As filed with the Securities and Exchange Commission on August 5, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
WODFI LLC
(Originator of the Trust described herein)
(Exact name of registrant as specified in its charter)
----------------------
Delaware 65-0934017
(Registrant's State or other jurisdiction of (Registrant's I.R.S. Employer
incorporation or organization) Identification No.)
WODFI LLC A. Tucker Allen
120 N.W. 12th Avenue 120 N.W. 12th Avenue
Deerfield Beach, FL 33442 Deerfield Beach, FL 33442
(954) 429-2200 (954) 429-2200
(Address, including zip code, (Name, address, including
and telephone number, of Registrant's
zip code, and telephone number, including including area code,
principal executive offices) area code, of agent for service)
----------------------
Copies to:
Kenneth P. Morrison
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
(312) 861-2000
----------------------
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement as determined by
the Registrant in light of market conditions. If the only securities being
registered on this form are being offered pursuant to dividend or interest
reinvestment plans, please check the following box. | |
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under Securities Act of 1933,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. | |
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. | |
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. | |
CALCULATION OF REGISTRATION FEE
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered Aggregate Price Per Unit (1)Aggregate Offering Price (1)Registration Fee
============================ ================ ========================== ========================== =================
Asset Backed Notes $1,000,000 100% $1,000,000 $278
============================ ================ ========================== ========================== =================
(1) Estimated solely for purposes of calculating the registration fee.
----------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 5, 1999
PROSPECTUS
World Omni Master Owner Trust
Issuer
WODFI LLC
Transferor
World Omni Financial Corp.
Servicer
Asset Backed Notes
BEFORE YOU THE TRUST--
PURCHASE ANY OF
THE NOTES, YOU o may periodically issue asset backed notes in one or more series;
SHOULD CAREFULLY
CONSIDER THE RISK o will own--
FACTORS o receivables arising from a selected portfolio of automobile dealer
BEGINNING revolving floor plan financing agreements;
ON PAGE 9 IN THIS o payments due on those receivables; and
PROSPECTUS. o other property described in this prospectus and in the prospectus
supplement; and
THE SOLE SOURCE
OF PAYMENTS ON o will not own the dealer accounts from which the receivables arise.
THE NOTES IS THE
ASSETS OF THE THE NOTES--
TRUST. THE NOTES
ARE NOT INTERESTS o will represent indebtedness secured by the assets of the trust;
IN OR OBLIGATIONS
OF WORLD OMNI o will be paid only from the assets of the trust;
FINANCIAL CORP.,
WODFI LLC OR o will represent the right to payments in the amounts and at the times
ANY OTHER ENTITY described in the prospectus supplement for that series;
OR PERSON.
o offered by this prospectus will be rated investment grade by at least one
THIS PROSPECTUS nationally recognized rating agency;
MAY BE USED TO
OFFER AND SELL o may benefit from one or more forms of credit enhancement; and
ANY SERIES OF
NOTES ONLY IF o may be issued as part of a designated series which may include one or
ACCOMPANIED BY more classes.
THE PROSPECTUS
SUPPLEMENT FOR
THAT SERIES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE NOTES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
, 1999
[Intentionally Left Blank]
3
TABLE OF CONTENTS
Page
WHERE TO FIND INFORMATION IN THIS
PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT...............................................................................5
SUMMARY...........................................................................................................6
The Parties.................................................................................................6
Securities to be Issued by the Trust........................................................................6
Payments on the Notes.......................................................................................6
Assets of the Trust.........................................................................................7
Servicing Fees..............................................................................................8
Tax Status..................................................................................................8
ERISA Considerations........................................................................................8
Ratings ...................................................................................................8
RISK FACTORS......................................................................................................9
THE SERVICER.....................................................................................................14
THE TRANSFEROR...................................................................................................14
THE TRUST........................................................................................................14
The Owner Trustee..........................................................................................16
USE OF PROCEEDS..................................................................................................17
THE DEALER FLOOR PLAN FINANCING BUSINESS.........................................................................17
Creation of Receivables....................................................................................17
Credit Approval and Credit Guidelines......................................................................18
Payment Terms..............................................................................................21
Billing and Collection Procedures..........................................................................21
Dealer Monitoring..........................................................................................21
Intercreditor Agreement for Security Interests in
Vehicles and Non-Vehicle Collateral Security............................................................23
Relationship with Affiliates...............................................................................23
THE ACCOUNTS.....................................................................................................24
THE NOTES........................................................................................................24
General ..................................................................................................24
Interest ..................................................................................................25
Principal..................................................................................................26
The Indenture and the Series Supplements...................................................................28
Excluded Series............................................................................................34
Collection Account.........................................................................................34
Excess Funding Account.....................................................................................38
Allocation Percentages.....................................................................................39
Allocation of Collections; Deposits in Collection
Account.................................................................................................41
Limited Subordination of Certificateholder's Interest;
Enhancements............................................................................................42
Distributions..............................................................................................43
New Issuances..............................................................................................43
The Indenture Trustee......................................................................................45
Reports to Noteholders.....................................................................................45
Book-Entry Registration....................................................................................46
Definitive Notes...........................................................................................49
THE TRANSFER AND SERVICING AGREEMENTS............................................................................50
Receivables Purchase Agreement.............................................................................50
Conveyance of Receivables and Collateral Security..........................................................52
Representations and Warranties by the Transferor...........................................................53
Eligible Accounts and Eligible Receivables.................................................................55
Ineligible Receivables and Excess Receivables..............................................................56
Addition of Accounts.......................................................................................57
Removal of Accounts........................................................................................59
Distributions..............................................................................................63
Defaulted Receivables and Recoveries.......................................................................63
Optional Repurchase........................................................................................64
Investment Events and Early Amortization Events............................................................65
Termination; Fully Funded Date.............................................................................66
Indemnification............................................................................................67
Collection and Other Servicing Procedures..................................................................68
Servicer Covenants.........................................................................................68
Servicing Compensation and Payment of Expenses.............................................................69
Certain Matters Regarding the Servicer.....................................................................70
Servicing Default..........................................................................................70
Rights Upon Servicing Default..............................................................................71
Waiver of Past Defaults....................................................................................71
Reports ..................................................................................................71
Evidence as to Compliance..................................................................................72
Amendments.................................................................................................73
Intercreditor Arrangements.................................................................................73
Administration Agreement...................................................................................74
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES.........................................................................74
Transfer of Receivables....................................................................................74
Certain Matters Relating to Bankruptcy.....................................................................75
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..........................................................................76
General ..................................................................................................76
Tax Characterization and Treatment of Notes................................................................77
Tax Characterization of the Trust..........................................................................80
STATE AND LOCAL TAX CONSEQUENCES.................................................................................81
ERISA CONSIDERATIONS.............................................................................................81
PLAN OF DISTRIBUTION.............................................................................................82
LEGAL OPINIONS...................................................................................................83
WHERE YOU CAN FIND MORE INFORMATION..............................................................................83
INCORPORATION BY REFERENCE.......................................................................................84
INDEX OF TERMS...................................................................................................85
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WHERE TO FIND INFORMATION IN THIS PROSPECTUS
AND THE PROSPECTUS SUPPLEMENT
We provide information to you about the notes in two separate documents
that provide varying levels of detail:
(a) this prospectus, which provides general information, some of
which may not apply to a particular series of notes, including your
series; and
(b) the prospectus supplement for a series of notes, which will
provide financial and other information regarding the pool of receivables
held by the trust and will specify the terms of a particular series of
notes, including:
o which classes of the series being offered;
o the timing of interest and principal payments for each class of
the series;
o the priority of interest and principal payments for each class
of the series;
o information about credit enhancement for each class of the
series, if any;
o the ratings for each class of the series; and
o the method for selling each class of the series.
IF THE TERMS OF YOUR SERIES OF NOTES VARY BETWEEN THIS PROSPECTUS AND THE
PROSPECTUS SUPPLEMENT FOR THAT SERIES, YOU SHOULD RELY ON THE INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus and
the prospectus supplement for your series of notes. We have not authorized
anyone to provide you with other or different information. You should not assume
that the information in this prospectus and any prospectus supplement is
accurate on any date other than the dates stated on their respective covers.
We are not offering the notes in any state where the offer is not
permitted.
You can find a list of the pages where capitalized terms used in this
prospectus are defined under the caption "Index of Terms" which appears at the
end of this prospectus.
We include cross-references in this prospectus to captions in this
prospectus where you can find further related discussions.
5
SUMMARY
This summary highlights selected information from this prospectus and
provides an overview to aid in your understanding of the notes. It does not
contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of a series of notes,
carefully read this entire prospectus and the prospectus supplement for that
series.
THE PARTIES
ISSUER/TRUST
World Omni Master Owner Trust, a Delaware business trust formed by the
Transferor and the Owner Trustee.
TRANSFEROR
WODFI LLC, a Delaware limited liability company and a wholly-owned subsidiary of
World Omni Financial Corp.
SERVICER
World Omni Financial Corp., a Florida corporation and a wholly-owned subsidiary
of JM Family Enterprises, Inc.
OWNER TRUSTEE
The Owner Trustee will be .
INDENTURE TRUSTEE
The Indenture Trustee will be .
SECURITIES TO BE ISSUED BY THE TRUST
NOTES
The trust will issue one or more series of notes. Each series of notes may
include one or more classes. The trust may issue additional series of notes
after the issuance of notes offered by this prospectus.
OTHER SECURITIES
The trust will also issue certificates. The certificates are beneficial
interests in the trust and represent the entire equity of the Trust. The
certificates will not be offered or sold under this prospectus.
