light trucks; and
o other assets as described in this prospectus and to
be specified in the related prospectus supplement
THE SECURITIES:
1. will be asset-backed securities sold periodically in
one or more series and each series will be secured by
the assets of the trust or will evidence beneficial
ownership interests in the trust;
2. will be offered in separate series;
3. if specified in the related prospectus supplement,
all of the classes may not be offered in a particular
series;
4. of a series may be divided into two or more classes
which may have different interest rates and which may
receive principal payments in differing proportions
and at different times;
5. will consist of:
o notes (which will be treated as indebtedness of the
trust) and/or
o certificates (which will represent an undivided
ownership interest in the trust); and
6. of any series are not obligations of World Omni Auto
Receivables LLC, World Omni Financial Corp. or any of
their affiliates, and neither the securities nor the
underlying receivables are insured or guaranteed by
any governmental agency.
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THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED OF THE OFFERED SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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No secondary market will exist for a series of securities prior its offering. We
cannot assure you that a secondary market will develop for the securities of any
series or, if it does develop, that it will continue.
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Investing in the offered securities involves risks. We refer you to "Risk
Factors" beginning on page 4 of this prospectus. For each series, see "Risk
Factors" in the related prospectus supplement.
The date of this prospectus is , 2000
THE SECURITIES MAY BE
OFFERED THROUGH ONE OR MORE
DIFFERENT METHODS,
INCLUDING OFFERINGS THROUGH
UNDERWRITERS, AS MORE FULLY
DESCRIBED UNDER "PLAN OF
DISTRIBUTION" ON PAGE OF
THIS PROSPECTUS AND IN THE
RELATED PROSPECTUS
SUPPLEMENT. OFFERINGS OF
CERTAIN CLASSES OF THE
SECURITIES, AS SPECIFIED IN
THE RELATED PROSPECTUS
SUPPLEMENT, MAY BE MADE IN
ONE OR MORE TRANSACTIONS
EXEMPT FROM THE
REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OF
1933, AS AMENDED. SUCH
OFFERINGS ARE NOT BEING
MADE PURSUANT TO THIS
PROSPECTUS OR THE RELATED
REGISTRATION STATEMENT.
This prospectus may not be
used to consummate sales of
the offered securities
unless accompanied by a
prospectus supplement.
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND EACH ACCOMPANYING PROSPECTUS SUPPLEMENT
Information about the offered securities is contained in two separate
documents that progressively provide more detail: (a) this prospectus, which
provides general information, some of which may not apply to the offered
securities; and (b) the accompanying prospectus supplement for each series,
which describes the specific terms of the offered securities. If the terms of
the offered securities vary between this prospectus and the accompanying
prospectus supplement, you should rely on the information in the prospectus
supplement.
You should rely only on the information contained in this prospectus and
the accompanying prospectus supplement. We have not authorized anyone to provide
you with information that is different from that contained in this prospectus
and the prospectus supplement. The information in this prospectus is accurate
only as of the date of this prospectus.
Certain capitalized terms are defined and used in this prospectus to assist
you in understanding the terms of the offered securities and this offering. The
capitalized terms used in this prospectus are defined on the pages indicated
under the caption "Index of Terms" beginning on page in this prospectus.
In this prospectus, the terms "seller," "we," "us" and "our" refer to World
Omni Auto Receivables LLC.
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If you require additional information, the mailing address of our principal
executive offices is World Omni Auto Receivables LLC, 120 N.W. 12th Avenue
Deerfield Beach, Florida 33442 and the telephone number is (954) 429-2200. For
other means of acquiring additional information about us or a series of
securities, see "Incorporation of Certain Information By Reference" beginning on
page 56 of this prospectus.
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TABLE OF CONTENTS
SECTION PAGE
RISK FACTORS...................................... 4
PROSPECTUS SUPPLEMENT............................. 10
THE ISSUERS....................................... 10
THE TRUST ASSETS.................................. 10
THE RECEIVABLES POOL.............................. 11
General......................................... 11
Receivables Pools............................... 11
Pre-Funding Accounts............................ 12
The Receivables................................. 12
Delinquencies, Repossessions and Net Losses..... 13
Maturity and Prepayment Considerations.......... 13
THE SELLER........................................ 13
WORLD OMNI FINANCIAL CORP......................... 14
General......................................... 14
Certain Administrative and Legal Proceedings.... 14
WORLD OMNI FINANCIAL CORP.'S AUTOMOBILE FINANCE
BUSINESS........................................ 15
General......................................... 15
Underwriting.................................... 15
Risk Based Pricing.............................. 16
Servicing....................................... 17
Insurance....................................... 18
POOL FACTORS...................................... 18
USE OF PROCEEDS................................... 19
THE TRUSTEE....................................... 19
DESCRIPTION OF THE SECURITIES..................... 19
General......................................... 19
General Payment Terms of Securities............. 20
Book-Entry Registration......................... 20
Definitive Securities........................... 22
Reports to Securityholders...................... 23
DESCRIPTION OF THE TRUST DOCUMENTS................ 24
Sale and Assignment of Receivables.............. 24
Accounts........................................ 24
The Servicer.................................... 25
Servicing Procedures............................ 26
Payments on Receivables......................... 26
Servicing Compensation.......................... 26
Distributions................................... 27
SECTION PAGE
Credit and Cash Flow Enhancements............... 27
Evidence as to Compliance....................... 28
Certain Matters Regarding the Servicers......... 28
Servicer Termination Event...................... 28
Rights upon Servicer Termination Event.......... 29
Waiver of Past Defaults......................... 29
Amendments...................................... 29
Termination..................................... 30
DESCRIPTION OF THE NOTES.......................... 31
General......................................... 31
Principal and Interest on the Notes............. 31
The Indenture................................... 32
DESCRIPTION OF THE CERTIFICATES................... 34
General......................................... 34
DISTRIBUTIONS OF PRINCIPAL AND INTEREST........... 35
SOME LEGAL ASPECTS OF THE RECEIVABLES............. 35
General......................................... 35
Interests in the Receivables.................... 35
Security Interests in the Financed Vehicles..... 36
Repossession.................................... 37
Notice of Sale; Redemption Rights............... 37
Deficiency Judgments and Excess Proceeds........ 37
Consumer Protection Laws........................ 38
Other Limitations............................... 39
FEDERAL INCOME TAX CONSEQUENCES................... 40
FASITs.......................................... 40
Trust Treated as Partnerships................... 40
Tax Consequences to Holders of the Notes........ 41
Tax Consequences to Holders of the
Certificates.................................... 45
TRUSTS TREATED AS GRANTOR TRUSTS.................. 49
ERISA CONSIDERATIONS.............................. 55
PLAN OF DISTRIBUTION.............................. 55
FINANCIAL INFORMATION............................. 55
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE....................................... 56
LEGAL MATTERS..................................... 56
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RISK FACTORS
You should carefully consider the following risks and the risks described
under "RISK FACTORS" in the prospectus supplement for the securities before
making an investment decision. In particular, distributions on your securities
will depend on payments received on and other recoveries with respect to the
receivables. Therefore, you should carefully consider the risk factors relating
to the receivables and the financed vehicles.
Your investment could be materially and adversely affected if any of the
following risks are realized.
YOU MUST RELY FOR REPAYMENT ONLY UPON
THE TRUST'S ASSETS WHICH MAY NOT BE
SUFFICIENT TO MAKE FULL PAYMENTS ON
YOUR SECURITIES. Your securities are either secured by or represent beneficial ownership
interests solely in the assets of the related trust. Your securities will not
represent an interest in or obligation of us, the trustee, World Omni
Financial Corp., or any other person. We or another entity may have a limited
obligation to repurchase some receivables under some circumstances as
described in the agreements relating to a particular series. Distributions on
any class of securities will depend solely on the amount and timing of
payments and other collections in respect of the related receivables. We
cannot assure you that these amounts, together with other payments and
collections in respect of the related receivables, will be sufficient to make
full and timely distributions on any offered securities. The offered
securities and the receivables will not be insured or guaranteed, in whole or
in part, by the United States or any governmental entity or by any provider of
credit enhancement unless specified in the related prospectus supplement.
YOU MAY EXPERIENCE REDUCED RETURNS AND
DELAYS ON YOUR SECURITIES RESULTING
FROM CHANGES IN DELINQUENCY LEVELS AND
LOSSES. There can be no assurance that the historical levels of delinquencies and
losses experienced by World Omni 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 SECURITIES RESULTING FROM
PREPAYMENTS. You may receive payment of principal on the 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
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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.
All of the receivables are prepayable at any time. The rate of prepayments on
the receivables may be influenced by a variety of economic, social and other
factors, including:
o other events which have the same effect as prepayments in full of
receivables, including liquidations due to default, as well as receipts of
proceeds from insurance policies and repurchases of receivables;
o repurchases of receivables by World Omni Financial Corp. as a result of
breaches of representations and warranties, and/or breaches of particular
covenants;
o the application of any remaining amounts on deposit in any pre-funding
accounts not applied to the purchase of additional receivables; and
o the purchase by the seller or the servicer of the receivables when the
aggregate principal balance thereof is 10% or less of the initial aggregate
principal balance.
The rate of prepayments of receivables cannot be predicted and therefore, no
assurance can be given as to the level of prepayments that a trust will
experience.
YOU MAY EXPERIENCE REDUCED RETURNS ON
YOUR SECURITIES RESULTING FROM
DISTRIBUTION OF AMOUNTS IN THE
PRE-FUNDING ACCOUNT. A trust may have a pre-funding account. The trust will purchase receivables
from the seller (which, in turn, will acquire these receivables from World
Omni Financial Corp.) 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.
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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. Many federal and state laws, including the Uniform Commercial Code, govern the
transfer of the receivables by the seller to the trustee, the 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. takes a
security interest in the financed vehicle by placing a lien on the title to
the financed vehicle. In connection with each sale of receivables, World Omni
Financial Corp. will assign its security interests in the financed vehicles to
the seller. Due to the administrative burden and expense of retitling each of
the financed vehicles, World Omni Financial Corp. will not amend or reissue
the certificates of title to the financed vehicles to reflect the assignment
to the trust. In the absence of an amendment or reissuance, the trust may not
have a perfected security interest in the financed vehicles securing the
receivables in some states. World Omni Financial Corp. will be obligated to
repurchase any receivable sold to a trust which did not have a perfected
security interest in the name of World Omni Financial Corp. in the financed
vehicle on the closing date. World Omni Financial Corp. will purchase any
receivable sold to a trust as to which it failed to maintain a perfected
security interest in the name of World Omni Financial Corp. in the financed
vehicle securing the receivable. All repurchases by World Omni Financial Corp.
are limited to breaches that materially and adversely affect the receivable,
subject to the expiration of the applicable cure period. If the security
interest of World Omni Financial Corp. is perfected, the trust will have a
prior claim over subsequent purchasers of the financed vehicle and holders of
subsequently perfected security interests.
Due to, among other things, liens for repairs of a financed vehicle or for
unpaid taxes of an obligor, the trust could lose the priority of its security
interest in a financed vehicle. Neither World Omni Financial Corp. nor the
servicer will have any obligation to purchase a receivable if these liens
result in the loss of the priority of the security interest in the financed
vehicle after the issuance of securities by the trust. Generally, no action
will be taken to perfect the rights of the trustee in proceeds of any
insurance policies covering individual financed vehicles or obligors.
Therefore, the rights of a third party with an interest in the proceeds could
prevail against the rights of the trust prior to the time the proceeds are
deposited by the servicer into an account controlled by the trustee. We refer
you to "Some Legal Aspects of the Receivables--Security Interests in the
Financed Vehicles."
The servicer will maintain possession of the original contracts for of each of
the receivables. If the servicer sells or pledges and delivers
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the original contracts for the receivables to another party, in violation of
its obligations under the documents for the securities, this party could
acquire an interest in the receivable having a priority over the trust's
interest. Furthermore, if the servicer becomes insolvent, competing claims to
ownership or security interests in the receivables could arise. These claims,
even if unsuccessful, could result in delays in payments on the securities. If
successful, the attempt could result in losses or delays in payment to you or
an acceleration of the repayment of the securities.
RECEIVABLES THAT FAIL TO COMPLY WITH
CONSUMER PROTECTION LAWS MAY RESULT IN
LOSSES ON YOUR INVESTMENT. Federal and state consumer protection laws impose requirements on creditors in
connection 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.
BANKRUPTCY OF WORLD OMNI FINANCIAL
CORP. AND WORLD OMNI AUTO RECEIVABLES
LLC (SELLER) COULD RESULT IN LOSSES OR
DELAYS IN PAYMENTS ON YOUR SECURITIES. Non-Consolidation
The seller has structured the securities with the intent that the voluntary or
involuntary application for relief by World Omni Financial Corp., as the sole
member of the seller under the United States Bankruptcy Code or similar state
laws will not result in consolidation of the assets and liabilities of the
seller with those of World Omni Financial Corp. These steps include:
o the creation of the seller as a separate limited purpose limited liability
company, with a limited liability company agreement restricting the seller's
business; and
o restricting the seller's ability to commence a voluntary case or proceeding
under any insolvency law without the consent of the managing member, and the
unanimous approvals of all the
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members of the board of directors of the seller, including, without
limitation, the affirmative vote of the two independent directors.
The seller has received advice of counsel to the effect that, subject to
particular facts, assumptions and qualifications, it would not be a proper
exercise by a court of its equitable discretion to disregard the separate
existence of the seller and World Omni Financial Corp. and to require the
consolidation of the assets and liabilities of the seller with those of World
Omni Financial Corp. in the event of the application of the federal bankruptcy
laws to World Omni Financial Corp. Notwithstanding these steps, a court might
consolidate the assets and liabilities of the seller with those of World Omni
Financial Corp. in a proceeding under an insolvency law. Delays or reductions
in distributions on the related securities could result from a consolidation.
True Sale
If the sale of the receivables from World Omni Financial Corp. to the seller
is treated as a sale, the receivables would not be part of the bankruptcy
estate of World Omni Financial Corp. and would not be available to creditors
of World Omni Financial Corp. We refer you to "World Omni Financial Corp."
World Omni Financial Corp. will warrant to the seller that its sale of the
receivables is a valid sale of the receivables. In addition, World Omni
Financial Corp. and the seller will treat these sales as a sale of the
receivables to the seller. The seller will take all actions that are required
to perfect the seller's ownership interest in the receivables. Upon issuance
of each series of securities, the seller will receive the advice of counsel to
the effect that in the event World Omni Financial Corp. were to become the
subject of a voluntary or involuntary case under the United States Bankruptcy
Code subsequent to the transfer of receivables to the seller, the transfer of
these receivables by World Omni Financial Corp. to the seller would be
characterized as a "true sale" of these receivables from World Omni Financial
Corp. to the seller and these receivables and the proceeds thereof would not
form part of World Omni Financial Corp.'s bankruptcy estate pursuant to
Section 541 of the United States Bankruptcy Code. This advice of counsel will
be subject to facts, assumptions and qualifications.
Notwithstanding the foregoing, if World Omni Financial Corp. were to become a
debtor in a bankruptcy case and a creditor or trustee-in-bankruptcy of World
Omni Financial Corp. or World Omni Financial Corp. took the position that the
sale of receivables to the seller should be recharacterized as a pledge of the
receivables to secure a borrowing of the seller, then you could be adversely
affected by delays or reductions in payments of collections of receivables.
In 1993, the U.S. Court of Appeals for the Tenth Circuit concluded that
accounts sold by a debtor prior to the filing for bankruptcy
8
remain property of the debtor's bankruptcy estate. Although the receivables
are likely "chattel paper", as defined under the Uniform Commercial Code
rather than accounts, the rationale behind the decision is equally applicable
to chattel paper. Considerable legal uncertainty exists concerning this
decision. While World Omni Financial Corp. is not located in the Tenth
Circuit, it is impossible to predict whether other courts will follow this
decision. If a court applied the rule in this decision in a bankruptcy of
World Omni Financial Corp., notwithstanding that the transfer of receivables
to the seller was treated as a sale, the receivables would be part of World
Omni Financial Corp.'s bankruptcy estate. This could result in delays and
reductions in payments to you.
A RATING OF THE SECURITIES IS NOT A
RECOMMENDATION TO PURCHASE, HOLD OR
SELL SECURITIES. 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.
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PROSPECTUS SUPPLEMENT
The prospectus supplement for each series of securities to be offered, will
describe, among other things, with respect to the series of securities:
o a description of structural features of each class of securities;
o the identity of each class within the series;
o the initial aggregate principal amount, the interest rate (or the method
for determining the rate) and the authorized denominations of each class
of offered securities;
o certain information concerning the receivables relating to the series,
including the principal amount, type and characteristics of the
receivables on the cutoff date;
o the existence of any pre-funding account for the purchase of additional
receivables and its material terms;
o additional information with respect to any credit enhancement and, if the
holder of the securities will be materially dependent upon any provider
of credit enhancement for timely payment of interest and/or principal,
information regarding the provider or counterparty;
o the order of the application of principal and interest payments to each
class of offered securities and the allocation of principal to be so
applied;
o the extent of subordination of any subordinate securities;
o the payment date for the securities;
o information regarding the servicer for the receivables;
o the circumstances, if any, under which the offered securities are subject
to redemption prior to maturity;
o the trustee for the securities;
o information regarding tax considerations; and
o additional information with respect to the method of distribution of the
securities.
THE ISSUERS
With respect to each series of securities, the seller will establish a
separate trust that will issue the securities.
THE TRUST ASSETS
To the extent specified in the prospectus supplement for a trust, the
assets of a trust will include:
o a pool of retail installment sale contracts secured by new and used
automobiles and light trucks;
o moneys received under the receivables after the applicable cutoff date;
o amounts as from time to time may be held in one or more trust accounts
established and maintained on behalf of the trust by a trustee;
o the rights of the seller under the sale and servicing agreement or
pooling and servicing agreement pursuant to which seller sold the
receivables to the trust and the servicer services the receivables on
behalf of the trust;
10
o security interests in the financed vehicles;
o the rights of the seller to receive any proceeds with respect to the
receivables from claims on certain insurance policies covering the
financed vehicles or the obligors;
o any credit enhancement (including any interest rate and currency
protection agreements) provided for the benefit of holders of the
securities of the trust;
o any pre-funding account; and
o any and all proceeds of the foregoing.
If so provided in the related prospectus supplement, the property of a
trust may also include a pre-funding account, into which the seller will deposit
to a trust cash and which will be used by the trust to purchase receivables from
the seller during a specified period. Any receivables so conveyed to a trust
will also be assets of the trust.
The receivables comprising the trust assets will be, as specifically
described in the related prospectus supplement:
o originated by various dealers and acquired by World Omni Financial Corp.,
o acquired by World Omni Financial Corp. from other originators or owners
of receivables, or
o originated by World Omni Financial Corp.
The underwriting criteria applicable to the receivables included in any
trust is described under "World Omni Financial Corp.'s Automobile Finance
Business--Underwriting", or to the extent different, in the related prospectus
supplement.
THE RECEIVABLES POOL
GENERAL
Information with respect to the pool of receivables (the receivables pool)
will be described in the related prospectus supplement.
RECEIVABLES POOLS
On or prior to each closing date, World Omni Financial Corp. will sell and
assign to the seller, without recourse its entire interest in the receivables
pool, together with its security interests in the financed vehicles, pursuant to
a purchase agreement between World Omni Financial Corp. and the seller.
In each purchase agreement, World Omni Financial Corp. will represent and
warrant to the seller, among other things, that:
o the information provided with respect to the receivables is correct in
all material respects;
o at the origination date of the receivable, physical damage insurance
covering each financed vehicle is in effect in accordance with World Omni
Financial Corp.'s normal requirements;
o at the closing date each of the related receivables are free and clear of
all security interests, liens, charges, and encumbrances and no offsets,
defenses, or counterclaims against dealers have been asserted or
threatened;
o at the closing date each of the receivables is secured by a
first-priority perfected security interest in the financed vehicle in
favor of World Omni Financial Corp.; and
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o each receivable, at origination and, at the closing date, complies in all
material respects with applicable federal and state laws, including
consumer credit, truth in lending, equal credit opportunity and
disclosure laws.
As of the last day of the second (or, if World Omni Financial Corp. elects,
the first) month following the discovery by or notice to the seller and World
Omni Financial Corp. of a breach of any representation or warranty that
materially and adversely affects a receivable, unless the breach is cured, World
Omni Financial Corp. will purchase the receivable from the trust for a purchase
amount equal to the unpaid principal balance owed by the obligor plus interest
thereon at the respective annual percentage rate to the last day of the month of
repurchase. The repurchase obligation will constitute the sole remedy against
the seller for any uncured breach.
To the extent indicated in the related prospectus supplement, the seller or
the trust may purchase the receivables from warehouse facilities or structured
commercial paper issuers.
PRE-FUNDING ACCOUNTS
If the related prospectus supplement indicates, the property of a trust
will include cash in an amount not to exceed 25% of the initial aggregate
principal balance of the securities. The seller will deposit this amount into a
pre-funding account. For a maximum of 90 days after the closing date, the trust
will use this cash to purchase additional receivables; the seller will be
obligated to sell additional receivables to the related trust, subject only to
the availability of additional receivables. It is expected that the additional
receivables will have an aggregate principal balance approximately equal to the
amount deposited to the pre-funding account on the closing date (the "PRE-FUNDED
AMOUNT"). The trust will purchase the additional receivables (subject to the
satisfaction of conditions specified in the prospectus supplement) from time to
time during the funding period specified in the prospectus supplement. The
funding period will not exceed three months. Any funds on deposit in the
pre-funding account and not yet invested in additional receivables will be
invested in eligible investments. If the Pre-Funded Amount is not fully utilized
by the end of the funding period, the remaining Pre-Funded Amount will be
applied to prepay securities.
We refer you to "Description of the Trust Documents--Sale and Assignment of
Receivables."
Any conveyance of additional receivables to a trust is subject to the
satisfaction of the conditions precedent and conditions subsequent specified in
the related prospectus supplement. If any of these conditions are not met with
respect to any additional receivables within the time period specified in the
related prospectus supplement, World Omni Financial Corp. will be required to
repurchase the additional receivables from the related trust, at the purchase
amounts therefor.
The characteristics of the entire receivables pool included in any trust
may vary from those described in the related prospectus supplement as additional
receivables are conveyed to the trust from time to time during the funding
period. Unless the prospectus supplement indicates otherwise, the
characteristics of the additional receivables are not expected to be materially
different from the receivables included in the trust as of the closing date. The
related prospectus supplement will indicate any restrictions on the
characteristics of the additional receivables.
THE RECEIVABLES
As specified in the related prospectus supplement, the receivables consist
of simple interest receivables. "SIMPLE INTEREST RECEIVABLES" provide for the
amortization of the amount financed under the receivable over a series of fixed
level monthly payments. Each monthly payment consists of an installment of
interest which is calculated on the basis of the outstanding principal balance
of the receivable multiplied by the stated annual percentage rate and further
multiplied by the period elapsed (as a fraction of a calendar year) since the
preceding payment of interest was made. As payments are
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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 which
results from prepayments will be borne entirely by you.
The related prospectus supplement may describe some additional information
with respect to the maturity and prepayment considerations applicable to a
particular pool of receivables and the related series of securities.
THE SELLER
World Omni Auto Receivables LLC was formed as a Delaware limited liability
company on April 13, 1999 and is a wholly-owned subsidiary of World Omni
Financial Corp. The principal executive offices of the seller are located at 120
N.W. 12th Avenue, Deerfield Beach, Florida 33442, and its telephone number is
(305) 429-2200. The Managing Member is located at 120 N.W. 12th Avenue,
Deerfield Beach, Florida 33442.
The seller was organized solely for the purpose of acquiring receivables
and associated rights, issuing securities and engaging in related transactions.
The seller's limited liability company agreement limits the activities of the
seller to the foregoing purposes and to any activities incidental to and
necessary for these purposes.
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WORLD OMNI FINANCIAL CORP.
GENERAL
World Omni Financial Corp. is a Florida corporation and a wholly owned
subsidiary of JM Family Enterprises, Inc. ("JMFE"), a Delaware corporation.
World Omni Financial Corp. provides installment contract and lease contract
financing to retail customers of some automotive dealers within and outside the
Alabama, Florida, Georgia, North Carolina and South Carolina area ("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, Inc. ("SET"), World Omni Financial Corp.'s sister
corporation, as well as to other automotive dealers within and outside the five
state area.
SET is the exclusive distributor of Toyota cars and light duty trucks,
parts and accessories in the five state area. As such, SET is the sole provider
of Toyotas to dealers in the five state area. SET distributes Toyota vehicles
pursuant to a distributor agreement, which first was entered into in 1968 and
has been renewed through October 2004, with Toyota Motor Sales, USA, Inc.
World Omni Financial Corp. initiated operations in 1982, and as of
December 31, 1999, December 31, 1998, December 31, 1997 and December 31, 1996,
World Omni Financial Corp. and its affiliates had approximately 106,337, 76,883,
56,442 and 46,897 retail installment sale contracts outstanding, respectively.
The aggregate outstanding principal balances of retail installment sale
contracts at the above dates (including retail installment contracts that were
sold but are still being serviced by World Omni Financial Corp.), were
approximately $1,235 million, $818 million, $608 million and $475 million,
respectively.
CERTAIN ADMINISTRATIVE AND LEGAL PROCEEDINGS
As part of its regular examination process of the consolidated federal
income tax returns of JMFE and its subsidiaries (including World Omni Financial
Corp.) for certain prior years, the Internal Revenue Service (the "IRS") is
reviewing, among other things, some transactions that were consummated in prior
years relating to retail lease contracts. The IRS has proposed treating these
transactions as sales rather than financings for federal income tax purposes,
which would affect World Omni Financial Corp.'s depreciation deductions. It has
also proposed treating the origination trust and each securitization trust
created for those transactions as an association taxable as a corporation rather
than a trust for federal income tax purposes. In connection with each
transaction, World Omni Financial Corp. received an opinion of tax counsel to
the effect that these transactions were properly treated as financings for
federal income tax purposes and that neither the origination trust nor the
relevant securitization trusts would be treated as an association taxable as a
corporation for federal income tax purposes. While management believes that a
challenge by the IRS would be unsuccessful, we cannot assure you of this result.
The IRS has also proposed changes to other positions that were taken on the tax
returns it is examining.
Management is vigorously defending its positions and believes that the
ultimate resolution of all of the issues will not have a material adverse effect
on securityholders, JMFE's or World Omni Financial Corp.'s operations and
financial condition. However, if the IRS were to prevail on certain of these
issues, it could have a material adverse effect on JMFE's or World Omni
Financial Corp.'s operations and financial condition. Nevertheless, management
believes that, even if the IRS were to prevail on all of these issues it would
not result in any material impairment of World Omni Financial Corp.'s ability to
perform its obligations and its duties as servicer under the trust documents. We
cannot however, assure you of this result.
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WORLD OMNI FINANCIAL CORP.'S AUTOMOBILE FINANCE BUSINESS
GENERAL
World Omni Financial Corp. primarily purchases retail installment sale
contracts in the five state area (and currently to a limited extent other states
in which it conducts business) from dealers pursuant to existing dealer
agreements in the ordinary course of business. We refer you to "World Omni
Financial Corp." The contracts were originated by participating dealers in
accordance with World Omni Financial Corp.'s requirements and were purchased in
accordance with World Omni Financial Corp.'s underwriting standards, which
emphasize among other things, the prospective purchaser's ability to make timely
payments and creditworthiness.
World Omni Financial Corp. purchases retail installment sale contracts from
over 600 dealers. Pursuant to written agreements with World Omni Financial
Corp., each dealer offers automobile and light duty truck financing pursuant to
World Omni Financial Corp. approved terms and a World Omni Financial Corp.
supplied or approved form of retail motor vehicle installment sale contract and
disclosure statement. Each dealer is responsible for obtaining credit-related
information about a prospective purchaser and for forwarding the information for
review and credit evaluation to either World Omni Financial Corp.'s offices,
located in St. Louis, Missouri ("ST. LOUIS CENTER") or to offices at Deerfield
Beach, Florida ("DEERFIELD OFFICE"), as applicable. At the St. Louis center or
the Deerfield office, each application is reviewed, evaluated and "scored" as
described under "World Omni Financial Corp.'s Automobile Finance
Business-Underwriting." The results of this computer-based evaluation are sent
to the purchase office located in the St. Louis center or Deerfield office, as
applicable for final review and credit evaluation. The purchase office then
advises the dealer if the applicant is acceptable to World Omni Financial Corp.
If a prospective buyer is accepted, the dealer will prepare all necessary
paperwork to sell the vehicle from its inventory to the customer, including
entering into a retail installment sale contract with its customer. The dealer
then verifies the existence of insurance and thereafter sells the contract to
World Omni Financial Corp. The St. Louis center and the Deerfield office verify
that all documents supplied by a dealer with respect to a retail installment
sale contract conform with World Omni Financial Corp.'s requirements. For
further information regarding the underwriting of retail installment sale
contracts, see "World Omni Financial Corp.'s Automobile Finance Business-
Underwriting" below.
The St. Louis center and a center located in Mobile, Alabama ("MOBILE
CENTER"), service World Omni Financial Corp.'s retail installment sale
contracts. The Mobile center and St. Louis center handle collection activities,
operational accounting and dealer and customer inquiries for World Omni
Financial Corp.
The principal executive offices of World Omni Financial Corp. are located
at 120 N.W. 12th Avenue, Deerfield Beach, Florida 33442 and its telephone number
is (954) 429-2200.
UNDERWRITING
The World Omni Financial Corp. underwriting standards are intended to
evaluate a prospective buyer's credit standing and repayment ability. Generally,
a prospective buyer is required by the dealer to complete a credit application
on a form prepared or approved by World Omni Financial Corp. As part of the
description of the applicant's financial condition, the applicant is required to
provide current information enumerating, among other things, employment history,
residential status and annual income. Upon receipt by the applicable office, all
application data is entered into a centralized computer network that
automatically obtains an independent credit bureau report and then "scores" the
application with the use of a scorecard. The scorecard enables World Omni
Financial Corp. to review an application and establish the probability that the
proposed installment contract will be paid in accordance with its terms. The
credit scores rank-order applications according to credit risk, which is the
likelihood that the account
15
will be delinquent or repossessed. The application also is evaluated against a
"cutoff score" established by World Omni Financial Corp. as the minimum
acceptable score to purchase an installment contract, which is revised from time
to time as changes occur in economic conditions and World Omni Financial Corp.'s
installment contract portfolio.
Generally, the score card provides a means of analysis to assist in
decision making, but the final decision generally rests with World Omni
Financial Corp.'s credit specialists. Under World Omni Financial Corp.'s
guidelines, a credit specialist generally may not override the scorecard
analysis of applications above or below the cutoff score by more than a limited
percentage of the applications. Both the number of overrides granted by each
credit specialist and the aggregate number of overrides granted by all credit
specialists are tracked by World Omni Financial Corp. in order to insure the
statistical validity of the scoring models. Detailed reporting on aspects of the
numerical scoring model is utilized to track performance of World Omni Financial
Corp.'s retail automobile and light duty truck installment sales contract
portfolio and to enable World Omni Financial Corp. to fine tune the scoring
model according to statistical indications to continually assure the statistical
validity of the scoring models. In certain circumstances, World Omni Financial
Corp. may pre-approve applicants with established World Omni Financial Corp.
credit histories based on a credit bureau score and other credit criteria
without the use of a custom scorecard. World Omni may also automatically approve
or deny applicants based on a credit bureau score, custom score and other credit
criteria. Applicants not automatically approved will be reviewed by a credit
specialist and may be subsequently approved.
World Omni Financial Corp. also originates retail installment sale
contracts under a lease termination program where it offers to obligors who
lease financed vehicles from its affiliates the option of financing the purchase
of the leased vehicle at lease expiration. These loans 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. More recently, 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 St. Louis center and Deerfield 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. has used risk based pricing since 1997. This
includes a tier-based system of interest rates and loan to value ratios
representing the varying degrees of credit risk assigned to different ranges of
credit scores. The amount of a retail installment sale contract secured by a new
vehicle or used vehicle generally will not exceed 120% of the dealer invoice
cost of the related vehicle or 120% of clean black book value, respectively,
plus select accessories at the dealer cost (for new only), sales tax, title and
registration fees, any insurance premiums for credit life and credit disability
insurance, and certain fees for extended service contracts. However, the amount
advanced may be less, or in limited circumstances more, than the maximum
permissible amount due to a number of factors, including, but not limited to,
down payment and trade-in equity.
16
SERVICING
Collection efforts are primarily performed through the Mobile center and
St. Louis center. These efforts are enhanced by the use of automated dialing and
collections systems. Independent contractors are employed in connection with
repossessions. General guidelines for retail installment sale contract
collection and repossession of the related financed vehicles include the
following:
NUMBER OF
DAYS DELINQUENT ACTION
- ---------------------------------- ---------------------------------------------------------------
10................................ The obligor automatically is mailed a past due notice
12-22............................. Telephone contact with the obligor is initiated
23-120............................ Additional personal contact regarding collection is made
75................................ The vehicle is normally repossessed
Generally, after a contract is 75 days delinquent, the related financed
vehicle is repossessed, although under some circumstances repossession may occur
prior or later than this time. Repossessions are conducted by independent
contractors who are engaged in the business of repossessing vehicles. Generally,
repossessed vehicles are disposed of by auction. Upon repossession and
disposition of the financed vehicle, to the extent permitted by state law, any
remaining deficiency is pursued by World Omni Financial Corp. to the extent the
obligor is deemed to have sufficient assets to cover the deficiency. We refer
you to "Some Legal Aspects of the Receivables--Deficiency Judgments and Excess
Proceeds".
World Omni Financial Corp. follows detailed procedures with respect to
rescheduling of delinquent accounts and extensions of contracts. Generally a
rescheduling or an extension requires the demonstration of financial
difficulties, an ability to repay and approval by management. The legal
documents for the securities will permit the servicer to reschedule or extend a
receivable, or grant a rebate or other adjustment, only in accordance with the
customary procedures of the servicer and otherwise in accordance with these
agreements. We refer you to "The Description of the Trust Documents--Servicing
Procedures".
World Omni Financial Corp. from time to time implements a program whereby
obligors meeting the eligibility criteria specified below may be permitted, at
the option of the related obligor, to defer one month's payment of principal
during the December/January holiday period or July/August summer period (the
"PAYMENT EXTENSION PROGRAM"). In connection with the Payment Extension Program,
the obligor must pay an extension fee calculated generally at the APR of the
related retail installment sale contract for the month in which the contract is
extended. As a result, the obligor would pay the equivalent of an additional
interest payment in exchange for receiving a non-credit related extension.
The criteria for making an extension pursuant to the Payment Extension
Program generally include the following:
o the obligor is not currently 20 days or more delinquent and never has
been more than 60 days past due;
o the obligor has made six or more scheduled monthly payments and has more
than six remaining scheduled monthly payments;
o fewer than ten percent (in number) of the obligor's payments have been
greater than 30 days past due;
o the obligor cannot have extended the contract during the previous 90
days;
o the receivable must have a certain APR; and
o the obligor must not currently be in bankruptcy or litigation status.
17
The agreement will provide that no receivable can be extended more than six
times during the life of the receivable (excluding Payment Extension Programs)
or extended beyond the month immediately preceding the month in which the final
scheduled payment date occurs and that all related extension fees must be
deposited into the collection account within two business days of receipt by the
servicer.
INSURANCE
World Omni Financial Corp. requires each obligor under a receivable to
obtain comprehensive and collision insurance with respect to the related
financed vehicle and requires the selling dealer to verify the existence of the
insurance before it will purchase the contract from the related dealer.
Following the purchase, World Omni Financial Corp. performs no ongoing
verification of insurance coverage. Commencing in August, 1998, World Omni
Financial Corp. stopped maintaining vendor's single interest physical damage
insurance with respect to newly originated retail installment sale contracts.
World Omni Financial Corp. does not require obligors to maintain credit
disability or life or credit health insurance or other similar insurance
coverage which provides for payments to be made on the automobile and light duty
truck retail installment sale contracts which it purchases on behalf of the
obligors in the event of disability or death. To the extent that any insurance
coverage is obtained on behalf of an obligor, payments received in respect of
coverage may be applied to payments on the related receivable to the extent that
the obligor's beneficiary chooses to do so.
POOL FACTORS
The pool factor for each class of securities will be a seven-digit decimal,
which the servicer will compute prior to each distribution with respect to the
class of securities, indicating the remaining outstanding principal balance of
the class of securities as of the applicable payment date, as a fraction of the
initial outstanding principal balance of the class of securities. Each pool
factor will be initially 1.0000000, and thereafter will decline to reflect
reductions in the outstanding principal balance of the applicable class of
securities. A securityholder's portion of the aggregate outstanding principal
balance of the related class of securities is the product of (i) the original
aggregate purchase price of the securityholder's securities and (ii) the
applicable pool factor.
As more specifically described in the related prospectus supplement
securityholders will receive reports on or about each payment date concerning
the payments received on the receivables, the principal balance of the
receivables pool, each pool factor and various other items of information. In
addition, securityholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date permitted
by law.
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USE OF PROCEEDS
Unless otherwise provided in the related prospectus supplement, the trust
will use the net proceeds from the sale of the securities of a series to
purchase the receivables from the seller and to make the deposit of any
pre-funded amount to the pre-funding account and make any other required
deposits to trust accounts. The seller will in turn use its net proceeds to
purchase the receivables pool from World Omni Financial Corp. World Omni
Financial Corp. may use all or a portion of the proceeds to reacquire the
receivables from affiliates of World Omni Financial Corp. or from warehouse
facilities or structured commercial paper issuers who in turn will repay
indebtedness secured by the receivables. World Omni Financial Corp. will use any
remainder of the proceeds for general corporate purposes.
THE TRUSTEE
The trustee or trustees for each series of securities will be specified in
the related prospectus supplement. The trustee's liability in connection with
the issuance and sale of the related securities is limited solely to the express
obligations of the trustee described in the agreement related to the securities.
With respect to each series of securities, the procedures for the
resignation or removal of the trustee and the appointment of a successor trustee
shall be specified in the related prospectus supplement.
DESCRIPTION OF THE SECURITIES
GENERAL
The securities will be issued in series. The trust may issue securities in
one or more classes. Each class of securities will either evidence beneficial
interests in a segregated pool of assets or will represent debt of the trust
secured by the trust assets. The following summaries (together with additional
summaries under "Description of the Trust Documents" below) describe all
material terms and provisions common to all securities. The summaries do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all of the provisions of the documentation for the related
securities and the related prospectus supplement.
All of the securities offered pursuant to this prospectus and the related
prospectus supplement will be rated in one of the four highest rating categories
by one or more nationally recognized statistical rating agencies (the "RATING
AGENCIES").
Each series or class of securities offered pursuant to this prospectus may
have a different interest rate, which may be a fixed or adjustable interest
rate. The related prospectus supplement will specify the interest rate for each
series or class of securities described in the related prospectus supplement, or
the initial interest rate and the method for determining subsequent changes to
the interest rate.
A series may include one or more classes of "strip securities" which are
securities that are entitled (i) to principal distributions, with
disproportionate, nominal or no interest distributions, or (ii) to interest
distributions, with disproportionate, nominal or no principal distributions. In
addition, a series of securities may include two or more classes of securities
that differ as to timing, sequential order, priority of payment, interest rate
or amount of distribution of principal or interest or both. Distributions of
principal or interest or both on any class also may be made upon the occurrence
of specified events, in accordance with a schedule or formula, or on the basis
of collections from designated portions of the receivables pool. Any series may
include one or more classes of "accrual securities," which are securities for
which all or some of the interest is added to the principal balance instead of
currently distributed.
If so provided in the related prospectus supplement, a series may include
one or more other classes of securities that are senior to one or more other
classes of subordinate securities in respect of distributions of principal and
interest and allocations of losses on receivables.
19
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:
o slows the amortization rate of the related securities relative to the
installment payment schedule of the related receivables, or
o attempts to match the amortization rate of the related securities to an
amortization schedule established at the time the securities are issued.
Any of these features may terminate prior to the scheduled date and result
in distributions to the securityholders and an acceleration of the amortization
of the securities.
If specified in the related prospectus supplement, the trustee may retain
all or a portion of the collected payments (and held in some eligible
investments, including receivables) for a specified period prior to being used
to fund payments of principal to securityholders. In addition, the related
prospectus supplement may provide that for purposes of determining payments on
the securities, specified portions of principal payments on indicated
receivables will be deemed interest payments on those receivables.
Eligible investments are generally limited to investments acceptable to the
Rating Agencies rating the securities as being consistent with the rating of the
securities. We refer you to "Description of the Trust Documents-- Accounts."
Neither the securities nor the underlying receivables will be guaranteed or
insured by any governmental agency or instrumentality or any other person unless
specifically described in the related prospectus supplement.
BOOK-ENTRY REGISTRATION
Holders of securities may hold their securities through DTC (in the United
States) or Clearstream Banking, societe anonyme ("CLEARSTREAM") or Euroclear (in
Europe) if they are participants of the system, or indirectly through
organizations that are participants in the systems. Clearstream and Euroclear
will hold omnibus positions on behalf of the Clearstream participants and the
Euroclear
20
participants, respectively, through customers' securities accounts in
Clearstream's and Euroclear's names on the books of their respective
depositories (collectively, the "DEPOSITORIES") which in turn will hold the
positions in customers' securities accounts in the Depositories' names on the
books of DTC. DTC is a limited purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code and a "clearing
agency" registered pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold securities for its participants and to
facilitate the clearance and settlement of securities transactions between
participants through electronic computerized book-entries, thereby eliminating
the need for physical movement of securities. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations. Indirect
access to the DTC system also is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("INDIRECT
PARTICIPANTS").
Transfers between DTC participants will occur in accordance with DTC rules.
Transfers between Clearstream participants and Euroclear participants will occur
in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly through Clearstream participants or
Euroclear participants, on the other, will be effected in DTC in accordance with
DTC rules on behalf of the relevant European international clearing system by
its Depository; however, the cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in the system in accordance with its rules and procedures. If the
transaction complies with all relevant requirements, Euroclear or Clearstream,
as the case may be, will then deliver instructions to the Depository to take
action to effect final settlement on its behalf.
Because of time-zone differences, credits of securities in Clearstream or
Euroclear as a result of a transaction with a DTC participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and the credits or any transactions in the
securities settled during the processing will be reported to the relevant
Clearstream participant or Euroclear participant on the same business day. Cash
received in Clearstream or Euroclear as a result of sales of securities by or
through a Clearstream participant or a Euroclear participant to a DTC
participant will be received with value on the DTC settlement date but will be
available in the relevant Clearstream or Euroclear cash account only as of the
business day following settlement in DTC.
The holders of securities that are not participants or indirect
participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, securities may do so only through participants and indirect
participants. In addition, holders of securities will receive all distributions
of principal and interest from the trustee through the participants who in turn
will receive them from DTC. Under a book-entry format, holders of securities may
experience some delay in their receipt of payments, since the payments will be
forwarded by the trustee to Cede & Co., as nominee for DTC. DTC will forward the
payments to its participants, which thereafter will forward them to indirect
participants or beneficial owners of securities.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "RULES"), DTC is required to make book-entry transfers of
securities among participants on whose behalf it acts with respect to the
securities and to receive and transmit distributions of principal of, and
interest on, the securities. Participants and indirect participants with which
the holders of securities have accounts with respect to the securities similarly
are required to make book-entry transfers and receive and transmit the payments
on behalf of their respective holders of securities. Accordingly, although the
holders of securities will not possess the securities, the Rules provide a
mechanism by which participants will receive payments on securities and will be
able to transfer their interest.
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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.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear system and to clear and settle transactions between Euroclear
participants through simultaneous electronic book-entry delivery against
payment.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "TERMS AND CONDITIONS"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear system, withdrawal of
securities and cash from the Euroclear system, and receipts of payments with
respect to securities in the Euroclear system.
Although DTC, Euroclear and Clearstream have implemented the foregoing
procedures in order to facilitate transfers of interests in book-entry
securities among participants of DTC, Euroclear and Clearstream, they are under
no obligation to perform or to continue to comply with the procedures, and the
procedures may be discontinued at any time. None of the seller nor any other
person will have any responsibility for the performance by DTC, Euroclear or
Clearstream or their respective direct or indirect participants of their
respective obligations under the rules and procedures governing their
operations. The information herein concerning DTC, Clearstream and Euroclear and
their book-entry systems has been obtained from sources believed to be reliable,
but the seller takes no responsibility for the accuracy or completeness of the
information.
DEFINITIVE SECURITIES
Unless the related prospectus supplement provides otherwise, the securities
will be issued in fully registered, certificated form (definitive securities) to
the securityholders of a given series or their nominees, only if:
o the trustee in respect of the related series advises in writing that DTC
is no longer willing or able to discharge properly its responsibilities
as depository with respect to the securities and the trustee is unable to
locate a qualified successor,
o the trustee, at its option, elects to terminate the book-entry-system
through DTC, or
o after the occurrence of an event of default under the related indenture
or a default by the servicer under the related sale and servicing
agreement or pooling and servicing agreement, securityholders
representing at least a majority of the outstanding principal amount of
the securities advise the applicable trustee through DTC in writing that
the continuation of a book-entry system through DTC (or its successor) is
no longer in the securityholders' best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the applicable trustee will be required to notify all the
securityholders through participants of the availability of
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definitive securities. Upon surrender by DTC of the definitive securities
representing the securities and receipt of instructions for re-registration, the
applicable trustee will reissue the securities as definitive securities to the
securityholders.
Distributions of principal of, and interest on, the securities will
thereafter be made by the applicable trustee in accordance with the procedures
described in the related indenture, pooling and servicing agreement or trust
agreement directly to holders of definitive securities in whose names the
definitive securities were registered at the close of business on the applicable
record date.
The distributions will be made by check mailed to the address of the holder
as it appears on the register maintained by the applicable trustee. The final
payment on any the security, however, will be made only upon presentation and
surrender of the security at the office or agency specified in the notice of
final distribution to the applicable securityholders.
Definitive securities in respect of a given series of securities will be
transferable and exchangeable at the offices of the applicable trustee or of a
certificate registrar named in a notice delivered to holders of the definitive
securities. No service charge will be imposed for any registration of transfer
or exchange, but the applicable trustee may require payment of a sum sufficient
to cover any tax or other governmental charge imposed.
REPORTS TO SECURITYHOLDERS
On each payment date, the applicable trustee will include with each
distribution to each securityholder as of the related record date a statement
generally setting forth the following:
(i) the amount of the distribution allocable to principal of each
class of securities;
(ii) the amount of the distribution allocable to interest on each
class of securities;
(iii) the principal balance of the receivables pool and the pool
factor for each class of securities as of the last day of the preceding
collection period;
(iv) the aggregate principal balance of each class of securities as of
the last day of the preceding collection period, after giving effect to
payments of principal under (i) above;
(v) the amount of the servicing fee paid to the servicer with respect
to the related collection period, the amount of any unpaid servicing fees
and the change in the amount from that of the prior payment date;
(vi) the amount of any interest and principal carryover shortfall, on
the payment date and any change from the prior payment date;
(vii) the amount paid to the securityholders from the reserve account
for the payment date, its balance and any change from the prior payment
date; and
(viii) the number and the aggregate purchase amount of receivables
repurchased by World Omni Financial Corp. or purchased by the servicer.
DTC will supply these reports to securityholders in accordance with its
procedures. The report will also indicate each amount described under subclauses
(i), (ii), (v), (vi), (vii) and (viii) above in the aggregate and as a dollar
amount per $1,000 of original principal balance of a security.
After the end of each calendar year, the applicable trustee will mail to
each person who was a securityholder during the year, a statement (prepared by
the servicer) containing certain information needed in the preparation of
federal income tax returns.
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DESCRIPTION OF THE TRUST DOCUMENTS
The following summary describes the material terms of the documents used to
create a trust and issue the related securities. The trust documents for notes
will generally consist of a purchase agreement, generally between World Omni
Financial Corp., as seller and World Omni Auto Receivables LLC, as purchaser, a
sale and servicing agreement, generally between the trust, as issuer and the
seller, as seller and World Omni Financial Corp., as servicer, an indenture,
generally between the trust and the applicable trustee, and a trust agreement,
generally between the seller and the applicable trustee. The trust documents for
certificates will generally consist of a purchase agreement, generally between
World Omni Financial Corp., as seller and World Omni Auto Receivables LLC, as
purchaser and a pooling and servicing agreement or a trust agreement between the
seller and the trustee. The prospectus supplement for a given series will
specify the trust documents utilized for that series of securities. We have
filed forms of the trust documents as an exhibit to the registration statement
of which this prospectus forms a part. This summary does not purport to be
complete.
SALE AND ASSIGNMENT OF RECEIVABLES
On or prior to the closing date for each series of securities, World Omni
Financial Corp. will sell and assign to the seller, without recourse, except for
representations and warranties, its entire interest in the receivables to be
included in the trust, together with its security interests in the financed
vehicles. At the time of issuance of the securities, the seller will transfer
the receivables to a trust pursuant to a sale and servicing agreement or a
pooling and servicing agreement.
As more fully described in the related prospectus supplement, World Omni
Financial Corp. will purchase from the related trust any receivable transferred
to a trust if the interest of the securityholders in that receivable is
materially adversely affected by a breach of any representation or warranty made
by World Omni Financial Corp. with respect to that receivable, which breach has
not been cured following the discovery by or notice to World Omni Financial
Corp. of the breach. In addition, if so specified in the related prospectus
supplement, World Omni Financial Corp. may from time to time reacquire
receivables or substitute other receivables for the defective receivables.
Pending sale to the seller, World Omni Financial Corp. may finance the
receivables in warehouse facilities provided to affiliates of World Omni
Financial Corp. On or prior to the closing date, for each series of securities,
these affiliates 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 on the receivables as described in "Description
of the Trust Documents--The Servicer" in this prospectus.
ACCOUNTS
With respect to each series of securities, the servicer will establish and
maintain with the applicable trustee one or more accounts, in the name of the
trustee on behalf of the related securityholders. The servicer will deposit all
payments made on or with respect to the related receivables into a collection
account. The trustee will deposit amounts released from the collection account
and any reserve account or other credit enhancement for distribution to the
securityholders into a distribution account. The trustee will make distributions
to the securityholders from the distribution account.
If the related prospectus supplement so provides, the trustee will maintain
a pre-funding account solely to hold funds to pay to the seller for additional
receivables during the funding period. Monies on deposit in the pre-funding
account will not be available to cover losses on or in respect of the
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receivables. On the closing date, the seller will deposit the initial pre-funded
amount from the sale proceeds of the securities.
If the related prospectus supplement so provides, the seller will establish
and maintain the interest reserve account in the name of the applicable trustee
on behalf of the securityholders. On the closing date, the seller will deposit
cash in the interest reserve account. On payment dates specified in the related
prospectus supplement, the trustee will withdraw funds on deposit in the
interest reserve account in excess of the required amount and will deposit such
funds in the distribution account for distribution.
The related prospectus supplement will describe any other accounts to be
established with respect to a trust, including any other reserve account, yield
supplement account or interest reserve account.
Funds in the collection account, the distribution account, any pre-funding
account, any reserve account and other accounts identified in the related
prospectus supplement (collectively, the "TRUST ACCOUNTS") will be invested in
eligible investments. Eligible investments are generally limited to investments
acceptable to the Rating Agencies rating the securities as being consistent with
the rating of the securities. Subject to certain conditions, eligible
investments may include securities issued by the servicer or its affiliates or
other trusts created by World Omni Financial Corp. or its affiliates. Eligible
investments must generally mature on the related payment date. However, funds in
the reserve account may be invested in securities that will mature after the
next payment date and will not be sold to meet any shortfalls. Thus, the amount
of cash in any reserve account at any time may be less than the balance of the
reserve account. If required withdrawals from any reserve account exceeds the
amount of cash in the reserve account a temporary shortfall in the amounts
distributed to the related securityholders could result. The average life of the
securities could then increase. Except as otherwise specified in the related
prospectus supplement, the trustee will deposit investment earnings on funds in
the Trust Accounts, net of losses and investment expenses, in the collection
account on each payment date.
If so provided in the prospectus supplement, on or before the business day
prior to each applicable payment date, the servicer will deposit into the
related collection account as an advance an amount equal to the amount of
interest that would have been due on the receivables related to a series at
their respective APRs for the related collection period minus the amount of
interest actually received on the receivables during the related collection
period. The servicer will not be required to make any advances to the extent
that it does not expect to recoup the advance from subsequent collections or
recoveries. If the servicer makes an advance that becomes a non-recoverable
advance, the trust will pay the servicer an amount equal to the non-recoverable
advance prior to paying the holders of securities. Unless otherwise specified in
the prospectus supplement, the servicer will make no advances of principal on
the receivables.
The applicable trustee will maintain the Trust Accounts so long as either:
o the short-term unsecured debt obligations of the applicable trustee meet
the criteria of each Rating Agency; or
o the applicable trustee is a depository institution or trust company
having a minimum long-term unsecured debt rating specified in the related
prospectus supplement and corporate trust powers and the related Trust
Account is maintained in a segregated trust account in the corporate
trust department of the applicable trustee.
If the applicable trustee at any time does not qualify under either of these
criteria, the servicer will move the Trust Accounts to a depository institution
meeting these requirements.
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THE SERVICER
World Omni Financial Corp. will be the servicer under each sale and
servicing agreement or pooling and servicing agreement. Any servicer may
delegate its servicing responsibilities to one or more subservicers, but will
not be relieved of its liabilities with respect thereto.
The servicer will make representations and warranties regarding its
authority to enter into, and its ability to perform its obligations under, the
related sale and servicing agreement or pooling and servicing agreement. An
uncured breach of a representation or warranty that in any respect materially
and adversely affects the interests of the securityholders will constitute a
default by the servicer under the related sale and servicing agreement or
pooling and servicing agreement.
SERVICING PROCEDURES
The servicer will service, administer and make reasonable efforts to
collect all amounts due on or in respect of the receivables. The servicer will
make reasonable efforts to collect all the amounts and, in a manner consistent
with the trust documents, will service the receivables generally in accordance
with customary and usual procedures of institutions which service retail
installment sale contracts secured by new and used automobiles and light trucks
and, to the extent more exacting, the procedures used by the servicer in respect
of retail installment sale contracts secured by new and used automobiles and
light trucks serviced for its own account. Consistent with its normal
procedures, the servicer may, in its sole discretion, arrange with the obligor
on a receivable to extend the payment schedule. The sale and servicing agreement
or pooling and servicing agreement will provide that no more than six extensions
may be granted and will provide for the timing of the extensions. The servicer
may not modify the original due dates or the amount of the scheduled payments,
or extend the final payment date on any receivable beyond the last day of the
collection period before the final scheduled payment date occurs. If the
servicer grants an extension with respect to a receivable other than in
accordance with the aforementioned limitations, the servicer must purchase the
receivable. Following any purchase of a receivable by the servicer, the
receivable will be released from the trust and conveyed to the servicer. The
servicer may sell the financed vehicle securing a defaulted receivable, if any,
at a public or private sale, or take any other action permitted by applicable
law. We refer you to "Some Legal Aspects of the Receivables."
PAYMENTS ON RECEIVABLES
Obligors will generally make payments on the receivables by mail for
deposit into a lock box and account maintained by the servicer. The servicer
will deposit in the collection account amounts attributable to the receivables
within two business days after receipt. The servicer will deposit all other
payments it receives on or in respect of the receivables into the collection
account not later than two business days after receipt.
SERVICING COMPENSATION
The trust will pay to the servicer a servicing fee on each payment date
equal to the product of one-twelfth of the specified percentage per annum and
the principal balance of the receivables pool as of the close of business on the
first day of the related collection period. With respect to the first payment
date, the servicing fee will be based on the original principal balance of the
receivables pool. The related prospectus supplement will describe the servicing
fee. The servicer will also collect and retain, as additional servicing
compensation, any late fees, prepayment charges, and other administrative fees
or similar charges allowed by applicable law with respect to the receivables
that are part of the trust, and will be entitled to reimbursement from the trust
for certain liabilities. The servicer will allocate the payments by or on behalf
of obligors to scheduled payments, late fees and other charges and principal
26
and interest in accordance with the servicer's normal practices and procedures.
The trust will pay the servicing fee out of collections from the receivables,
prior to distributions to securityholders.
The servicing fee and additional servicing compensation will compensate the
servicer for performing the functions of a third party servicer of automotive
receivables as an agent for the trust. Servicing duties include collecting and
posting all payments, responding to inquiries of obligors on the receivables,
investigating delinquencies, sending payment coupons to obligors, reporting tax
information to obligors, paying costs of disposition of defaults and policing
the collateral. The servicing fee also compensates the servicer for
administering the receivables, including accounting for collections and
furnishing monthly and annual statements as required with respect to a series of
securities regarding distributions and generating federal income tax
information.
As long as World Omni Financial Corp. believes that sufficient collections
will be available from interest collections on one or more future payment dates
to pay the servicing fee, World Omni Financial Corp. may, as servicer, elect to
waive the servicing fee with respect to the related collection period, without
interest. The servicing fee for the related collection period will be deemed to
equal zero for all purposes of the trust documents.
DISTRIBUTIONS
Beginning on the payment date specified in the related prospectus
supplement, the trust will make distributions of principal and interest (or,
where applicable, of principal or interest only) on each class of securities to
the holders of notes and certificates of the series. The prospectus supplement
will describe the timing, amount, priorities and other specifics of
distributions to each class of noteholders and certificateholders of each
series.
On each payment date the trustee will transfer collections on the related
receivables from the collection account to the distribution account for
distribution to securityholders. To the extent described in the related
prospectus supplement, distributions in respect of principal of a class of
securities of a given series may be subordinate to distributions in respect of
interest on the class, and distributions in respect of the certificates of the
series may be subordinate to payments in respect of the notes of the series.
CREDIT AND CASH FLOW ENHANCEMENTS
The related prospectus supplement will describe the amounts and types of
credit enhancement arrangements and any provider of credit enhancement with
respect to each class of securities of a given series. This credit enhancement
may consist of:
(i) financial guaranty insurance policies or surety bonds;
(ii) subordination of one or more classes of securities or
overcollateralization, letters of credit, credit or liquidity
facilities;
(iii) reserve funds, third party payments, guaranteed cash deposits;
or
(iv) other arrangements as may be described in the related prospectus
supplement or any combination of two or more of the foregoing.
Credit enhancement for a class of securities may cover one or more other
classes of securities of the same series. Credit enhancement for a series of
securities may cover one or more other series of securities.
Credit enhancement increases the likelihood of receipt by the relevant
securityholders of their full amount of principal and interest and decreases the
likelihood that these securityholders will experience losses. Credit enhancement
may not provide protection against all risks of loss and may not guarantee
27
repayment of the entire principal balance and interest thereon. If losses exceed
the amount covered by any credit enhancement or are not covered by any credit
enhancement, the relevant securityholders will bear their allocable share of
deficiencies, as described in the related prospectus supplement. If credit
enhancement covers more than one series of securities, securityholders of any
series will be subject to the risk that the credit enhancement will be exhausted
by the claims of securityholders of other series.
To the extent provided in the related prospectus supplement, cash flow
enhancement may be in the form of swaps (including without limitation currency
swaps) and other interest rate protection agreements, repurchase obligations
(including without limitation put options), yield supplement agreements, other
agreements with respect to third party payments or other support or other
arrangements as the related prospectus supplement may describe.
EVIDENCE AS TO COMPLIANCE
Annually, the servicer will furnish to the related trust and trustee a
statement from a firm of independent public accountants as to the compliance by
the servicer during the preceding twelve months with standards relating to the
servicing of receivables.
The servicer will also deliver to the related trust and the trustee an
officer's certificate stating that the servicer has fulfilled its obligations
under the sale and servicing agreement or pooling and servicing agreement in all
material respects throughout the preceding 12 months. If there has been a
default in the fulfillment of any of these obligations in any material respect,
the officer's certificate will describe the default. The servicer also will
agree to give the trustee notice of defaults by the servicer under the related
sale and servicing agreement or pooling and servicing agreement.
Securityholders may obtain copies of the statements and certificates by
written request addressed to the trustee.
CERTAIN MATTERS REGARDING THE SERVICERS
The servicer may not resign from its obligations and duties under any sale
and servicing agreement or pooling and servicing agreement unless it determines
that its duties are no longer permissible by reason of a change in applicable
law or regulations. No resignation will become effective until a successor
servicer has assumed the servicer's obligations and duties under the applicable
sale and servicing agreement or pooling and servicing agreement. The servicer
may not assign the sale and servicing agreement or pooling and servicing
agreement or any of its rights, powers, duties or obligations under the
applicable sale and servicing agreement or pooling and servicing agreement
except as otherwise provided or except in connection with a permitted
consolidation, merger, conveyance, transfer or lease.
Neither the servicer nor any of its directors, officer, employees, and
agents will be liable to the trust or the securityholders for taking any action
or for refraining from taking any action pursuant to the sale and servicing
agreement or pooling and servicing agreement, or for errors in judgment. This
provision will not protect the servicer nor any of these persons against any
liability imposed by reason of negligence, willful misfeasance or bad faith. The
servicer is under no obligation to appear in, prosecute, or defend any legal
action that is not incidental to its servicing responsibilities under the
applicable sale and servicing agreement or pooling and servicing agreement and
that, in its opinion, may cause it to incur any expense or liability.
Any entity into which the servicer may be merged or consolidated, or any
entity resulting from merger or consolidation or any entity succeeding to the
business of the servicer will succeed the servicer under the applicable sale and
servicing agreement or pooling and servicing agreement.
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SERVICER TERMINATION EVENT
Except as otherwise provided in the related prospectus supplement, a
servicer termination event under the related trust documents will include, among
others:
o any failure by the servicer to deliver to the applicable trustee for
deposit in any of the related Trust Accounts any required payment or to
direct the trustee to make any required distributions therefrom, which
failure continues unremedied for more than five (5) business days after
written notice from the trustee is received by the servicer or after
discovery by the servicer;
o any failure by the servicer duly to observe or perform in any material
respect any other covenant or agreement in the trust documents, among
others which materially and adversely affects the rights of the related
securityholders and which continues unremedied for more than sixty
(60) days after written notice of the failure (1) to the servicer by the
applicable trustee or (2) to the servicer, and to the applicable trustee
by holders of the controlling securities evidencing not less than 50% of
the voting rights of the controlling securities; and
o events of financial insolvency, readjustment of debt, marshaling of
assets and liabilities, or similar proceedings with respect to the
servicer.
RIGHTS UPON SERVICER TERMINATION EVENT
Except as otherwise provided in the related prospectus supplement, as long
as a servicer termination event under the related trust documents remains
unremedied, the applicable trustee or holders of the controlling securities
evidencing not less than 50% of the voting rights of the controlling securities
may terminate all the rights and obligations of the servicer, if any, under the
sale and servicing agreement or pooling and servicing agreement, whereupon a
successor servicer appointed by the trustee or the trustee will become servicer
under the trust documents. If, however, a bankruptcy trustee or similar official
has been appointed for the servicer, and no servicer termination event has
occurred, the bankruptcy trustee or official may have the power to prevent the
trustee or the securityholders from effecting a transfer of servicing.
WAIVER OF PAST DEFAULTS
With respect to the trust, except as otherwise provided in the prospectus
supplement, the holders of the controlling securities evidencing not less than
50% of the voting rights of the controlling securities may, on behalf of all
securityholders of the related securities, waive any default by the servicer in
the performance of its obligations under the related trust documents and its
consequences, except a default in making any required deposits to or payments
from any of the Trust Accounts in accordance with the trust documents. No waiver
will impair the securityholders' rights with respect to subsequent defaults.
AMENDMENTS
Unless otherwise specified in the related prospectus supplement, each of
the trust documents may be amended by the parties to each agreement, without the
consent of the related securityholders, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of the trust
documents or of modifying in any manner the rights of the securityholders. These
amendments require:
o a confirmation from each Rating Agency then rating the related securities
that the amendment will not result in a reduction or withdrawal of its
rating on the securities of that class, and
o the servicer shall have delivered an officer's certificate stating that
the amendment will not materially and adversely affect the interest of
any securityholder.
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Unless otherwise specified in the related prospectus supplement, World Omni
Financial Corp., the servicer, and the applicable trustee with the consent of
the holders of the controlling securities evidencing not less than 50% of the
voting rights of the controlling securities may amend the trust documents for
the purpose of adding, changing, modifying or eliminating any of the provisions
of the trust documents. The consent of all securityholders is required for any
amendment that:
o increases or reduces the amount or priority of, or accelerates or delays
the timing of, collections of payments on the related receivables or
distributions to securityholders; or
o reduces the required percentage of the securities which are required to
consent to these amendments.
TERMINATION
With respect to each trust, the obligations of the servicer, World Omni
Financial Corp. and the applicable trustee pursuant to the related trust
documents will terminate upon the earlier to occur of:
o the maturity or other liquidation of the last related receivable and the
disposition of any amounts received upon liquidation of any remaining
receivables;
o the payment to securityholders of the related series of all amounts
required to be paid to them pursuant to the trust documents; and
o the exercise by the seller or servicer of its option to purchase all the
remaining receivables as of the end of any collection period immediately
preceding a payment date to the extent the principal balance of the
receivables pool of the related contracts is less than 10% of the initial
principal balance of the receivables pool in respect of the trust assets,
for a price equal to the aggregate of the principal balance of the
remaining receivables, plus accrued and unpaid interest during the
related collection period.
Unless otherwise specified in the related prospectus supplement, any
outstanding securities of the related series will be redeemed concurrently with
the events specified above. The resulting distribution to the related
securityholders of proceeds may affect the prepayment rate of the securities.
Voting Rights; Controlling Securities.
Voting rights will be exercised by the holders of the controlling
securities as identified in the related prospectus supplement. If specified in
the related prospectus supplement, holders of senior securities may be the
controlling securities until they are repaid in full.
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DESCRIPTION OF THE NOTES
GENERAL
With respect to each trust that issues notes, one or more classes of notes
of the related series will be issued pursuant to the terms of an indenture, the
form of which has been filed as an exhibit to the registration statement of
which this prospectus forms a part. We have filed a form of the indenture as an
exhibit to the registration statement related to this prospectus. This summary
does not purport to be complete.
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of losses,
interest rate and amount of or method of determining payments of principal and
interest with respect to each class of notes of a series will be described in
the related prospectus supplement. The right of holders of any class of notes of
a series to receive payments of principal and interest may be senior or
subordinate to the rights of holders of any other class or classes of notes of
such series, as described in the related prospectus supplement. Unless otherwise
provided in the related prospectus supplement, payments of interest on the notes
of the related series will be made prior to payments of principal. To the extent
provided in the related prospectus supplement, a series may include one or more
classes of strip notes entitled to:
o principal payments with disproportionate, nominal or no interest
payments; or
o interest payments with disproportionate, nominal or no principal
payments.
Each class of notes may have a different interest rate, which may be a
fixed, variable or adjustable interest rate (and which may be zero for some
classes of strip notes), or any combination of the foregoing. The related
prospectus supplement will specify the interest rate for each class of notes of
a series or the method for determining the interest rate. One or more classes of
notes of a series may be redeemable in whole or in part under the circumstances
specified in the related prospectus supplement, including at the end of the
funding period (if any) or as a result of the servicer's exercising its option
to purchase the related receivables pool.
To the extent specified in any prospectus supplement, one or more classes
of notes of a given series may have fixed principal payment schedules, as set
forth in the related prospectus supplement. Noteholders of the notes would be
entitled to receive as payments of principal on any given payment date the
applicable amounts set forth on the schedule with respect to the notes, in the
manner and to the extent set forth in the related prospectus supplement. The
aggregate initial principal amount of the notes and certificates, if any, of a
series may, after giving effect to the purchase of all additional receivables,
if any, be greater or less than the aggregate initial principal balance of the
receivables in that series.
To the extent specified in the related prospectus supplement, payments of
interest to holders of two or more classes of notes within a series may have the
same priority. Under some circumstances, the amount available for the payments
could be less than the amount of interest payable on the notes on any of the
dates specified for payments in the related prospectus supplement, in which case
the holders of the classes of notes will receive their ratable share (based upon
the aggregate amount of interest due to the noteholders) of the aggregate amount
available to be distributed in respect of interest on the notes.
In the case of a series of notes which includes two or more classes of
notes, the sequential order and priority of payment in respect of principal and
interest, and any schedule or formula or other provisions applicable to the
determination of the order and priority of the payment, of each class will be
set forth in the related prospectus supplement. Payments in respect of principal
and interest of any class of notes will be made on a pro rata basis among all
the noteholders of the class. A series with notes may provide for a revolving
period, during which collections of principal in respect of the receivables
31
are not applied to payments of principal of the notes, or may provide for a
liquidity facility or similar arrangement that permits one or more classes of
notes to be paid in planned amounts on scheduled payment dates.