SUBORDINATION
A portion of the certificates will be subordinated to a series of notes to the
extent described in this prospectus and the prospectus supplement for the
series.
One or more classes of notes of a series may be subordinate to one or more
classes of notes. The relative priority of each series and class of notes will
be described in the prospectus supplement for that series.
PAYMENTS ON THE NOTES
INTEREST
The trust will pay interest on the notes monthly or with the frequency as is
specified in the prospectus supplement for that series. Each series or class of
notes will have its own interest rate, which may be fixed, variable, contingent,
adjustable or any combination of these characteristics. The interest rate or the
method for determining the interest rate for a series or class of notes will be
specified in the prospectus supplement for that series.
6
The sources of funds the trust will use to pay interest on a series or class of
notes will be specified in the prospectus supplement for that series. Typically,
these sources will include:
o interest collections on the receivables held
by the trust
o servicer advances
o available credit enhancement
PRINCIPAL
Each series or class of notes will have a stated principal amount.
Ordinarily, principal payments on the notes will occur on one or more dates
specified in the prospectus supplement for that series. The sources of funds the
trust will use to pay principal will be specified in the prospectus supplement
for that series. Typically, these sources will include:
o all or a portion of the principal collections
on the receivables held by the trust
o servicer advances
o all or a portion of the interest collections
remaining after interest payments
o available credit enhancement
The manner in which the trust will apply available funds toward principal
payments on a series of notes will be set forth in the prospectus supplement for
that series.
Each series of notes will have a revolving period during which no principal
payments are made. Among the possible ways principal payments may be made are
the following:
o a single targeted final payment date, on
which all principal is repaid at once
o a controlled amortization period, during which a predetermined amount of
principal is repaid on each specified payment date until all principal has
been repaid
o an index amortization period, during which
the amount of principal that is repaid is
determined by reference to an index
However, it is possible that principal payments on a class or series of notes
will begin earlier than the date specified in the prospectus supplement for that
series. Upon the occurrence of an early amortization event for a series of
notes, the trust will apply all funds allocated to that series to the repayment
of the outstanding principal of and interest on the notes and the other
securities, if any, in that series, unless the prospectus supplement for that
series provides that those funds will be set aside for payment on a later date.
An early amortization event will likely result in an earlier commencement of the
repayment of principal on the notes than the date specified in the prospectus
supplement for that series. In addition, an early amortization event may result
in delays or reductions in the payments on your notes.
ASSETS OF THE TRUST
The primary assets of the trust will be a revolving pool of receivables arising
under selected revolving floor plan financing agreements entered into with World
Omni by retail automotive dealers to finance their inventory of new and used
automobiles and light duty trucks.
The receivables will be sold by World Omni to the Transferor, and then
transferred by the Transferor to the trust. The trust will grant a security
interest in the receivables and the other property of the trust to the trustee
under the indenture for the notes for the benefit of the noteholders. The trust
property will also include:
o security interests in the collateral securing
the dealers' obligations to pay the
7
receivables, which will include unsold
vehicles and which may include parts inventory,
equipment, fixtures, service accounts, real
estate and guarantees;
o amounts held on deposit in specified trust
accounts maintained for the trust or for a
series or class of notes;
o recourse World Omni may have against the
dealers under the financing agreements;
o a portion of the Transferor's rights under its
purchase agreement with World Omni; and
o any additional property, or exclusions of
the foregoing types of property, described
in the prospectus supplement.
As new receivables arise under the selected financing agreements, they generally
will be transferred to the trust on a daily basis. Prior to the date on which
funds are required to be set aside for payment on a series of notes, the trust
generally will transfer the principal collections on the receivables to the
Transferor, provided there are sufficient assets in the trust. If there are
insufficient assets in the trust, the trust will retain the principal
collections and invest them in eligible investments.
However, if a cash accumulation event specified in the prospectus supplement for
a series of notes occurs, the trust will retain all or a portion of the
principal collections and invest them in eligible investments in a cash
accumulation account dedicated to the noteholders of that series for future
payment on the notes of that series.
SERVICING FEES
For each series of notes, the trust will pay the servicer a set monthly fee as
compensation for servicing the receivables, as set forth in the related
prospectus supplement.
TAX STATUS
Kirkland & Ellis, special tax counsel, is of the opinion that, for federal
income tax purposes, the notes will be characterized as indebtedness and the
trust will not be characterized as an association (or publicly traded
partnership) taxable as a corporation.
By accepting a note, you agree to treat the notes as indebtedness for federal,
state and local income and franchise tax purposes.
See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" and "STATE AND LOCAL TAX
CONSEQUENCES" in this prospectus concerning the application of federal, state
and local tax laws.
ERISA CONSIDERATIONS
Subject to the considerations discussed under "ERISA CONSIDERATIONS," an
employee benefit plan regulated by the Employee Retirement Income Security Act
of 1974 may purchase the notes, including any subordinated notes. See "ERISA
CONSIDERATIONS" for a description of the limitations on the purchase of notes by
employee benefit plans. Employee benefit plans should consult with their counsel
before purchasing any notes.
RATINGS
All of the notes offered under this prospectus will be rated investment grade by
at least one nationally recognized rating agency. Any other ratings for a series
or class of notes will be described in the prospectus supplement for that
series.
8
RISK FACTORS
You should consider carefully the following risk factors in deciding
whether to purchase the notes.
DEALER CONCENTRATION MAY RESULT IN LARGER LOSSES FROM A SINGLE DEALER DEFAULT
As of May 31, 1999, World Omni provided new and used car floor plan financing
for approximately 240 dealers or dealer groups. Although no dealer or dealer
group accounted for more than 8.13% of the aggregate principal amount of the
outstanding receivables as of May 31, 1999, approximately 35.79% of the
aggregate principal amount of the receivables outstanding as of that date were
generated by the 8 largest dealers or dealer groups. A default by one of these
dealers or dealer groups could result in delays or reductions in payments on
your notes. In addition, as of May 31, 1999, approximately $23.7 million of
receivables were generated by dealers or dealer groups affiliated with JM Family
Enterprises.
RECEIVABLES MAY BE UNCOLLECTIBLE DUE TO SUPERIOR INTERESTS
World Omni and the Transferor will file financing statements covering the
receivables sold by World Omni to the Transferor and then transferred to the
trust. The financing statements will perfect the security interests of the
Transferor and the trust in the receivables. However, World Omni will serve as
the custodian of the receivables and will not physically segregate or mark the
receivables to indicate that they have been sold to the Transferor and then
transferred to the trust. See "THE TRANSFER AND SERVICING AGREEMENTS -
CONVEYANCE OF RECEIVABLES AND COLLATERAL SECURITY."
If the receivables are "chattel paper" under the Uniform Commercial Code and
another party purchases or takes a security interest in the receivables for
value, in the ordinary course of business and without actual knowledge of the
Transferor's or the trust's interest, that purchaser or secured party will
acquire an interest in the receivables superior to the trust's interest. The
trust will not be able to collect on the receivable if there is a superior
interest. This may result in delays or reductions in payments on your notes. See
"CERTAIN LEGAL ASPECTS - TRANSFER OF RECEIVABLES."
RECEIVABLES MAY BE UNSECURED DUE TO SALES OUT OF TRUST
Dealers give World Omni a security interest in the vehicles they purchase to
secure their obligations under the receivables. When the financed vehicle is
sold, World Omni's security interest in the vehicle generally will terminate. If
the dealer who sold the vehicle fails to pay World Omni the amount owed on the
receivable, the receivable will become unsecured because the buyer generally
takes the vehicle free of the security interest. If the financed vehicle is sold
"out of trust," sold without the dealer applying the proceeds of the sale to
repay the receivable, the trust will not be able to foreclose on the financed
vehicle. This may result in delays or reductions in payments on your notes.
9
A BANKRUPTCY OF WORLD OMNI OR THE TRANSFEROR MAY DELAY OR REDUCE PAYMENTS ON THE
NOTES
World Omni will sell receivables to the Transferor, and the Transferor will
transfer the receivables to the trust. Although World Omni and the Transferor
have taken steps, such as the creation of the Transferor as a special purpose
entity, to ensure that the transactions described in this prospectus are
respected, and to reduce the likelihood that the Transferor would voluntarily
file for bankruptcy, if World Omni or the Transferor were to become a debtor in
bankruptcy, a court could conclude that the receivables transferred to the trust
are not owned by the trust, but rather are part of the estate of the debtor in
bankruptcy. The court may conclude that the transfer of the receivables from the
party in bankruptcy was not really a sale, but rather a secured financing, or
the court may conclude that the party in bankruptcy and the owner of the
receivables should be treated as a single entity rather than separate entities.
If this were to occur, you could experience delays or reductions in payments on
your notes as a result of:
o the "automatic stay" provisions of the U.S. Bankruptcy Code, which
prevent creditors from exercising remedies against a debtor in
bankruptcy, and provisions of the U.S. Bankruptcy Code that permit
substitution of collateral in specified circumstances;
o some tax or government liens on World Omni's or the Transferor's
property that arose prior to the transfer of a receivable to the
trust having a right to be paid from collections on the receivables
before those collections are used to make payments on your notes; and
o the fact that the trust or the indenture trustee may not have a
perfected security interest in the financed vehicles or cash
collections on the receivables held by World Omni at the time a
bankruptcy proceeding begins.
If World Omni or the Transferor were to become a debtor in bankruptcy, it may be
able to recover payments made by it to the trust to repurchase receivables prior
to the date of the bankruptcy petition. This could result in delays or
reductions in payments on your notes.
In addition, if World Omni, any of its affiliates, or any of the manufacturers
of the related vehicles filed for bankruptcy, the dealers might respond by
delaying or withholding payments on the receivables, even without legal or
contractual justification. This could result in delays or reductions in payments
on your notes.
10
FAILURE OF SOUTHEAST TOYOTA DISTRIBUTORS TO REPURCHASE VEHICLES FROM TERMINATED
DEALERS MAY RESULT IN INCREASED LOSSES ON THE RECEIVABLES
Southeast Toyota Distributors, an affiliate of World Omni and the largest
distributor of vehicles to the dealers generating the receivables, is obligated
to repurchase some of the dealer's vehicles if its dealership agreement is
terminated or expires. If Southeast Toyota Distributors is unwilling or unable
to repurchase those vehicles, losses on the receivables of those dealers may
increase. This could result in delays or reductions in payments on your notes.
FAILURE OF WORLD OMNI TO GENERATE SUFFICIENT NEW RECEIVABLES MAY RESULT IN THE
TRUST HOLDING ASSETS WITH A LOWER YIELD
The trust depends upon World Omni to generate new receivables to replace the
receivables that are repaid. In the event that World Omni is unable to generate
sufficient new receivables, or is unable to transfer the receivables it
generates because of restrictions in its financing arrangements or otherwise,
the trust will be required to hold cash or investment securities rather than
receivables, which may have a lower yield. Because the trust's assets are the
sole source of payments on the notes, this could result in delays or reductions
in payments on your notes. World Omni does not guarantee that it will continue
to generate receivables at historical rates. The following events could
negatively impact World Omni's ability to generate new receivables:
o A decline in the manufacture and sale of automobiles and light
trucks due to an economic downturn, a labor disruption,
competitive pressure, or other factors
o A change in vehicle distribution practices
o A change in dealer inventory management practices
o A change in the interest rates charged by World Omni to
dealers
o A change in the amounts of the credit lines or other terms
offered by World Omni to dealers
o Defaults on accounts by dealers
o Termination of dealer franchises
o Dealers becoming insolvent or filing for bankruptcy
o Seasonal fluctuations in the sale and leasing of vehicles
As of May 31, 1999, approximately 32% of the aggregate principal balance of the
receivables held by World Omni were related to vehicles sold to dealers by
Southeast Toyota Distributors. Accordingly, the ability of World Omni to supply
new receivables to the trust will be in part dependent upon the ability of
Southeast Toyota Distributors to sell vehicles.
11
THE FAILURE OF DEALERS TO MAKE PAYMENTS ON THE RECEIVABLES COULD DELAY OR REDUCE
PAYMENTS ON THE NOTES
The trust's ability to make payments on the notes generally depends on
collections from dealers on the receivables. The prospectus supplement will
describe past patterns of dealer payments on similar receivables.
The timing of the sale and lease of vehicles is uncertain. It depends on many
economic and social factors that are beyond the control of World Omni, the
Transferor and the trust. Sales incentive programs and financing incentive
programs of vehicle manufacturers, including Toyota, and distributors, including
Southeast Toyota Distributors, also affect the sale and lease of vehicles. We do
not guarantee that dealers will pay on the receivables at the same rate as in
the past or in any particular pattern. If the dealers' ability to pay on the
receivables declines for whatever reason, you might experience delays or
reductions in payments on your notes.
FAILURE OF WORLD OMNI OR THE TRANSFEROR TO FULFILL ITS REPURCHASE OBLIGATIONS
MAY ADVERSELY AFFECT THE TRUST
World Omni, the Transferor and their respective affiliates generally are not
obligated to make payments to you on your notes and do not insure or guarantee
the payment of the receivables or your notes. However, World Omni will make
representations and warranties to the Transferor regarding the characteristics
of the receivables. The Transferor will assign these representations and
warranties to the trust, and the Transferor will make its own representations
and warranties to the trust in connection with the transfer of the receivables
to the trust. If World Omni or the Transferor breaches its representations and
warranties, and the breach materially and adversely affects the receivable or
the interests of the noteholders in that receivable, it will be obligated to
repurchase the receivable from the trust. If World Omni or the Transferor fails
to repurchase the affected receivable, you may experience delay or reductions in
payments on your notes. See "THE TRANSFER AND SERVICING AGREEMENTS - RECEIVABLES
PURCHASE AGREEMENT" and " REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR."
THE TRUST ASSETS ARE LIMITED TO THE RECEIVABLES AND ANY FORMS OF CREDIT
ENHANCEMENT
The notes represent obligations of the trust only. The sole source of payments
on the notes are the assets of the trust. The trust will not have any
significant assets or sources of funds other than the receivables, its limited
rights in accounts, and other rights or credit enhancements as specified in the
prospectus supplement for the series. The notes are not obligations of and are
not insured or guaranteed by World Omni, the Transferor or any other entity or
person (including any affiliate of World Omni or the Transferor).
You must rely primarily on payments on the trust's receivables, funds in the
specified accounts and other credit enhancements, if any, for repayment of your
notes. In addition, you may have to look to the proceeds from the repossession
and sale of the collateral that secures defaulted receivables and the proceeds
from any recourse against dealers under the financing agreements. If these
sources are
12
insufficient, you might experience delays or reductions in payments on your
notes.
THE TRUST HAS LIMITED RESTRICTIONS ON ISSUING ADDITIONAL SERIES OF NOTES
The trust, as a master trust, may issue additional series of notes. The terms of
any additional series of notes will be established at the time of their issuance
and may vary substantially from the terms of your notes. The terms of the
agreements creating a new series of notes may not change the terms of any
existing series of notes, and it is a condition to the issuance of any
additional series of notes that it not result in a decrease in the rating of any
existing series of notes. However, the issuance of additional series of notes
could ultimately result in delays or reductions in payments on your notes.
POTENTIAL DELAYS IN PAYMENTS DUE TO YEAR 2000 NONCOMPLIANCE
Year 2000 compliance refers to the ability of technology information systems to
recognize the difference between the years 1900 and 2000. If an information
technology system was written using two digits rather than four digits to define
the applicable year, it may not be able to differentiate between the years 1900
and 2000 and may generate erroneous data.
World Omni has identified all significant internal applications that will
require modification to ensure Year 2000 compliance. Internal and external
resources are being used to make the required modifications and test Year 2000
compliance. World Omni plans to complete the modifications and testing process
of all significant applications by August 31, 1999, which is prior to any
anticipated impact on its operating systems. Accordingly, World Omni does not
anticipate Year 2000 issues with its computer systems to have a material adverse
effect on the trust, the receivables or the servicing of the receivables. The
August 31, 1999 date is based on estimates and assumptions of future events.
These estimates may not be achieved and actual results could differ materially
from those anticipated.
If World Omni's systems are not Year 2000 compliant, the servicing of the
receivables could be adversely affected, which could result in delays or
reductions in payments on the notes.
LIMITED ABILITY TO RESELL NOTES
The underwriters for a series of notes may assist in the resale of those notes,
but they are not required to do so. A trading market for the notes may not
develop. If a trading market does develop, it might not continue or it might not
be sufficiently liquid to allow you to resell any of your notes.
13
THE SERVICER
World Omni Financial Corp. ("WORLD OMNI" or the "SERVICER") is a Florida
corporation and a subsidiary of JM Family Enterprises, Inc. ("JM FAMILY
ENTERPRISES"), a Delaware corporation. World Omni is primarily engaged in
providing dealerships throughout the United States with a full range of
financial services. World Omni provides wholesale floor plan financing and
capital loans to dealers and also provides retail motor vehicle leasing and
installment financing to the customers of these dealers and to others. The
principal executive offices of World Omni are located at 120 N.W. 12th Avenue,
Deerfield Beach, Florida 33442, and its telephone number is (954) 429-2200.
THE TRANSFEROR
WODFI LLC (the "TRANSFEROR") is a Delaware limited liability company and a
wholly-owned subsidiary of World Omni. The Transferor was organized in July 1999
for limited purposes, which include:
o purchasing receivables from World Omni;
o financing the receivables purchased;
o transferring the receivables to third parties; and
o any activities incidental to and necessary or convenient for the
accomplishment of those
purposes.
The principal executive office of the Transferor is located at 120 N.W. 12th
Avenue, Deerfield Beach, Florida 33442, and its telephone number is (954)
429-2200.
The Transferor has taken steps in structuring the transactions
contemplated by this prospectus that are intended to ensure that a petition for
relief by World Omni under the U.S. Bankruptcy Code or similar applicable state
laws ("INSOLVENCY LAWS") will not result in a court disregarding the Transferor
as a separate entity and consolidating its assets and liabilities with those of
World Omni. These steps include the creation of the Transferor as a separate,
limited purpose entity pursuant to its certificate of formation and limited
liability company agreement, which contain limitations, including restrictions
on the nature of the Transferor's business and a restriction on the Transferor's
ability to file a petition for relief under any Insolvency Law without the
unanimous affirmative vote of all of its board directors. The Transferor's
limited liability company agreement also includes a provision requiring the
Transferor to have two directors who qualify as independent as that term is
defined in the Transferor's limited liability company agreement. See "RISK
FACTORS - A BANKRUPTCY OF WORLD OMNI OR THE TRANSFEROR MAY DELAY OR REDUCE
PAYMENTS ON THE NOTES" and "CERTAIN LEGAL ASPECTS OF THE RECEIVABLES - CERTAIN
MATTERS RELATING TO BANKRUPTCY."