THE INDENTURE
Events of Default; Rights upon Event of Default.
Unless otherwise specified in the prospectus supplement, "EVENTS OF
DEFAULT" under the indenture will consist of:
o a default for five days or more in the payment of any interest on any
note;
o a default in the payment of the principal of or any installment of the
principal of any such note when the same becomes due and payable to the
extent funds are available therefor and on the related final scheduled
payment date;
o a material default in the observance or performance of any covenant or
agreement of the trust, subject to notice and cure provisions;
o any representation or warranty made by the trust being materially
incorrect as of the date it was made, subject to notice and care
provisions; or
o some events of bankruptcy, insolvency, receivership or liquidation of
the trust.
Unless otherwise specified in the applicable prospectus supplement, the
indenture generally entitles noteholders to principal only to the extent of
amounts deposited in the distribution account. Therefore, the failure to pay
principal on a class of notes generally will not result in the occurrence of an
Event of Default until the final scheduled payment date for the class of notes.
If an Event of Default should occur and be continuing with respect to the
notes, the indenture trustee or holders of the controlling securities evidencing
not less than 50% of the voting rights of the controlling securities may
immediately declare the notes due and payable. This declaration of acceleration
may, under some circumstances, be rescinded by the holders of the controlling
securities evidencing not less than 50% of the voting rights of the controlling
securities.
If the notes are due and payable following an Event of Default, the
indenture trustee may institute proceedings to collect amounts due or foreclose
on the trust assets, exercise remedies as a secured party, sell the receivables
included or elect to have the trust maintain possession of the receivables and
continue to apply collections on such receivables as if there had been no
declaration of acceleration. The indenture trustee is generally prohibited from
selling the receivables following an Event of Default unless:
o the holders of all the outstanding notes consent to such sale,
o the proceeds of such sale are sufficient to fully pay the outstanding
notes, or
o the indenture trustee determines that the future collections on the
receivables would be insufficient to make payments on the notes and the
indenture trustee obtains the consent of the holders of the controlling
securities evidencing not less than 66 2/3% of the voting rights of the
controlling securities.
Unless otherwise specified in the applicable prospectus supplement, if an
Event of Default occurs and is continuing with respect to the notes, the
indenture trustee is generally under no obligation to exercise any of its rights
or powers at the request or direction of any of the holders of such notes, if
the indenture trustee reasonably believes it will not be adequately indemnified
against any resulting costs, expenses and liabilities. Subject to the provisions
for indemnification and some limitations contained in
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the indenture, the holders of the controlling securities evidencing not less
than 50% of the voting rights of the controlling securities will have the right
to direct the time, method and place of conducting any proceeding or any remedy
available to the indenture trustee. Holders of the controlling securities
evidencing not less than 50% of the voting rights of the controlling securities
may, generally, waive any default with respect to the notes, except a default in
the payment of principal or interest.
Unless otherwise specified in the applicable prospectus supplement, no
holder of a note will have the right to institute any proceeding with respect to
the indenture, unless (i) such holder previously has given to the indenture
trustee written notice of a continuing Event of Default, (ii) the holders of the
controlling securities evidencing not less than 25% of the voting rights of the
controlling securities have made a written request to such indenture trustee to
institute such proceeding in its own name as indenture trustee, (iii) such
holder or holders have offered such indenture trustee reasonable indemnity, (iv)
such indenture trustee has for 60 days failed to institute such proceeding and
(v) no direction inconsistent with such written request has been given to such
indenture trustee during such 60-day period by the holders of the controlling
securities evidencing not less than 50% of the voting rights of the controlling
securities.
In addition, the indenture trustee and the holders of notes, by accepting
such notes, will covenant, to the extent legally enforceable, that they will not
at any time institute against the trust any bankruptcy, reorganization or other
proceeding under any federal or state bankruptcy or similar law.
Certain Covenants. A trust may not consolidate with or merge into any
other entity, unless the trust meets specific conditions, including that the
rating of the notes then in effect would not be reduced or withdrawn by the
Rating Agencies rating the notes as a result of such merger or consolidation.
Each trust makes negative covenants. Unless otherwise specified in the
applicable prospectus supplement, these covenants generally provide that a trust
will not sell, transfer, exchange or otherwise dispose of any of the trust
assets, (i) except as expressly permitted by the trust documents or some related
documents with respect to the trust, (ii) claim any credit on or make any
deduction from the principal and interest payable in respect of the notes (other
than amounts withheld under the Code or applicable state law) or assert any
claim against any present or former holder of such notes because of the payment
of taxes levied or assessed upon the trust, (iii) dissolve or liquidate in whole
or in part, (iv) permit the validity or effectiveness of the indenture to be
impaired or permit any person to be released from any covenants or obligations
with respect to the notes under the indenture except as may be expressly
permitted by the indenture or (v) permit any lien, charge, excise, claim,
security interest, mortgage or other encumbrance to be created on or extend to
or otherwise arise upon or burden the trust assets or any part of the trust
assets, or any interest in the trust assets or the proceeds of the trust assets.
Each trust will engage only in the activities specified in this prospectus.
A trust will not incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the notes, the indenture or other related
documents.
Annual Compliance Statement. The indenture requires the trust to file
annually with the indenture trustee a written statement as to the fulfillment of
its obligations under the indenture.
Indenture Trustee's Annual Report. The indenture requires the indenture
trustee to mail each year to all noteholders a brief report relating to its
eligibility and qualification to continue as indenture trustee under the
indenture, any amounts advanced by it under the indenture, the amount, interest
rate and maturity date of some indebtedness owing by the trust to the indenture
trustee in its individual capacity, the property and funds physically held by
such indenture trustee as such and any action taken by it that materially
affects the notes and that has not been previously reported.
Modification of Indenture. Unless otherwise specified in the applicable
prospectus supplement, the trust and the indenture trustee may, with the consent
of the holders of the controlling securities
33
evidencing not less than 50% of the voting rights of the controlling securities,
execute a supplemental indenture to add provisions to, change in any manner or
eliminate any provisions of, the indenture, or modify (except as provided below)
in any manner the rights of the noteholders.
Unless otherwise specified in the applicable prospectus supplement, the
consent of each holder of outstanding notes affected thereby will generally be
required to:
o change the due date of any installment of principal of or interest on
any such note, reduce its principal amount, interest rate or the
redemption price;
o impair the right to institute suit for the enforcement of some
provisions of the indenture regarding payment or otherwise terminate or
impair the lien of the indenture trustee on the trust assets;
o reduce the percentage of the aggregate amount of the outstanding notes
required to consent to supplemental indentures or to waive compliance or
defaults;
o liquidate the receivables when the proceeds of such sale would be
insufficient to fully pay outstanding notes; or
o terminate the lien of the indenture on any collateral or deprive the
holder of the security afforded by the lien of the indenture.
Unless otherwise specified in the applicable prospectus supplement, a trust
and the indenture trustee may also enter into supplemental indentures, without
obtaining the consent of the noteholders for the purpose of, among other things,
adding any provisions to or changing in any manner or eliminating any of the
provisions of the indenture or of modifying in any manner the rights of such
noteholders; provided that such action will not materially and adversely affect
the interest of any such noteholder.
Satisfaction and Discharge of Indenture. An indenture will be discharged
with respect to the trust assets securing a series of notes upon the delivery to
the indenture trustee for cancellation of all such notes or, with some
limitations, upon deposit with such indenture trustee of funds sufficient for
the payment in full of all such notes.
The Indenture Trustee.
The indenture trustee may resign at any time, in which event the servicer
will appoint a successor trustee. The servicer may also remove any such
indenture trustee if such indenture trustee ceases to be eligible to continue as
such under the indenture or if such indenture trustee becomes insolvent. In such
circumstances, the servicer will appoint a successor trustee for the notes. Any
resignation or removal of the indenture trustee and appointment of a successor
trustee does not become effective until acceptance of the appointment by the
successor trustee.
DESCRIPTION OF THE CERTIFICATES
GENERAL
With respect to each trust that issues certificates, one or more classes of
certificates of the related series will be issued pursuant to the terms of a
pooling and servicing agreement or trust agreement, the forms of which have been
filed as exhibits to the registration statement of which this prospectus forms a
part. We have filed a form of the pooling and servicing agreement and trust
agreement as exhibits to the registration statement related to this prospectus.
This summary does not purport to be complete.
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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:
o distributions in respect of principal with disproportionate, nominal or
no interest distributions, or
o interest distributions with disproportionate, nominal or no
distributions in respect of principal.
Each class of certificates may have a different interest rate, which may be
a fixed, variable or adjustable interest rates (and which may be zero for some
classes of certificates) or any combination of the foregoing. The related
prospectus supplement will specify the interest rate for each class of
certificates of a series or the method for determining the interest rate. Unless
otherwise provided in the related prospectus supplement, distributions in
respect of the certificates of a series that includes notes may be subordinate
to payments in respect of the notes as more fully described in the related
prospectus supplement. Distributions in respect of interest on and principal of
any class of certificates will be made on a pro rata basis among all the
certificateholders of such class.
In the case of a series of certificates which includes two or more classes
of certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of interest and principal, and any schedule or formula
or other provisions applicable to the determination of the order, priority of
payment or amount of each class shall be as set forth in the related prospectus
supplement. A series with certificates may provide for a revolving period,
during which collections of principal on the receivables are not applied to
distributions on the related securities, or may provide for a liquidity facility
or similar arrangement that permits one or more classes of the related
securities to be paid in planned amounts on scheduled distribution dates. The
aggregate initial principal amount of the certificates and the notes, if any, of
a series may, after giving effect to the purchase of all additional receivables,
if any, for a series be greater or less than the aggregate initial principal
balance of the receivables in that series.
SOME LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The transfer of receivables by World Omni Financial Corp. to the seller,
and by the seller to the trust, the perfection of the security interests in the
receivables and the enforcement of rights to realize on the financed vehicles as
collateral for the receivables are subject to a number of federal and state
laws, including the Uniform Commercial Code as in effect in various states.
INTERESTS IN THE RECEIVABLES
The trustee will appoint the servicer as custodian of the receivables and
all related documents. The servicer will not physically segregate the
receivables from the servicer's other receivables or other receivables that the
servicer services for others to reflect the sale to the trust. However, Uniform
Commercial Code financing statements reflecting the sale and assignment of the
receivables by World Omni Financial Corp. to the seller and by the seller to the
trust will be filed, and the respective accounting records and computer files of
World Omni Financial Corp. and the seller will reflect the sale and assignment.
The receivables will remain in the possession of the servicer and will not be
stamped or otherwise marked to reflect the assignment to the trustee. If,
through inadvertence or fraud, a third party purchases (including the taking of
a security interest in) a receivable for new value in the ordinary
35
course of its business, without actual knowledge of the trust's interest, and
take possession of a receivable, this purchaser would acquire an interest in the
receivable superior to the interest of the trust.
The seller will take no action to perfect the rights of the trustee in
proceeds of any insurance policies covering individual financed vehicles or
obligors. Therefore, the rights of a third party with an interest in the
proceeds could prevail against the rights of the trust prior to the time the
proceeds are deposited by the servicer into a Trust Account.
SECURITY INTERESTS IN THE FINANCED VEHICLES
General.
In states in which retail installment sale contracts evidence the credit
sale of financed vehicles by dealers to obligors, the contracts also constitute
personal property security agreements and include grants of security interests
in the vehicles under the applicable Uniform Commercial Code. Perfection of
security interests in the financed vehicles is generally governed by the motor
vehicle registration laws of the state in which the vehicle is located. In all
states in which the receivables have been originated, a security interest in
financed vehicles is perfected by obtaining the certificate of title to the
financed vehicle or notation of the secured party's lien on the vehicles'
certificate of title.
Unless the related prospectus supplement specifies otherwise, each
receivable will name World Omni Financial Corp. as obligee or assignee and as
the secured party. World Omni Financial Corp. also takes all actions necessary
under the laws of the state in which the financed vehicle is located to perfect
World Omni Financial Corp.'s security interest in the financed vehicle,
including, where applicable, having a notation of its lien recorded on the
vehicle's certificate of title. The obligors on the receivables will not be
notified of the sale from World Omni Financial Corp. to the seller, or the sale
from the seller to the trust, and no action will be taken to record the transfer
of the security interest from World Omni Financial Corp., directly or
indirectly, to the seller or from the seller to the trust by amendment of the
certificates of title for the financed vehicles or otherwise.
Perfection.
World Omni Financial Corp. will transfer and assign its security interest
in the related financed vehicles to the seller, and the seller will transfer and
assign its security interest in the financed vehicles to the related trust.
However, because of the administrative burden and expense, neither World Omni
Financial Corp. nor the seller will amend the certificates of title of the
financed vehicles to identify the related trust as the new secured party.
In most states, these assignments are an effective conveyance of a security
interest without amendment of any lien noted on a vehicle's certificate of
title, and the assignee succeeds to the assignor's rights as secured party.
However, by not identifying the trust as the secured party on the certificate of
title, the security interest of the trust in the vehicle could be defeated
through fraud or negligence.
Continuation of Perfection.
Under the laws of most states, the perfected security interest in a vehicle
continues for four months after the vehicle is moved to a state other than the
state in which it is initially registered and thereafter until the owner
re-registers the vehicle in the new state. A majority of states generally
require surrender of a certificate of title to re-register a vehicle.
Accordingly, a secured party must surrender possession if it holds the
certificate of title to the vehicle. In the case of a vehicle registered in a
state providing for the notation of a lien on the certificate of title but not
possession by the secured party, the secured party will receive notice of
surrender if the security interest is noted on the certificate of title. Thus,
the
36
secured party will have the opportunity to re-perfect its security interest in
the vehicle in the state of relocation. In states that do not require a
certificate of title for registration of a motor vehicle, re-registration could
defeat perfection. Under each sale and servicing agreement or pooling and
servicing agreement, the servicer will be obligated to take appropriate steps,
at the servicer's expense, to maintain perfection of security interests in the
financed vehicles and will be obligated to purchase the related receivable if it
fails to do so.
Priority of Certain Liens Arising by Operation of Law.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected security
interest in a financed vehicle. Federal tax liens may have priority over the
lien of a secured party. The laws of some states and federal law permit the
confiscation of vehicles by government authorities under some circumstances if
used in unlawful activities, which may result in the loss of a secured party's
perfected security interest in the confiscated vehicle.
REPOSSESSION
In the event of default by vehicle purchasers, the holder of the motor
vehicle retail installment sale contract has all the remedies of a secured party
under the Uniform Commercial Code, except where specifically limited by other
state laws. Among the Uniform Commercial Code remedies, the secured party has
the right to perform self-help repossession unless the act would constitute a
breach of the peace. Unless the financed vehicle is voluntarily surrendered
self-help is the most likely method to be used by the servicer and is
accomplished by retaking possession of the financed vehicle. Some jurisdictions
require that the obligor be notified of the default and be given a time period
within which he may cure the default prior to repossession. Generally, the right
of reinstatement may be exercised on a limited number of occasions in any
one-year period. In cases where the obligor objects or raises a defense to
repossession, or applicable state law requires a court order from the
appropriate state court to repossess the financed vehicle in accordance with
that order.
NOTICE OF SALE; REDEMPTION RIGHTS
The Uniform Commercial Code and other state laws require the secured party
to provide the obligor with reasonable notice of the date, time and place of any
public sale and/or the date after which any private sale of the collateral may
be held. The obligor has the right to redeem the collateral prior to actual sale
by paying the secured party the unpaid principal balance of the obligation plus
reasonable expenses for repossessing, holding and preparing the collateral for
disposition and arranging for its sale, plus, in some jurisdictions, reasonable
attorneys' fees. In some states the obligor must pay any delinquent installments
or the unpaid balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. Some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness. Other states do not prohibit or limit deficiency judgments.
However, a deficiency judgment is a personal judgment against the obligor for
the shortfall, and a defaulting obligor likely has little capital or sources of
income available following repossession. Therefore, in many cases, deficiency
judgments will provide little or no recoveries.
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
37
Occasionally, after resale of a vehicle and payment of all expenses and all
indebtedness, a surplus of funds exist. In that case, the Uniform Commercial
Code requires the creditor to remit the surplus to any other lienholder, with
respect to the vehicle. If they do not exist or there are remaining funds, the
Uniform Commercial Code requires the creditor to remit the surplus to the former
owner of the vehicle.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. The application of these laws to particular circumstances is often
unclear and some courts and regulatory authorities have adopted new
interpretations of these often unclear laws. These laws include the
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Federal Trade
Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the
Fair Debt Collection Procedures Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations B and Z, the Solders' and Sailors' Civil Relief Act
of 1940, state adoptions of the National Consumer Act and the Uniform Consumer
Credit Code, and state motor vehicle retail installment sales act, retail
installment sales acts and other similar laws. Also, state laws impose finance
charge ceilings and other restrictions on consumer transactions and require
contract disclosures in addition to those required under federal law. These
requirements impose specific statutory liabilities upon creditors who fail to
comply with their provisions. In some cases, this liability could affect an
assignee's ability to enforce consumer finance contracts or result in the
imposition of penalties in excess of amounts owing on the receivables. If the
trust were obligated to pay any damages, its assets would be directly reduced,
resulting in a potential loss to the securityholders.
Under the laws of some states, finance charges with respect to motor
vehicle retail installment contracts may include the additional amount, if any,
that a purchaser pays as part of the purchase price for a vehicle solely because
the purchaser is buying on credit rather than for cash (a cash sale
differential). If a dealer charges a differential, applicable finance charge
ceilings could be exceeded.
The "holder-in-due-course" rule of the Federal Trade Commission (the "FTC
RULE"), subjects an assignee of a seller of goods in a consumer credit
transaction (and some related creditors) to all claims and defenses that the
obligor in the transaction could assert against the seller of the goods. Other
state laws may duplicate the effect of the FTC Rule. The FTC Rule limits
liability to the amounts paid by the obligor under the contract. The holder of
the contract may also be unable to collect any balance remaining due from the
obligor.
The FTC Rule applies to most of the receivables. Accordingly, the purchaser
for the applicable financed vehicle may assert claims or defenses against the
related trust as holder of the related receivables that the purchaser may assert
against the seller of the financed vehicle. The maximum liability under these
claims equals the amounts paid by the obligor on the receivable. If an obligor
were successful in asserting any claim or defense, the claim or defense would
constitute a breach of World Omni Financial Corp.'s warranties under the related
purchase agreement and would create an obligation of World Omni Financial Corp.
to repurchase the receivable unless the breach is cured. We refer you to
"Description of the Trust Documents--Sale and Assignment of Receivables."
In several cases, consumers have asserted that the self-help remedies of
secured parties under the Uniform Commercial Code and related laws violate the
due process protections provided under the 14th Amendment to the Constitution of
the United States. Courts have generally upheld the notice provisions of the
Uniform Commercial Code and related laws as reasonable or have found that the
repossession and resale by the creditor do not involve sufficient state action
to afford constitutional protection to borrowers.
Most state vehicle dealer licensing laws require sellers of vehicles to
have a license to sell vehicles at retail sale. In addition, with respect to
used vehicles, the Federal Trade Commission requires that all
38
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
a seller failed to provide a buyer's guide or odometer disclosure statement to
the purchaser of a financed vehicle. If an obligor on a receivable were
successful in asserting any claim or defense, the servicer could pursue on
behalf of the related trust any reasonable remedies against the seller or the
manufacturer of the vehicle.
Under each purchase agreement, World Omni Financial Corp. will have
represented and warranted that each receivable complies with all requirements of
law in all material respects. Accordingly, if an obligor has a claim against a
trust for violation of any law and the claim materially and adversely affects
the trust's interest in a receivable, the violation would constitute a breach of
the warranties of World Omni Financial Corp. and would create an obligation of
World Omni Financial Corp. to repurchase the receivable unless the breach is
cured.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or to enforce a deficiency judgment. For example, in
a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a vehicle and, as part of the rehabilitation plan,
may reduce the amount of the secured indebtedness to the market value of the
vehicle at the time of bankruptcy (as determined by the court), leaving the
creditor as a general unsecured creditor for the remainder of the indebtedness.
A bankruptcy court may also reduce the monthly payments due under a contract or
change the rate of interest and time of repayment of the indebtedness. In
addition, the Soldiers' and Sailors' Civil Relief Act of 1940, as amended and
similar state legislation may limit the interest payable on a receivable during
and obligor's active duty in the military. We refer you to "Risk
Factors--Consumer Protection Laws May Adversely Affect the Receivables" in this
prospectus.
39
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax consequences
of the purchase, ownership and disposition of the securities. However, the
summary does not purport to deal with federal income tax consequences applicable
to all categories of holders, some of which may be subject to special rules. For
example, it does not discuss the tax treatment of noteholders or
certificateholders that are insurance companies, regulated investment companies
or dealers in securities. This discussion is directed to prospective purchasers
who purchase securities in the initial distribution and who hold the securities
as "capital assets" within the meaning of Section 1221 of the Internal Revenue
Code of 1986, as amended (the "CODE"). Prospective investors are urged to
consult their own tax advisors in determining the federal, state, local, foreign
and any other tax consequences to them of the purchase, ownership and
disposition of the securities.
The following summary is based upon current provisions of the Code, the
Treasury regulations promulgated, judicial authority, and ruling authority, all
of which are subject to change, which change may be retroactive. Each trust will
be provided with an opinion of Cadwalader, Wickersham & Taft, special federal
tax counsel to the trust, regarding some federal income tax matters discussed
below. An opinion of federal tax counsel, however, is not binding on the IRS or
the courts. Moreover, there are no cases or IRS rulings on similar transactions
involving both debt and equity interests issued by a trust with terms similar to
those of the securities. As a result, the IRS may disagree with all or a part of
the discussion below. No ruling on any of the issues discussed below will be
sought from the IRS. For purposes of the following summary, references to the
trust, the securities and related terms, parties and documents shall be deemed
to refer, unless otherwise specified, to each trust and the securities and
related terms, parties and documents applicable to the trust.
The federal income tax consequences to certificateholders will vary
depending on whether the trust is treated as a partnership under the Code and
applicable Treasury regulations or whether the trust will be treated as a
grantor trust. The prospectus supplement for each series of certificates will
specify whether the trust will be treated as a partnership or as a grantor
trust.
FASITS
Section 860H through 860L of the Code provide for the creation of entity
for federal income tax purposes, referred to as a "financial asset
securitization investment trust" ("FASIT"). These provisions were effective as
of September 1, 1997 and Treasury regulations were proposed on February 4, 2000,
but many technical issues concerning FASITs remain. To qualify as a FASIT, an
entity must meet certain requirements under Section 860L of the Code and must
elect such treatment. The applicable sale and servicing agreement or pooling and
servicing agreement and indenture, if applicable, may provide for a FASIT
election with respect to the trust, or be amended in accordance with the
provisions thereof to provide that the seller and trustee will cause a FASIT
election to be made for the trust if the seller delivers to the trustee or the
indenture trustee and, if applicable, the insurer, an opinion of counsel to the
effect that, for federal income tax purposes, (1) the deemed issuance of FASIT
regular interests (occurring in connection with such election) will not
adversely affect the federal income tax treatment of the securities, (2)
following such election such trust will not be deemed to be an association (or
publicly traded partnership) taxable as a corporation and (3) such election will
not cause or constitute an event in which gain or loss would be recognized by
any securityholder or the trust.
TRUSTS TREATED AS PARTNERSHIPS
Tax Characterization of the Trust as a Partnership.
A trust which is not treated as a grantor trust and which does not
affirmatively elect to be treated as a corporation will be treated as a
partnership under applicable Treasury regulations as long as there are two or
more beneficial owners and will be ignored as a separate entity where there is a
single beneficial
40
owner of all equity classes of the related series (including any class of notes
treated as equity for federal income tax purposes). Federal tax counsel will
deliver its opinion that a trust will not be an association (or publicity traded
partnership) taxable as a corporation for federal income tax purposes. This
opinion will be based on the assumption that the terms of the sale and servicing
agreement or pooling and servicing agreement and indenture and related documents
will be complied with, including the making of no affirmative election to be
treated as a corporation. Such counsel's opinion will also conclude that the
nature of the income of the trust will exempt it from the rule that certain
publicly traded partnerships are taxable as corporations.
If the trust were taxable as a corporation for federal income tax purposes,
the trust would be subject to corporate income tax on its taxable income. The
trust's taxable income would include all its income on the receivables, possibly
reduced by its interest expense on the notes. Any corporate income tax could
materially reduce cash available to make payments on the notes and distributions
on the securities, and certificateholders could be liable for any tax that is
unpaid by the trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness.
The seller will agree, and the noteholders will agree by their purchase of
notes, to treat the notes as debt for federal, state and local income and
franchise tax purposes. Prior to the sale of securities by the related trust,
federal tax counsel will deliver its opinion to the trust with respect to each
series of notes that either:
o the notes of the series will be characterized as debt for federal income
tax purposes; or
o the notes of the series should be characterized as debt for federal
income tax purposes, but if the notes are not characterized as debt, the
notes will be characterized as interests in a partnership.
Except as described below under the heading "--Possible Alternative Treatment of
the Notes" below, the discussion below assumes that the characterization of the
notes as debt for federal income tax purposes is correct.
OID.
The discussion below assumes that all payments on the notes are denominated
in U.S. dollars, and that the notes are not "interest only" or "principal only"
notes. To the extent we offer these notes, the related prospectus supplement
will describe the relevant federal income tax consequences. Moreover, the
discussion assumes that the interest formula for the notes meets the
requirements for "qualified stated interest" under Treasury regulations (the
"OID REGULATIONS") relating to debt instruments issued with original issue
discount ("OID"). Finally, the discussion assumes that any OID on the notes
(i.e., any excess of the principal amount of the notes over their issue price)
is de minimis (i.e., less than 1/4% of their principal amount multiplied by the
weighted average maturity of the notes), all within the meaning of the OID
Regulations. If these conditions are not satisfied with respect to any given
series of notes and as a result the notes are treated as issued with OID,
additional tax considerations with respect to the notes will be disclosed in the
applicable prospectus supplement.
Interest Income on the Notes.
Based on the above assumptions, except as discussed below, the notes will
not be considered issued with OID. The stated interest thereon generally will be
taxable to a noteholder as ordinary interest income when received or accrued in
accordance with the noteholder's method of tax accounting. Under the OID
Regulations, a holder of a note issued with a de minimis amount of OID generally
must include OID in income, on a pro rata basis, as principal payments are made
on the note. It is believed that any prepayment premium paid as a result of a
mandatory redemption will be taxable as ordinary income when it becomes fixed
and unconditionally payable. A purchaser who buys a note for more or less than
41
its principal amount will generally be subject, respectively, to the premium
amortization or market discount rules of the Code.
A holder of a note that has a fixed maturity date of not more than one year
from the issue date of the note (a "SHORT-TERM NOTE") may be subject to special
rules. Under the OID Regulations, all stated interest will be treated as OID. An
accrual basis holder of a Short-Term Note (and some cash basis holders,
including regulated investment companies, as described in Section 1281 of the
Code) generally would be required to report interest income as OID accrues on a
straight-line basis over the term of each interest period. Other cash basis
holders of a Short-Term Note would, in general, be required to report interest
income as interest is paid (or, if earlier, upon the taxable disposition of the
Short-Term Note). However, a cash basis holder of a Short-Term Note reporting
interest income as it is paid may be required to defer a portion of any interest
expense otherwise deductible on indebtedness incurred to purchase or carry the
Short-Term Note until the taxable disposition of the Short-Term Note. A cash
basis taxpayer may elect under Section 1281 of the Code to accrue interest
income on all nongovernment debt obligations with a term of one year or less, in
which case the taxpayer would include OID on the Short-Term Note in income as it
accrues, but would not be subject to the interest expense deferral rule referred
to in the preceding sentence. Certain special rules apply if a Short-Term Note
is purchased for more or less than its principal amount.
Market Discount.
Whether or not the notes are issued with OID, a subsequent purchaser (i.e.,
a purchaser who acquires a note not at the time of original issue) of a note at
a discount will be subject to the "Market Discount Rules" of Sections 1276
through 1278 of the Code. In general, these rules provide that if the holder of
a note purchases the note at a market discount (i.e., a discount from its
original issue price plus any accrued OID that exceeds a de minimis amount
specified in the Code) and thereafter recognizes gain upon a disposition (or
receives a principal payment), the lesser of:
o the gain (or the principal payment); or
o the accrued market discount (not previously included in income) will be
taxed as ordinary income.
Generally, the accrued market discount for each interest accrual period will be
the total market discount (not previously included in income) on the note
multiplied by a fraction, the numerator of which is the interest (or OID, if the
note was issued with more than de minimis OID) for such period and the
denominator of which is the total interest (or OID) from the beginning of such
period to maturity date of the note. The holder may elect, however, to determine
accrued market discount under the constant yield method. The adjusted basis of a
note subject to the election will be increased to reflect market discount
included in gross income, thereby reducing any gain or increasing any loss on a
subsequent sale or taxable disposition. Holders should consult with their own
tax advisors as to the effect of making this election.
Limitations imposed by the Code, which are intended to match deductions
with the taxation of income, may defer deductions for interest on indebtedness
incurred or continued, or short-sale expenses incurred, to purchase or carry a
note with accrued market discount. A noteholder who elects to include market
discount in gross income as it accrues, however, is exempt from this rule.
Notwithstanding the above rules, market discount on a note will be
considered to be zero if it is less than a de minimis amount, which is 0.25% of
the remaining principal balance of the note multiplied by its expected weighted
average remaining life. If market discount is de minimis, the actual amount of
discount must be allocated to the remaining principal distributions on the note,
and when the distribution is received, capital gain will be recognized equal to
discount allocated to the distribution.
42
Amortizable Bond Premium.
In general, if a subsequent purchaser acquires a note at a premium (i.e.,
an amount in excess of the amount payable upon the maturity of the note), the
noteholder will be considered to have purchased the note with "amortizable bond
premium" equal to the amount of the excess. A noteholder may elect to deduct the
amortizable bond premium as it accrues under a constant yield method over the
remaining term of the note. Accrued amortized bond premium may only be used as
an offset against qualified stated interest income when the income is included
in the holder's gross income under the holder's normal accounting method.
Election to Treat All Interest as Original Issue Discount.
A holder may elect to include in gross income all interest that accrues on
a note using constant yield method. For purposes of this election, interest
includes stated interest, OID, de minimis OID, market discount, de minimis
market discount and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium. In applying the constant yield method to a note
with respect to which this election has been made, the issue price of the note
will equal the electing holder's adjusted basis in the note immediately after
its acquisition, the issue date of the note will be the date of its acquisition
by the electing holder, and no payments on the note will be treated as payments
of qualified stated interest. This election, if made, may not be revoked without
the consent of the IRS. Holders should consult with their own tax advisors as to
the effect of making this election in light of their individual circumstances.
Sale or Other Disposition.
If a noteholder sells a note, the holder will recognize gain or loss in an
amount equal to the difference between the amount realized on the sale and the
holder's adjusted tax basis in the note. The adjusted tax basis of a note to a
particular noteholder will equal the holder's cost for the note, increased by
any market discount, OID and gain previously included by the noteholder in
income with respect to the note and decreased by the amount of premium (if any)
previously amortized and by the amount of principal payments previously received
by the noteholder with respect to the note. Any gain or loss will be capital
gain or loss, except for gain representing accrued interest and accrued market
discount not previously included in income. Capital losses generally may be used
by a corporate taxpayer only to offset capital gains, and by an individual
taxpayer only to the extent of capital gains plus $3,000 of other income.
Capital gains realized by individual taxpayers from the sale or exchange of
capital assets held for more than one year are subject to preferential rates of
tax.
Non-U.S. Holders.
Interest paid (or accrued) to a noteholder who is other than a U.S. person
as defined in the Code and Treasury Regulations (a "non-U.S. person") generally
will be considered "portfolio interest," and generally will not be subject to
United States federal income tax and withholding tax, if the interest is not
effectively connected with the conduct of a trade or business within the United
States by the non-U.S. person and the non-U.S. person:
o is not actually or constructively a "10 percent shareholder" of the trust
or the seller (including a holder of 10% of the outstanding certificates)
or a "controlled foreign corporation" with respect to which the trust or
the seller is a "related person" within the meaning of the Code; and
o provides the trustee or other person who is otherwise required to
withhold U.S. tax with respect to the notes with an appropriate statement
(on Form W-8 or a similar form), signed under penalties of perjury,
certifying that the beneficial owner of the note is a foreign person and
providing the foreign person's name and address.
If the information provided in this statement changes, the non-U.S. person must
inform the trust within 30 days of the change. If a note is held through a
securities clearing organization or some other financial
43
institutions, the organization or institution may provide the relevant signed
statement to the withholding agent; in that case, however, the signed statement
must be accompanied by a Form W-8 or substitute form provided by the non-U.S.
person that owns the note. If the interest is not portfolio interest, then it
will be subject to United States federal income and withholding tax at a rate of
30%, unless reduced or eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a non-U.S. person will be exempt from United
States federal income and withholding tax; provided that:
o the gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. person; and
o in the case of an individual non-U.S. person, the non-U.S. person is not
present in the United States for 183 days or more in the taxable year.
For these purposes "U.S. person" means a citizen or resident of the United
States for U.S. federal income tax purposes, a corporation or partnership
(except to the extent provided in applicable Treasury regulations) created or
organized in or under the laws of the United States, any state or the District
of Columbia, including an entity treated as a corporation or partnership for
U.S. federal income tax purposes, an estate the income of which is subject to
U.S. federal income taxation regardless of its source, or a trust if a court
within the United States is able to exercise primary supervision over the
administration of such trust, and one or more such U.S. persons have the
authority to control all substantial decisions of such trust (or, to the extent
provided in applicable Treasury regulations, certain trusts in existence on
August 20, 1996, which are eligible to elect to be treated as U.S. persons.
Final regulations dealing with withholding tax on income paid to non-U.S.
persons and related matters (the "NEW WITHHOLDING REGULATIONS") were issued by
the Treasury Department on October 6, 1997. The new withholding regulations will
generally be effective for payments made after December 31, 2000, subject to
some transition rules. Prospective noteholders who are non-U.S. persons are
strongly urged to consult their own tax advisors with respect to the new
withholding regulations.
Backup Withholding.