THE TRUST
World Omni Master Owner Trust (the "TRUST") is a Delaware business trust
formed pursuant to a Trust Agreement (the "TRUST AGREEMENT"), between the
Transferor and , as Owner Trustee
14
(the "OWNER TRUSTEE"), dated on or before the date on which the first series of
Notes are issued by the Trust (the "INITIAL CLOSING DATE").
On the Initial Closing Date the Transferor shall have conveyed to the
Trust, without guaranty that the Trust will be able to collect, the receivables
(the "RECEIVABLES") arising under selected revolving financing agreements (the
"ACCOUNTS") entered into with World Omni by retail automotive dealers franchised
by dealers (the "DEALERS") to finance their inventory of new and used
automobiles and light duty trucks. The property of the Trust consists of:
o the Receivables existing in the Accounts on , 1999
(the "INITIAL CUT-OFF DATE");
o all Receivables generated in the Accounts after the Initial Cut-Off
Date;
o Receivables existing in or generated in any Accounts added to the
Trust on or after the related addition date;
o an assignment of all the Transferor's rights and remedies under the
Receivables Purchase Agreement, dated as of the Initial Closing Date,
between World Omni and the Transferor (the "RECEIVABLES PURCHASE
AGREEMENT"), pursuant to which the Transferor will purchase
Receivables from World Omni;
o all collections of principal under the Receivables ("PRINCIPAL
COLLECTIONs") and all collection of interest and other nonprincipal
charges (including insurance service fees, amounts recovered on
Defaulted Receivables and insurance proceeds) under the Receivables
("INTEREST COLLECTIONS" and, together with Principal Collections,
"COLLECTIONS");
o all funds on deposit in specified accounts of the Trust;
o any letter of credit, surety bond, cash collateral account, spread
account, guaranteed rate agreement, swap or other interest rate
protection agreement, maturity liquidity facility, tax protection
agreement or other arrangement (each, an "ENHANCEMENT") issued for a
series or class of notes;
o a security interest in motor vehicles securing the Receivables (the
"VEHICLEs"); and
o a security interest in specified parts inventory, equipment,
fixtures, service accounts and, in some cases, realty and/or personal
guarantees securing the Receivables (the "COLLATERAL SECURITY").
See "THE TRANSFER AND SERVICING AGREEMENTS - RECEIVABLES PURCHASE AGREEMENT" for
an overview of the Receivables Purchase Agreement. The noteholders will not have
any interest in any Enhancements provided for the benefit of the noteholders of
another series or class. See "THE TRANSFER AND SERVICING AGREEMENTS - REMOVAL OF
ACCOUNTS" for information regarding the removal of Receivables and Accounts from
the trust.
The Transferor, the Trust and World Omni as Servicer will enter into a
trust sale and servicing agreement, dated as of the Initial Closing Date (the
"TRUST SALE AND SERVICING AGREEMENT"). Pursuant to the Trust Sale and Servicing
Agreement the Trust will acquire the Receivables from the Transferor and
15
the Servicer will agree to service the Receivables, the Transferor is
conditionally allowed, and in some circumstances is obligated:
o to designate new Accounts to be included as Accounts and to convey to
the Trust the Receivables of those new Accounts,
o to designate ineligible Accounts to be removed, and
o to require the Trustee to return receivables in the removed Accounts
to the Transferor.
See "THE TRANSFER AND SERVICING AGREEMENTS - ADDITION OF ACCOUNTS" for
information regarding the addition of Accounts.
The Trust may issue one or more series of asset backed notes
(collectively, the "NOTES"). A portion of the Trust's assets and cash flows will
be allocated to the holders of each series of Notes (for a particular series or
all series, the "NOTEHOLDERS' INTEREST"). The Trust will also issue certificates
(the "CERTIFICATES"). The Certificates represent the entire beneficial interests
in the Trust. Initially, the Transferor will hold all of the Certificates. The
portion of the Trust's assets and cash flows remaining after allocation of the
Noteholders' Interest will be allocated to the holders of the Certificates
("CERTIFICATEHOLDERS' INTEREST"). The principal amount of the
Certificateholder's Interest will fluctuate as the aggregate principal balance
of the Receivables (the "POOL BALANCE") fluctuates, as new series of Notes are
issued, and as outstanding series of Notes are repaid or refunded. A portion of
the Certificateholder's Interest will be subordinated to the Noteholder's
Interest of each series of Notes to the extent described in this prospectus and
the prospectus supplement for that series. The Certificates initially will be
held by the Transferor and are not being offered by this prospectus.
The prospectus supplement will describe the capitalization of the Trust at
the time of the issuance of the series of Notes offered by that prospectus
supplement.
Prior to its formation, the Trust had no assets or obligations. The Trust
has not and will not engage in any business activity other than:
o acquiring and holding the Receivables, the other assets of the Trust
and proceeds therefrom;
o issuing the Notes and the Certificates; and
o making payments on the above and related activities.
As a consequence, the Trust is not expected to have any need for, or source of,
capital resources other than the assets of the Trust.
THE OWNER TRUSTEE
, a , will serve as Owner Trustee under
the Trust Agreement. The principal executive offices of the Owner Trustee are
located at , and its telephone number is .
16
USE OF PROCEEDS
The net proceeds from the sale of a series of the notes will be paid to
the Transferor. The Transferor will use those proceeds to purchase Receivables
from World Omni and to make deposits into the Excess Funding Account, if
necessary, and into any other account specified in the related prospectus
supplement.
THE DEALER FLOOR PLAN FINANCING BUSINESS
The Receivables to be conveyed to the Trust by the Transferor result from
loans by World Omni to Dealers made by World Omni under floor plan financing
agreements to finance the Dealers' purchases of new and used Vehicles. Used
Vehicles may be purchased by Dealers at auctions, from other dealers or directly
from vehicle owners.
World Omni is the major wholesale financing source for Dealers in the
Southeast Toyota Distributors' distribution network. Since 1981, World Omni has
increased its floor plan finance penetration of those Dealers to approximately
50% as of May 31, 1999. World Omni services the Dealers from its main office
located in Deerfield Beach, Florida.
CREATION OF RECEIVABLES
World Omni finances 100% of the invoice price of new Vehicles. A
Receivable is created upon shipment of the new vehicle from the vehicle
manufacturer or distributor to the Dealer.
The amount that World Omni will lend on a used vehicle varies.
o For vehicles purchased by the dealer at an auction and financed by
World Omni via payment directly to the auction, World Omni finances
100% of the auction price plus the buyer's fees paid to the auction.
o In some circumstances, the vehicle being financed by World Omni is
one that was sold by World Omni to the dealer. These vehicles are
ones that were leased by World Omni to a consumer for a period of
time and that were returned to World Omni at the end of the lease. If
the used vehicle being financed under World Omni's floorplan is one
that was sold by World Omni to the dealer, World Omni will lend 100%
of the price the dealer paid to World Omni for the vehicle.
o For select dealers, World Omni will lend 100% of the "Black Book"
value of the used vehicle. In some circumstances the Black Book value
includes the value of additional equipment on the vehicle.
o In situations other than those described above, World Omni will
finance up to 80% of the wholesale value of the vehicle as defined in
the NADA Official Used Car Guide's "Average Trade In" column.
Used Vehicles represented approximately 16.2%, 19.4%, 17.6% and 18.1% of the
total dollar amount of Receivables outstanding as May 31, 1999, and December 31,
1998, 1997 and 1996, respectively.
17
CREDIT APPROVAL AND CREDIT GUIDELINES
World Omni's wholesale floor plan and used car floor plan programs are
administered by its Commercial Operations Department located in Deerfield Beach.
World Omni provides floor plan financing to Dealers pursuant to
pre-established credit guidelines. World Omni must approve each prospective
Dealer before that Dealer signs a dealer financing agreement. Each dealer
financing agreement generally includes a security agreement, a personal guaranty
by the principal owner of the Dealer and, when necessary, an intercreditor
agreement. The collateral subject to the security agreement generally consists
of:
o the Vehicles;
o all inventory, equipment and other property of the Dealer, including
parts inventory, furniture, fixtures and tools;
o all additions, accessories and accessions;
o all intangibles, instruments, chattel paper and accounts arising out
of the sale or lease of the foregoing;
o all substitutions, returned and repossessed items; and
o all proceeds thereof, including insurance proceeds.
The Commercial Operations Department performs an analytical and investigative
review to evaluate the character and credit of the principal owners of a
prospective Dealer and to determine whether the Dealer's capital structure is
adequate to support the business. In conducting its review, representatives of
the Commercial Operations Department will conduct interviews with Dealer
principals, check credit references, obtain dealership and personal financial
statements and review the business history of dealership management and existing
business plans.
The key process in approving a floor plan financing request is the
completion of a financial statement review of the prospective borrower. In many
cases, this review will be based on pro forma statements and projections
completed by the prospective Dealer.
Because the financial data are generally comprised primarily of
projections, the review centers mainly on the financial strength and integrity
of the guarantors and their past history. In addition, the location of the
particular dealership is analyzed. The main thrust of this analysis relates to
the market area and the potential for Vehicle sales. When available, state
vehicle registration data is used in the analysis of a Dealer's primary market
area to help determine the retail penetration ability of a new Dealer. Dealers
who sell Toyotas generally sign a release letter which enables Southeast Toyota
Distributors to provide World Omni access to its files on those Dealers. The
database provides a wide array of financial information and trend analysis. The
Dealer's financial statements are verified and the Dealer's profitability during
the first year of operation is projected.