Each holder of a note (other than an exempt holder such as a corporation,
tax-exempt organization, qualified pension and profit-sharing trust, individual
retirement account or nonresident alien who provides certification as to status
as a nonresident) will be required to provide, under penalties of perjury, a
certificate containing the holder's name, address, correct federal taxpayer
identification number and a statement that the holder is not subject to backup
withholding. Should a nonexempt noteholder fail to provide the required
certification, the trust will be required to withhold 31% of the amount
otherwise payable to the holder, and remit the withheld amount to the IRS as a
credit against the holder's federal income tax liability.
Possible Alternative Treatment of the Notes.
In the opinion of federal tax counsel, in the event that any series of
notes were not treated as debt for federal income tax purposes, the series of
notes would be characterized for federal income tax purposes as interests in a
partnership. If any series of the notes did constitute interests in a
partnership, it is expected that stated interest payments on the notes would be
treated either as guaranteed payments under section 707(c) of the Code or as a
preferential allocation of net income of the trust (with all other items of
trust income, gain, loss, deduction and credit being allocated to the holders of
the securities). Although the federal income tax treatment of the notes for most
accrual basis taxpayers should not differ materially under the characterization
from the treatment of the notes as debt, the characterization could result in
adverse effects for some holders of notes. For example, holders of notes treated
as interests in a partnership could be subject to tax on income equal to the
entire amount of the stated interest payments
44
on the notes (plus possibly some other items) even though the trust might not
have sufficient cash to make current cash distributions of the amount. Thus,
cash basis holders would in effect be required to report income in respect of
the notes on the accrual basis and holders of the notes could become liable for
taxes on trust income even if they have not received cash from the trust to pay
the taxes. Moreover, income allocable to a holder of a note treated as a
partnership interest that is a pension, profit-sharing or employee benefit plan
or other tax-exempt entity (including an individual retirement account) could
constitute "unrelated debt-financed income" generally taxable to a holder under
the Code. In addition, foreign persons holding the notes could be subject to
withholding or required to file a U.S. federal income tax return and to pay U.S.
federal income tax (and, in the case of a corporation, branch profits tax) on
their share of accruals of guaranteed payments and trust income, and individuals
holding the notes might be subject to some limitations on their ability to
deduct their share of trust expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
Treatment of the Trust as a Partnership.
The seller and the servicer will agree, and the certificateholders will
agree by their purchase of certificates, to treat the trust as a partnership for
purposes of federal and state income tax, franchise tax and any other tax
measured in whole or in part by income, with the assets of the partnership being
the assets held by the trust, the partners of the partnership being the
certificateholders (including the seller in its capacity as recipient of
distributions from the Spread Account and any other account specified in the
related prospectus supplement in which the seller has an interest), and the
notes being debt of the partnership. However, the proper characterization of the
arrangement involving the trust, the certificates, the notes, the seller and the
servicer is not clear because there is no authority on transactions closely
comparable to those contemplated herein.
A variety of alternative characterizations are possible. For example,
because the certificates may have some features characteristic of debt, the
certificates might be considered debt of the seller or the trust. Any
characterization should not result in materially adverse tax consequences to
certificateholders as compared to the consequences from treatment of the
certificates as equity in a partnership, described below. The following
discussion assumes that the certificates represent equity interests in a
partnership.
The following discussion assumes that all payments on the certificates are
denominated in U.S. dollars, none of the certificates are strip securities and a
series of certificates includes a single class of certificates. If these
conditions are not satisfied with respect to any given series of certificates,
additional tax considerations with respect to the certificates will be disclosed
in the applicable prospectus supplement.
Partnership Taxation.
As a partnership, the trust will not be subject to federal income tax.
Rather, each certificateholder will be required to separately take into account
the holder's accruals of guaranteed payments (if any) from the trust and its
allocated share of other income, gains, losses, deductions and credits of the
trust. The trust's income will consist primarily of interest and finance charges
earned on the receivables (including appropriate adjustments for market
discount, OID and premium) and any gain upon collection or disposition of
receivables. The trust's deductions will consist primarily of interest accruing
with respect to the notes, guaranteed payments (if any) on the certificates,
servicing and other fees, and losses or deductions upon collection or
disposition of receivables.
Under the trust agreement, stated interest payments on the certificates
(including interest on amounts previously due on the certificates but not yet
distributed) will be treated as allocations of net interest income (that is,
interest income on the receivables less interest deductions on the notes) and,
to the extent distributions of the stated interest exceed the net interest
income, as "guaranteed payments" under Section 707(c) of the Code. Guaranteed
payments are payments to partners for the use of their
45
capital and, in the present circumstances, are treated as deductible to the
trust and ordinary income to the certificateholders. The trust will have a
calendar year tax year and will deduct the guaranteed payments under the accrual
method of accounting. Certificateholders with a calendar year tax year are
required to include the accruals of net interest income and guaranteed payments
in income in their taxable year that corresponds to the year in which the net
income accrues or the trust deducts the guaranteed payments, and
certificateholders with a different taxable year are required to include the
amounts in income in their taxable year that includes the December 31 of the
trust year in which the net income accrues or the trust deducts the guaranteed
payments. It is possible that guaranteed payments will not be treated as
interest for all purposes of the Code.
In addition, the trust agreement will provide, in general, that the
certificateholders will be allocated taxable income of the trust for each
collection period equal to the sum of:
o any trust income attributable to discount on the receivables that
corresponds to any excess of the principal amount of the securities over
their initial issue price;
o prepayment premium, if any, payable to the certificateholders for the
month; and
o any other amounts of income payable to the certificateholders for the
month.
The allocation will be reduced by any amortization by the trust of premium on
receivables that corresponds to any excess of the issue price of securities over
their principal amount. All remaining items of income, gain, loss and deduction
of the trust will be allocated to the seller.
Based on the economic arrangement of the parties, this approach for
allocating trust income and accruing guaranteed payments should be permissible
under applicable Treasury regulations, although no assurance can be given that
the IRS would not require a greater amount of income to be allocated to
certificateholders. Moreover, even under the foregoing method of allocation,
certificateholders may be subject to tax on income equal to the entire amount of
stated interest payments on the certificates plus the other items described
above even though the trust might not have sufficient cash to make current cash
distributions of the amount. Thus, cash basis holders will in effect be required
to report income from the certificates on the accrual basis and
certificateholders may become liable for taxes on trust income even if they have
not received cash from the trust to pay the taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
certificateholders but certificateholders may be purchasing securities at
different times and at different prices, certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the trust.
Most of the taxable income and guaranteed payments allocated to a
certificateholder that is a pension, profit-sharing or employee benefit plan or
other tax-exempt entity (including an individual retirement account) will
constitute "unrelated debt-financed income" generally taxable to a holder under
the Code.
An individual taxpayer's share of expenses of the trust (including fees to
the servicer but not interest expense) would be miscellaneous itemized
deductions. The deductions might be disallowed to the individual in whole or in
part and might result in the holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to the holder over the life of
the trust. It is not clear whether these rules would be applicable to a
certificateholder to the extent it received guaranteed payments.
The trust intends to make all tax calculations relating to income and
allocations to certificateholders on an aggregate basis. If the IRS were to
require that the calculations be made separately for each receivable, the trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on certificateholders.
46
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 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.
47
Section 754 Election.
In the event that a certificateholder sells its certificates at a profit
(loss), the purchasing certificateholder will have a higher (lower) basis in the
certificates than the selling certificateholder had. The tax basis of the
trust's assets will not be adjusted to reflect that higher (or lower) basis
unless the trust were to file an election under Section 754 of the Code. In
order to avoid the administrative complexities that would be involved in keeping
accurate accounting records, as well as potentially onerous information
reporting requirements, the trust will not make the election. As a result,
certificateholders might be allocated a greater or lesser amount of trust income
than would be appropriate based on their own purchase price for certificates.
Administrative Matters.
The trustee is required to keep or have kept complete and accurate books of
the trust. The books will be maintained for financial reporting and tax purposes
on an accrual basis and the fiscal year of the trust will be the calendar year.
The trustee will file a partnership information return (IRS Form 1065) with the
IRS for each taxable year of the trust issuing certificates and will report each
certificateholder's allocable share of items of trust income and expense and
accruals of guaranteed payments to holders and the IRS on Schedule K-1. The
trust will provide the Schedule K-1 information to nominees that fail to provide
the trust with the information statement described below and the nominees will
be required to forward the information to the beneficial owners of the
certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the trust or be subject to penalties unless the
holder notifies the IRS of all the inconsistencies.
Under Section 6031 of the Code, any person that holds certificates as a
nominee at any time during a calendar year is required to furnish the trust with
a statement containing some information on the nominee, the beneficial owners
and the certificates so held. The information includes (i) the name, address and
taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and taxpayer identification number of the person,
(y) whether the person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly-owned agency or
instrumentality of either of the foregoing and (z) some information on
certificates that were held, bought or sold on behalf of the person throughout
the year. In addition, brokers and financial institutions that hold certificates
through a nominee are required to furnish directly to the trust information as
to themselves and their ownership of certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any information
statement to the trust. The information referred to above for any calendar year
must be furnished to the trust on or before the following January 31. Nominees,
brokers and financial institutions that fail to provide the trust with the
information described above may be subject to penalties.
The seller will be designated as the tax matters partner in the trust
agreement and will be responsible for representing the certificateholders in any
dispute with the IRS. The Code provides for administrative examination of a
partnership as if the partnership were a separate and distinct taxpayer.
Generally, the statute of limitations for partnership items does not expire
before three years after the date on which the partnership information return is
filed. Any adverse determination following an audit of the return of the trust
by the appropriate taxing authorities could result in an adjustment of the
returns of the certificateholders, and, under some circumstances, a
certificateholder may be precluded from separately litigating a proposed
adjustment to the items of the trust. An adjustment could also result in an
audit of a certificateholder's returns and adjustments of items not related to
the income and losses of the trust.
48
Tax Consequences to Non-U.S. Certificateholders.
It appears under recent amendments to the Code that the trust would not be
considered to be engaged in the conduct of a trade or business in the United
States for purposes of federal withholding taxes with respect to non-U.S.
persons, and, although there is no clear authority dealing with that issue under
facts substantially similar to those described here, the trust intends to take
the position that it is not engaged in the conduct of a trade or business in the
United States. Non-U.S. persons that are partners in a partnership that is not
engaged in the conduct of a trade or business in the United States are subject
to U.S. withholding tax at a rate of 30 percent assessed on a gross basis on
certain items of fixed or determinable annual or periodical gains, profits and
income earned by the partnership from U.S. sources that are allocable to the
non-U.S. partners. To the extent that any income earned by a partnership is
allocable to partners that are non-U.S. persons, the partnership is obligated to
withhold the gross basis tax, unless the tax is eliminated by an income tax
treaty to which the United States is a signatory or another exemption applies.
It is not expected that interest earned by the trust would qualify as "portfolio
interest" that is not subject to U.S. withholding tax to the extent allocable to
a certificateholder that is a non-U.S. person. Assuming then that the trust is
not considered to be engaged in the conduct of a trade or business in the United
States, the trust would be required to withhold U.S. tax on interest earned by
the trust on the receivables that is allocable to certificateholders that are
non-U.S. persons, unless the tax is eliminated by an income tax treaty. Non-U.S.
persons holding certificates will therefore be required to provide to the
trustee an IRS Form 1001 or successor form establishing the non-U.S.
certificateholder's entitlement to benefits under an income tax treaty that
eliminates U.S. withholding tax on payments of interest from U.S. sources.
Subsequent adoption of Treasury regulations or the issuance of other
administrative pronouncements may require the trust to change its withholding
procedures.
Backup Withholding.
Distributions made on the certificates and proceeds from the sale of the
certificates will be subject to a "backup" withholding tax of 31% if, in
general, the certificateholder fails to comply with certain identification
procedures, unless the holder is an exempt recipient under applicable provisions
of the Code. We refer you to "Federal Income Tax Consequences to Holders of the
Notes--Backup Withholding."
TRUSTS TREATED AS GRANTOR TRUSTS
Tax Characterization of Grantor Trusts.
If specified in the related prospectus supplement, Cadwalader, Wickersham &
Taft will deliver its opinion that the trust will not be classified as an
association taxable as a corporation and that such trust will be classified as a
grantor trust under subpart E, Part I of subchapter J of the Code. In this case,
beneficial owners of grantor trust certificates will be treated for federal
income tax purposes as owners of a portion of the trust's assets as described
below. The certificates issued by a trust that is treated as a grantor trust are
referred to as grantor trust certificates.
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.
49
Each grantor trust certificateholder will be required to report on its
federal income tax return in accordance with such grantor trust
certificateholder's method of accounting its pro rata share of the entire income
from the receivables in the trust represented by grantor trust certificates,
including interest, OID, if any, prepayment fees, assumption fees, any gain
recognized upon an assumption and late payment charges received by the servicer.
Under Code Section 162 or 212, each grantor trust certificateholder will be
entitled to deduct its pro rata share of servicing fees, prepayment fees,
assumption fees and late payment charges retained by the servicer, provided that
such amounts are reasonable compensation for services rendered to the trust.
Grantor trust certificateholders that are individuals, estates or trusts will be
entitled to deduct their share of expenses only to the extent such expenses plus
all other miscellaneous itemized deductions exceed two percent of their
respective adjusted gross incomes. A grantor trust certificateholder using the
cash method of accounting must take into account its pro rata share of income
and deductions as and when collected by or paid to the servicer. A grantor trust
certificateholder using an accrual method of accounting must take into account
its pro rata share of income and deductions as they become due or are paid to
the servicer, whichever is earlier. If the servicing fees paid to the servicer
are deemed to exceed reasonable servicing compensation, the amount of such
excess could be considered as an ownership interest retained by the servicer (or
any person to whom the servicer assigned for value all or a portion of the
servicing fees) in a portion of the interest payments on the receivables. The
receivables would then be subject to the "coupon stripping" rules of the Code
discussed below.
Stripped Bonds and Stripped Coupons.
Although the tax treatment of stripped bonds is not entirely clear, based
on recent guidance by the IRS, it appears that each purchaser of a grantor trust
certificate that bears non-pro rata portions of the principal and interest
payment on the receivables will be treated as the purchaser of a stripped bond
or stripped coupon, which generally should be treated as a single debt
instrument issued on the day it is purchased for purposes of calculating any
OID. Generally, under Treasury regulations issued under Section 1286 of the
Code, if the discount on a stripped bond is larger than a de minimis amount (as
calculated for purposes of the OID rules of the Code) such stripped bond will be
considered to have been issued with OID. For these purposes, OID is the excess
of the "stated redemption price at maturity" (generally, principal and any
interest which is not "qualified stated interest") of a debt instrument over its
issues-price. We refer you to "OID" below. Based on the preamble to the Section
1286 Treasury Regulations, federal tax counsel is of the opinion that, although
the matter is not entirely clear, the interest income on the certificates at the
sum of the pass-through rate and the portion of the servicing fee rate that does
not constitute excess servicing will be treated as "qualified stated interest"
within the meaning of the Section 1286 Treasury Regulations and such income will
be so treated in the trustee's tax information reporting. It is possible that
the treatment described in this paragraph will apply only to that portion of the
receivables in a particular trust as to which there is "excess servicing" and
that the remainder of such receivables will not be treated as stripped bonds,
but as undivided interests as described above. Unless indicated otherwise in the
applicable prospectus supplement, it is not anticipated that grantor trust
certificates which are stripped bonds will be issued with greater than de
minimis OID. Stripped coupons will have OID equal to the excess of all
anticipated payments thereon over their issue price, and that OID will not be de
minimis.
OID.
The rules of the Code relating to OID (currently Sections 1271 through 1273
and 1275) will be applicable to a grantor trust certificateholder that acquires
an undivided interest in a stripped bond or stripped coupon issued or acquired
with OID, and such person must include in gross income the sum of the "daily
portions," as defined below, of the OID on such stripped bond or stripped coupon
for each day on which it owns a certificate, including the date of purchase but
excluding the date of disposition.
50
Because payments on such stripped bonds and stripped coupons may be accelerated
by prepayments on the underlying obligations, OID will be determined as required
under Code Section 1272(a)(6). Pursuant to Code Section 1272 (a)(6), OID
accruals will be calculated based on a constant interest method and a prepayment
assumption indicated in such prospectus supplement. In the case of an original
grantor trust certificateholder, the daily portions of OID generally would be
determined as follows. A calculation will be made of the portion of OID that
accrues on the stripped bond or stripped coupon during each successive monthly
accrual period (or shorter period in respect of the date of original issue or
the final payment date). This will be done, in the case of each full monthly
accrual period, by adding (1) the present value of all remaining payments to be
received on the stripped bond or stripped coupon under the prepayment assumption
used in respect of the grantor trust certificates and (2) any payments (other
than qualified stated interest) received during such accrual period, and
subtracting from the total the "adjusted issue price" of the stripped bond or
stripped coupon at the beginning of such accrual period. No representation is
made that the grantor trust certificates will prepay at any prepayment
assumption. The "adjusted issue price" of a stripped bond or stripped coupon at
the beginning of the first accrual period is its issue price (as determined for
purposes of the OID rules of the Code) and the "adjusted issue price" of a
stripped bond or stripped coupon at the beginning of a subsequent accrual period
is the "adjusted issue price" at the beginning of the immediately preceding
accrual period plus the amount of OID allocable to that accrual period and
reduced by the amount of any payment (other than qualified stated interest) made
at the end of or during that accrual period. The OID accruing during such
accrual period will then be divided by the number of days in the period to
determine the daily portion of OID for each day in the period. A subsequent
grantor trust certificateholder will be required to adjust its OID accrual to
reflect its purchase price, the remaining period to maturity and, possibly, a
new prepayment assumption. The servicer will report to all grantor trust
certificateholders holding stripped bonds or stripped coupons as if they were
original holders.
With respect to the receivables, the method of calculating OID as described
above will cause the accrual of OID to either increase or decrease (but never
below zero) in any given accrual period to reflect the fact that prepayments are
occurring at a faster or slower rate than the prepayment assumption used in
respect of the receivables. Subsequent purchasers that purchase grantor trust
certificates at more than a de minimis discount should consult their tax
advisors with respect to the proper method to accrue such OID.
Market Discount.
A grantor trust certificateholder that acquires an undivided interest in
receivables may be subject to the market discount rules of Sections 1276 through
1278 to the extent an undivided interest in a receivable or stripped bond is
considered to have been purchased at a "market discount." Generally, the amount
of market discount is equal to the excess of the portion of the principal amount
of such receivable allocable to such holder's undivided interest over such
holder's tax basis in such interest. Market discount with respect to a grantor
trust certificate will be considered to be zero if the amount allocable to the
grantor trust certificate is less than 0.25% of the grantor trust certificate's
stated redemption price at maturity multiplied by the weighted average maturity
remaining after the date of purchase. Treasury regulations implementing the
market discount rules have not yet been issued; therefore, investors should
consult their own tax advisors regarding the application of these rules and the
advisability of making any of the elections allowed under Code Section 1276 and
1278. The IRS may require you to compute market discount on a receivable by
receivable basis, based on the allocation of your purchase price among the
receivables based on their fair market values. However, we will not furnish
information to you on a receivable by receivable basis. Accordingly, if you
compute premium amortization on an aggregate basis, you may be required by the
IRS to recompute such premium on a receivable by receivable basis.
51
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain or disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of such payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. While the
Treasury Department has not yet issued regulations, rules described in the
relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or according to one of the following methods. If a
grantor trust certificate is issued with OID, the amount of market discount that
accrues during any accrual period would be equal to the product of (1) the total
remaining market discount and (2) a fraction, the numerator of which is the OID
accruing during the period and the denominator of which is the total remaining
OID at the beginning of the accrual period. For grantor trust certificates
issued without OID, the amount of market discount that accrues during a period
is equal to the product of (1) the total remaining market discount and (2) a
fraction, the numerator of which is the amount of stated interest paid during
the accrual period and the denominator of which is the total amount of stated
interest remaining to be paid at the beginning of the accrual period. For
purposes of calculating market discount under any of the above methods in the
case of instruments (such as the grantor trust certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing such instruments, the same prepayment assumption applicable to
calculating the accrual of OID will apply. Because the regulations described
above have not been issued, it is impossible to predict what effect those
regulations might have on the tax treatment of a grantor trust certificate
purchased at a discount or premium in the secondary market.
A holder who acquired a grantor trust certificate at a market discount also
may be required to defer a portion of its interest deductions for the taxable
year attributable to any indebtedness incurred or continued to purchase or carry
such grantor trust certificate purchased with market discount. For these
purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which such market discount is includible in income. If such holder elects to
include market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
Premium.
The price paid for a grantor trust certificate by a holder will be
allocated to such holder's undivided interest in each receivable based on each
receivable's relative fair market value, so that such holder's undivided
interest in each receivable will have its own tax basis. A grantor trust
certificateholder that acquires an interest in receivables at a premium may
elect to amortize such premium under a constant interest method. Amortizable
bond premium will be treated as an offset to interest income on such grantor
trust certificate. The basis for such grantor trust certificate will be reduced
to the extent that amortizable premium is applied to offset interest payments.
We cannot tell you whether a reasonable prepayment assumption should be used in
computing amortization of premium allowable under Section 171 of the Code. A
grantor trust certificateholder that makes this election for a grantor
certificate that is acquired at a premium will be deemed to have made an
election to amortize bond premium with respect to all debt instruments having
amortizable bond premium that such grantor trust certificateholder acquires
during the year of the election or thereafter. We will not furnish information
to you on a receivable by receivable basis. Accordingly, if you compute premium
amortization on an aggregate basis, the IRS may require you to recompute such
premium.
52
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a grantor trust certificate acquired at a premium
should recognize a loss if a receivable prepays in full, equal to the difference
between the portion of the prepaid principal amount of such receivable that is
allocable to the grantor trust certificate and the portion of the adjusted basis
of the grantor trust certificate that is allocable to such receivable. If a
reasonable prepayment assumption is used to amortize such premium, it appears
that such a loss would be available, if at all, only if prepayments have
occurred at a rate faster than the reasonable assumed prepayment rate. It is not
clear whether any other adjustments would be required to reflect differences
between an assumed prepayment rate and the actual rate of prepayments.
Election to Treat All Interest as OID.
The OID regulations permit a grantor trust certificateholder to elect to
accrue all interest, discount (including de minimis market discount or OID) and
premium in income as interest, based on a constant yield method. If such an
election were to be made with respect to a grantor trust certificate with market
discount, the certificateholder would be deemed to have made an election to
include in income currently market discount with respect to all other debt
instruments having market discount that such grantor trust certificateholder
acquires during the year of the election or thereafter. Similarly, a grantor
trust certificateholder that makes this election for a grantor trust certificate
that is acquired at a premium will be deemed to have made an election to
amortize bond premium with respect to all debt instruments having amortizable
bond premium that such grantor trust certificateholder owns or acquires. We
refer you to "--Premium" above. The election to accrue interest, discount and
premium on a constant yield method with respect to a grantor trust certificate
is irrevocable.
Sale or Exchange of a Grantor Trust Certificate.
Sale or exchange of a grantor trust certificate prior to its maturity will
result in gain or loss equal to the difference, if any, between the amount
received and the owner's adjusted basis in the grantor trust certificate. Such
adjusted basis generally will equal the seller's purchase price for the grantor
trust certificate, increased by the OID and any market discount included in the
seller's gross income with respect to the grantor trust certificate, and reduced
by any market premium amortized by the seller and by principal payments on the
grantor trust certificate previously received by the seller. Such gain or loss
will be capital gain or loss to an owner for which a grantor trust certificate
is a "capital asset" within the meaning of Section 1221 of the Code (except in
the case of gain attributable to accrued market discount, as noted above under
"--Market Discount") and, with respect to noncorporate owners, will be
short-term or long-term, depending on weather the grantor trust certificate has
been held for 12 months or less, or more than 12 months respectively. (Long-term
capital gain tax rates of noncorporate owners provide a reduction as compared
with short-term capital gains, which are taxed at ordinary income tax rates.)
Grantor trust certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1) of the Code, so that gain or loss recognized from
the sale of a grantor trust certificate by a bank or a thrift institution to
which such section applies will be treated as ordinary income or loss. Non-U.S.
Persons.
Non-U.S. Persons.
Interest or OID paid to non-U.S. persons who own grantor trust certificates
will be treated as "portfolio interest" for purposes of United States
withholding tax. Such interest (including OID, if any) attributable to the
underlying receivables will not be subject to the normal 30% (or such lower rate
provided for by an applicable tax treaty) withholding tax imposed on such
amounts provided that (1) the non-U.S. person is not a "10% shareholder" (within
the definition of Section 871(h)(3)) of any obligor
53
on the receivables; and is not a controlled foreign corporation (within the
definition of Section 957) related to any obligor on the receivables and
(2) such certificateholder fulfills certain certification requirements. Under
these requirements, the certificateholder must certify, under penalty of
perjury, that it is not a U.S. person and must provide its name and address. If,
however, such interest or gain is effectively connected to the conduct of a
trade or business within the U.S. by such certificateholder, such owner will be
subject to U.S. federal income tax thereon at graduated rates. Potential
investors who are not U.S. persons should consult their own tax advisors
regarding the specific tax consequences of owning a certificate. See "Tax
Consequences to the Holders of the Notes--Non-U.S. Holders" above for a further
discussion of these rules.
Information Reporting and Backup Withholding.
The servicer will furnish or make available, within a reasonable time after
the end of each calendar year, to each person who was a grantor trust
certificateholder at any time during such year, such information as the servicer
deems necessary or desirable to assist grantor trust certificateholders in
preparing their federal income tax returns, or to enable holders to make such
information available to beneficial owners or financial intermediaries that hold
grantor trust certificates as nominees on behalf of beneficial owners or
financial intermediaries that hold grantor trust certificates as nominees on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments. Any amounts
deducted and withheld from a distribution to a recipient would be allowed as a
credit against such recipient's federal income tax liability.
The federal tax discussion set forth above is included for general
information only and may not be applicable to your particular tax situation. You
should consult your tax advisor with respect to the tax consequences of the
purchase, ownership and disposition of securities, including the tax
consequences under state, local and foreign and other tax laws and the possible
effects of changes in federal or other tax laws.
54
ERISA CONSIDERATIONS
The prospectus supplement for each series of securities will summarize,
subject to the limitations discussed in each prospectus supplement,
considerations under ERISA relevant to the purchase of the securities by
employee benefit plans and individual retirement accounts.
PLAN OF DISTRIBUTION
The securities offered hereby and by means of the related prospectus
supplements will be offered through one or more of the methods described below.
The prospectus supplement with respect to each series of securities will
describe the method of offering of the series of securities, including the
initial public offering or purchase price of each class of securities or the
method by which the price will be determined and the net proceeds to the seller
of the sale.
The offered securities will be offered through the following methods from
time to time and offerings may be made concurrently through more than one of
these methods or an offering of a particular series of securities may be made
through a combination of two or more of these methods:
o By negotiated firm commitment underwriting and public reoffering by
underwriters specified in the applicable prospectus supplement;
o By placements by the seller with investors through dealers; and
o By direct placements by the seller with investors.
As more fully described in the prospectus supplement, if underwriters are
used in a sale of any offered securities, the securities will be acquired by the
underwriters for their own account and may be resold from time to time in one or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices to be determined at the time of sale or at the time
of commitment of the sale. Firm commitment underwriting and public reoffering by
underwriters may be done through underwriting syndicates or through one or more
firms acting alone. The specific managing underwriter or underwriters, if any,
with respect to the offer and sale of the offered securities of a particular
series will be described on the cover of the related prospectus supplement and
the members of the underwriting syndicate, if any, will be named in the
prospectus supplement. If so specified in the related prospectus supplement, the
offered securities will be distributed in a firm commitment underwriting,
subject to the terms and conditions of the underwriting agreement, by the
underwriters named in the underwriting agreement. The prospectus supplement will
describe any discounts and commissions to be allowed or paid by the seller to
the underwriters, any other items constituting underwriting compensation and any
discounts and commissions to be allowed or paid to the dealers. The obligations
of the underwriters will be subject to certain conditions precedent. The
underwriters with respect to a sale of any class of securities will be obligated
to purchase all the securities if any are purchased.
The seller and its affiliates will agree to indemnify the underwriters
against certain civil liabilities, including liabilities under the Securities
Act or will contribute to payments required to be made in respect of the civil
liabilities.
The place and time of delivery for any series of securities in respect of
which this prospectus is delivered will be described in the accompanying
prospectus supplement. To the extent specified in the prospectus supplement for
the related series, the seller or its affiliates may retain some of the classes
of securities.
FINANCIAL INFORMATION
Certain specified trust assets will secure each series of securities, no
trust will engage in any business activities or have any assets or obligations
prior to the issuance of the related series of securities. Accordingly, no
financial statements with respect to any trust assets will be included in this
prospectus or in the related prospectus supplement.
55
A prospectus supplement may contain the financial information or financial
statements of any provider of credit enhancement.
INCORPORATION OF CERTAIN INFORMATION
BY REFERENCE
All documents filed by us pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this prospectus and prior to
the termination of the offering of the offered securities of a series will be
deemed to be incorporated by reference into this prospectus and to be a part of
this prospectus from the date of filing of the documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
in this prospectus shall be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained in this prospectus or
in any other subsequently filed document which is or is deemed to be
incorporated by reference in this prospectus modifies or supersedes the
statement. Any statement so modified or superseded will not be deemed, except as
so modified or superseded, to constitute a part of this prospectus.
We will provide without charge to each person to whom a copy of this
prospectus is delivered, upon the written or oral request of the person, a copy
of any and all of the documents incorporated by reference in this prospectus
(not including the exhibits to the documents, unless the exhibits are
specifically incorporated by reference in the documents). Requests for the
copies should be directed to the office of the General Counsel, 120 N.W. 12th
Avenue Deerfield Beach, Florida 33442 (954) 429-2200.
This prospectus and the prospectus supplement for each series are parts of
our registration statement. This prospectus does not contain, and the related
prospectus supplement will not contain, all of the information in our
registration statement. For further information, please see our registration
statement and the accompanying exhibits which we have filed with the Commission.
This prospectus and any prospectus supplement may summarize contracts and/or
other documents. For further information, please see the copy of the contract or
other document filed as an exhibit to the registration statement. You can obtain
copies of the registration statement from the Commission upon payment of the
prescribed charges, or you can examine the registration statement free of charge
at the Commission's offices. Reports and other information filed with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Regional Offices of the Commission at Seven World Trade Center, 13th
Floor, New York, New York 10048; and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of the material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. You can obtain information on the
operation of the Public Reference Section by calling 1-800-732-0330. The
Commission also maintains a site on the World Wide Web at "http://www.sec.gov"
at which users can view and download copies of reports, proxy and information
statements and other information filed electronically through the EDGAR system.
Copies of the trust documents relating to a series of securities will be
provided to each person to whom a prospectus and the related prospectus
supplement are delivered, upon written or oral request directed to our offices
at 120 N.W. 12th Avenue Deerfield Beach, Florida 33442 (954) 429-2200.
LEGAL MATTERS
The validity of the securities offered hereby and certain federal income
tax matters will be passed upon for the seller by Cadwalader, Wickersham & Taft
or by other counsel identified in the related prospectus supplement.
56
INDEX OF TERMS
Clearstream...................................................................................................... 20
Code............................................................................................................. 40
Commission....................................................................................................... 4
Deerfield office................................................................................................. 15
Depositories..................................................................................................... 21
Euroclear Participants........................................................................................... 26
Events of Default................................................................................................ 32
Federal Tax Counsel.............................................................................................. 47
five state area.................................................................................................. 14
FTC Rule......................................................................................................... 38
indirect participants............................................................................................ 21
IRS.............................................................................................................. 14
JMFE............................................................................................................. 14
Mobile center.................................................................................................... 15
new withholding regulations...................................................................................... 44
OID.............................................................................................................. 41
OID Regulations.................................................................................................. 41
Payment Date..................................................................................................... 23
Payment Extension Program........................................................................................ 17
Pool Factor...................................................................................................... 21
Pre-Funded Amount................................................................................................ 12
Rating Agencies.................................................................................................. 19
Receivables Pool................................................................................................. 13
Rules............................................................................................................ 21
Securities Act................................................................................................... 4
Servicer Termination Event....................................................................................... 34
Short-Term Note.................................................................................................. 42
Simple Interest Receivables...................................................................................... 12
St. Louis center................................................................................................. 15
Terms and Conditions............................................................................................. 22
Trust Accounts................................................................................................... 25
57
SUBJECT TO COMPLETION, DATED MAY 24, 2000.
PROSPECTUS SUPPLEMENT(1) TO PROSPECTUS DATED .
$[ ]
(APPROXIMATE)
WORLD OMNI AUTO RECEIVABLES TRUST 2000-[ ]
[$[ ] CLASS A-1, [ ]% ASSET BACKED NOTES, DUE [ ]
$[ ] CLASS A-2, [ ]% ASSET BACKED NOTES, DUE [ ]
$[ ] CLASS A-3, [ ]% ASSET BACKED NOTES, DUE [ ]
$[ ] CLASS A-4, [ ]% ASSET BACKED NOTES, DUE [ ] ]
WORLD OMNI AUTO RECEIVABLES LLC
SELLER
WORLD OMNI FINANCIAL CORP.
SERVICER
The World Omni Auto Receivables LLC Auto Receivables Backed Notes
Series 2000- will include [ ] classes of notes, that we are offering
pursuant to this prospectus supplement. The Series 2000- notes are
collateralized by the assets of a trust. The trust's main assets will be a pool
of retail installment sale contracts secured by new and used automobiles and
light trucks and other assets as described in the prospectus and this prospectus
supplement.
o Only the securities described on the following table are being offered by
this prospectus supplement and the prospectus.
o The securities will accrue interest from , .
o The price to the public and the proceeds to the seller listed below
exclude interest accrued from , the date the notes will
be issued.
o The proceeds from the sale of the securities exclude expenses, estimated
at $ .
o The controlling securities are [class A-1, class A-2, class A-3 and
class A-4] notes.
UNDERWRITING DISCOUNTS
PRICE TO PUBLIC AND COMMISSIONS PROCEEDS TO SELLER
[Per class A-1 note] $ $ $
[Per class A-2 note]
[Per class A-3 note]
[Per class A-4 note]
We will not list the notes on any national securities exchange or on any
automated quotation system of any registered securities association such as
NASDAQ.