When a Dealer requests a floor plan financing program, World Omni conducts
a search of the appropriate records of the filing office or offices to determine
if there are other creditors of the Dealer with current security interest
filings. Prior filings are given particular attention by World Omni
18
management, especially if they relate to Vehicles or if the wording is broad
enough to indicate a possible conflict with World Omni's security interest. In
those instances, World Omni works together with the particular Dealer to
eliminate any conflicts. Steps taken include executing an intercreditor
agreement with any other creditor and/or arranging for the filing of amendments
to any prior financing statements. World Omni may approve the Dealer's request
for a floor plan financing program but will not advance any funds to the Dealer
until all conflicts are resolved.
If a prospective Dealer is approved by World Omni, the Dealer and World
Omni enter into a dealer financing agreement. The principal owner of the
dealership is generally required to guarantee the Dealer's obligations to World
Omni and to subordinate its loans to the dealership to the Dealer's indebtedness
to World Omni.
Pursuant to the dealer financing agreement, in order to secure all
indebtedness of the Dealer to World Omni, the Dealer grants to World Omni a
first priority security interest in its inventory of Vehicles and, in many
cases, to other inventory, such as parts and equipment, as well.
World Omni is, in most cases, the exclusive source of floor plan financing
for a Dealer. When a Dealer has an additional source of financing, the other
floor plan financier generally takes a security interest in collateral which
overlaps with World Omni's. In these situations, World Omni will not advance
funds until it has entered into an intercreditor agreement with the other floor
plan financier in which each of World Omni and the other financier subordinates
its lien on any Vehicle financed by the other party, and the proceeds thereof,
to the lien of the financing party.
Each Dealer is required by its dealer financing agreement to obtain
physical damage insurance covering all Vehicles, with the Servicer being named
as an additional loss payee. World Omni arranges this insurance for some Dealers
through a master policy issued by St. Paul Fire and Marine Insurance Company,
which is currently rated A+15 by A.M. Best Company, Inc., a nationally
recognized insurance rating agency. An affiliate of World Omni handles claims
adjustments under these policies. As to Dealers who elect to make other coverage
arrangements, World Omni's affiliate maintains a follow-up system, which
includes:
o coverage verification;
o tracking of policy expiration dates;
o renewal follow-up; and
o verification that World Omni is properly identified as a loss payee.
As a matter of practice, World Omni does not, however, require that payments
received under these policies be paid to it so long as a Dealer is not "out of
trust"; that is, if the Dealer sells a Vehicle and World Omni determines that
the Dealer has used the sale proceeds thereof for its own separate purposes.
During the initial 120-day period after the signing of a dealer financing
agreement, World Omni conducts monthly floor plan audits, verifying the purchase
and sale of all Vehicles. At the end of 180 days, a "FINANCIAL STATEMENT REVIEW"
is completed, and the Dealer's initial risk classification is updated. Dealer
credit ratings range from one to four, with one being the most financially
sound. This risk classification determines the floor plan audit frequency and is
important in setting the Dealer's credit
19
limit. However, World Omni does not adjust the interest rates charged to Dealers
on the basis of risk classification.
o "CLASS I DEALERs" are Dealers which are determined to be low risk due
to their stability and exceptional working capital, net worth,
profits and good audit results.
o "CLASS II DEALERs" are Dealers which are determined to be of moderate
risk and are not as stable as Class I Dealers, although they are
judged to have adequate working capital, net worth, profits and
wholesale experience.
o "CLASS III DEALERs" are Dealers which are determined to have marginal
working capital, net worth and profits, and which may have
experienced more than a normal amount of audit violations.
o As of May 31, 1999, the number of Accounts designated by World Omni
as Class I Dealers, Class II Dealers and Class III Dealers was 123,
59, and 25, respectively (51%, 25% and 10%, respectively, of the
total number of Dealers in the Wholesale Portfolio as of that date).
o As of May 31, 1999, the principal balance of Receivables in the
Wholesale Portfolio arising in Accounts with Class I Dealers, Class
II Dealers and Class III Dealers was approximately 57%, 23% and 9%,
respectively, of the aggregate principal balance of Receivables in
the Wholesale Portfolio.
Dealers that are classified as being high-risk are designated by World
Omni as "CLASS IV DEALERS." Class IV Dealers generally include those Dealers
with poor audit histories, used car credit lines and/or capital loans
outstanding and that have inadequate or negative working capital, net worth and
profits. Class IV Dealers also include those Dealers for which a check has been
returned within the previous twelve months for reason of insufficient funds or
who have sold Vehicles "out of trust." Class IV Dealers are generally considered
by World Omni to be problem Dealers, normally subject to a minimum of three
dealer reviews by World Omni per year. As of May 31, 1999 the number of Accounts
designated by World Omni as Class IV Dealers was 33 (approximately 14% of the
total number of Dealers in the Wholesale Portfolio as of that date). As of May
31, 1999, the principal balance of Receivables in the Wholesale Portfolio
arising in Accounts with Class IV Dealers was approximately 12% of the aggregate
principal balance of Receivables in the Wholesale Portfolio.
World Omni establishes a base inventory guideline to provide floor plan
financing adequate for Dealers' normal vehicle sales. Typically, Dealers are
granted credit lines based on a 60-day sales rate for new vehicles and a 45-day
sales rate for used vehicles. These credit lines are monitored on a daily basis
and adjustments are made upon appropriate credit approval or disapproval.
If World Omni determines that a specific Dealer's inventory is excessive,
the Dealer may be placed on finance hold status. In addition, a Dealer may be
placed on finance hold if the dealer financing agreement is violated, a check is
returned unpaid or a Dealer requests controlled Vehicle releases. In these
circumstances, World Omni assumes control of Vehicle releases to the Dealer and
specifically approves the releases on a unit-by-unit basis. Dealers are also
placed on finance hold status if World Omni determines that the Dealer has sold
"out of trust." Finance hold status on a particular Dealer will remain until
World Omni determines that the circumstances have been remedied.
20
PAYMENT TERMS
Receivables related to new Vehicles are due on demand, but generally must
be paid upon the earlier of (a) one to ten days (averaging four days) following
the sale or other disposition of the Vehicle, (b) within one business day of the
dealers being funded by the proceeds of a retail or lease contract and (c) a
fixed period after the Vehicle's initial acquisition by the Dealer. Although
dealer financing agreements may vary as to the precise measurement of the fixed
period, generally the principal balance of the Receivable must be paid down 10%
per month beginning April 1 of the year following the model year of the
underlying Vehicle, and must be paid in full by the next October, unless the
Vehicle is recategorized as a used Vehicle. Receivables in fleet sales for
special dealers who have a delayed payment privilege must generally be paid in
full on the earlier of (1) the 20th day after delivery to the end user or (2)
receipt of payment from the end user.
Receivables relating to used Vehicles, Vehicles purchased at Program Sales
and under the Toyota Renewed program are generally stated to be due on demand or
on the earlier of (1) the sale of the Vehicle or (2) 90 days. World Omni, in its
sole discretion, may generally grant one extension for a period of 30 days, if a
principal payment of 10% of the unpaid principal balance is made by the Dealer
prior to the extension.
World Omni charges interest monthly on Receivables secured by new Vehicles
at an annual rate generally averaging prime + 0.30% or LIBOR + 2.04%.
Receivables secured by used Vehicles accrue interest at an annual rate generally
averaging 2.04% over the London interbank offered rate ("LIBOR") or 0.92% over
prime. Upon agreement with the Dealers, World Omni may change the rate
mechanism, the rate which the Receivables are tied to, currently either LIBOR or
the prime rate, or the interest rate premium in any manner.
Some Dealers maintain funds with World Omni under an inventory cash escrow
agreement, pursuant to which funds are held for cash management, liquidity and
working capital purposes. The Dealers can withdraw these funds so long as the
Dealer has not defaulted under its floor plan agreements with World Omni.
Interest on the prepaid funds is offset against interest due from the Dealer on
the floor plan line. Funds deposited by Dealers with World Omni will be treated
by World Omni as Principal Collections of Receivables, and withdrawals by
Dealers will be treated by World Omni as creating new Receivables.
BILLING AND COLLECTION PROCEDURES
A statement setting forth interest and other billing and account
information is prepared by World Omni and distributed on a monthly basis to each
Dealer. Each Dealer's bills are generated on approximately the first or second
business day of the month, and payments are due on the tenth day of the month in
which they are billed. Interest is billed retroactively and Dealers make
payments by check or electronic funds transfer.
The monthly statement lists each outstanding Receivable and details all
credits and debits applied to each Receivable during the period. Dealers are
required to make principal payments on Receivables when due by check or
electronic funds transfer.
DEALER MONITORING
World Omni produces a daily accounting of the balance outstanding under
each credit line. All exposures above established credit lines require approval
by World Omni's Commercial Operations
21
Department on a monthly basis. A monthly status report is provided to World Omni
senior management. This report is an all-inclusive summary of the monthly and
ongoing developments relating to Dealer credits. A review of all existing credit
lines (the "FINANCIAL STATEMENT REVIEW") is completed at least once a year and
is not limited to financial statement and ratio analysis, but is designed to
provide an overview of the entire operation as it relates to World Omni. A
security interest search is conducted on an annual basis in conjunction with the
formal review of the Dealer to ensure that there are no conflicts with World
Omni's security interests.
The Commercial Operations Department follows a procedure (the "BOOK
REVIEW") to verify the validity of new Dealer financial statements. It is World
Omni's intention to complete a Book Review with most new Dealers. The process
mirrors the Financial Statement Review, but includes an actual review and
verification of the Dealer's records. Upon completion, the results are discussed
with the Dealer principals and guarantors. Any deficiencies are addressed and
action plans implemented with a timetable for resolution.