- ------------------
(1) This form of prospectus supplement is representative of the form of
prospectus supplement that may typically be used in a particular
transaction. The provisions in this form may change from transaction to
transaction, whether or not the provisions are bracketed in the form to
reflect the specific parties, the structure of the securities, servicing
provisions, receivables pool, provisions of the sale and servicing
agreement, indenture and other matters. In all cases, the provisions in the
prospectus supplement will be consistent in material respects with the
provisions in the prospectus.
------------------------
The Series 2000- notes are not obligations of World Omni Auto Receivables
LLC, World Omni Financial Corp., the trustees, or any of their respective
affiliates. [The offered notes and the underlying receivables are not insured or
guaranteed by any governmental agency or any of the persons specified above.
Principal will be paid on the notes in sequence. All principal will be paid on
the class A-1 notes until they are fully paid, then on the class A-2 until fully
paid, etc.]
Investing in the offered notes involves risk. We refer you to "Risk
Factors" beginning on page [ ] in this prospectus supplement and page [ ] in the
prospectus.
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of the notes, or passed upon the accuracy or
adequacy of this prospectus supplement or prospectus. Any representation to the
contrary is a criminal offense.
We expect that the delivery of the offered notes will be made in book-entry
form only through the facilities of the Depository Trust Company and Clearstream
Bank, societe anonyme and the Euroclear System on or about [ ].
[UNDERWRITERS]
[ ], 2000
The information in this prospectus supplement is not complete and may be
changed. We may not sell these securities until we deliver a final prospectus
supplement and prospectus. This prospectus supplement and prospectus are not an
offer to sell these securities and are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the offered notes is contained in two separate documents
that progressively provide more detail: (a) the accompanying prospectus, which
provides general information, some of which may not apply to the offered notes;
and (b) this prospectus supplement, which describes the specific terms of the
offered notes. If the terms of the offered notes vary between this prospectus
supplement and the accompanying prospectus, you should rely on the information
in this prospectus supplement.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with information that is different from that contained in this
prospectus supplement and the prospectus. The information in this prospectus
supplement is accurate only as of the date of this prospectus supplement.
This prospectus supplement begins with several introductory sections
describing the Series 2000- notes and the trust in abbreviated form:
Summary Of Prospectus Supplement, which gives a brief introduction of the
key features of the Series 2000- notes and a description of the receivables;
and
Risk Factors, appearing on page of this prospectus supplement, which
describes risks that apply to the Series 2000- notes which are in addition to
those described in the prospectus with respect to the securities issued by the
trust generally.
This prospectus supplement and the accompanying prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this prospectus supplement and the
prospectus identify the pages where these sections are located.
Certain capitalized terms are defined and used in this prospectus
supplement and the prospectus to assist you in understanding the terms of the
offered notes and this offering. The capitalized terms used in this prospectus
supplement are defined on the pages indicated under the caption "Index of
Significant Definitions" beginning on page S- in this prospectus supplement.
In this prospectus supplement, the terms "seller," "we," "us" and "our"
refer to World Omni Auto Receivables LLC.
S-2
TABLE OF CONTENTS
SECTION PAGE
- -------------------------------------------------- ----
SUMMARY OF TERMS.................................. S-4
RISK FACTORS...................................... S-8
FORMATION OF THE TRUST............................ S-11
General......................................... S-11
Capitalization of the Trust..................... S-11
The Owner Trustee............................... S-11
The Indenture Trustee........................... S-11
THE RECEIVABLES POOL.............................. S-14
COMPOSITION OF THE RECEIVABLES POOL............... S-14
Delinquencies, Repossessions and Net Losses..... S-15
YIELD CONSIDERATIONS.............................. S-17
POOL FACTORS AND OTHER INFORMATION................ S-17
USE OF PROCEEDS................................... S-17
DESCRIPTION OF THE SECURITIES..................... S-17
General......................................... S-17
Payments of Interest............................ S-17
Payments of Principal........................... S-18
SECTION PAGE
- -------------------------------------------------- ----
Optional Redemption............................. S-19
REGISTRATION OF NOTES............................. S-19
Book Entry Registration......................... S-19
DESCRIPTION OF THE CERTIFICATES................... S-20
DESCRIPTION OF THE TRUST DOCUMENTS................ S-23
Sale and Assignment of Receivables.............. S-23
Trust Accounts.................................. S-23
Advances........................................ S-24
Servicing Compensation and Payment
of Expenses..................................... S-24
Distributions................................... S-24
[Reserve Account]............................... S-27
Statements to Noteholders....................... S-27
FEDERAL INCOME TAX CONSEQUENCES................... S-28
[STATE AND LOCAL TAX CONSEQUENCES]................ S-31
ERISA CONSIDERATIONS.............................. S-32
UNDERWRITING...................................... S-34
LEGAL OPINIONS.................................... S-36
S-3
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 2000-[ ]. The
trust was formed on [ , 2000] under a trust agreement between
World Omni Auto Receivables LLC, a Delaware limited liability company and
[owner trustee], as the owner trustee.
THE SELLER: The seller is World Omni Auto Receivables LLC, a wholly-owned, special-purpose
subsidiary of World Omni Financial Corp.
The address and telephone number of the seller is:
120 N.W. 12th Avenue
Deerfield Beach, Florida 33442
(954) 429-2200
CLOSING DATE: On or about [ ]
CUTOFF DATE: [ ]
INDENTURE TRUSTEE: [ ]
OWNER TRUSTEE: [ ]
TRUST ASSETS: The trust's primary source of funds to make payments of principal of and
interest on the notes will be the trust assets, which will include:
o a pool of retail installment sale contracts between dealers in new and used
automobiles and light trucks and retail obligors;
o the right to receive payments under the receivables after specified cutoff
dates;
o security interests in the financed vehicles;
o the rights of the seller to receive any proceeds with respect to the
receivables from claims on physical damage and other insurance policies
covering the financed vehicles or the obligors;
o [the reserve account]; and
o any and all proceeds of the foregoing.
THE RECEIVABLES: The receivables that the seller will transfer to the trust will be secured by
new and used automobiles and light trucks including the rights to all payments
received with respect to the contracts after the applicable cutoff date.
On the closing date, the trust will acquire receivables. For further
information about the characteristics of the receivables as of the cutoff
date, see "The Receivables Pool--The Receivables" in the prospectus and "The
Receivables Pool" in this prospectus supplement.
S-4
General characteristics of the receivables as of the cutoff date:
Initial Pool Balance................................................ $
Weighted Average APR................................................ %
Weighted Average Remaining
Term to Maturity (months)...........................................
Weighted Average Original Term
to Maturity (months)................................................
Latest Scheduled Maturity Date......................................
We refer you to "The Receivables Pool" in this prospectus supplement.
TITLE, REGISTRATION AND DENOMINATION OF
OFFERED SECURITIES: World Omni Auto Receivables Trust 2000-[ ] will issue the following
securities:
o [ %] asset-backed notes, class A-1 in the aggregate original principal
amount of [$ ];
o [ %] asset-backed notes, class A-2 in the aggregate original principal
amount of [$ ];
o [ %] asset-backed notes, class A-3 in the aggregate original
o principal amount of [$ ]; and
o [ %] asset-backed notes, class A-4 in the aggregate original principal
amount of [$ ].
The aggregate original principal amount of the notes will be [$ ]. We
will issue the notes in minimum denominations of $1,000 and integral multiples
of $1,000, in book entry form only, through The Depository Trust Company. For
more information, read "Description of the Securities--Book-Entry
Registration" in the prospectus.
The trust will also issue certificates that represent interests in the
property of the trust that remains after full payment to you of interest on
and principal of the notes. This prospectus supplement and the accompanying
prospectus offer only the notes.
TERMS OF NOTES: The principal terms of the notes follow:
PAYMENT DATES: The indenture trustee will make payments on the notes on the [ ] day of
each [month] or, if the [ ] day is not a business day, on the next business
day. The first payment date will be [ , 2000].
INTEREST: On each payment date, the indenture trustee will pay to the holders of record
of each class of notes (the noteholders as of the related record date),
[thirty (30) days] of interest at the interest rate with respect to that class
of notes on the outstanding principal amount of that class of notes at the
close of the preceding payment date. Interest on the notes will be calculated
on the basis of a [360 day year of twelve 30 day] months. On the initial
payment date, the
S-5
interest payable on each class of notes will be based on the initial principal
amount of each class of notes and number of days from and including the
closing date to and including [ ], 2000. We refer you to
"Description of the Securities--Payments of Interest" in this prospectus
supplement.
The indenture trustee will make all payments of interest to the noteholders on
a pro rata basis to the extent of available funds.
PRINCIPAL: The indenture trustee will pay principal of the notes on each payment date on
the classes of notes in the following order:
o [first, on the class A-1 notes until their outstanding principal amount
equals zero;
o second, on the class A-2 notes until their outstanding principal amount
equals zero;
o third, on the class A-3 notes until their outstanding principal amount
equals zero; and
o fourth, on the class A-4 notes until their outstanding principal amount
equals zero].
All outstanding principal and interest with respect to a class of notes will
be payable in full on its final scheduled payment date. We refer you to
"Description of the Trust Documents--Distributions--Payments to Noteholders"
in this prospectus supplement.
RECORD DATES: The indenture trustee will make payments to holders of record of the notes as
of the close of business on the record date applicable to the payment date.
The record date for a payment date will be the [ ] calendar day of the
month in which the payment date occurs.
SERVICING: After the sale of the receivables to the trust, World Omni Financial Corp.
will continue to service the receivables. World Omni Financial Corp.'s
responsibilities as servicer will include, among other things, collection of
payments, realization on the receivables and the financed vehicles and
monitoring the performance of the receivables. In return for World Omni
Financial Corp.'s services, the trust will pay a fee to World Omni Financial
Corp. out of the interest payments received by the trust. We refer you to
"Description of the Trust Documents-Servicing Compensation" in this prospectus
supplement.
PRIORITY OF PAYMENTS: On each payment date, funds available for distribution from the receivables,
net of specified trust expenses, will be distributed in the following amounts
and order of priority:
(1) to the servicer, the servicing fee and all unpaid servicing fees;
(2) [to the noteholders of each class, pro rata, in accordance with their
interest entitlements; and
(3) to the noteholders of each class, sequentially, their principal
entitlements.]
S-6
We refer you to "Description of the Trust Documents--Distributions--Payments
to Noteholders" in this prospectus supplement.
OPTIONAL REDEMPTION: The seller or the servicer may, at their option, redeem the outstanding notes
by purchasing all the receivables. The seller or the servicer may only redeem
the notes when the aggregate principal balance of the receivables is equal to
10% or less of the initial pool balance. The redemption price will at least
equal the unpaid principal amount of the notes, plus accrued and unpaid
interest.
CREDIT ENHANCEMENT:
[USE OF EXCESS SPREAD TO INCREASE
OVERCOLLATERALIZATION: The aggregate cutoff date principal balance of the receivables which aggregate
$ will exceed the $ initial aggregate
principal amount of the notes by $ , which is approximately
% of the initial principal amount of the notes. Unless offset by losses
of the receivables, the use of excess spread to pay principal of the notes
will cause the outstanding principal amount of the notes to decrease faster
than the principal balance of the receivables decreases, thereby increasing
overcollateralization and the overcollateralization percentage.
EXCESS SPREAD: Excess spread is the excess of interest collections on the receivables
(exclusive of some amounts) over servicing fees and interest on the notes.
This amount will be used first to offset net losses on the receivables, then,
if necessary, to increase the reserve account to the required amount and
finally, in some circumstances, to release cash to the seller].
[RESERVE ACCOUNT The initial amount in the reserve account will be $ , which is
% of the original principal amount of the securities. The indenture
trustee will apply funds in the reserve account to make payments due on the
notes that are not covered by collections on the receivables. The reserve
account will be replenished to its required amount with excess spread, if
available.]
[PRIORITY OF PAYMENTS; SUBORDINATION
OF CERTIFICATES: On each payment date, the indenture trustee will apply the trust's available
funds first, to pay interest on the notes and second, to pay the outstanding
principal amount of the notes in the order described herein. The subordination
of payments on the certificates is intended to decrease the likelihood that
the trust will default in making payment due on the notes.]
[TAX STATUS: In the opinion of Cadwalader, Wickersham & Taft, for federal income tax
purposes the notes will be characterized as debt and the trust will not be
characterized as an association (or publicly traded partnership) taxable as a
corporation. In accepting a note, each holder of that note will agree to treat
the notes as indebtedness for federal income tax purposes. We refer you to
"Federal Income Tax
S-7
Consequences" in the prospectus and "Federal Income Tax Consequences" in this
prospectus supplement for additional information concerning the application of
federal tax laws to the trust and the notes.]
[ERISA CONSIDERATIONS: Subject to the considerations discussed under "ERISA Considerations", the
notes are eligible for purchase by pension, profit-sharing or other employee
benefit plans, as well as individual retirement accounts and some types of
Keogh Plans. By its acquisition of a note, each of these entities is deemed to
represent that its purchase and holding of a note will not give rise to a non-
exempt prohibited transaction]. We refer you to "ERISA Considerations" in this
prospectus supplement.
RATINGS OF THE NOTES: It is a condition of issuance that the notes be rated " " (or its
equivalent) by at least two nationally recognized rating agencies. A security
rating is not a recommendation to buy, sell or hold securities and may be
revised or withdrawn at any time by the assigning rating agency. We refer you
to "Risk Factors--A Rating of the securities is not a recommendation to buy,
hold or sell securities" in the prospectus supplement.
RISK FACTORS
Prospective investors in the notes should consider the following factors
and the additional factors discussed under "Risk Factors" in the prospectus:
THE OCCURRENCE OF DEFAULT UNDER THE
INDENTURE MAY RESULT IN INSUFFICIENT
FUNDS TO MAKE PAYMENTS ON YOUR
SECURITIES The trust will not have any significant assets or sources of funds to make
payments on the notes other than the receivables and the reserve account. You
must rely for repayment of your notes upon payments on the receivables and
amounts, if any, in the reserve account. Although funds in the reserve account
may be available on each payment date to cover shortfalls in distributions of
interest and principal on the notes, the amounts available in the reserve
account are limited. If the reserve account becomes depleted, the trust will
depend solely on current collections on the receivables to make payments on
the notes.
PROCEEDS OF THE SALE OF RECEIVABLES MAY
NOT BE SUFFICIENT TO PAY YOUR
SECURITIES IN FULL; FAILURE TO PAY
PRINCIPAL ON YOUR NOTES WILL NOT
CONSTITUTE AN EVENT OF DEFAULT UNTIL
MATURITY If so directed by the holders of the requisite percentage of outstanding notes
of a series, following an acceleration of the notes upon an event of default,
the indenture trustee will sell the receivables owned by the trust only in
limited circumstances. However, there is no assurance that the market value of
those receivables will at any time be equal to or greater than the
S-8
aggregate principal amount of the notes. Therefore, upon an event of default,
there can be no assurance that sufficient funds will be available to repay you
in full. In addition, the amount of principal required to be paid to the
noteholders will generally be limited to amounts available in the collection
account (and the reserve fund, if any). Therefore, the failure to pay
principal of your notes generally will not result in the occurrence of an
event of default until the final scheduled payment date for your notes.
PREPAYMENT ON RECEIVABLES MAY CAUSE
PREPAYMENTS ON SECURITIES Principal on each class of notes must be fully paid by the final scheduled
payment date for that class of notes. We have determined the final scheduled
payment date for each class of notes so that distributions on the underlying
receivables will be sufficient to retire each such class on or before its
final scheduled payment date. However, because some prepayments of the
receivables are likely and some receivables have terms to maturity that are
shorter than the term to maturity assumed in calculating each class's final
scheduled payment date, the actual payment of any class of notes likely will
occur earlier, and could occur significantly earlier, than such class's final
scheduled payment date. Nevertheless, there can be no assurance that the final
distribution of principal of any or all classes of notes will be earlier than
such class's final scheduled payment date.
[THE GEOGRAPHIC CONCENTRATION AND
PERFORMANCE OF THE RECEIVABLES MAY
INCREASE THE RISK OF LOSS ON YOUR
INVESTMENT Economic conditions in the states where obligors reside may affect
delinquencies, losses and prepayments on the receivables. The following
economic conditions may affect payments on the receivables:
o unemployment,
o interest rates,
o inflation rates, and
o consumer perceptions of the economy.
If a large number of obligors are located in a particular state, these
conditions could increase the delinquency, credit loss or repossession
experience of the receivables. If there is a concentration of obligors and
receivables in particular states, any adverse economic conditions in those
states may affect the performance of the securities more than if this
concentration did not exist.
S-9
As of [ ], World Omni Financial Corp.'s records indicate that the
billing addresses of the obligors of the receivables were in the following
states:
PERCENTAGE OF TOTAL
STATE PRINCIPAL BALANCE:
---------------------------------------------------------- -------------------
[ ]%
[ ]%
[ ]%
[ ]%
[ ]%
We refer you to "The Receivables Pool" in this prospectus supplement.]
YOU MAY HAVE DIFFICULTY SELLING YOUR
SECURITIES AND/OR OBTAINING YOUR
DESIRED PRICE DUE TO THE ABSENCE OF A
SECONDARY MARKET There will have been no secondary market for any series of your securities
prior to the related offering. The underwriters intend to make a secondary
market for the securities, but are not obligated to do so. We cannot assure
you that a market will develop or, if it does develop, that it will provide
you with liquidity of investment or continue for the life of your securities.
There have been times in the past when very few buyers of asset backed
securities existed and there may be similar times in the future. As a result,
you may be unable to obtain the price that you wish to receive for your
securities or you may suffer a loss on your investment.
S-10
FORMATION OF THE TRUST
GENERAL
The trust is a business trust formed under the laws of the State of
Delaware under a trust agreement. Before the sale and assignment of the trust
assets to the trust, the trust will have no assets or obligations or any
operating history. The trust will not engage in any business other than:
(1) acquiring, holding and managing the receivables, the other trust assets
and any proceeds from the receivables and other trust assets;
(2) issuing and making payments on the securities; and
(3) engaging in other activities to accomplish the above.
The trust will initially be capitalized with equity (exclusive of the
amounts allocated in the reserve account) equal to $ , which
is the aggregate principal amount of the receivables as of the cutoff date less
the initial aggregate principal amount of the notes. The certificates evidence
the equity in the trust. The seller will hold the certificates or sell or
otherwise transfer them.
If the protection provided to the investment of the noteholders by the
reserve account is insufficient, the trust will look only to the obligors on the
receivables and the proceeds from the repossession and sale of financed vehicles
which secure defaulted receivables. In this event, some factors, such as the
trust's not having first priority perfected security interests in some of the
Financed Vehicles, may affect the trust's ability to realize on the collateral
securing the receivables. These factors may reduce the proceeds available to
noteholders with respect to the notes. We refer you to "Description of the Trust
Documents--Distributions--Allocations and Distributions" in this prospectus
supplement and "Certain Legal Aspects of the Receivables" in the prospectus.
CAPITALIZATION OF THE TRUST
The following table illustrates the capitalization of the trust as of the
closing date, as if the issuance and sale of the notes had taken place on such
date:
[class A-1 notes]........................................................................................ $
[class A-2 notes]........................................................................................
[class A-3 notes]........................................................................................
[class A-4 notes]........................................................................................
certificates.............................................................................................
Total....................................................................................................
==========
THE OWNER TRUSTEE
[ ] is the owner trustee under the trust agreement.
[ ] is a Delaware banking corporation and its principal offices
are located at [ ]. The owner trustee will perform limited
administrative functions under the trust agreement.
THE INDENTURE TRUSTEE
[ ] is the indenture trustee under the
indenture. It is a national banking association and its principal offices are
located at [ ].
S-11
THE RECEIVABLES POOL
The pool of receivables (the receivables pool) purchased on the closing
date will have an aggregate outstanding principal balance of approximately
$[ ] as of the cutoff date. Each receivable is a simple interest
receivable. World Omni Financial Corp. purchased most of the receivables from
dealers in the ordinary course of business. Approximately [ %] of the
receivables were originated by World Omni Financial Corp. under a program where
World Omni Financial Corp. offers to obligors which lease vehicles from its
affiliates the option of financing the purchase of the leased vehicle when the
related lease expires. As of the cutoff date, the receivables meet the criteria
described in the prospectus under "The Receivables Pool." In addition, as of the
applicable cutoff date, each receivable:
o [is secured by a new or used automobile or light duty truck;
o was originated in the United States;
o provides for level monthly payments that fully amortize the amount
financed over its original term, subject to some exceptions;
o was originated on or prior to [ ];
o has an original term of [ ] to [ ] months and has a remaining
term to maturity of not less than [ ] months nor more than [ ]
months;
o provides for the payment of a finance charge at a stated annual
percentage rate ("APR") ranging from [ ]% to [ ]%;
o shall not have a scheduled payment that is more than 30 days past due;
o was not due, to the best knowledge of World Omni Financial Corp., from
any obligor who is presently the subject of a bankruptcy proceeding or is
bankrupt or insolvent;
o was not secured by a financed vehicle that had been repossessed without
reinstatement; and
o has a scheduled maturity not later than [ ].]
COMPOSITION OF THE RECEIVABLES POOL
Initial Pool Balance......................................................................................... $ [ ]
Number of Receivables........................................................................................ [ ]
Average Cutoff Date Principal Balance........................................................................ $ [ ]
Average Original Amount Financed............................................................................. [ ]
Range of Original Amount Financed............................................................................ [ ]
Weighted Average APR of Receivables(1)....................................................................... [ ]%
Range of APRs................................................................................................ [ ]
Weighted Average Remaining Maturity(1)....................................................................... [ ]
Range of Remaining Maturities as of the Cutoff Date.......................................................... [ ]
- ------------------
(1) By original principal balance as of the cutoff date.
Approximately [ ]% of the aggregate cutoff date principal balance of
the receivables purchased on the closing date, constituting [ ]% of the
number of the total receivables, represent new vehicles, and approximately
[ ]% of the aggregate cutoff date principal balance of the receivables
purchased on the closing date, constituting [ ]% of the number of the total
receivables, represent used vehicles.
The geographic distribution and distribution by annual percentage rate of
the receivables conveyed to the trust on the closing date as of the cutoff date
are described in the following tables.
S-12
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUTOFF DATE
PERCENT OF INITIAL PERCENT OF
NUMBER OF NUMBER OF POOL INITIAL POOL
STATE(1) RECEIVABLES RECEIVABLES BALANCE BALANCE(1)
- ---------------------------------------------------------------- ----------- -------------- ------- ------------
Alabama......................................................... % $ %
Florida.........................................................
Georgia.........................................................
North Carolina..................................................
South Carolina..................................................
All Others(2)...................................................
Total......................................................... 100% 100%
- ------------------
(1) Based on address of origination.
(2) No other state represents a percentage of the aggregate Principal Balance as
of the initial cutoff date in excess of percent.
(3) Percentages may not add up to 100% because of rounding.
DISTRIBUTION OF THE RECEIVABLES BY ANNUAL PERCENTAGE RATE AS OF THE CUTOFF DATE
PERCENT OF INITIAL PERCENT OF
NUMBER OF NUMBER OF POOL INITIAL POOL
ANNUAL PERCENTAGE RATE RANGE RECEIVABLES RECEIVABLES(1) BALANCE BALANCE(1)
- ---------------------------------------------------------------- ----------- -------------- ------- ------------
[ ]% - [ ]%............................................. % $ %
[ ]% - [ ]%.............................................
[ ]% - [ ]%.............................................
[ ]% - [ ]%.............................................
[ ]% - [ ]%.............................................
[ ]% - [ ]%.............................................
------- ------ ------- ------
Total 100.00% 100.00%
======= ====== ======= ======
- ------------------
(1) Percentages may not add up to 100% because of rounding.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Set forth below is some information concerning World Omni Financial Corp.'s
experience with respect to its portfolio of new and used automobile and light
duty truck retail installment sale contracts similar to the receivables.
The data presented in the following tables are for illustrative purposes
only. There is no assurance that World Omni Financial Corp.'s delinquency,
credit loss and repossession experience with respect to automobile and light
duty truck installment sale contracts in the future, or the experience of the
trust with respect to the receivables, will be similar to that described below.
Losses and delinquencies are affected by, among other things, general and
regional economic conditions and the supply of and demand for automobiles and
light duty trucks.
S-13
DELINQUENCY EXPERIENCE
(DOLLARS IN THOUSANDS)
1999 1998 1997 1996
------- ------ ------ ------
Ending Number of Contracts................................................... 106,337 76,883 56,442 46,897
Percentage of Delinquent Contracts(1)(2)(3)
31-60 Days................................................................... 1.39% 1.82% 1.99% 2.69%
61-90 Days................................................................... 0.13% 0.16% 0.25% 0.23%
91 Days and Over............................................................. 0.02% 0.02% 0.06% 0.04%
------- ------ ------ ------
Total...................................................................... 1.54% 2.00% 2.30% 2.96%
- ------------------
(1) Delinquency figures reported exclude delinquent bankrupt contracts. As of
December 31, 1999, bankrupt contracts greater than 60 days past due totaled
749.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
(3) As a percentage of the total number of contracts at period end.
NET LOSS AND REPOSSESSION EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
1999 1998 1997 1996
---------- -------- -------- --------
Ending Net Receivables........................................... $1,235,065 $818,488 $607,890 $475,410
Ending Number of Contracts....................................... 106,337 76,883 56,442 46,897
Average Portfolio Outstanding During the Period.................. $ 985,303 $758,566 $495,091 $427,851
Average Number of Contracts Outstanding During the Period........ 88,807 72,772 50,210 42,949
Number of Repossessions.......................................... 1,335 1,300 1,178 1,181
Repossessions as a Percentage of Average Number of Contracts
Outstanding.................................................... 1.50% 1.79% 2.35% 2.75%
Net Repossession Losses (1) (2).................................. $ 5,223 $ 6,248 $ 6,293 $ 6,643
Net Losses as a Percentage of Average Portfolio Outstanding...... 0.53% 0.82% 1.27% 1.55%
- ------------------
(1) Net losses equal the aggregate net principal balances of all contracts
determined to be uncollectable in the period plus accrued but unpaid
interest earned through the point of charge-off, less any recoveries.
(2) Includes charged-off amounts as well as repossession losses but does not
include expenses incurred to dispose of vehicles.
S-14
YIELD CONSIDERATIONS
All of the receivables can be prepaid at any time without charge. For this
purpose "prepayments" include prepayments in full, liquidations due to default,
as well as receipts of proceeds from physical damage, credit life and credit
accident and health insurance policies and some other receivables repurchased
for administrative reasons. A variety of economic, social, and other factors may
influence the rate of prepayments on the receivables. For example, an obligor
generally may not sell or transfer the Financed Vehicle securing a receivable
without the consent of World Omni Financial Corp. Noteholders will bear all
reinvestment risk resulting from a faster or slower incidence of prepayment of
receivables. The exercise by the seller or servicer of its option to purchase
the receivables and redeem the notes under the conditions described in
"Description of the Securities--Optional Redemption" in this prospectus
supplement will also accelerate the payment of the notes.
POOL FACTORS AND OTHER INFORMATION
The pool factor with respect to any class of notes is a seven digit decimal
which the servicer will compute each month indicating the principal balance of
that class of notes as a fraction of the initial principal balance of that class
of notes. The pool factor will be 1.0000000 as of the closing date; thereafter,
the pool factor will decline to reflect reductions in the principal balance of
the applicable class of notes. Therefore, if you are a class A-1 noteholder,
your share of the principal balance of the class A-1 notes is the product of
(1) the original denomination of your note and (2) the pool factor.
Under the indenture, the noteholders will receive monthly reports
concerning the payments received on the receivables, the pool factors and
various other items of information. The indenture trustee will furnish to the
noteholders of record during any calendar year information for tax reporting
purposes not later than the latest date permitted by law. We refer you to
"Description of the Trust Documents--Statements to Noteholders" in this
prospectus supplement.
USE OF PROCEEDS
The seller will use the net proceeds of the sale of the notes to purchase
the receivables from World Omni Financial Corp.
DESCRIPTION OF THE SECURITIES
GENERAL
The notes will be issued under the terms of an indenture between the Issuer
and the indenture trustee, and the certificates will be issued under the terms
of the trust agreement between the seller and the owner trustee. We have filed
forms of the indenture and the trust agreement as exhibits to the Registration
Statement.
PAYMENTS OF INTEREST
Interest on the principal balances of the classes of the notes will accrue
at their respective per annum interest rates and will be payable to the
noteholders monthly on each payment date, commencing [ ].
Payments will be made to the noteholders of record as of the day immediately
preceding such payment date or, if Definitive Securities are issued, as of the
15th day of the preceding month. Interest on the outstanding principal amount of
the notes will accrue at the applicable interest rate during the interest
accrual period (from the closing date (in the case of the first payment date) or
from the [fifteenth] day of the month preceding the month of a payment date to
and including the [fourteenth] day of the month of the payment date). Interest
on each class of the notes will be calculated
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on the basis of a 360-day year consisting of twelve 30-day months. The indenture
trustee will generally apply the Total Distribution Amount remaining after the
payment of the servicing fee and any withdrawals from the reserve account to
make interest payments on the notes. We refer you to "Description of the Trust
Documents--Distributions--Payments to Noteholders" in this prospectus
supplement.
Interest payments to all classes of noteholders will have the same
priority. Under some circumstances, the amount available for interest payments
could be less than the amount of interest payable on the notes on any payment
date. In this instance each class of noteholders will receive its ratable share
(based upon the aggregate amount of interest due to such class of noteholders)
of the aggregate amount available to be distributed in respect of interest on
the notes.
PAYMENTS OF PRINCIPAL
The indenture trustee will make principal payments to the noteholders on
each payment date in an amount generally equal to the sum of (1) the Regular
Principal Distribution Amount plus (2) the Accelerated Principal Distribution
Amount. [The "REGULAR PRINCIPAL DISTRIBUTION AMOUNT" with respect to any payment
date will generally equal the sum of principal payments received with respect to
the receivables during the calendar month (the "COLLECTION PERIOD") preceding
such payment date, plus the principal balances of defaulted receivables written
off in the related Collection Period. The "ACCELERATED PRINCIPAL DISTRIBUTION
AMOUNT" with respect to any payment date will equal the portion, if any, of the
Total Distribution Amount for the related Collection Period that remains after
payment of (a) the servicing fee, (b) the noteholders' Interest Distributable
Amount, (c) the Regular Principal Distribution Amount, and (d) any required
deposits to the reserve account on such payment date. The indenture trustee will
make principal payments on the notes from the Total Distribution Amount, if any
remaining after the payment of the servicing fee and the noteholders' Interest
Distributable Amount. Amounts in the reserve account are also available to make
payments of the Regular Principal Distribution Amount. The indenture trustee
will make payments of any Accelerated Principal Distribution Amount from the
Total Distribution Amount, if any, remaining after required deposits to the
reserve account]. We refer you to "Description of the Trust
Documents--Distributions--Payments to Noteholders" in this prospectus
supplement.
On the Business Day immediately preceding each payment date (a
"DETERMINATION DATE"), the indenture trustee shall determine the amount in the
Collection Account for the related Collection Period allocable to interest and
the amount allocable to principal on an actual basis. Payments to noteholders on
the following payment date will be based on this allocation. A "BUSINESS DAY" is
a day other than a Saturday, a Sunday or a day on which banking institutions or
trust companies in the City of New York, Deerfield Beach, Florida or Mobile,
Alabama are authorized by law, regulation or executive order to be closed.
On each payment date, principal payments on the notes will be applied in
the following order of priority:
(1) to the principal balance of the class A-1 notes until the principal
balance of the class A-1 notes is reduced to zero;
(2) to the principal balance of the class A-2 notes until the principal
balance of the class A-2 notes is reduced to zero;
(3) to the principal balance of the class A-3 notes until the principal
balance of the class A-3 notes is reduced to zero; and
(4) to the principal balance of the class A-4 notes until the principal
balance of the class A-4 notes is reduced to zero].
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The principal balance of each class of notes, to the extent not previously
paid, will be due as described below:
o the principal balance of the class A-1 notes, to the extent not
previously paid, will be due on the [ ] payment date;
o the principal balance of the class A-2 notes, to the extent not
previously paid, will be due on the [ ] payment date;
o the principal balance of the class A-3 notes, to the extent not
previously paid, will be due on the [ ] payment date; and
o the principal balance of the class A-4 notes, to the extent not
previously paid, will be due on the [ ] payment date.
The actual date on which the aggregate outstanding principal amount of any
class of notes is paid in full may be earlier than the respective final
scheduled payment dates.
OPTIONAL REDEMPTION
To avoid excessive administrative expense, the seller or the servicer may
at its option purchase all remaining receivables from the trust. The seller or
the servicer (or its successor) may exercise this repurchase option on or after
the last day of any month on or after which the aggregate principal balance of
the receivables is equal to 10% or less of the aggregate cutoff date principal
balance of receivables. The redemption price will at least equal the aggregate
of the unpaid principal amount of the notes plus accrued and unpaid interest as
of such last day. Exercise of this right will result in the early retirement of
the notes. Upon declaration of an optional redemption, the indenture trustee
will give written notice of termination to each noteholder of record. The final
distribution to any noteholder will be made only upon surrender and cancellation
of each noteholder's note at the office or agency of the indenture trustee
specified in the notice of termination.
REGISTRATION OF NOTES
BOOK ENTRY REGISTRATION
The notes will initially be represented by notes registered in the name of
Cede & Co. as nominee of The Depository Trust Company ("DTC"), and will only be
available in the form of book-entries on the records of DTC and participating
members of DTC in denominations of $1,000. DTC is a limited-purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "CLEARING CORPORATION" within the meaning of the New
York Uniform Commercial Code, and a "CLEARING AGENCY" registered under the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended.
DTC accepts securities for deposit from its participating organizations
("PARTICIPANTS") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks and
trust companies and clearing corporations and may include some other
organizations. Indirect access to the DTC system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly.
A person acquiring an interest in the notes (each, a "NOTE OWNER") will
hold his or her interest through DTC, in the United States, or Clearstream
Banking, societe anonyme ("CLEARSTREAM") or the Euroclear System ("EUROCLEAR"),
in Europe. Transfers within DTC, Clearstream or Euroclear, as the case may be,
will be in accordance with the usual rules and operating procedures of the
relevant system.
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Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and counterparties holding directly or indirectly through
Clearstream or Euroclear, on the other, will be effected in DTC through
Citibank, N.A. or Morgan Guaranty Trust Company of New York, the relevant
depositaries of Clearstream or Euroclear, respectively, and each a participating
member of DTC. We refer you to "Description of the Securities--Book Entry
Registration" in the prospectus.