Wholesale floor plan audits are completed at least once per quarter at all
Dealers and in most cases monthly, based on the Dealer risk profile and the
prior audit experience of the Dealer. The audit includes a physical verification
of every floor planned Vehicle and, if a Vehicle cannot be located, the related
manufacturer's statement of origin or title.
World Omni's extensive Dealer monitoring process is designed to provide an
early indication of a problem. The daily reporting of Dealer exposures and
Dealer payments is intended to provide the Commercial Operations Department with
early warning signs of potential problems.
If the results of the Dealer monitoring process show that a particular
Dealer is suffering financial difficulties, World Omni's Commercial Operations
Department will closely monitor the Dealer while working with the Dealer to
improve its financial condition. Floor plan audit frequency may be increased and
a Book Review may be performed with the results being discussed with the Dealer
and principals or guarantors. Operating trends are generally reviewed, including
the Dealer's cash and net working capital position. Finally, a meeting may be
held between World Omni and the Dealer resulting in the implementation of a plan
of action and a corresponding timetable in which the plan is to be completed.
These risk management procedures could also be activated in the event a routine
audit reveals a shortage in a Dealer's Vehicle inventory, a Dealer check is
returned for which there are insufficient funds or a Dealer specifically
requests assistance. Dealers who demonstrate these or other problems may be
placed on finance hold, which would result in approval on a per unit basis or
cash-on-delivery terms. World Omni also works to protect the dealership by
providing auditing advice, cash flow management and credit relationship
assistance in order to maintain the value of the dealership as an ongoing
entity. However, further deterioration may result in the seizure and liquidation
of Vehicle inventory. The Wholesale Portfolio, and those Receivables arising
from the Portfolio which are transferred to the Trust, may sometimes include
Receivables arising in Accounts with Dealers which were previously placed by
World Omni on finance hold or which were otherwise non-performing for a period
of time.
If World Omni's review reveals that a Dealer has diverted proceeds from
Vehicle sales due to World Omni to other uses, the Commercial Operations
Department suspends the Dealer's credit lines and sends a demand for payment of
the delinquent obligation. Southeast Toyota Distributors and the Dealer's non-
Toyota manufacturers will be informed by World Omni of the change in status.
Cash-on-delivery terms may be approved depending on the severity of the
situation. At this point a demand may also be made on the guarantor(s).
22
If after exhausting all possible options, the Dealer is unable to pay
amounts owed to World Omni, World Omni may terminate the dealer financing
agreement in accordance with its terms and applicable state law. Generally, in
these circumstances the Dealer's new Vehicle inventory will be resold to the
manufacturer, which generally pays the repurchase price to World Omni for credit
against the aggregate amount of outstanding Receivables owed by the Dealer to
World Omni. If the Dealer resists termination, World Omni will declare the
Dealer in default of its obligations, demand payment in full of its Dealer Note
and all Receivables created thereunder and foreclose on its collateral by taking
possession of the Dealer's Vehicle inventory, and any other Collateral Security.
If necessary, World Omni may also obtain a court order requiring foreclosure.
Used Vehicles are auctioned off to the highest bidder. All proceeds are applied
against the relevant Dealer liabilities. World Omni will generally pursue any
uncollected amounts from the Dealer's guarantors. Once World Omni has commenced
liquidation, it writes off any amounts it determines are uncollectible. During
the course of a liquidation, World Omni may recognize additional losses or
recoveries.
INTERCREDITOR AGREEMENT FOR SECURITY INTERESTS IN VEHICLES AND NON-VEHICLE
COLLATERAL SECURITY
As stated above, the agreements constituting the financing arrangements,
including the Accounts, provide for a security interest in the Vehicles in favor
of World Omni, which security interest World Omni represents is a first priority
security interest. The security interests in the Vehicles in favor of World Omni
have been assigned by World Omni to the Transferor pursuant to the Receivables
Purchase Agreement and then by the Transferor to the Trust pursuant to the Trust
Sale and Servicing Agreement. In its other lending activities, World Omni may
have made capital loans, real estate loans or other advances to Dealers that are
also secured by a security interest in the Vehicles. In these instances, World
Omni has agreed in the Receivables Purchase Agreement not to exercise its
security interest in any Vehicle until the Trust shall have been paid in full in
respect of the Receivables secured by the Trust's security interest in that
Vehicle. In addition, in connection with other loans or advances made by World
Omni to a Dealer, World Omni may also have a security interest in Collateral
Security other than a Vehicle ("NON-VEHICLE COLLATERAL SECURITY"), such as
personal guarantees, if any, securing the amounts owed by the Dealer. In these
cases, World Omni, in its sole discretion, may realize on the Non-Vehicle
Collateral Security for its own benefit in respect of its loans or advances
before the Trust is permitted to realize upon the Non-Vehicle Collateral
Security. Because of the subordinate position of the Trust in respect of
Non-Vehicle Collateral Security, there is no assurance that the Trust will
realize any proceeds in respect of any Non-Vehicle Collateral Security.
RELATIONSHIP WITH AFFILIATES
In July 1995, World Omni and its insurance and warranty affiliates
instituted a program (the "SUPERWRAP PROGRAM") to encourage Southeast Toyota
Dealers who finance floor plan vehicles with World Omni to purchase other
financial products sold by World Omni and its insurance and warranty affiliates,
and to remain competitive with other automotive finance companies. Under the
SuperWRAP Program, World Omni and its affiliates pay participating Dealers
specified amounts based on a pricing grid, and these payments are assigned by
the Dealers to World Omni and applied automatically by World Omni to reduce
interest payments on the Receivables. The Dealers remain obligated to pay the
full interest payments on the Receivable in the event World Omni or its
affiliates fail to make the SuperWRAP Program payments to the Dealers. All
Southeast Toyota Distributors Dealers who have floor plan accounts with World
Omni are eligible to participate under the SuperWRAP Program. Approximately
$882,136, $2,095,805, $1,849,843, and $691,538 in payments were made by World
Omni and its affiliates to Dealers under the SuperWRAP Program for the six
months ended June 30, 1999, and the years ended December 31, 1998, 1997, and
1996, respectively.
23
THE ACCOUNTS
The Receivables arise in the Accounts. The Accounts have been selected
from all the accounts in World Omni's portfolio that were Eligible Accounts at
the time of selection (the "WHOLESALE PORTFOLIO"). Commercial finance
receivables similar to the current Accounts which meet the criteria set forth in
the Trust Sale and Servicing Agreement may be added to the Trust in the future
(the existing Accounts and the additional accounts, the "ELIGIBLE PORTFOLIO").
In order to be included in the Eligible Portfolio, each Account must be an
account established by World Omni in the ordinary course of business and meet
the other criteria provided in the Trust Sale and Servicing Agreement. See "THE
TRANSFER AND SERVICING AGREEMENTS - REPRESENTATIONS AND WARRANTIES BY
TRANSFEROR." World Omni may at anytime and without notice or consent of any
third party modify the rates being charged Dealers under the floor plan
financing agreements.
Under the Trust Sale and Servicing Agreement, the Transferor has the right
and, in some circumstances, is obligated, subject to the limitations and
conditions, if any, in its other financing arrangements and agreements to
designate additional qualifying Accounts to be included as Accounts. It may also
sell to the Transferor, in the case of World Omni, and convey to the Trust, in
the case of the Transferor, the Receivables of the Additional Accounts,
including Receivables created from the Additional Accounts. These accounts must
meet the eligibility criteria set forth above as of the date the accounts are
designated as Additional Accounts. World Omni will generally sell to the
Transferor the Receivables then existing or thereafter created under the
Additional Accounts, and the Transferor will in turn convey them to the Trust.
See "THE TRANSFER AND SERVICING AGREEMENTS - ADDITION OF ACCOUNTS." In addition,
as of any Additional Cut-Off Date in respect of Additional Accounts and the date
any new Receivables are generated, World Omni will represent and warrant to the
Transferor, and the Transferor will represent and warrant to the Trust, that the
Receivables meet the eligibility requirements set forth in the Trust Sale and
Servicing Agreement. See "THE TRANSFER AND SERVICING AGREEMENTS - CONVEYANCE OF
RECEIVABLES AND RELATED SECURITY." Under the circumstances specified in the
Trust Sale and Servicing Agreement, the Transferor has the right to remove
Accounts, and the Receivables arising from the Accounts, from the Trust. See
"THE TRANSFER AND SERVICING AGREEMENTS - REMOVAL OF ACCOUNTS." Throughout the
term of the Trust, the Accounts from which the Receivables arise will be the
same Accounts transferred by the Transferor on the Closing Date plus any
Additional Accounts, minus any Accounts removed from the Trust.
Information regarding the Accounts will be set forth in the prospectus
supplement.
THE NOTES
GENERAL
The Notes may be issued in one or more series, each series with one or
more classes. Each series of Notes will be issued pursuant to the terms of an
Indenture (the "INDENTURE") and a Series Supplement to the Indenture for that
series (each, a "SERIES SUPPLEMENT"), each between the Trust and
, as Indenture Trustee. Forms of the Indenture and the Series
Supplement have been filed as exhibits to the registration statement of which
this prospectus forms a part. The Transferor will provide a copy of the
Indenture and relevant Series Supplement (each without exhibits) upon request of
a Noteholder. The following summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all of the
provisions of the Notes, the Indenture and the applicable Series
24
Supplement. Where particular provisions or terms used in the Indenture or a
Series Supplement are referred to, the actual provisions, including definition
of terms, are incorporated by reference as part of this summary.
The Notes of each series will evidence obligations of the Trust secured by
the assets of the Trust allocated to the Noteholders' Interest of that series
and will represent the right to receive from those assets funds up to the
amounts required to make payments of interest on and principal of the Notes of
that series as described in the related prospectus supplement. Principal and
interest on the Notes will generally be paid on the day of the month (each,
a "PAYMENT DATE") as set forth in the related prospectus supplement. A portion
of the Certificateholder's Interest will be subordinated to the Noteholders'
Interest of each series to the extent described in the related prospectus
supplement.
Each series of Notes will initially be represented by one or more Notes
registered in the name of the nominee of DTC (together with any successor
depository selected by the Trust, the "DEPOSITORY") in the United States, or
Cedelbank or Euroclear in Europe, except as set forth below. Notes will be
available for purchase in denominations of $1,000 and integral multiples thereof
in book-entry form only. The Transferor has been informed by DTC that DTC's
nominee will be Cede & Co. Accordingly, Cede & Co.
is expected to be the holder of record (the "NOTEHOLDER") of the Notes.
Unless and until Definitive Notes are issued under the limited
circumstances described in this prospectus or in the related prospectus
supplement, no Noteholder will be entitled to receive a physical certificate
representing a Note. All references herein to actions by Noteholders refer to
actions taken by DTC upon instructions from its participants. All references
herein to distributions, notices, reports and statements to Noteholders refer to
distributions, notices, reports and statements to DTC or Cede & Co., as the
registered holder of the Notes, as the case may be, for distribution to
Noteholders in accordance with DTC's procedures. See " - BOOK-ENTRY
REGISTRATION" and " - DEFINITIVE NOTES."
INTEREST
Interest on the principal balance of the Notes of a series or class will
accrue at the rate specified in or determined in the manner specified in the
related prospectus supplement. Interest will be payable to the Noteholders of a
series or class as and on the dates specified in the related prospectus
supplement ("INTEREST PAYMENT DATES"). The prospectus supplement for a series or
class of Notes may provide that the interest rate and the Interest Payment Dates
applicable to each Note of that series or class may be subject to adjustment
from time to time, including as a result of a decline in the interest rate of
the Receivables.
Interest Collections and other amounts allocable to the Noteholders'
Interest of a series of Notes generally will be used to make interest payments
to Noteholders of that series on each Interest Payment Date, provided, however,
if Interest Payment Dates occur less frequently than monthly, during an Early
Amortization Period, interest will be distributed to the Noteholders monthly on
each Payment Date (each, a "SPECIAL PAYMENT DATE"). If the Interest Payment
Dates for a series or class of Notes occur less frequently than monthly, the
Interest Collections or other amounts allocable to that class will be deposited
in a trust account (an "INTEREST FUNDING ACCOUNT") and will be used to make
interest payments to Noteholders of that series or class on the next Interest
Payment Date. If a series has more than one class of Notes, each class may have
a separate Interest Funding Account.
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PRINCIPAL
The Notes of each series will have a revolving period during which no
principal payments are made on the Notes (the "REVOLVING PERIOD"). The Revolving
Period for a series or class will begin on the date specified in the related
prospectus supplement and end on the earlier of (a) the day immediately
preceding the Accumulation Period Commencement Date or the Principal
Commencement Date for that series and (b) the business day immediately preceding
the day on which an Early Amortization Event or an Investment Event occurs for
that series. See " - INVESTMENT EVENTS AND EARLY AMORTIZATION EVENTS" for a
discussion of the events that might lead to the early termination of the
Revolving Period and the recommencement of the Revolving Period. If a series of
Notes has more than one class, each class may have a different Revolving Period.
During the Revolving Period Principal Collections and other specified
amounts otherwise allocable to the Noteholders' Interest of that series or class
will not be paid to the Noteholders, but rather will be paid to the Transferor,
deposited to the Excess Funding Account, or allocated to the Noteholders of
another class or series.
If the principal of the Notes of a series or class is scheduled to be paid
in full on an expected date specified in the related prospectus supplement (the
"EXPECTED PAYMENT DATE"), the Notes will have an accumulation period (the
"ACCUMULATION PERIOD"). The Accumulation Period will begin at the close of
business on the date specified in or determined in the manner specified in the
related prospectus supplement and will end on the earliest of (a) the
commencement of an Investment Period for that series, (b) the commencement of an
Early Amortization Period for that series and (c) payment in full of the
outstanding principal amount of the Notes of that series.
During an Accumulation Period, Principal Collections and other specified
amounts allocable to the Noteholders' Interest of a series will be deposited
into a trust account established for the benefit of the Noteholders of that
series (a "PRINCIPAL FUNDING ACCOUNT") and used to make principal distributions
to the Noteholders of that series when due. The amount to be deposited in the
Principal Funding Account for any series of Notes on any Payment Date may, but
will not necessarily, be limited to an amount (the "CONTROLLED DEPOSIT AMOUNT")
specified in the related prospectus supplement. If a series has more than one
class of Notes, each class may have a different Accumulation Period and a
separate Principal Funding Account and Controlled Deposit Amount, and the
related prospectus supplement will describe any priorities among the classes of
a series for deposits of principal into the Principal Funding Accounts.
If the principal of the Notes of a series is scheduled to be paid in
installments commencing on a date specified in the related prospectus supplement
(the "PRINCIPAL COMMENCEMENT DATE"), the Notes will have an amortization period
(the "CONTROLLED AMORTIZATION PERIOD"). The Controlled Amortization Period will
begin at the close of business on the date specified in or determined in the
manner specified in the related prospectus supplement and will end on the
earliest of (a) the commencement of a Investment Period for that series, (b) the
commencement of an Early Amortization Period for that series and (c) payment in
full of the outstanding principal amount of the Notes of that series.
During a Controlled Amortization Period, Principal Collections and other
specified amounts allocable to the Noteholders' Interest of that series will be
used on each Payment Date to make principal distributions to any class of
Noteholders of that series then scheduled to receive distributions. The amount
to be distributed to Noteholders of any series of Notes on any Payment Date may,
but will not necessarily, be limited to an amount (the "CONTROLLED AMORTIZATION
AMOUNT") for that series specified
26
in the related prospectus supplement. If a series has more than one class of
Notes, each class may have a different Controlled Amortization Period and a
separate Controlled Amortization Amount, and the related prospectus supplement
will describe any priorities among the classes of a series for distributions.
The payment of principal of the Notes of a series or class may commence
earlier than the applicable Expected Payment Date or Principal Commencement
Date, and the final principal payment for the Notes of a series or class may be
made earlier or later than the applicable Expected Payment Date or other
expected date if an Early Amortization Event occurs for that series or class or
under the circumstances described in this prospectus or in the related
prospectus supplement.
If the related prospectus supplement so specifies, the Notes of a series
may have an investment period (the "INVESTMENT PERIOD"). The Investment Period
for a series of Notes will begin on the day (the "INVESTMENT PERIOD COMMENCEMENT
DATE") on which an investment event for that series has occurred (an "INVESTMENT
EVENT") and will end on the earliest of (a) the commencement of an Early
Amortization Period for that series, (b) the recommencement of the Revolving
Period for that series, and (c) payment of the outstanding principal amount of
the Notes of that series in full.
During the Investment Period, Principal Collections and other specified
amounts allocable to the Noteholders' Interest of that series will be deposited
on each Payment Date in a Principal Funding Account and used to make principal
distributions to the Noteholders of that series when due. The amount to be
deposited in a Principal Funding Account for any series of Notes on any Payment
Date will not be limited to any Controlled Deposit Amount or Controlled
Amortization Amount. If a series has more than one class of Notes, each class
may have a separate Principal Funding Account, and the related prospectus
supplement will describe any priorities among the classes of a series for
deposits of principal into the Principal Funding Accounts.
After the date on which the amount on deposit in the Principal Funding
Account for a series of Notes equals the outstanding principal amount of the
Notes of that series (the "FULLY FUNDED DATE"), Noteholders of that series will
no longer have any interest in the Receivables and all the representations and
covenants of the Transferor and the Servicer relating to the Receivables, as
well as other specified provisions of the Indenture, and all remedies for
breaches of those representations and warranties, will no longer accrue to the
benefit of the Noteholders of that series, in each case unless the Revolving
Period for that series recommences. In addition, upon the occurrence of the
Fully Funded Date for a series, no Interest Collections, Principal Collections,
defaulted Receivables or Miscellaneous Payments will be allocated to that series
unless the Revolving Period for that series recommences. Notwithstanding the
foregoing, when the final distribution has been made for a series of Notes or
the Fully Funded Date has occurred for a series of Notes, the Noteholders of
that series will no longer have any interest in the Receivables. See " -
TERMINATION; FULLY FUNDED DATE."
During the period beginning on the day on which an Early Amortization
Event has occurred for a series of Notes and ending on the earliest of (1) the
payment in full of the outstanding principal balance of the Notes of that
series, (2) the recommencement of the Revolving Period for that series and (3)
the Termination Date for that series (the "EARLY AMORTIZATION PERIOD"), the
Revolving Period, the Investment Period, the Controlled Amortization Period or
the Accumulation Period, as the case may be, for that series will terminate. See
" - INVESTMENT EVENTS AND EARLY AMORTIZATION EVENTS" for a description of events
that might result in the commencement of an Early Amortization Period for a
series of Noteholders.
27
During the Early Amortization Period for a series of Notes, Principal
Collections and other specified amounts allocable to the Noteholders' Interest
of that series will be distributed as principal payments to the applicable
Noteholders monthly on each Payment Date beginning with the first Special
Payment Date. During the Early Amortization Period for a series of Notes,
distributions of principal to Noteholders of that series will not be limited to
any Controlled Deposit Amount or Controlled Amortization Amount. In addition, to
the extent provided in the related Series Supplement, any funds on deposit in
the Excess Funding Account for that series and any funds on deposit in the
Principal Funding Account for that series will be paid to the Noteholders of the
relevant class or series.