If you are acquiring beneficial ownership interests in the notes, you may
hold the notes directly though DTC if you are a Participant, or you may hold
your interest indirectly through organizations which are Participants. Your
ownership of a book-entry note will be recorded on the records of the brokerage
firm, bank, thrift institution or other financial intermediary that maintains
your account for that purpose. In turn the entity's ownership of the book-entry
note will be recorded on the records of DTC (or of a participating firm that
acts as its agent, whose interest will in turn be recorded on the records of
DTC). We refer you to "Description of the Securities--Book-Entry Registration"
in the prospectus.
DESCRIPTION OF THE CERTIFICATES
[The trust will also issue the certificates with an aggregate initial
balance of $[ ]. The certificates will represent fractional undivided
interests in the trust and will be issued pursuant to the trust agreement. The
certificates are not being offered hereby and will initially be held by the
seller, which may thereafter sell the certificates. The certificates will not
bear interest. No principal will be paid on the certificates until the
outstanding principal balances of the notes have been paid in full.]
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DESCRIPTION OF THE TRUST DOCUMENTS
The following summary describes some terms of the trust documents which are
comprised of the purchase agreement, the sale and servicing agreement, the
indenture and the trust agreement. We have filed forms of the trust documents as
exhibits to the Registration Statement. We will file a copy of the final trust
documents with the Commission following the issuance of the securities. Because
this is a summary of the trust documents, it does not contain all the
information that may be important to you. You should read the trust documents in
their entirety if you require complete information regarding their contents.
SALE AND ASSIGNMENT OF RECEIVABLES
On or before the closing date, various structured commercial paper lending
vehicles and an affiliated entity of World Omni Financial Corp. will transfer
their interests in the receivables to World Omni Financial Corp. The seller will
then purchase from World Omni Financial Corp. under the purchase agreement,
without recourse (except as provided in the purchase agreement), World Omni
Financial Corp.'s entire interest in the receivables, together with World Omni
Financial Corp.'s security interests in the related financed vehicles. At the
time of issuance of the notes, the seller will sell and assign to the trust,
without recourse, except as provided in the sale and servicing agreement, its
entire interest in the receivables, together with its security interests in the
financed vehicles. The indenture trustee will, concurrently with such sale and
assignment, execute, authenticate, and deliver the notes to the seller in
exchange for the receivables. The seller will sell the notes to the
underwriters. We refer you to "Underwriting" in this prospectus supplement.
To assure uniform quality in servicing, as well as to reduce administrative
costs, the indenture trustee will appoint the servicer as custodian of the
receivables and all documents related thereto. The receivables will not be
physically segregated from other automobile and light duty truck retail
installment sale contracts of the servicer, or those which the servicer services
for others, to reflect the transfer to the trust.
In the purchase agreement, World Omni Financial Corp. will make
representations and warranties to the seller concerning the receivables, as
described under "Receivables Pool" in the prospectus supplement. As of the last
day of the second (or, if World Omni Financial Corp. elects, the first) month
following the discovery by or notice to the seller and World Omni Financial
Corp. of a breach of any representation or warranty that materially and
adversely affects the interest of the trust or the indenture trustee, unless the
breach is cured, World Omni Financial Corp. will purchase such receivable from
the trust for the Purchase Amount. The repurchase obligation will constitute the
sole remedy available to the noteholders, the owner trustee or the indenture
trustee for any such uncured breach.
TRUST ACCOUNTS
The indenture trustee will establish and maintain one or more accounts
(collectively, the "COLLECTION ACCOUNT") in the name of the indenture trustee on
behalf of the noteholders. Within two Business Days of receipt of funds, the
servicer will deposit collections into the Collection Account. The indenture
trustee will also establish and maintain one or more accounts, in the name of
the indenture trustee on behalf of the noteholders, from which it will make all
distributions with respect to the notes (collectively, the "DISTRIBUTION
ACCOUNT").
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ADVANCES
[The servicer will make advances of interest] in respect of the
receivables.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicing fee for the servicer will be [ ]% per annum of the Pool
Balance as of the first day of the related Collection Period (or, in the case of
the first distribution date, as of the initial Cutoff Date). The "POOL BALANCE"
will represent the aggregate principal balance of the receivables at the end of
a Collection Period, after giving effect to all payments received from obligors,
Purchase Amounts for that Collection Period, and all losses realized on
receivables liquidated during such Collection Period.
The servicing fee in respect of a Collection Period (together with any
portion of the servicing fee that remains unpaid from prior payment dates) will
be paid on the payment date following such Collection Period out of collections
for such Collection Period. The servicer may elect to waive the servicing fee
with respect to a related collection period as discussed in "Description of the
Trust Documents--Servicing Compensation" in the prospectus.
DISTRIBUTIONS
Deposits to Distribution Account
On or before each payment date, the indenture trustee will deposit into the
Distribution Account all collections and other amounts on deposit in the
Collection Account constituting the Total Distribution Amount (net of the
servicing fee for such payment date and any previously unpaid servicing fees).
Allocations and Distributions
On each payment date, the servicer will instruct the indenture trustee to
make the following distributions, to the extent of the amount then on deposit in
the Distribution Account, in the following order of priority:
(1) allocate to the noteholders for distribution as described below, from
the Total Distribution Amount remaining after the deduction of the
unpaid servicing fees, the Noteholders' Interest Distributable Amount;
(2) allocate to the noteholders for distribution as described below, from
the Total Distribution Amount remaining after the application of clause
(1) and the deduction of the unpaid servicing fees, the Noteholders'
Principal Distributable Amount;
(3) allocate to the reserve account, from the Total Distribution Amount
remaining after the application of clause (2) and the deduction of the
unpaid servicing fees, the excess, if any, of the specified reserve
amount over the amount then allocated to the reserve account;
(4) distribute to the certificateholders, from the Total Distribution
Amount remaining after the application of clause (3) and the deduction
of unpaid servicing fees and only after the notes have been paid in
full, until the certificate balance has been reduced to zero; and
(5) distribute to the seller the remaining balance, if any.
For purposes of this prospectus supplement, the following terms shall have the
following meanings:
"ACCELERATED PRINCIPAL DISTRIBUTION AMOUNT" means with respect to any
payment date, the portion, if any, of the Total Distribution Amount for the
related Collection Period that remains after payment of (a) the servicing
fee, (b) the Noteholders' Interest Distributable Amount, (c) the Regular
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Principal Distribution Amount, and (d) the amount, if any, required to be
allocated to the reserve account on such payment date.
"INTEREST DISTRIBUTION AMOUNT" means, generally, with respect to any
payment date, the sum of the following amounts with respect to the
preceding Collection Period:
o that portion of all collections on the receivables allocable to
interest;
o all proceeds of the liquidated receivables, net of expenses incurred
by the servicer in connection with such liquidation and any amounts
required by law to be remitted to the obligor on the liquidated
receivables ("LIQUIDATION PROCEEDS"), in accordance with the
servicer's customary servicing procedures, and all recoveries in
respect of liquidated receivables which were written off in prior
Collection Periods;
o the Purchase Amount of each receivable that was repurchased by the
seller or purchased by the servicer under an obligation which arose
during the related Collection Period, to the extent attributable to
accrued interest thereon; and
o investment earnings on funds on deposit in the Collection Account.
"NOTEHOLDERS' DISTRIBUTABLE AMOUNT" means, with respect to any payment
date, the sum of the Noteholders' Interest Distributable Amount and the
Noteholders' Principal Distributable Amount.
"NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, with respect to any
payment date, the excess of the Noteholders' Interest Distributable Amount
for the preceding payment date, over the amount in respect of interest that
was actually paid on the notes on such preceding payment date, plus
interest on the amount of interest due but not paid to Noteholders on the
preceding payment date, to the extent permitted by law, at the respective
interest rates borne by each class of the notes for the related interest
accrual period.
"NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with respect to
any payment date, the sum of the Noteholders' Monthly Interest
Distributable Amount for such payment date and the Noteholders' Interest
Carryover Shortfall for such payment date.
"NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with
respect to any payment date, interest accrued for the related interest
accrual period on each class of notes at the respective interest rate for
such class on the outstanding principal balance of the notes of such class
on the immediately preceding payment date (or, in the case of the first
payment date, on the Closing Date), after giving effect to all payments of
principal to the Noteholders of such class on or prior to such payment
date.
"NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with
respect to each payment date, the sum of (i) the Regular Principal
Distribution Amount and (ii) the Accelerated Principal Distribution Amount.
"NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of
any payment date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall from the preceding payment date over the amount in respect of
principal that is actually distributed to the noteholders on such payment
date.
"NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to
any payment date, the sum of the Noteholders' Monthly Principal
Distributable Amount for such payment date and the Noteholders' Principal
Carryover Shortfall as of the close of the preceding payment date;
provided, however, that the Noteholders' Principal Distributable Amount
shall not exceed the outstanding principal balance of the notes; and
provided, further, that the Noteholders' Principal Distributable
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Amount on the final scheduled payment date for each class of notes will
equal at least the amount that is necessary (after giving effect to other
amounts to be deposited in the Distribution Account on such payment date
and allocable to principal) to reduce the outstanding principal balance of
the related class of notes to zero.
"REALIZED LOSSES" means the excess of the principal balance of any
liquidated receivable over Liquidation Proceeds to the extent allocable to
principal.
"REGULAR PRINCIPAL DISTRIBUTION AMOUNT" means, generally, with respect
to any payment date, the sum of the following amounts with respect to the
related Collection Period:
o that portion of all collections on the receivables allocable to
principal;
o all Liquidation Proceeds attributable to the principal amount of
receivables which became liquidated receivables during such
Collection Period in accordance with the servicer's customary
servicing procedures, plus the amount of Realized Losses with
respect to such liquidated receivables;
o to the extent attributable to principal, the Purchase Amount
received with respect to each receivable repurchased by the seller
or purchased by the servicer under an obligation which arose during
the related Collection Period; and
o partial prepayments relating to refunds of extended warranty
protection plan costs or of physical damage, credit life or
disability insurance policy premiums, but only if such costs or
premiums were financed by the respective obligor as of the date of
the original contract.
The Regular Principal Distribution Amount is the reduction in the
aggregate principal balance of the receivables in a Collection Period and
will be determined on the related Determination Date on an actual basis.
"TOTAL DISTRIBUTION AMOUNT" for a payment date is the sum of the
Interest Distribution Amount and the Regular Principal Distribution Amount
(other than the portion attributable to Realized Losses).
PAYMENTS TO NOTEHOLDERS
On each payment date, all amounts allocated to the noteholders will be
generally paid in the following order of priority:
(i) to the applicable noteholders, accrued and unpaid interest on the
outstanding principal balance of the applicable class of notes at the applicable
interest rate;
(ii) the noteholders' Principal Distributable Amount in the following order
of priority:
(a) [to the class A-1 noteholders in reduction of principal until the
principal balance of the class A-1 notes has been reduced to zero;
(b) to the class A-2 noteholders in reduction of principal until the
principal balance of the class A-2 notes has been reduced to zero;
(c) to the class A-3 noteholders in reduction of principal until the
principal balance of the class A-3 notes has been reduced to zero; and
(d) to the class A-4 noteholders in reduction of principal until the
principal balance of the class A-4 notes has been reduced to zero.]
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[RESERVE ACCOUNT
The reserve account will provide protection to the noteholders. The seller
will initially deposit into the reserve account a specified reserve amount equal
to an initial deposit on the closing date in cash or eligible investments in the
amount of $[ ], which is [ ]% of the initial principal balance of the
securities. The trustee will deposit investment earnings on funds in the reserve
account, net of losses and investment expenses, into the reserve account until
the reserve account reaches the specified balance required.
The indenture trustee will hold amounts allocated from time to time to the
reserve account for the benefit of noteholders. On each payment date the
indenture trustee will pay to the noteholders from the reserve account the
amount by which the Total Distribution Amount (after the payment of the
servicing fee) with respect to any Collection Period is less than the
Noteholders' Distributable Amount. On each payment date, the indenture trustee
will deposit into the reserve account up to the specified reserve amount to the
extent of the portion, if any, of the Total Distribution Amount remaining after
payment of the servicing fee and the payment of the Noteholders' Distributable
Amount.
If the amount allocated to the reserve account on any payment date (after
giving effect to all deposits therein or other withdrawals therefrom on such
payment date) is greater than the specified reserve amount for the related
payment date, the indenture trustee will generally distribute the excess amount
to the seller. [To the extent the seller elects, the seller may instruct the
indenture trustee to deposit such excess amounts in the Collection Account for
application as described in [ ]. The seller has no obligation to make this
election.] Upon this distribution, the noteholders will not have any rights in,
or claims to, such amounts. Subsequent to any reduction or withdrawal by any
rating agency of its rating of any class of notes, unless such rating has been
restored, the indenture trustee will pay any such excess to noteholders on each
payment date as an accelerated payment of principal.
After the payment in full, or the provision for such payment, of (i) all
accrued and unpaid interest on the notes and (ii) the outstanding principal
balance of the securities, the indenture trustee will distribute any remaining
funds in the reserve account, subject to some limitations, to the seller.
The subordination of the certificates and the reserve account are intended
to enhance the likelihood of receipt by noteholders of the full amount of
principal and interest due them and to decrease the likelihood that the
noteholders will experience losses. However, in some circumstances, the reserve
account could be depleted. If the amount required to be withdrawn from the
reserve account to cover shortfalls in collections on the receivables exceeds
the amount then allocated to the reserve account, noteholders could incur losses
or a temporary shortfall in the amounts distributed to the noteholders could
result, which could, in turn, increase the average lives of the notes.]
STATEMENTS TO NOTEHOLDERS
On each payment date, the indenture trustee will include with each
distribution to each noteholder of record as of the close of business on the
applicable record date a statement (prepared by the servicer) as described in
"Description of the Securities--Statements to Noteholders" in the prospectus.
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FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Set forth below is a summary of certain United States federal income tax
considerations relevant to the beneficial owner of a note that holds the note as
a capital asset and, unless otherwise indicated below, is a U.S. Person (as
defined in the accompanying prospectus). This summary does not address special
tax rules which may apply to certain types of investors, and investors that hold
notes as part of an integrated investment. This summary supplements the
discussion contained in the accompanying prospectus under the heading "Federal
Income Tax Consequences," and supersedes that discussion to the extent that the
two discussions are not consistent. The authorities on which we based this
discussion are subject to change or differing interpretations, and any such
change or interpretation could apply retroactively. This discussion reflects the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), as well as regulations promulgated by the U.S. Department of Treasury.
You should consult your own tax advisors in determining the federal, state,
local and any other tax consequences of the purchase, ownership and disposition
of the notes.
Characterization of the Notes. There are no regulations, published rulings
or judicial decisions addressing the characterization for federal income tax
purposes of securities with terms that are substantially the same as those of
the notes. A basic premise of United States federal income tax law is that the
economic substance of a transaction generally will determine the federal income
tax consequences of such transaction. The determination of whether the economic
substance of a loan secured by an interest in property is instead a sale of a
beneficial ownership interest in such property has been made by the Internal
Revenue Service (the "IRS") and the courts on the basis of numerous factors
designed to determine whether the trust has relinquished (and the investor has
obtained) substantial incidents of ownership in such property. Among those
factors, the primary factors examined are whether the investor has the
opportunity to gain if the property increases in value, and has the risk of loss
if the property decreases in value. Based on an assessment of these factors, in
the opinion of Cadwalader, Wickersham & Taft, special tax counsel to the seller,
(i) the class [ ] notes will be treated as indebtedness for federal income
tax purposes and not as an ownership interest in the receivables or an equity
interest in the trust and (ii) the class [ ] notes may either be treated as
indebtedness or as an equity interest in the trust for federal income tax
purposes. We refer you to "Federal Income Tax Consequences" in the accompanying
prospectus. Except as set forth below under "--Alternative Treatment of the
Class [ ] Notes," the remainder of this discussion assumes that the class [ ]
notes are debt for federal income tax purposes. Prospective investors should
consult their own tax advisors as to the characterization of the class [ ]
notes.
Classification of the Trust. In the opinion of Cadwalader, Wickersham &
Taft, special tax counsel to the seller, the trust will not be treated as an
association taxable as a corporation or a publicly traded partnership taxable as
a corporation for federal income tax purposes, but rather will be disregarded as
a separate entity and treated as a mere security device when there is a single
beneficial owner of the trust, or will be treated as a domestic partnership when
there are two or more beneficial owners of the trust, including the case if the
class [ ] notes are treated as equity interests in the trust.
DISCOUNT AND PREMIUM
For federal income tax reporting purposes, it is anticipated that the notes
will not be treated as having been issued with original issue discount. The
prepayment assumption that will be used in determining the rate of accrual of
original issue discount and of market discount and premium, if any, for federal
income tax purposes will be based on the assumption that subsequent to the date
of any determination the receivables will prepay at [ ], and there will be
no extensions of maturity for any
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receivable. However, no representation is made as to the rate, if any, at which
the receivables will prepay.
The IRS has issued regulations under Sections 1271 and 1275 of the Code
generally addressing the treatment of debt instruments issued with original
issue discount. The original issue discount regulations and Section 1272(a)(6)
of the Code do not adequately address certain issues relevant to, or are not
applicable to, securities such as the notes. Prospective purchasers of the notes
are advised to consult with their tax advisors concerning the tax treatment of
such notes.
Certain classes of the notes may be treated for federal income tax purposes
as having been issued at a premium. Whether any holder of such a class of notes
will be treated as holding notes with amortizable bond premium will depend on
such noteholder's purchase price and the payments remaining to be made on such
note at the time of its acquisition by such noteholder. You should consult your
own tax advisors regarding the possibility of making an election to amortize
such premium on such classes of notes.
GAIN OR LOSS ON DISPOSITION
If you sell a note, you must recognize gain or loss equal to the difference
between the amount realized from the sale and your adjusted basis in such note.
The adjusted basis generally will equal your cost of such note, increased by any
original issue discount included in your ordinary gross income with respect to
the note and reduced (but not below zero) by any payments on the note previously
received or accrued by you (other than qualified stated interest payments) and
any amortizable premium. Similarly, when you receive a principal payment with
respect to a note, you will recognize gain or loss equal to the difference
between the amount of the payment and the allocable portion of your adjusted
basis in the note. Such gain or loss will generally be a long-term capital gain
or loss if you held the note for more than one year.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments of interest and principal, as well as payments of proceeds from
the sale of notes, may be subject to the "backup withholding tax" under Section
3406 of the Code at a rate of 31% if you fail to furnish to the trust certain
information, including your taxpayer identification number, or otherwise fail to
establish an exemption from such tax. Any amounts deducted and withheld from a
payment should be allowed as a credit against your federal income tax.
Furthermore, certain penalties may be imposed by the IRS on a recipient of
payments that is required to supply information but that does not do so in the
proper manner.
We will report to noteholders and to the IRS for each calendar year the
amount of any "reportable payments" during such year and the amount of tax
withheld, if any, with respect to payments on the notes.
WITHHOLDING REGULATIONS EFFECTIVE DECEMBER 31, 2000
On October 6, 1997, the Treasury Department issued regulations which make
certain modifications to the withholding rules for investors who are non-U.S.
Persons (as defined in the accompanying prospectus) and the backup withholding
and information reporting rules described above. The regulations attempt to
unify certification requirements and modify reliance standards. Such regulations
will generally be effective for payments made after December 31, 2000, subject
to certain transition rules. Non-U.S. Persons are urged to consult their tax
advisors regarding the effect of these regulations. We refer you to "--
Alternative Treatment of the Class [ ] Notes" below, concerning the possible
application of withholding tax with respect to class [ ] notes held by non-U.S.
Persons.
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ALTERNATIVE TREATMENT OF THE CLASS [ ] NOTES
If the class [ ] notes are treated as equity (partnership) interests
rather than indebtedness, while the aggregate amount of income reportable by an
investor should not differ over the life of the obligation, the timing and
character of such income could differ significantly. It is possible that
payments on the class [ ] notes would be treated as "guaranteed payments" under
the Code to the extent of the amount of interest and any discount accrued, and a
return of capital as to any excess. To the extent payments are so characterized,
a class [ ] noteholder who is a U.S. Person would be subject to federal income
tax in substantially the same manner, except for timing and income
characterization differences, as if the class [ ] notes were treated as debt.
If a class [ ] noteholder's ownership of a class [ ] note is
characterized as an equity interest but payments thereon are not treated as
"guaranteed payments," it is unclear how its distributable share of partnership
income would be calculated. A class [ ] noteholder may be allocated a share of
net income of the partnership equal to the amount of interest and discount
income that accrued on the class [ ] notes for the applicable period. A class
[ ] noteholder would be subject to federal income taxes on such income even
though it may not have received an equivalent amount of cash from the
partnership, for example, because of defaults or delinquencies on the trust
assets. The characterization of an item of income or loss (e.g., as dividends,
as interest, as rental income or as capital gain or loss as opposed to ordinary
income or loss) will usually be the same for the class [ ] noteholder as it is
for the partnership.
It is not known whether any of the receivables were issued with original
issue discount greater than a de minimis amount. If any of such trust assets
were in fact issued at greater than de minimis discount or are otherwise treated
as issued with original issue discount under the Treasury regulations, an amount
of income will be imputed to the trust with respect to such trust assets. In
general, aggregate amount of original issue discount imputed to the trust with
respect to each such trust asset will be the excess of the "stated redemption
price at maturity" of such asset over its original issue price. The trust would
have to include original issue discount in income as interest over the term of
the respective trust asset possessing original issue discount under a constant
yield method. In general, original issue discount must be included in income in
advance of the receipt of cash representing that income. As indicated above,
class [ ] noteholders may be allocated items of income of the trust in the
event that such class [ ] noteholder's income is not treated as "guaranteed
payments". Such allocated income would include any original issue discount
determined to exist with respect to any of the trust assets. Each class [ ]
noteholder should consult its own tax adviser regarding the impact to it of the
original issue discount rules as applied to the trust and the impact of such
with respect to such class [ ] noteholders. Some receivables may not have been
issued with original issue discount, but, rather, may have been issued with
"unstated interest" as determined under Section 483 of the Code. In this event,
such unstated interest will be treated in a manner similar to original issue
discount.
Moreover, the purchase price paid by the trust for receivables may be
greater or less than the remaining principal balance of the receivables at the
time of purchase. If so, such trust assets will have been acquired at a premium
or discount, as the case may be. Accordingly, in a manner similar to original
issue discount, a class [ ] noteholder may be allocated a portion of such
market discount income or premium amortization in the event that such class [ ]
noteholder's income is not treated as "guaranteed payments". Each class [ ]
noteholder should consult its own tax adviser regarding the impact to it of the
market discount and premium rules as applied to the trust and the impact of such
with respect to such class [ ] noteholder.
A class [ ] noteholder will not be able to deduct its share of losses on
the trust assets (to the extent otherwise deductible under the Code) to the
extent that such losses exceed its adjusted basis in its partnership interest
(i.e., the class [ ] note). In addition, class [ ] noteholders who are
individuals or certain closely held corporations (and certain other taxpayers)
may be subject to other limitations on
S-26
losses or deductions including the at risk limitations, the passive loss rules,
the limitation on the deduction of investment interest, the limitation on
deduction of non-business bad debts, and the limitation on the deduction of
certain miscellaneous itemized non-trade or business expenses to the extent they
do not, in the aggregate, exceed two percent of the taxpayer's adjusted gross
income. Such taxpayers should consult their tax advisor concerning the various
limitations on losses that may be applicable to an investment in a class [ ]
note.
All or a portion of any taxable income allocated to a class [ ] noteholder
that is a pension, profit-sharing or employee benefit plan or other tax-exempt
entity (including an individual retirement account) may constitute "unrelated
business taxable income" which generally would be taxable to the holder under
the Code.
If the class [ ] notes are treated as equity (partnership) interests for
income tax purposes, a class [ ] noteholder who is a non-U.S. Person may be
subject to withholding tax on its share of the income of the trust.
In view of the foregoing treatment of individuals, certain closely held
corporations, tax-exempt entities and non-U.S. Persons, if the Class [ ] Notes
are treated as equity, the class [ ] notes may not be a suitable investment for
such persons, and such persons should consult their own tax advisors in this
regard.
[STATE AND LOCAL TAX CONSEQUENCES
A rule under the Florida Income Tax Code (the "Loan Rule") provides that a
"financial organization" earning or receiving interest from loans secured by
tangible property located in Florida will be deemed to be conducting business or
earning or receiving income in Florida, and will be subject to Florida corporate
income tax regardless of where the interest was received. A financial
organization is defined to include any bank, trust company, savings bank,
industrial bank, land bank, safe deposit company, private banker, savings and
loan association, credit union, cooperative bank, small loan company, sales
finance company or investment company. If the Loan Rule were to apply to the
notes, then a financial organization investing in the notes would be subject to
Florida corporate income tax on a portion of its income at a maximum rate of
5.5%, and would be required to file an income tax return in Florida, even if it
has no other Florida contacts. The seller believes the Loan Rule does not apply
to an investment in the notes or the receipt of interest on the notes by a
financial organization with no other Florida contacts. We urge you to consult
your own tax advisor as to the applicability of the Loan Rule to an investment
in the notes and your ability to offset any such Florida tax against any other
state tax liabilities.
The State of Florida imposes a value-based intangibles tax on January 1 of
each year at the rate of $1.50 per $1,000 of value on certain intangibles owned,
managed or controlled by Florida domiciliaries or intangibles having a business
situs in Florida. On the last business day of each year, in an effort to
minimize the impact of this intangibles tax, the seller intends to transfer 99%
of its right, title and interest in, to and under the certificates owned by the
seller as of such day, together with all of its duties, rights and obligations
under the sale and servicing agreement to World Omni Acceptance III Corp.,
("WOAC III"), a wholly-owned subsidiary of World Omni Financial Corp., located
and managed outside the State of Florida (such transfer, the "Annual Servicing
Transfer"). In connection with such Annual Transfer, World Omni Financial Corp.
shall transfer all of its rights, obligations and duties under the sale and
servicing agreement to WOAC III. The trust will continue to maintain its first
priority perfected security interest in the receivables. Only the seller's
interest in the receivables, together with World Omni Financial Corp.'s
management and control authority and obligations, will be transferred to WOAC
III, to be held in escrow and returned to the seller and World Omni Financial
Corp., respectively, on the first business day of the following year. This
annual transfer is consistent with the
S-27
Technical Assistance Advisement 95(C)2-021 issued by the Florida Department of
Revenue, which holds that a transfer of receivables to a wholly-owned subsidiary
located outside the State of Florida and having no contacts with the State of
Florida was sufficient to avoid the imposition of the intangibles tax on the
receivables subject to such tax. As additional protection, the trust will be
indemnified by World Omni Financial Corp. with respect to any liability for this
intangibles tax. World Omni Financial Corp. has agreed in the sale and servicing
agreement not to conduct any servicing activities during the period of the
Annual Servicing Transfer.
The discussion above does not address the tax treatment of the trust, the
securities or the security owners under any state or local tax law other than
Florida law to the extent set forth above. Prospective investors are urged to
consult their own tax advisors regarding the local tax treatment of the trust
and the securities, and the consequences of purchase, ownership or disposition
of the securities under any state or local tax law, if applicable.
ERISA CONSIDERATIONS
[Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan within the meaning of
Section 3(3) of ERISA, as well as an individual retirement account, a Keogh plan
and any other plan within the meaning of Section 4975 of the Code (each a
"BENEFIT PLAN"), from engaging in particular transactions with persons that are
"PARTIES IN INTEREST" under ERISA or "DISQUALIFIED PERSONS" under the Code with
respect to such Benefit Plan. A violation of these "prohibited transaction"
rules may result in an excise tax or other penalties and liabilities under ERISA
and the Code for such persons or the fiduciaries of the Benefit Plan. In
addition, Title I of ERISA also requires fiduciaries of a Benefit Plan subject
to ERISA to make investments that are prudent, diversified and in accordance
with the governing plan documents.
Certain transactions involving the trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased notes if assets of the trust were deemed to be assets of the
Benefit Plan. Under a regulation issued by the United States Department of Labor
(the "REGULATION"), the assets of the trust would be treated as plan assets of a
Benefit Plan for the purposes of ERISA and the Code only if the Benefit Plan
acquired an "EQUITY INTEREST" in the trust and none of the exceptions contained
in the Regulation was applicable. An equity interest is defined under the
Regulation as an interest other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features. Although there is little guidance on the subject, the seller believes
that, at the time of their issuance, the notes should be treated as indebtedness
of the trust without substantial equity features for purposes of the Regulation.
This determination is based in part upon the traditional debt features of the
notes, including the reasonable expectation of purchasers of notes that the
notes will be repaid when due, as well as the absence of conversion rights,
warrants and other typical equity features. The debt treatment of the notes for
ERISA purposes could change if the trust incurred losses].
[However, without regard to whether the notes are treated as an equity
interest for purposes of the Regulation, the acquisition or holding of notes by
or on behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if the trust, the seller, the servicer, the owner trustee or the
indenture trustee is or becomes a party in interest or a disqualified person
with respect to such Benefit Plan. Certain exemptions from the prohibited
transaction rules could be applicable to the purchase and holding of notes by a
Benefit Plan depending on the type and circumstances of the plan fiduciary
making the decision to acquire such notes. Included among these exemptions are:
Prohibited Transaction Class Exemption ("PTCE") 96-23, regarding transactions
effected by "in-house asset managers"; PTCE 95-60, regarding investments by
insurance company general accounts; PTCE 90-1, regarding investments by
insurance company pooled separate accounts; PTCE 91-38, regarding investments by
bank collective
S-28
investment funds; and PTCE 84-14, regarding transactions effected by "qualified
professional asset managers." By acquiring a note, each initial purchaser,
transferee and owner of a beneficial interest will be deemed to represent that
either (1) it is not acquiring the notes with the assets of a Benefit Plan; or
(2) the acquisition and holding of the notes will not give rise to a nonexempt
prohibited transaction under Section 406(a) of ERISA or Section 4975 of the
Code.]
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and some church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements; however, governmental plans may be
subject to comparable state law restrictions.
A plan fiduciary considering the purchase of notes should consult its legal
advisors regarding whether the assets of the trust would be considered plan
assets, the possibility of exemptive relief from the prohibited transaction
rules and other issues and their potential consequences.
S-29
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated [ , 2000] among World Omni Financial
Corp., the seller and the underwriters, the seller has agreed to sell to the
underwriters named below and each of the underwriters has severally agreed to
purchase, the principal amount of the offered notes described opposite its name
below:
CLASS A-1 NOTES
PRINCIPAL
AMOUNT
--------------
[ ]...................................... $[ ]
[ ]...................................... [
[ ]...................................... [
[ ]...................................... [
--------------
Total................................................... $[ ]
==============
CLASS A-2 NOTES
PRINCIPAL
AMOUNT
--------------
[ ]...................................... $[ ]
[ ]...................................... [
[ ]...................................... [
[ ]...................................... [
--------------
Total................................................... $[ ]
==============
CLASS A-3 NOTES
PRINCIPAL
AMOUNT
--------------
[ ]...................................... $[ ]
[ ]...................................... [
[ ]...................................... [
[ ]...................................... [
--------------
Total................................................... $[ ]
==============
CLASS A-4 NOTES
PRINCIPAL
AMOUNT
--------------
[ ]...................................... $[ ]
[ ]...................................... [
[ ]...................................... [
[ ]...................................... [
--------------
Total................................................... $[ ]
==============
The underwriters have advised the seller that they propose initially to
offer the offered notes to the public at the prices described herein, and to
some dealers at such prices less the initial concession not in
S-30
excess of [ % per class A-1 note, % per class A-2 note, % per
class A-3 note and % per class A-4 note.] The underwriters may allow and
the related dealers may reallow a concession not in excess of [ % per
class A-1 note, % per class A-2 note, % per class A-3 note and %
per class A-4 note] to some other dealers. After the initial public offering of
the offered notes, the public offering price and such concessions may be
changed.
The underwriting agreement provides that the obligations of the
underwriters are subject to some conditions precedent and that the underwriters
will purchase all the notes offered hereby if any of such notes are purchased.
[Each underwriter has represented and agreed that (a) it has not offered or
sold, and will not offer to sell, any offered notes to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal agent) for the
purposes of their businesses or otherwise in circumstances that do not
constitute an offer to the public in the United Kingdom for the purposes of the
Public Offers of Securities Regulations 1995, (b) it has complied and will
comply with all applicable provisions of the Financial Services Act of 1986 of
Great Britain with respect to anything done by it in relation to the offered
notes in, from or otherwise involving the United Kingdom and (c) it has only
issued or passed on and will only issue or pass on in the United Kingdom any
document in connection with the issue of the offered notes to a person who is of
a kind described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom the document may
otherwise lawfully be issued or passed on.]
The notes are a new issue of securities with no established trading market.
World Omni Financial Corp. and the seller do not intend to apply for listing of
the notes on a national securities exchange. The underwriters have advised World
Omni Financial Corp. and the seller that they intend to act as market makers for
the notes. However, the underwriters are not obligated to do so and may
discontinue any market making at any time without notice. Accordingly, no
assurance can be given as to the liquidity of any trading market for the notes.
[In connection with the offering of the notes, the underwriters may engage
in transactions that stabilize, maintain or otherwise affect the market price of
the notes. Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M, pursuant to which such person may bid
for or purchase the notes for the purpose of stabilizing its market price. In
addition, the underwriters may impose "penalty bids" whereby they may reclaim
from a dealer participating in the offering the selling concession with respect
to the notes that the dealer distributed in the offering but subsequently
purchased for the account of the underwriters in the open market. Any of the
transactions described in this paragraph may result in the maintenance of the
price of the notes at a level above that which might otherwise prevail in the
open market. None of the transactions described in this paragraph is required,
and, if they are taken, may be discontinued at any time without notice].
World Omni Financial Corp. and the seller have agreed to indemnify the
underwriters against some liabilities, including civil liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in respect of some liabilities, including civil liabilities under the
Securities Act.
[In the ordinary course of their respective businesses, the underwriters
and their affiliates have engaged and may engage in investment banking and/or
commercial banking transactions with World Omni Financial Corp. and the seller
and their affiliates]. We refer you to "Use of Proceeds" herein and "Plan of
Distribution" in the accompanying prospectus.
This prospectus supplement and the accompanying prospectus may be used by
the underwriters, affiliates of which have an ownership interest in, or
participate in banking transactions with, World Omni Financial Corp. and the
seller, in connection with offers and sales related to market making
S-31
transactions in the notes. The underwriters may act as principals or agents in
such transactions. Such sales will be made at prices related to prevailing
market prices at the time of the sale or otherwise.
LEGAL OPINIONS
Some legal matters relating to the securities will be passed upon for the
seller and the servicer by Cadwalader, Wickersham & Taft, New York, New York.
Some legal matters relating to Florida state tax laws will be passed upon for
the seller and the servicer by . Certain
legal matters relating to the notes will be passed upon for the underwriters by
[ ].
S-32
INDEX OF TERMS
Accelerated Principal Distribution
Amount.................................. S-16, S-20
APR....................................... S-15
Benefit Plan.............................. S-28
Business Day.............................. S-16
Clearstream............................... S-17
Collection Account........................ S-19
Collection Period......................... S-16
Determination Date........................ S-16
disqualified persons...................... S-28
Distribution Account...................... S-19
DTC....................................... S-17
equity interest........................... S-28
ERISA..................................... S-28
ERISA Considerations...................... S-8
Euroclear................................. S-17
Interest Distribution Amount.............. S-21
Liquidation Proceeds...................... S-24
Note Owner................................ S-17
Noteholders' Distributable Amount......... S-21
Noteholders' Interest Carryover
Shortfall............................... S-21
Noteholders' Interest Distributable
Amount.................................. S-21
Noteholders' Monthly Interest
Distributable Amount.................... S-21
Noteholders' Monthly Principal
Distributable Amount.................... S-21
Noteholders' Principal Carryover
Shortfall............................... S-21
Noteholders' Principal Distributable
Amount.................................. S-21
Participants.............................. S-17
parties in interest....................... S-28
Pool Balance.............................. S-20
PTCE...................................... S-28
Realized Losses........................... S-22
Regular Principal Distribution Amount..... S-16, S-22
Regulation................................ S-28
Total Distribution Amount................. S-22
S-33
- ---------------------------------------------------------
---------------------------------------------------------
- ---------------------------------------------------------
---------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS AND
PROSPECTUS SUPPLEMENT. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION OR
REPRESENTATIONS. THIS PROSPECTUS AND PROSPECTUS SUPPLEMENT IS AN OFFER TO SELL
ONLY THE SECURITIES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES AND IN
JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS
PROSPECTUS AND PROSPECTUS SUPPLEMENT IS CURRENT ONLY AS OF ITS DATES. UNTIL
[ ], ALL DEALERS EFFECTING TRANSACTIONS IN THE OFFERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS'
OBLIGATION TO DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO AN UNSOLD ALLOTMENT OR SUBSCRIPTION.
------------------------
$[ ]
(APPROXIMATE)
WORLD OMNI AUTO RECEIVABLES LLC
SELLER
AUTO RECEIVABLES BACKED
NOTES SERIES 2000-
------------------------
PROSPECTUS SUPPLEMENT
------------------------
[UNDERWRITER]
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
Subject to completion, dated May 24, 2000.
Prospectus Supplement(1) to Prospectus dated ______________.
$[ ]
(Approximate)
World Omni Auto Receivables Trust 2000-[ ]
[$[_______] class A, [___]% asset backed certificates
$[_______] class B, [___]% asset backed certificates]
World Omni Auto Receivables LLC
Seller
Word Omni Financial Corp.
Servicer
The World Omni Auto Receivables LLC Auto Receivables Backed
Certificates Series 2000-__ will include [_______] classes of certificates, that
we are offering pursuant to this prospectus supplement. The Series 2000-__
certificates are collateralized by the assets of a trust. The trust's main
assets will be a pool of retail installment sale contracts secured by new and
used automobiles and light trucks and other assets as described in the
prospectus and this prospectus supplement.
o Only the securities described on the following table are being offered
by this prospectus supplement and the prospectus.
o Credit enhancement will be provided by a reserve fund, and, in the
case of the class A certificates, the subordination of the class B
certificates.
o The price to the public and the proceeds to the seller listed below
include interest accrued from ______, ___ to, but not including, the
date the certificates will be issued.
o The proceeds from the sale of the securities exclude expenses,
estimated at $ .
Price to Public Underwriting Discounts and Proceeds to Seller
Commissions
[Per class A certificate]
[Per class B certificate]
- --------------------
We will not list the certificates on any national securities exchange
or on any automated quotation system of any registered securities association
such as NASDAQ.
------------------------------------
The Series 2000-__ certificates are not obligations of World Omni Auto
Receivables LLC, World Omni Financial Corp., the trustee, or any of their
respective affiliates. [The offered certificates and the underlying receivables
are not insured or guaranteed by any governmental agency or any of the persons
- --------
1 This form of prospectus supplement is representative of the form of prospectus
supplement that may typically be used in an equity transaction. The provisions
in this form may change from transaction to transaction, whether or not the
provisions are bracketed in the form to reflect the specific parties, the
structure of the securities, servicing provisions, receivables pool, provisions
of the purchase agreement, pooling and servicing agreement and other matters. In
all cases, the provisions in the prospectus supplement will be consistent in
material respects with the provisions in the prospectus.
specified above. Principal and interest will be paid on the certificates on the
__ of each month, unless the __ is not a Business Day, in which case, the
payment will be made on the following Business Day. The first distribution date
will be ___________, ____.]
Investing in the offered certificates involves risk. We refer you to
"Risk Factors" beginning on page [ ] in this prospectus supplement and page [ ]
in the prospectus.
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of the certificates, or passed upon the
accuracy or adequacy of this prospectus supplement or prospectus. Any
representation to the contrary is a criminal offense.
We expect that the delivery of the offered certificates will be made in
book-entry form only through the facilities of the Depository Trust Company and
Clearstream Bank, societe anonyme and the Euroclear System on or about
[--------].
[UNDERWRITERS]
[ ], 2000
The information in this prospectus supplement is not complete and may be
changed. We may not sell these securities until we deliver a final prospectus
supplement and prospectus. This prospectus supplement and prospectus are not an
offer to sell these securities and are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
IMPORTANT NOTICE about INFORMATION PRESENTED in this
PROSPECTUS SUPPLEMENT and the ACCOMPANYING PROSPECTUS
Information about the offered certificates is contained in two separate
documents that progressively provide more detail: (a) the accompanying
prospectus, which provides general information, some of which may not apply to
the offered certificates; and (b) this prospectus supplement, which describes
the specific terms of the offered certificates. If the terms of the offered
certificates vary between this prospectus supplement and the accompanying
prospectus, you should rely on the information in this prospectus supplement.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with information that is different from that contained in this
prospectus supplement and the prospectus. The information in this prospectus
supplement is accurate only as of the date of this prospectus supplement.
This prospectus supplement begins with several introductory sections
describing the Series 2000-__ certificates and the trust in abbreviated form:
Summary Of Prospectus Supplement, which gives a brief introduction of the
key features of the Series 2000-__ certificates and a description of the
receivables; and
Risk Factors, appearing on page ____ of this prospectus supplement, which
describes risks that apply to the Series 2000-__ certificates which are in
addition to those described in the prospectus with respect to the securities
issued by the trust generally.
This prospectus supplement and the accompanying prospectus include cross
references to sections in these materials where you can find further related
discussions. The tables of contents in this prospectus supplement and the
prospectus identify the pages where these sections are located.
Certain capitalized terms are defined and used in this prospectus
supplement and the prospectus to assist you in understanding the terms of the
offered certificates and this offering. The capitalized terms used in this
prospectus supplement are defined on the pages indicated under the caption
"Index of Significant Definitions" beginning on page S-___ in this prospectus
supplement.
In this prospectus supplement, the terms "seller," "we," "us" and "our"
refer to World Omni Auto Receivables LLC.
S-2
TABLE OF CONTENTS
SUMMARY OF TERMS....................................4
RISK FACTORS.......................................10
THE TRUST..........................................12
General........................................12
The Trustee....................................12
THE RECEIVABLES POOL...............................12
COMPOSITION OF THE RECEIVABLES POOL................13
Delinquencies, Repossessions and Net Losses....16
YIELD CONSIDERATIONS...............................16
OTHER INFORMATION..................................17
USE OF PROCEEDS....................................17
DESCRIPTION OF THE SECURITIES......................17
General........................................17
Payments of Interest...........................17
Payments of Principal..........................18
Optional Redemption............................18
REGISTRATION OF CERTIFICATES.......................18
General........................................18
Book Entry Registration........................18
DESCRIPTION OF THE TRUST DOCUMENTS.................19
Sale and Assignment of Receivables.............19
Trust Accounts.................................20
Advances.......................................20
Servicing Compensation and Payment of Expenses.20
Distributions..................................21
Subordination of the class B
certificates; [Reserve Acount]...............25
Statements to Certificateholders...............26
FEDERAL INCOME TAX CONSEQUENCES....................26
STATE AND LOCAL TAX CONSEQUENCES...................26
ERISA CONSIDERATIONS...............................27
UNDERWRITING.......................................28
LEGAL OPINIONS.....................................30
S-3
SUMMARY OF TERMS
The following summary is a short, concise description of the main terms
of the certificates. 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 certificates following this summary and in the prospectus.
PARTIES AND DATES:
Issuer: The issuer of the certificates is
World Omni Auto Receivables Trust
2000-[ ]. The trust was formed on
[_________, 2000] under a pooling
and servicing agreement among World
Omni Auto Receivables LLC, World
Omni Financial Corp. and [trustee].
Seller: The seller is World Omni Auto
Receivables LLC, a wholly-owned,
special-purpose subsidiary of World
Omni Financial Corp.
The address and telephone number of
the seller is:
120 N.W. 12th Avenue
Deerfield Beach, Florida 33442
(954) 429-2200
Closing Date: On or about [______________________]
Cutoff Date: [__________________________]
Servicer: World Omni Financial Corp., the
parent of the seller.
Trustee: [__________________________]
TRUST ASSETS: The trust's primary source of funds
to make payments of principal of and
interest on the certificates will be
the trust assets, which will
include:
o a pool of retail
installment sale contracts
between dealers in new and
used automobiles and light
trucks and retail obligors;
o the right to receive
payments under the
receivables after specified
cutoff dates;
o security interests in the
financed vehicles;
S-4
o the rights of the seller to
receive any proceeds with
respect to the receivables
from claims on physical
damage and other insurance
policies covering the
financed vehicles or the
obligors;
o [the reserve account]; and
o any and all proceeds of the
foregoing.
The Receivables: The receivables that the seller will
transfer to the trust will be
secured by new and used automobiles
and light trucks including the
rights to all payments received with
respect to the contracts after the
applicable cutoff date.
On the closing date, the trust will
acquire the receivables. For further
information about the
characteristics of the receivables
as of the cutoff date, see "The
Receivables Pool - The Receivables"
in the prospectus and "The
Receivables Pool" in this prospectus
supplement.
General characteristics of the
receivables as of the cutoff date:
Initial Pool Balance:..............................$
Weighted Average APR...............................%
Weighted Average Remaining
Term to Maturity (months):.........................
Weighted Average Original Term
to Maturity (months):..............................
Latest Scheduled Maturity Date.....................
We refer you to "The Receivables
Pool" in this prospectus supplement................
TITLE, REGISTRATION AND DENOMINATION OF World Omni Auto Receivables Trust 2000-[ ] will
OFFERED SECURITIES: issue the following securities:
o [ %] asset-backed certificates,
class A in the aggregate
original principal amount of
[$________]; and
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o [ %] asset-backed certificates,
class B in the aggregate
original principal amount of
[$______];
The aggregate original principal
amount of the offered certificates
will be [$__________]. We will issue
the certificates in minimum
denominations of $1,000 and integral
multiples of $1,000, in book-entry
form only, through The Depository
Trust Company, Clearstream Bank,
societe anonyme and the Euroclear
System. For more information, read
"Description of the Securities -
Book-Entry Registration" in the
prospectus.
TERMS OF CERTIFICATES: The principal terms of the
certificates follow:
Distribution Dates: The trustee will make payments on
the certificates on the [__] day of
each month or, if the [__] day is
not a Business Day, on the next
Business Day. The first distribution
date will be [ , 2000]
Class A Interest: On each distribution date, the
trustee will pay to the holders of
record of the class A certificates
(the class A certificateholders as
of the related record date), [thirty
(30) days] of interest at the class
A pass-through rate on the
outstanding principal amount of that
class of certificates at the close
of the preceding distribution date.
Interest on the class A certificates
will be calculated on the basis of a
[360 day year of twelve 30 day
months]. On the initial distribution
date, the interest payable on the
class A certificates will be based
on the initial principal amount of
that class of certificates and
number of days from and including
the closing date to and including
[____________]. The class A
pass-through rate is [_____%]. We
refer you to "Description of the
Securities--Payments of Interest"
and "Description of the Trust
Documents--Distributions" in this
prospectus supplement.
The trustee will make all payments
of interest to the class A
certificateholders on a pro rata
basis to the extent of available
funds.
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Class A Principal: The trustee will pay principal on
the class A certificates on each
distribution date to the class A
certificateholders on a pro rata
basis in an amount equal to the
Class A Percentage of the Principal
Distribution Amount for the
Collection Period preceding such
distribution date. The Class A
Percentage is [____%]. We refer you
to "Description of the
Securities--Payments of Principal"
and "Description of the Trust
Documents--Distributions" in this
prospectus supplement.
Class B Interest: On each distribution date, the
trustee will pay to the holders of
record of the class B certificates,
[thirty (30) days] of interest at
the class B pass-through rate on the
outstanding principal amount of that
class of certificates at the close
of the preceding distribution date.
Interest on the class B certificates
will be calculated on the basis of a
[360 day year of twelve 30 day
months]. On the initial distribution
date, the interest payable on the
class B certificates will be based
on the initial principal amount of
the class B certificates and number
of days from and including the
closing date to and including
[_________]. The class B
pass-through rate is [________%]. We
refer you to "Description of the
Securities--Payments of Interest"
and "Description of the Trust
Documents--Distributions" in this
prospectus supplement.
The trustee will make all payments
of interest to the class B
certificateholders on a pro rata
basis to the extent of available
funds.
Class B Principal: The trustee will pay principal on
the class B certificates on each
distribution date to the class B
certificateholders on a pro rata
basis in an amount equal to the
Class B Percentage of the Principal
Distribution Amount for the
Collection Period preceding such
distribution date. The Class B
Percentage is [______%]. We refer
you to "Description of the
Securities--Payments of Principal"
and "Description of the Trust
Documents--Distributions" in this
prospectus supplement.
Record Dates: The trustee will make
payments to holders of record of the
certificates as of the close of
business on the record date
applicable to the distribution date.
The record date for a distribution
date will be the [__] calendar day
of the month in which the
distribution date occurs.
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SERVICING: After the sale of the receivables to
the trust, World Omni Financial
Corp. will continue to service the
receivables. World Omni Financial
Corp.'s responsibilities as servicer
will include, among other things,
collection of payments, realization
on the receivables and the financed
vehicles and monitoring the
performance of the receivables. In
return for World Omni Financial
Corp.'s services, the trust will pay
a fee to World Omni Financial Corp.
out of the interest payments
received by the trust. We refer you
to "Description of the Trust
Documents--Servicing Compensation"
in this prospectus supplement.
PRIORITY OF PAYMENTS: On each distribution
date, funds available for
distribution from the receivables,
net of specified trust expenses,
will be distributed in the following
amounts and order of priority:
(1) to the servicer, the
servicing fee and all
unpaid servicing fees;
(2) [to the class A
certificateholders, pro
rata, in accordance with
their interest
entitlements;
(3) to the class A
certificateholders, pro
rata, their principal
entitlements;
(4) to the class B
certificateholders, pro
rata, in accordance with
their interest
entitlements; and
(5) to the class B
certificateholders, pro
rata, their principal
entitlements.]
We refer you to "Description of the
Trust Documents--Distributions--
Payments to Certificateholders" in
this prospectus supplement.
Optional Redemption: The seller or the servicer may, at
their option, redeem the outstanding
certificates by purchasing all the
receivables. The seller or the
servicer may only redeem the
certificates when the aggregate
principal balance of the receivables
is equal to 10% or less of the
initial Pool Balance. The redemption
price will at least equal the unpaid
principal amount of the
certificates, plus accrued and
unpaid interest.
S-8
CREDIT ENHANCEMENT:
[Reserve Account The initial amount in the reserve
account will be $___________, which
is ___ % of the original principal
amount of the securities. The
trustee will apply funds in the
reserve account to make payments due
on the certificates that are not
covered by collections on the
receivables. The reserve account
will be replenished to its required
amount with excess collections, if
available.] Amounts in the reserve
account in excess of the required
amount will be released to the
seller and will no longer be
available to make payments on
certificates.
Subordination: On each distribution date, the class
A certificateholders are entitled to
the full payment of the amount due
to them before the class B
certificateholders receive any
payment. The subordination of
payments to the class B
certificateholders is intended to
decrease the likelihood that the
trust will be unable to make the
payments due on the class A
certificates.
[Tax Status: In the opinion of Cadwalader,
Wickersham & Taft, the trust will be
treated as a grantor trust for
federal income tax purposes, will
not be subject to federal income tax
and will not be characterized as an
association (or publicly traded
partnership) taxable as a
corporation. 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 certificates.]
[ERISA Considerations: Subject to the
considerations discussed under
"ERISA Considerations," the class A
certificates are eligible for
purchase by employee benefit plans.
Ratings of the Certificates: It is a condition of issuance that
the class A certificates be rated
"______" (or its equivalent) by at
least two nationally recognized
rating agencies and that the class B
certificates be rated "_____" (or
its equivalent) by at least two
nationally recognized rating
agencies. A security rating is not a
recommendation to buy, sell or hold
securities and may be revised or
withdrawn at any time by the
assigning rating agency. We refer
you to "Risk Factors--A Rating of
the securities is not a
recommendation to purchase, hold or
sell securities" in the prospectus.
S-9
RISK FACTORS
Prospective investors in the certificates should consider the following
factors and the additional factors discussed under "Risk Factors" in the
prospectus:
You can only rely on payments on the The trust will not have any significant assets or sources of funds to
receivables and any amounts in the make payments on the certificates other than the receivables and the
reserve account for payments on your reserve account. You must rely for distributions of your certificates
certificates: upon payments on the receivables and amounts, if any, in the reserve
account. Although funds in the reserve account may be available on each
distribution date to cover shortfalls in distributions of interest and
principal on the certificates, the amounts available in the reserve
account are limited. If the reserve account becomes depleted, the trust
will depend solely on current collections on the receivables to make
payments on the certificates.
Subordination of class B certificates Distributions of interest and principal on the class B certificates
increases risk of loss to class B will be subordinated in priority of payment interest and principal due
certificateholders: on the class A certificates. Consequently, the class B
certificateholders will not receive any distributions with respect to a
Collection Period until the full amount of interest and principal due on
the class A certificates on such distribution date has been distributed
to the class A certificateholders. Such subordination has the effect of
increasing the likelihood of payment on the class A certificates and
therefore decreasing the likelihood of payment on the class B
certificates.
Prepayment on receivables may affect your We have determined the final scheduled distribution date for each class
yield to maturity: of certificates so that distributions on the underlying receivables will
be sufficient to retire each such class on or before its final scheduled
distribution date. However, because some prepayments of the receivables
are likely and some receivables have terms to maturity that are shorter
than the term to maturity assumed in calculating each class's final
scheduled distribution date, the actual payment of any class of
certificates likely will occur earlier, and could occur significantly
earlier, than such class's final scheduled distribution date.
Nevertheless, there can be no assurance that the final distribution of
principal of any or all classes of certificates will be earlier than
such class's final scheduled distribution date.
S-10
[The geographic concentration and Economic conditions in the states where obligors reside may affect
performance of the receivables may delinquencies, losses and prepayments on the receivables. The following
increase the risk of loss on your economic conditions may affect payments on the receivables:
investment: o unemployment,
o interest rates,
o inflation rates, and
o consumer perceptions of the economy.
If a large number of obligors are located in a particular state, these
conditions could increase the delinquency, credit loss or repossession
experience of the receivables. If there is a concentration of obligors
and receivables in particular states, any adverse economic conditions in
those states may affect the performance of the securities more than if
this concentration did not exist.
As of [ ,] World Omni Financial Corp.'s records indicate that the
billing addresses of the obligors of the receivables were in the
following states:
PERCENTAGE OF
STATE TOTAL PRINCIPAL BALANCE:
__________________________ __________________________
____________________ [ ]%
____________________ [ ]%
____________________ [ ]%
____________________ [ ]%
____________________ [ ]%
We refer you to "The Receivables Pool" in this prospectus supplement.]
You may have difficulty selling your There will have been no secondary market for any series of your
securities and/or obtaining your desired securities prior to the related offering. The underwriters intend to
price due to the absence of a secondary make a secondary market for the securities, but are not obligated to do
market. so. We cannot assure you that a market will develop or, if it does
develop, that it will provide you with liquidity of investment or
continue for the life of your securities.
There have been times in the past when very few buyers of asset backed
securities existed and there may be similar times in the future. As a
result, you may be unable to obtain the price that you wish to receive
for your securities or you may suffer a loss on your investment.
S-11
THE TRUST
General
The seller will establish the trust by selling and assigning the trust
property, as described below, to the trustee in exchange for the certificates.
The trust will be governed by a pooling and servicing agreement dated as of
____________. The servicer will service the receivables pursuant to the pooling
and servicing agreement and will be compensated for acting as the servicer. See
"Description of the Trust Documents--Servicing Compensation and Payment of
Expenses." The trust will not engage in any business other than:
(1) acquiring, holding and managing the receivables, the other trust
assets and any proceeds from the receivables and other trust
assets;
(2) issuing and making payments on the securities; and
(3) engaging in other activities to accomplish the above.
If the protection provided to the investment of the certificateholders
by the reserve account is insufficient, and, in the case of the class A
certificateholders, the subordination of the class B certificates is
insufficient, the trust will look only to the obligors on the receivables and
the proceeds from the repossession and sale of financed vehicles which secure
defaulted receivables. In this event, some factors, such as the trust's not
having first priority perfected security interests in some of the financed
vehicles, may affect the trust's ability to realize on the collateral securing
the receivables. These factors may reduce the proceeds available to
certificateholders with respect to the certificates. We refer you to
"Description of the Trust Documents--Distributions--Allocations and
Distributions" in this prospectus supplement and "Some Legal Aspects of the
Receivables" in the prospectus.
The Trustee
[________________] is the trustee under the pooling and servicing
agreement. [___________] is a [national banking association] and its principal
offices are located at [________________].
THE RECEIVABLES POOL
The pool of receivables (the receivables pool) purchased on the closing
date will have an aggregate outstanding principal balance of approximately
$[___________] as of the cutoff date. Each receivable is a simple interest
receivable. World Omni Financial Corp. purchased most of the receivables from
dealers in the ordinary course of business. Approximately [__%] of the
receivables were originated by World Omni Financial Corp. under a program where
World Omni Financial Corp. offers to obligors which lease vehicles from its
affiliates the option of financing the purchase of the leased vehicle when the
related lease expires. As of the cutoff date, the receivables meet the criteria
described in the prospectus under "The Receivables Pool." In addition, as of the
applicable cutoff date, each receivable:
o [is secured by a new or used automobile or light duty truck;
S-12
o was originated in the United States;
o provides for level monthly payments that fully amortize the
amount financed over its original term, subject to some
exceptions;
o was originated on or prior to [_______];
o has an original term of [____] to [_____] months and has a
remaining term to maturity of not less than [___] months nor more
than [___] months;
o provides for the payment of a finance charge at a stated annual
percentage rate ("APR") ranging from [___]% to [___]%;
o shall not have a scheduled payment that is more than 30 days
past due;
o was not due, to the best knowledge of World Omni Financial
Corp., from any obligor who is presently the subject of a
bankruptcy proceeding or is bankrupt or insolvent;
o was not secured by a financed vehicle that had been repossessed
without reinstatement; and
o has a scheduled maturity not later than [____________].]
COMPOSITION OF THE RECEIVABLES POOL
Initial Pool Balance ...................................................................$[ ]
Number of Receivables...................................................................[ ]
Average Cutoff Date Principal Balance...................................................$[ ]
Average Original Amount Financed........................................................[ ]
Range of Original Amount Financed.....................................................[ ]
Weighted Average APR of Receivables(1)..................................................[ ]%
Range of APRs.........................................................................[ ]
Weighted Average Remaining Maturity(1)..................................................[ ]
Range of Remaining Maturities as of the Cutoff Date...................................[ ]
- ---------------------
(1) By original principal balance as of the cutoff date.
Approximately [____]% of the aggregate cutoff date principal balance of
the receivables purchased on the closing date, constituting [____]% of the
number of the total receivables, represent new vehicles, and approximately
[_____]% of the aggregate cutoff date principal balance of the receivables
purchased on the closing date, constituting [____]% of the number of the total
receivables, represent used vehicles.
The geographic distribution and distribution by annual percentage rate
of the receivables conveyed to the trust on the closing date as of the cutoff
date are described in the following tables.
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Geographic Distribution of the Receivables as of the Cutoff Date
PERCENT OF
PERCENT OF INITIAL INITIAL
NUMBER OF NUMBER OF POOL POOL
STATE(1) RECEIVABLES RECEIVABLES(3) BALANCE BALANCE(3)
-------- ----------- -------------- ------- ----------
Alabama............................... % $ %
Florida...............................
Georgia...............................
North Carolina........................
South Carolina........................
All Others(2).........................
Total........................ 100% 100%
- ---------------------
(1) Based on address of origination.
(2) No other state represents a percentage of the aggregate Principal Balance
as of the initial cutoff date in excess of ____ percent.
(3) Percentages may not add up to 100% because of rounding.
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Distribution of the Receivables by Annual Percentage Rate as of the Cutoff Date
PERCENT OF
INITIAL INITIAL
NUMBER OF PERCENT OF NUMBER POOL POOL
ANNUAL PERCENTAGE RATE RANGE RECEIVABLES OF RECEIVABLES(1) BALANCE BALANCE(1)
---------------------------- ----------- ----------------- ------- ----------
[----]% - [----]%..................... % $ %
[----]% - [----]%.....................
[----]% - [----]%.....................
[----]% - [----]%.....................
[----]% - [----]%.....................
[----]% - [----]%.....................
----------- ------------- -------------- ------------
------------- -------------- ------------
Total 100.00% 100.00%
============= ============== ============
- ---------------------
(1) Percentages may not add up to 100% because of rounding.
S-15
Delinquencies, Repossessions and Net Losses.
Set forth below is some information concerning World Omni Financial
Corp.'s experience with respect to its portfolio of new and used automobile and
light duty truck retail installment sale contracts similar to the receivables.
The data presented in the following tables are for illustrative
purposes only. There is no assurance that World Omni Financial Corp.'s
delinquency, credit loss and repossession experience with respect to automobile
and light duty truck installment sale contracts in the future, or the experience
of the trust with respect to the receivables, will be similar to that described
below. Losses and delinquencies are affected by, among other things, general and
regional economic conditions and the supply of and demand for automobiles and
light duty trucks.
Delinquency Experience
(Dollars in Thousands)
1999 1998 1997 1996
---- ---- ---- ----
Ending Number of Contracts................. 106,337 76,883 56,442 46,897
Percentage of Delinquent Contracts(1)(2)(3)
31-60 Days................................. 1.39% 1.82% 1.99% 2.69%
61-90 Days................................. 0.13% 0.16% 0.25% 0.23%
91 Days and Over........................... 0.02% 0.02% 0.06% 0.04%
----- ----- ----- -----
Total.......................... 1.54% 2.00% 2.30% 2.96%
- ----------
(1) Delinquency figures reported exclude delinquent bankrupt contracts. As of
December 31, 1999, bankrupt contracts greater than 60 days past due totaled
749.
(2) The period of delinquency is based on the number of days payments are
contractually past due. (3) As a percentage of the total number of
contracts at period end. Net Loss and Repossession Experience(1) (Dollars
in Thousands)
1999 1998 1997 1996
---- ---- ---- ----
Ending Net Receivables......................... $1,235,065 $818,488 $607,890 $475,410
Ending Number of Contracts..................... 106,337 76,883 56,442 46,897
Average Portfolio Outstanding During the Period $ 985,303 $758,566 $495,091 $427,851
Average Number of Contracts Outstanding During 88,807 72,772 50,210 42,949
the Period....................................
Number of Repossessions........................ 1,335 1,300 1,178 1,181
Repossessions as a Percentage of Average
Number of Contracts Outstanding................ 1.50% 1.79% 2.35% 2.75%
Net Repossession Losses (1) (2)................ $ 5,223 $ 6,248 $ 6,293 $ 6,643
Net Losses as a Percentage of Average
Portfolio Outstanding.......................... 0.53% 0.82% 1.27% 1.55%
- ----------
(1) Net losses equal the aggregate net principal balances of all contracts
determined to be uncollectable in the period plus accrued but unpaid
interest earned through the point of charge-off, less any recoveries.
(2) Includes charged-off amounts as well as repossession losses but does not
include expenses incurred to dispose of vehicles.
YIELD CONSIDERATIONS
All of the receivables can be prepaid at any time without charge. For
this purpose "prepayments" include prepayments in full, liquidations due to
default, as well as receipts of proceeds from physical damage, credit life and
credit accident and health insurance policies and some other receivables
repurchased for administrative reasons. A variety of economic, social, and other
factors may influence the rate of prepayments on the receivables. For example,
an obligor generally may not sell or transfer the financed vehicle securing a
S-16
receivable without the consent of World Omni Financial Corp. As the rate of
payment of principal of each class of certificates depends on the rate of
payment (including prepayments and liquidations due to default) of the principal
balance of the receivables, the final distribution in respect of the
certificates could occur significantly earlier than the final scheduled
distribution date. Certificateholders will bear all reinvestment risk resulting
from a faster or slower incidence of prepayment of receivables. The exercise by
the seller or servicer of its option to purchase the receivables and redeem the
certificates under the conditions described in "Description of the
Securities--Optional Redemption" in this prospectus supplement will also
accelerate the payment of the certificates.
OTHER INFORMATION
Under the pooling and servicing agreement, the certificateholders will
receive monthly reports concerning the payments received on the receivables and
various other items of information. The trustee will furnish to the
certificateholders of record during any calendar year information for tax
reporting purposes not later than the latest date permitted by law. We refer you
to "Description of the Trust Documents--Statements to Certificateholders" in
this prospectus supplement.
USE OF PROCEEDS
The seller will use the net proceeds of the sale of the certificates to
purchase the receivables from World Omni Financial Corp.
DESCRIPTION OF THE SECURITIES
General
The certificates will be issued under the terms of a pooling and
servicing agreement among the seller, the servicer and the trustee. We have
filed a form of the pooling and servicing agreement as an exhibit to the
registration statement.
Payments of Interest
Interest on the principal balances of the classes of the certificates
will accrue at their respective per annum pass-through rates and will be payable
to the certificateholders monthly on each distribution date, commencing
[__________]. Payments will be made to the certificateholders of record as of
the day immediately preceding such distribution date or, if definitive
securities are issued, as of the 15th day of the preceding month. Interest on
the outstanding principal amount of the certificates will accrue at the
applicable pass-through rates during the interest accrual period (from the
closing date (in the case of the first distribution date) or from the [first]
day of the month preceding the month of a distribution date to and including the
[last] day of the month of the distribution date). Interest on each class of the
certificates will be calculated on the basis of a 360-day year consisting of
twelve 30-day months. We refer you to "Description of the Trust
Documents--Distributions--Payments to Certificateholders" in this prospectus
supplement.
S-17
Payments of Principal
On the Business Day immediately preceding each distribution date, the
trustee shall determine the amount in the Collection Account for the related
Collection Period allocable to interest and the amount allocable to principal on
an actual basis. Payments to certificateholders on the following distribution
date will be based on this allocation. A "Collection Period" means with respect
to any distribution date, the calendar month preceding such distribution date. A
"Business Day" is a day other than a Saturday, a Sunday or a day on which
banking institutions or trust companies in the City of New York, Deerfield
Beach, Florida or Mobile, Alabama are authorized by law, regulation or executive
order to be closed. We refer you to "Description of the Trust
Documents--Distributions--Payments to Certificateholders" in this prospectus
supplement
Optional Redemption
To avoid excessive administrative expense, the seller or the servicer
may at its option purchase all remaining receivables from the trust. The seller
or the servicer (or its successor) may exercise this repurchase option on or
after the last day of any month on or after which the aggregate principal
balance of the receivables is equal to 10% or less of the aggregate cutoff date
principal balance of receivables. The redemption price will at least equal the
aggregate of the unpaid principal amount of the certificates plus accrued and
unpaid interest as of such last day. Exercise of this right will result in the
early retirement of the certificates. Upon declaration of an optional
redemption, the trustee will give written notice of termination to each
certificateholder of record. The final distribution to any certificateholder
will be made only upon surrender and cancellation of each certificateholder's
certificate at the office or agency of the trustee specified in the notice of
termination.
REGISTRATION OF CERTIFICATES
General
The Certificates will evidence interests in the trust created pursuant
to the pooling and servicing agreement. The class A certificates will evidence
in the aggregate an undivided ownership interest (the "Class A Percentage") of
approximately ____% of the trust and the class B certificates will evidence in
the aggregate an undivided ownership interest (the "Class B Percentage") of
approximately ____% of the trust.
Book Entry Registration
The certificates will initially be represented by certificates
registered in the name of Cede & Co. as nominee of The Depository Trust Company
("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. DTC is a
limited-purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered under the provisions of Section 17A of the Securities Exchange Act of
1934, as
S-18
amended. DTC accepts securities for deposit from its participating
organizations ("Participants") and facilitates the clearance and settlement of
securities transactions between Participants through electronic book-entry
changes in accounts of Participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers,
banks and trust companies and clearing corporations and may include some other
organizations. Indirect access to the DTC system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly.
A person acquiring an interest in the certificates will hold his or her
interest through DTC, in the United States, or Clearstream Banking, societe
anonyme ("Clearstream") or the Euroclear System ("Euroclear"), in Europe.
Transfers within DTC, Clearstream or Euroclear, as the case may be, will be in
accordance with the usual rules and operating procedures of the relevant system.
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and counterparties holding directly or indirectly through
Clearstream or Euroclear, on the other, will be effected in DTC through
Citibank, N.A. or Morgan Guaranty Trust Company of New York, the relevant
depositaries of Clearstream or Euroclear, respectively, and each a participating
member of DTC. We refer you to "Description of the Securities--Book Entry
Registration" in the prospectus.
If you are acquiring beneficial ownership interests in the
certificates, you may hold the certificates directly though DTC if you are a
Participant, or you may hold your interest indirectly through organizations
which are Participants. Your ownership of a book-entry certificate will be
recorded on the records of the brokerage firm, bank, thrift institution or other
financial intermediary that maintains your account for that purpose. In turn the
entity's ownership of the book-entry certificate will be recorded on the records
of DTC (or of a participating firm that acts as its agent, whose interest will
in turn be recorded on the records of DTC). We refer you to "Description of the
Securities--Book-Entry Registration" in the prospectus.
DESCRIPTION OF THE TRUST DOCUMENTS
The following summary describes some terms of the trust documents which
are comprised of the purchase agreement and the pooling and servicing agreement.
We have filed forms of the trust documents as exhibits to the registration
statement. We will file a copy of the final trust documents with the Securities
and Exchange Commission following the issuance of the securities. Because this
is a summary of the trust documents, it does not contain all the information
that may be important to you. You should read the trust documents in their
entirety if you require complete information regarding their contents.
Sale and Assignment of Receivables
On or before the closing date, various structured commercial paper
lending vehicles and an affiliated entity of World Omni Financial Corp. will
transfer their interests in the receivables to World Omni Financial Corp. The
seller will then 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 certificates, the seller will sell and
assign to the trust, without recourse,
S-19
except as provided in the pooling and servicing agreement, its entire interest
in the receivables, together with its security interests in the financed
vehicles. The trustee will, concurrently with such sale and assignment, execute,
authenticate, and deliver the certificates to the seller in exchange for the
receivables. The seller will sell the certificates 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 trustee will appoint the servicer as custodian of the
receivables and all documents related thereto. The receivables will not be
physically segregated from other automobile and light duty truck retail
installment sale contracts of the servicer, or those which the servicer services
for others, to reflect the transfer to the trust.
In the purchase agreement, World Omni Financial Corp. will make
representations and warranties to the seller concerning the receivables, as
described under "Receivables Pool" in this prospectus supplement. As of the last
day of the second (or, if World Omni Financial Corp. elects, the first) month
following the discovery by or notice to the seller and World Omni Financial
Corp. of a breach of any representation or warranty that materially and
adversely affects the interest of the trust or the trustee, unless the breach is
cured, World Omni Financial Corp. will purchase such receivable from the trust
for the Purchase Amount. The repurchase obligation will constitute the sole
remedy available to the certificateholders or the trustee for any such uncured
breach.
Trust Accounts
The trustee will establish and maintain one or more accounts
(collectively, the "Collection Account") in the name of the trustee on behalf of
the certificateholders. Within two Business Days of receipt of funds, the
servicer will deposit collections into the Collection Account. The trustee will
also establish and maintain one or more accounts, in the name of the trustee on
behalf of the certificateholders, from which it will make all distributions with
respect to the certificates (collectively, the "Distribution Account").
Advances
[The servicer will make advances of interest] in respect of the
receivables.
Servicing Compensation and Payment of Expenses
The servicing fee for the servicer will be [__]% per annum of the Pool
Balance as of the first day of the related Collection Period (or, in the case of
the first distribution date, as of the initial cutoff date). The "Pool Balance"
will represent the aggregate principal balance of the receivables at the end of
a Collection Period, after giving effect to all payments received from obligors,
Purchase Amounts for that Collection Period, and all losses realized on
receivables liquidated during such Collection Period.
The servicing fee in respect of a Collection Period (together with any
portion of the servicing fee that remains unpaid from prior distribution dates)
will be paid on the distribution date following such Collection Period out of
collections for such Collection Period. The servicer may elect to waive the
servicing fee with respect to a related Collection Period as
S-20
discussed in "Description of the Trust Documents--Servicing Compensation" in the
prospectus.
Distributions
Deposits to Distribution Account
On or before each distribution date, the servicer will cause the Total
Distribution Amount (net of the servicing fee for such distribution date and any
previously unpaid servicing fees) to be deposited into the Distribution Account.
The "Total Distribution Amount"for a distribution date shall be the sum of the
Interest Distribution Amount and the Principal Distribution Amount (other than
the portion thereof attributable to Realized Losses). "Realized Losses" means
the excess of the principal balance of any Liquidated Receivable over
Liquidation Proceeds to the extent allocable to principal received in the
Collection Period in which the receivable became a Liquidated Receivable.
Allocations and Distributions
On each distribution date, the servicer will instruct the trustee to
make the following distributions, to the extent of the amount then on deposit in
the Distribution Account, in the following order of priority:
(1) allocate to the class A certificateholders for distribution as
described below, from the Total Distribution Amount remaining after
the deduction of the unpaid servicing fees, the Class A Interest
Distributable Amount;
(2) allocate to the class A certificateholders for distribution as
described below, from the Total Distribution Amount remaining after
the application of clause (1) and the deduction of the unpaid
servicing fees, the Class A Principal Distributable Amount;
(3) allocate to the class B certificateholders for distribution as
described below, from the Total Distribution Amount remaining after
the application of clauses (1) and (2) and the deduction of the unpaid
servicing fees, the Class B Interest Distributable Amount; and
(4) allocate to the class B certificateholders for distribution as
described below, from the Total Distribution Amount remaining after
the application of clauses (1), (2) and (3) and the deduction of the
unpaid servicing fees, the Class B Principal Distributable Amount;
(5) allocate to the reserve account, from the Total Distribution Amount
remaining after the application of clause (2) and the deduction of the
unpaid servicing fees, the excess, if any, of the specified reserve
amount over the amount then allocated to the reserve account; and
(6) [distribute to the seller the remaining balance, if any.]
S-21
For purposes of this prospectus supplement, the following terms shall have the
following meanings:
The "Interest Distribution Amount" for a distribution date generally
will be the sum of the following amounts with respect to the preceding
Collection Period: (i) that portion of all collections on the receivables
allocable to interest; (ii) all proceeds of the liquidated receivables, net of
expenses incurred by the servicer in connection with such liquidation and any
amounts required by law to be remitted to the obligor on the liquidated
receivables ("Liquidation Proceeds"), to the extent attributable to interest due
thereon in accordance with the servicer's customary servicing procedures, and
all recoveries in respect of liquidated receivables which were written off in
prior Collection Periods; (iii) the Purchase Amount of each receivable that was
repurchased by the seller or purchased by the servicer under an obligation which
arose during the related Collection Period, to the extent attributable to
accrued interest thereon; and (iv) investment earnings on funds on deposit in
the Collection Account.
The "Principal Distribution Amount" for a distribution date generally
will be the sum of the following amounts with respect to the related Collection
Period: (i) that portion of all collections on the receivables allocable to
principal; (ii) all Liquidation Proceeds attributable to the principal amount of
receivables which became liquidated receivables during such Collection Period in
accordance with the servicer's customary servicing procedures, plus the amount
of Realized Losses with respect to such liquidated receivables; (iii) to the
extent attributable to principal, the Purchase Amount received with respect to
each receivable repurchased by the seller or purchased by the servicer under an
obligation which arose during the related Collection Period; and (iv) partial
prepayments relating to refunds of extended warranty protection plan costs or of
physical damage, credit life or disability insurance policy premiums, but only
if such costs or premiums were financed by the respective obligor as of the date
of the original contract.
The Interest Distribution Amount and the Principal Distribution Amount
on any distribution date shall exclude all payments and proceeds (including
Liquidation Proceeds) of any receivables the Purchase Amount of which has been
included in the Total Distribution Amount in a prior Collection Period.
The Interest Distribution Amount and Principal Distribution Amount with
respect to any distribution date will not be determined on the basis of the
reconciliation methodology described under "Description of the Transfer and
Servicing Agreements--Distributions--Allocation of Collections on Receivables;
Reconciliation."
Calculation of Distributable Amounts
The "Class A Distributable Amount" with respect to a distribution date
shall be an amount equal to the sum of (i) the "Class A Principal Distributable
Amount," consisting of the Class A Percentage of the Principal Distribution
Amount, plus (ii) the "Class A Interest Distributable Amount" consisting of
thirty (30) days' interest at the class A pass-through rate on the Class A
Certificate Balance as of the close of business on the last day of the preceding
Collection Period. In addition, on the final scheduled distribution date, the
Class A Principal
S-22
Distributable Amount will include the lesser of (A) the Class
A Percentage of any payments of principal due and remaining unpaid on each
receivable in the trust as of the last day of the preceding Collection Period
and (B) the portion of such amount necessary (after giving effect to the other
amounts described above to be distributed to the class A certificateholders on
such distribution date and allocable to principal) to reduce the Class A
Certificate Balance to zero.
The "Class A Certificate Balance" shall equal, initially,
$_____________ and, thereafter, shall equal the initial Class A Certificate
Balance reduced by all amounts previously distributed to class A
certificateholders and allocable to principal.
The "Class B Distributable Amount" with respect to a distribution date
shall be an amount equal to the sum of (i) the "Class B Principal Distributable
Amount," consisting of the Class B Percentage of the Principal Distribution
Amount plus (ii) the "Class B Interest Distributable Amount," consisting of
thirty (30) days' interest at the class B pass-through rate on the Class B
Certificate Balance as of the close of business on the last day of the preceding
Collection Period. In addition, on the final scheduled distribution date, the
principal required to be distributed to the class B certificateholders will
include the lesser of (i) the Class B Percentage of any payments of principal
due and remaining unpaid with respect to the receivables in the trust as of the
last day of the preceding Collection Period and (ii) the portion of the amount
in clause (i) above that is necessary (after giving effect to all other amounts
distributed to class A and class B certificateholders on such distribution date
and allocable to principal) to reduce the Class B Certificate Balance to zero.
The "Class B Certificate Balance" shall equal, initially,
$_______________ and, thereafter, shall equal the initial Class B Certificate
Balance, reduced by all amounts previously distributed to class B
certificateholders (or deposited in the reserve account, but not including the
reserve account initial deposit) and allocable to principal and by Realized
Losses.
The "Certificateholders' Distributable Amount" means, with respect to
any distribution date, the sum of the Class A Distributable Amount and the Class
B Distributable Amount.
Calculation of Amounts to Be Distributed
Prior to each distribution date, the servicer will calculate the Total
Distribution Amount, the Class A Distributable Amount and the Class B
Distributable Amount.
The holders of the class A certificates will receive on any
distribution date, to the extent of available funds, the Class A Distributable
Amount and any outstanding Class A Interest Carryover Shortfall and Class A
Principal Carryover Shortfall (each as defined below) as of the close of the
preceding distribution date. On each distribution date on which the sum of the
Class A Interest Distributable Amount and any outstanding Class A Interest
Carryover Shortfall from the preceding distribution date (plus interest on such
Class A Interest Carryover Shortfall at the class A pass-through rate from such
preceding distribution date to the current distribution date, to the extent
permitted by law) exceeds the Class A Percentage of the Interest Distribution
Amount (after payment of the servicing fee) on such distribution date, the class
A certificateholders shall be entitled generally to receive such amounts, first,
from the Class A Percentage of the Interest Distribution Amount; second, if such
amounts are
S-23
insufficient, from the amounts available in the reserve account; and
third, if such amounts are insufficient, from the Class B Percentage of the
Principal Distribution Amount (other than the portion thereof attributable to
Realized Losses).
The "Class A Interest Carryover Shortfall" as of the close of any
distribution date means the excess of the Class A Interest Distributable Amount
for such distribution date, plus any outstanding Class A Interest Carryover
Shortfall from the preceding distribution date, plus interest on such
outstanding Class A Interest Carryover Shortfall, to the extent permitted by
law, at the class A pass-through rate from such preceding distribution date
through the current distribution date, over the amount of interest that the
holders of the class A certificates actually received on such current
distribution date.
On each distribution date on which the sum of the Class A Principal
Distributable Amount and any outstanding Class A Principal Carryover Shortfall
from the preceding distribution date exceeds the Class A Percentage of the
Principal Distribution Amount on such distribution date, the class A
certificateholders shall be entitled to receive such amounts first, from the
Class B Percentage of the Principal Distribution Amount (other than the portion
thereof attributable to Realized Losses); second, if such amounts are
insufficient, from amounts available in the reserve account; and third, if such
amounts are insufficient, from the Class B Percentage of the Interest
Distribution Amount. The "Class A Principal Carryover Shortfall" as of the close
of any distribution date means the excess of the Class A Principal Distributable
Amount plus any outstanding Class A Principal Carryover Shortfall from the
preceding distribution date over the amount of principal that the holders of the
class A certificates actually received on such current distribution date.
The holders of the class B certificates will receive on any
distribution date, to the extent of available funds, the Class B Distributable
Amount and any outstanding Class B Interest Carryover Shortfall and Class B
Principal Carryover Shortfall (each as defined below) as of the close of the
preceding distribution date. On each distribution date on which the sum of the
Class B Interest Distributable Amount and any outstanding Class B Interest
Carryover Shortfall from the preceding distribution date (plus interest on such
Class B Interest Carryover Shortfall at the class B pass-through rate from such
preceding distribution date to the current distribution date, to the extent
permitted by law) exceeds the Class B Percentage of the Interest Distribution
Amount (after distribution of the servicing fee) on such distribution date less
any portion thereof required to be distributed to the class A certificateholders
pursuant to their prior rights as described above, the class B
certificateholders shall be entitled generally to receive such amounts, first,
from the Class A Percentage of the Interest Distribution Amount that is not
otherwise required to be distributed to the class A certificateholders as
described above and, second, from the amount, if any, available in the reserve
account (after giving effect to any withdrawals therefrom for distribution to
the class A certificateholders on such distribution date). The "Class B Interest
Carryover Shortfall" as of the close of any distribution date means the excess
of the Class B Interest Distributable Amount for such distribution date, plus
any outstanding Class B Interest Carryover Shortfall from the preceding
distribution date, plus interest on such outstanding Class B Interest Carryover
Shortfall, to the extent permitted by law, at the class B pass-through rate from
such preceding distribution date through the current distribution date, over the
amount of interest that the holders of the class B certificates actually
received on such current distribution date.
S-24
On each distribution date on which the sum of the Class B Principal
Distributable Amount and any outstanding Class B Principal Carryover Shortfall
from the preceding distribution date exceeds the Class B Percentage of the
Principal Distribution Amount on such distribution date less any portion thereof
required to be distributed to the class A certificateholders pursuant to their
prior rights as described above, the class B certificateholders shall be
entitled to receive such amounts, first, from the Interest Distribution Amount
that is not otherwise required to be distributed to the Class A or class B
certificateholders as described above and, second, from amounts available in the
reserve account (after giving effect to any withdrawals therefrom on such
Distribution Date for distribution to the class A certificateholders and for
distribution of interest to the class B certificateholders). The "Class B
Principal Carryover Shortfall" as of the close of any distribution date means
the excess of the Class B Principal Distributable Amount plus any outstanding
Class B Principal Carryover Shortfall from the preceding distribution date over
the amount of principal that the holders of class B certificates actually
received on such current distribution date.
Subordination of the class B certificates; [Reserve Acount]
The rights of the class B certificateholders to receive distributions
with respect to the receivables generally will be subordinated to the rights of
the class A certificateholders in the event of defaults and delinquencies on the
receivables as described herein and provided in the pooling and servicing
agreement. The protection afforded to the class A certificateholders through
subordination will be effected both by the preferential right of the class A
certificateholders to receive current distributions with respect to the
receivables and by the establishment of the reserve account. The seller will
initially deposit into the reserve account a specified reserve amount equal to
an initial deposit on the closing date in cash or eligible investments in the
amount of $[_________], which is [__]% of the initial principal balance of the
securities. The trustee will deposit investment earnings on funds in the reserve
account, net of losses and investment expenses, into the reserve account until
the reserve account reaches the specified balance required.
The trustee will hold amounts allocated from time to time to the
reserve account for the benefit of certificateholders. On each distribution date
the trustee will pay to the certificateholders from the reserve account the
amount by which the Total Distribution Amount (after the payment of the
servicing fee) with respect to any Collection Period is less than the
Certificateholders' Distributable Amount. On each distribution date, the trustee
will deposit into the reserve account up to the specified reserve amount to the
extent of the portion, if any, of the Total Distribution Amount remaining after
payment of the servicing fee and the payment of the Certificateholders'
Distributable Amount.
If the amount allocated to the reserve account on any distribution date
(after giving effect to all deposits therein or other withdrawals therefrom on
such distribution date) is greater than the specified reserve amount for the
related distribution date, the trustee will generally distribute the excess
amount to the seller. [To the extent the seller elects, the seller may instruct
the trustee to deposit such excess amounts in the Collection Account for
application as described in [__________]. The seller has no obligation to make
this election.] Upon this distribution, the certificateholders will not have any
rights in, or claims to, such
S-25
amounts. Subsequent to any reduction or withdrawal by any rating agency of its
rating of any class of certificates, unless such rating has been restored, the
trustee will pay any such excess to certificateholders on each distribution date
as an accelerated payment of principal.
After the payment in full, or the provision for such payment, of (i)
all accrued and unpaid interest on the certificates and (ii) the outstanding
principal balance of the securities, the trustee will distribute any remaining
funds in the reserve account, subject to some limitations, to the seller.
The subordination of the class B certificates and the reserve account
are intended to enhance the likelihood of receipt by class A certificateholders
of the full amount of principal and interest due them and to decrease the
likelihood that the class A certificateholders 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, certificateholders could incur losses or a temporary shortfall in the
amounts distributed to the certificateholders could result, which could, in
turn, increase the average lives of the certificates.]
If on any distribution date the holders of the class A certificates do
not receive the sum of the Class A Distributable Amount, the Class A Interest
Carryover Shortfall and the Class A Principal Carryover Shortfall for such
distribution date (after giving effect to any amounts withdrawn from the reserve
account and the Class B Percentage of the Total Distribution Amount and applied
to such deficiency, as described above), the holders of the class B certificates
generally will not receive any portion of the Total Distribution Amount. While
the class B certificateholders are entitled to receive amounts from the reserve
account as described above, such entitlement is subordinated to the rights of
the class A certificateholders to receive amounts from the reserve account as
described above. If the reserve account becomes depleted, the class B
certificateholders may experience shortfalls in the distributions due them and
incur a loss on their investment.
Statements to Certificateholders
On each distribution date, the trustee will include with each
distribution to each certificateholder of record as of the close of business on
the applicable record date a statement (prepared by the servicer) as described
in "Description of the Securities--Statements to Certificateholders" in the
prospectus.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Cadwalader, Wickersham & Taft, the trust will be
treated as a grantor trust for federal income tax purposes, will not be subject
to federal income tax and will not be characterized as an association (or a
publicly traded partnership) taxable as a corporation. See "Federal Income Tax
Consequences--Trusts Treated as Grantor Trusts" in the Prospectus.
S-26
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
certificates, then a financial organization investing in the certificates would
be subject to Florida corporate income tax on a portion of its income at a
maximum rate of 5.5%, and would be required to file an income tax return in
Florida, even if it has no other Florida contacts. The seller believes the Loan
Rule does not apply to an investment in the certificates or the receipt of
interest on the certificates 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 certificates and your ability to offset
any such Florida tax against any other state tax liabilities.
The State of Florida imposes a value-based intangibles tax on January 1
of each year at the rate of $1.50 per $1,000 of value on certain intangibles
owned, managed or controlled by Florida domiciliaries or intangibles having a
business situs in Florida. On the last Business Day of each year, in an effort
to minimize the impact of this intangibles tax, the servicer intends to transfer
the custody of the receivables, together with all of its duties, rights and
obligations under the pooling and servicing agreement to World Omni Acceptance
III Corp., ("WOAC III"), a wholly-owned subsidiary of World Omni Financial
Corp., located and managed outside the State of Florida (such transfer, the
"Annual Servicing Transfer"). The trust will continue to own the receivables.
Only the servicer's servicing rights under the pooling and servicing agreement,
together with its custody of the receivables, will be transferred to WOAC III,
to be held in escrow and returned to the servicer on the first Business Day of
the following year. This annual transfer is consistent with the Technical
Assistance Advisement 95(C)2-021 issued by the Florida Department of Revenue,
which holds that a transfer of receivables to a wholly-owned subsidiary located
outside the State of Florida and having no contacts with the State of Florida
was sufficient to avoid the imposition of the intangibles tax on the receivables
subject to such tax. As additional protection, the trust will be indemnified by
World Omni Financial Corp. with respect to any liability for this intangibles
tax. World Omni Financial Corp. has agreed in the pooling and servicing
agreement not to conduct any servicing activities during the period of the
Annual Servicing 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 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.
S-27
ERISA CONSIDERATIONS
The class A certificates
Subject to the considerations set forth under "ERISA Considerations" in
the Prospectus, the class A certificates may be purchased by or with assets of
an employee benefit plan or an individual retirement account (a "Plan") subject
to ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"). A fiduciary of a Plan must determine that the purchase of a class A
certificate is consistent with its fiduciary duties under ERISA and does not
result in a nonexempt prohibited transaction as defined in Section 406 of ERISA
or Section 4975 of the Code. For additional information regarding treatment of
the class A certificates under ERISA, see "ERISA Considerations" in the
Prospectus.
The class B certificates
The class B certificates may not be acquired by (a) an employee benefit
plan (as defined in Section 3(3) of ERISA) that is subject to the provisions of
Title I of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or (c)
any entity whose underlying assets include plan assets by reason of a plan's
investment in the entity. By its acceptance of a class B certificate, each class
B certificateholder will be deemed to have represented and warranted that it is
not subject to the foregoing limitation. For additional information regarding
treatment of the class B certificates under ERISA, see "ERISA Considerations" in
the Prospectus.
UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement dated [ , 2000] among World Omni Financial Corp., the
seller and the underwriters, the seller has agreed to sell to the underwriters
named below and each of the underwriters has severally agreed to purchase, the
principal amount of the offered certificates described opposite its name below:
S-28
CLASS A CERTIFICATES
PRINCIPAL
AMOUNT
[ ].................................................................... $[ ]
[ ].................................................................... [ ]
[ ].................................................................... [ ]
[ ].................................................................... [ ]
----------------
Total........................................................ $[ ]
================
CLASS B CERTIFICATES
PRINCIPAL
AMOUNT
[ ].................................................................... $[ ]
[ ].................................................................... [ ]
[ ].................................................................... [ ]
[ ].................................................................... [ ]
----------------
Total........................................................ $[ ]
================
The underwriters have advised the seller that they propose initially to
offer the offered certificates to the public at the prices described herein, and
to some dealers at such prices less the initial concession not in excess of
[____% per class A certificate and ____% per class B certificate.] The
underwriters may allow and the related dealers may reallow a concession not in
excess of [____% per class A certificate and ____% per class B certificate] to
some other dealers. After the initial public offering of the offered
certificates, the public offering price and such concessions may be changed.
The underwriting agreement provides that the obligations of the
underwriters are subject to some conditions precedent and that the underwriters
will purchase all the certificates offered hereby if any of such certificates
are purchased.
[Each underwriter has represented and agreed that (a) it has not
offered or sold, and will not offer to sell, any offered certificates to persons
in the United Kingdom except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as principal agent)
for the purposes of their businesses or otherwise in circumstances that do not
constitute an offer to the public in the United Kingdom for the purposes of the
Public Offers of Securities Regulations 1995, (b) it has complied and will
comply with all applicable provisions of the Financial Services Act of 1986 of
Great Britain with respect to anything done by it in relation to the offered
certificates in, from or otherwise involving the United Kingdom and (c) it has
only issued or passed on and will only issue or pass on in the United Kingdom
any document in connection with the issue of the offered certificates to a
person who is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to whom
the document may otherwise lawfully be issued or passed on.]
S-29
The certificates 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 certificates 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 certificates. 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 certificates.
[In connection with the offering of the certificates, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
market price of the certificates. 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 certificates for the purpose of
stabilizing its market price. In addition, the underwriters may impose "penalty
bids" whereby they may reclaim from a dealer participating in the offering the
selling concession with respect to the certificates 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 certificates at a level above that
which might otherwise prevail in the open market. None of the transactions
described in this paragraph is required, and, if they are taken, may be
discontinued at any time without notice].
World Omni Financial Corp. and the seller have agreed to indemnify the
underwriters against some liabilities, including civil liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in respect of some liabilities, including civil liabilities under the
Securities Act.
[In the ordinary course of their respective businesses, the
underwriters and their affiliates have engaged and may engage in investment
banking and/or commercial banking transactions with World Omni Financial Corp.
and the seller and their affiliates]. We refer you to "Use of Proceeds" herein
and "Plan of Distribution" in the accompanying prospectus.
This prospectus supplement and the accompanying prospectus may be used
by the underwriters, affiliates of which have an ownership interest in, or
participate in banking transactions with, World Omni Financial Corp. and the
seller, in connection with offers and sales related to market making
transactions in the certificates. The underwriters may act as principals or
agents in such transactions. Such sales will be made at prices related to
prevailing market prices at the time of the sale or otherwise.
LEGAL OPINIONS
Some legal matters relating to the securities will be passed upon for
the seller and the servicer by Cadwalader, Wickersham & Taft, New York, New
York. Some legal matters relating to Florida state tax laws will be passed upon
for the seller and the servicer by____________________________. Certain legal
matters relating to the certificates will be passed upon for the underwriters by
[ ].
S-30
INDEX OF TERMS
Annual Servicing Transfer..........................27
APR................................................13
Business Day.......................................18
Certificateholders' Distributable Amount...........23
Class A Certificate Balance........................23
Class A Distributable Amount.......................22
Class A Interest Carryover Shortfall...............24
Class A Interest Distributable Amount..............22
Class A Percentage.................................18
Class A Principal Carryover Shortfall..............24
Class A Principal Distributable Amount.............22
Class B Certificate Balance........................23
Class B Distributable Amount.......................23
Class B Interest Carryover Shortfall...............24
Class B Interest Distributable Amount..............23
Class B Percentage.................................18
Class B Principal Carryover Shortfall..............25
Class B Principal Distributable Amount.............23
Clearstream........................................19
Code...............................................28
Collection Account.................................20
Collection Period..................................18
Distribution Account...............................20
DTC................................................18
Euroclear..........................................19
Interest Distribution Amount.......................22
Liquidation Proceeds...............................22
Loan Rule..........................................27
Participants.......................................19
Plan...............................................28
Pool Balance.......................................20
Principal Distribution Amount......................22
Realized Losses....................................21
Total Distribution Amount..........................21
WOAC III...........................................27
S-31
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 (Approximate)
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 World Omni Auto Receivables LLC
prospectus and prospectus supplement is current only as of its dates. Until [ ], Seller
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 Auto Receivables Backed
with respect to an unsold allotment or subscription.
Notes Series 2000-
-----------------
PROSPECTUS SUPPLEMENT
-----------------
[Underwriter]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Registration Fee........................................................ $ 435,600
Printing and Engraving.................................................. 125,000
Legal Fees and Expenses................................................. 400,000
Accountants' Fees and Expenses.......................................... 100,000
Rating Agency Fees...................................................... 550,000
Trustee's Fees and Expenses............................................. 30,000
Miscellaneous Fees...................................................... 20,000
Total................................................................. $1,660,600
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 18-108 of the Delaware Limited Liability Company Act (the "Act")
provides that, subject to the standards and restrictions, if any, as are
described in its limited liability company agreement, a limited liability
company may, and shall have the power to, indemnify and hold harmless any member
or manager or other person from and against any and all claims and demands
whatsoever.
The Registrant was formed under the laws of Delaware. The limited liability
company agreement of the Registrant provides, in effect, that, subject to
certain limited exceptions, it will indemnify its members, directors or officers
and may indemnify any employee or agent of the Registrant who was or is a party
or is threatened to be made a party to a threatened, pending, or completed
action, suit, or proceeding (whether civil, criminal, administrative, or
investigative and whether formal or informal) other than an action by or in the
right of the Registrant, where such person is a party because such person is or
was a member, director, officer, employee, or agent of the Registrant. The
Registrant's limited liability company agreement also provides that it will
generally indemnify its members and directors against expenses, including,
attorney fees, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by a director in connection with an action,
suit or proceeding relating to acts or omissions of that director regarding
specified items relating to bankruptcy and insolvency.
In general, the Registrant will indemnify its members, directors or
officers and may indemnify its employees or agents against expenses, including
attorneys fees, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with an action,
suit or proceeding. To the fullest extent permitted by law, the Registrant will
also indemnify such member, director or officer and may indemnify such employee
or agent if the person acted in good faith and did not engage in willful
misconduct or gross negligence. With respect to a criminal action or proceeding,
the person must have had no reasonable cause to believe his misconduct was
unlawful. Unless ordered by a court, certain indemnifications shall be made by
the Registrant only as it authorizes in the specific case after (1) determining
that the indemnification is proper under the circumstances because the person to
be indemnified has met the applicable standard of conduct and (2) evaluating the
reasonableness of the expenses and of the amounts paid in settlement. This
determination and evaluation shall be made by a majority vote of the
disinterested members or, if there is only one member, by that member. However,
no indemnification shall be provided to any member, director, officer, employee,
or agent of the Registrant for or in connection with (1) the receipt of a
financial benefit to which the person is not entitled; (2) voting for or
assenting to a distribution to members in violation of the limited liability
company agreement or the Delaware Limited Liability Company Act; (3) a knowing
violation of law; or (4) acts or omissions of such person constituting willful
misconduct or gross negligence. To the extent that a member, director, officer,
employee, or agent of the Registrant has been successful on the merits or
otherwise in defense of an action, suit, or proceeding or in defense of any
claim, issue, or other
matter in such action, suit or proceeding, such person shall be indemnified
against actual and reasonable expenses, including reasonable attorney fees,
incurred by such person in connection with the action, suit, proceeding and any
action, suit or proceeding brought to enforce such mandatory indemnification.
In addition, no Member, director or officer of the Registrant shall be
liable to the Registrant or any other person who has an interest in the
Registrant for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such member, director or officer in good faith
on behalf of the Registrant and in a manner reasonably believed to be within the
scope of the authority conferred on such member, director or officer by the
limited liability company agreement of the Registrant, except that a member,
director or officer shall be liable for any such loss, damage or claim incurred
by reason of such member's, director's or officer's willful misconduct or gross
negligence.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
The Registrant also maintains insurance providing for payment, subject to
certain exceptions, on behalf of officers, directors and managers of the
Registrant and its subsidiaries of money damages incurred as a result of legal
actions instituted against them in their capacities as such officers, directors
or managers (whether or not such person could be indemnified against such
expense, liability or loss under the Delaware Limited Liability Company Act).
Each underwriting agreement will provide that the underwriter will
indemnify the Registrant against specified liabilities, including liabilities
under the Securities Act of 1933.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS.
(a) Exhibits
1.1 -- Form of Underwriting Agreement
3.1 -- Limited Liability Company Agreement of Registrant*
4.1 -- Form of Trust Agreement and exhibits thereto
4.2 -- Form of Indenture and exhibits thereto
4.3 -- Form of Pooling and Servicing Agreement
5.1 -- Opinion of Cadwalader, Wickersham & Taft with respect to legality
8.1 -- Opinion of Cadwalader, Wickersham & Taft with respect to tax matters (incorporated in
Exhibit 5.1)
10.1 -- Form of Sale and Servicing Agreement
10.2 -- Form of Purchase Agreement
23.1 -- Consent of Cadwalader, Wickersham & Taft (incorporated in Exhibit 5.1)
24.1 -- Power of Attorney (included on page II-5)
- ------------------
* Previously filed.
(b) Financial Statements
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
II-2
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes:
(a) To file during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement.
(b) That, for the purpose of determining any liability under the Securities
Act of 1933, as amended (the "Securities Act"), each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(d) That for purposes of determining any liability under the Securities
Act, each filing of the Registrant's annual reports pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(e) To provide to the Underwriters at the closing specified in the
Underwriting Agreements certificates in such denominations and registered in
such names as required by the Underwriters to provide prompt delivery to each
purchaser.
(f) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, that the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission (the "Commission") such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
securities Act and will be governed by the final adjudication of such issue.
(g) That for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(h) That for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(i) To file an application for the purpose of determining the eligibility
of the trustee to act under subsection (a) of Section 310 of the trust Indenture
Act in accordance with the rules and regulations prescribed by the Commission
under Section 305(b)(2) of the trust Indenture Act.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and reasonably believes that the security
rating requirement contained in Transaction Requirement B.5. of Form S-3 will be
met by the time of the sale of the securities registered hereunder and has duly
caused this Pre-Effective Amendment No. 1 to Form S-3 registration statement to
be signed on its behalf by the undersigned, thereunto duly authorized in the
City of Deerfield Beach, State of Florida, on May 19, 2000.
WORLD OMNI AUTO RECEIVABLES LLC
By: /S/ JAMES R. FOSTER
---------------------------------
Name: James R. Foster
Title: Treasurer
II-4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James R. Foster his true and lawful
attorney-in-fact and agent, with full power of substitution and re-
substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Pre-Effective Amendment No. 1 to Form S-3 registration statement, and to
file the same, with all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
said attorney-in-fact and agent or his substitutes or substitute may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to Form S-3 registration statement has been signed
by the following persons in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
- ------------------------------------------ --------------------------------------------------------- ------------
/S/ JAMES R. FOSTER Director and Treasurer May 19, 2000
James R. Foster (Chief Financial and Accounting Officer)
/S/ LOUIS R. FEAGLES Director and President May 19, 2000
Louis R. Feagles (Chief Executive Officer)
/S/ COLIN W. BROWN Director May 19, 2000
Colin W. Brown
/S/ JEFFREY B. SHAPIRO Director May 19, 2000
Jeffrey B. Shapiro
/S/ CHRISTOPHER C. WHEELER Director May 19, 2000
Christopher C. Wheeler
II-5
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -------------------------------------------------------------------------------------------------------
1.1 -- Form of Underwriting Agreement
3.1 -- Limited Liability Company Agreement of Registrant*
4.1 -- Form of Trust Agreement and exhibits thereto
4.2 -- Form of Indenture and exhibits thereto
4.3 -- Form of Pooling and Servicing Agreement
5.1 -- Opinion of Cadwalader, Wickersham & Taft with respect to legality
8.1 -- Opinion of Cadwalader, Wickersham & Taft with respect to tax matters (incorporated in Exhibit 5.1)
10.1 -- Form of Sale and Servicing Agreement
10.2 -- Form of Purchase Agreement
23.1 -- Consent of Cadwalader, Wickersham & Taft (incorporated in Exhibit 5.1)
24.1 -- Power of Attorney (included on page II-5)
- ------------------
* Previously filed.