Funds on deposit in any Principal Funding Account established for a class
or series of Notes will be invested in Eligible Investments and may be subject
to a guarantee or other mechanism specified in the related prospectus supplement
intended to assure a minimum rate of return on the investment of those funds. In
order to enhance the likelihood of the payment in full of the principal amount
of a series or class of Notes at the end of the related Accumulation Period,
that series or class may be subject to a maturity liquidity facility or other
similar mechanism specified in the related prospectus supplement. A maturity
liquidity facility is a financial contract that generally provides that
sufficient principal will be available to retire the Notes at a specified date.
Notes of a series or class may also be subject to purchase generally at
their respective principal amounts, in connection with a remarketing thereof if
so specified in the related prospectus supplement. A purchase of Notes of a
series or class may result in a decrease in the outstanding principal amount of
the series or class prior to the commencement of any related Controlled
Amortization Period or Early Amortization Period. The prospectus supplement for
any series of Notes subject to purchase will describe the conditions to and
procedures for any purchase. The proceeds of any purchase would be paid to the
holders of the Notes purchased.
THE INDENTURE AND THE SERIES SUPPLEMENTS
The Indenture will contain provisions that generally apply to all series
of Notes. Each Series Supplement will contain provisions that generally apply
only to the series of Notes issued under that Series Supplement.
MODIFICATION OF INDENTURE OR SERIES SUPPLEMENT WITHOUT NOTEHOLDER CONSENT.
The Trust and the Indenture Trustee may, without consent of the Noteholders,
enter into one or more supplemental indentures or amendments to any Series
Supplement for any of the following purposes:
(1) to correct or amplify the description of the collateral or add
additional collateral;
(2) to provide for the assumption of the Notes and the Indenture
obligations by a permitted successor to the Trust;
(3) to add additional covenants for the benefit of the Noteholders of
one or more series of Notes;
(4) to convey, transfer, assign, mortgage or pledge any property to
or with the Indenture Trustee;
28
(5) to cure any ambiguity or correct or supplement any provision in
the Indenture or in any Series Supplement or supplemental indenture which
may be inconsistent with any other provision of the Indenture or of any
Series Supplement or supplemental indenture;
(6) to provide for the acceptance of the appointment of a permitted
successor Indenture Trustee or to add to or change any of the provisions
of the Indenture or any Series Supplement as may be necessary and
permitted to facilitate the administration by more than one trustee;
(7) to modify, eliminate or add to the provisions of the Indenture or
any Series Supplement in order to comply with the Trust Indenture Act of
1939; and
(8) to add any provisions to change in any manner or eliminate any of
the provisions of the Indenture or modify in any manner the rights of
Noteholders under the Indenture or a Series Supplement; provided that any
action specified in this clause (8) does not adversely affect in any
material respect the interests of any Noteholder unless the Noteholder
consent is obtained as described below.
MODIFICATION OF INDENTURE OR SERIES SUPPLEMENT WITH NOTEHOLDER CONSENT.
With the consent of the holders of a majority in principal amount of the
Controlling Class of each series of Notes affected thereby, the Trust and the
Indenture Trustee may execute a supplemental indenture to add provisions to,
change in any manner or eliminate any provisions of the Indenture or a Series
Supplement, or modify in any manner the rights of the related Noteholders.
"Controlling Class" means, with respect to a series of Notes, (1) if there is
only one class of Notes in that series, all the Notes of that series, and (2) if
there is more than one class of Notes in that series, the class or classes with
the highest rating.
Without the consent of the holder of each outstanding Note affected
thereby, however, no supplemental indenture will:
(1) change the due date of any instalment of principal of or interest
on any Note or reduce the principal amount thereof, the applicable
interest rate, unless specifically permitted under the terms of the Note,
or the redemption price for a Note or change any place of payment where or
the coin or currency in which any Note or any interest thereon is payable
or modify any of the provisions of the Indenture in a manner that would
affect the calculation of the amount of any payment of interest or
principal due on any Note on any Payment Date;
(2) impair the right to institute suit for the enforcement of
specified provisions of the Indenture regarding payment;
(3) reduce the percentage of the aggregate principal amount of the
outstanding Notes the consent of the holders of which is required for any
specified supplemental indenture or the consent of the holders of which is
required for any waiver of compliance with specified provisions of the
Indenture or of specified defaults under the Indenture and their
consequences as provided for in the Indenture;
(4) modify or alter the provisions of the Indenture regarding the
voting of Notes held by the Trust, any other obligor on the Notes, the
Transferor or an affiliate of any of them;
(5) reduce the percentage of the aggregate outstanding principal
amount of the Notes the consent of the holders of which is required to
direct the Indenture Trustee to sell or liquidate the
29
Trust Estate if the proceeds of the sale would be insufficient to pay the
principal amount and accrued but unpaid interest on the outstanding Notes;
(6) decrease the percentage of the aggregate outstanding principal
amount of the Notes required to amend the sections of the Indenture which
specify the applicable percentage of aggregate outstanding principal
amount of the Notes necessary to amend the Indenture; or
(7) permit the creation of any lien ranking prior to or on a parity
with the lien of the Indenture on any part of the Trust Estate or, except
as otherwise permitted or contemplated in the Indenture, terminate the
lien of the Indenture on the Trust Estate or deprive the holder of any
Note of the security afforded by the lien of the Indenture.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT. "EVENTS OF DEFAULT" for
a series of Notes under the applicable Series Supplement will consist of:
(1) any failure to pay interest on the related Notes as and when the
same becomes due and payable, which failure continues unremedied for
days;
(2) any failure to make any required payment of principal on the
related Notes, which failure continues unremedied for days;
(3) any failure to observe or perform in any material respect any
other covenants or agreements in the Indenture, which failure materially
and adversely affects the rights of related Noteholders, and which failure
in either case continues for 30 days after the giving of written notice of
the failure (a) to the Trust and the Transferor (or the Servicer, as
applicable) by the Indenture Trustee or (b) to the Trust, the Transferor
(or the Servicer, as applicable) and the Indenture Trustee by the holders
of not less than 25% of the principal amount of the related Notes;
(4) failure to pay the unpaid principal balance of any series or
class of Notes by the final payment date for that series or class, if any,
set forth in the prospectus supplement for that series; and
(5) specified events of bankruptcy, insolvency or receivership
relating to the Trust.
The amount of principal required to be paid to Noteholders under the
Indenture will generally be limited to amounts available to be deposited in the
Note Distribution Account. Therefore, the failure to pay principal on a series
or class of Notes generally will not result in the occurrence of an Event of
Default until the applicable final payment date, if any, for that series or
class.
If an Event of Default should occur and be continuing with respect to any
series of Notes, the Indenture Trustee or the holders of a majority in principal
amount then outstanding of the Controlling Class for that series, may declare
the principal of those Notes to be immediately due and payable. This declaration
will constitute an Early Amortization Event for that series and may, under
specified circumstances, be rescinded by the holders of a majority in principal
amount of the Controlling Class. See " -- INVESTMENT EVENTS AND EARLY
AMORTIZATION EVENTS."
If the Notes of any series are declared due and payable following an Event
of Default with respect to that series, the Indenture Trustee may institute
proceedings to:
30
(1) collect amounts due or foreclose on Trust property,
(2) exercise remedies as a secured party,
(3) sell the portions of the related Trust Estate allocated to that
series, or
(4) elect to have the Trust maintain possession of the portions of
the Trust Estate allocated to that series and continue to apply
Collections as if there had been no declaration of acceleration (although
the Early Amortization Period commenced by that declaration will continue
unless the declaration is rescinded).
The Indenture Trustee, however, is prohibited from selling any Receivables held
by the Trust following an Event of Default, unless:
(1) the holders of all the outstanding Notes consent to the sale,
(2) the proceeds of the sale are sufficient to pay in full the
principal of and the accrued interest on the outstanding Notes at the date
of the sale, or
(3) in specified cases, the Indenture Trustee determines that the
Trust Estate would not provide sufficient funds on an ongoing basis to
make all payments on the Notes as those payments would have become due if
the Notes had not been declared due and payable, and the Indenture Trustee
obtains the consent of the holders of a majority of the aggregate
outstanding principal amount of the Controlling Class of each series of
the Notes.
Following a declaration that the Notes of any series are immediately due and
payable,
(1) Noteholders will be entitled to pro rata repayment of principal
on the basis of their respective unpaid principal balances, and
(2) repayment in full of the accrued interest on and unpaid principal
balances of the Notes of that series will be made prior to any further
distribution on the subordinated portion of the Certificates.
Subject to the provisions of the Indenture regarding the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with respect
to the Notes of any series or class, the Indenture Trustee will be under no
obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the holders of the Notes, if the Indenture
Trustee reasonably believes it will not be adequately indemnified against the
costs, expenses and liabilities which might be incurred by it in complying with
that request. Subject to the provisions for indemnification and limitations
specified in the Indenture, the holders of a majority in aggregate principal
amount of the outstanding Notes of the Controlling Class of a series will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Indenture Trustee for that series. The holders of a
majority in aggregate principal amount then outstanding of the Controlling
Class, may, in specified cases, waive any default with respect to that series,
except a default in the payment of principal or interest or a default in respect
of a covenant or provision of the Indenture or the applicable Series Supplement
that cannot be modified without the waiver or consent of all of the holders of
the Notes of that series.
31
No holder of a Note of any series will have the right to institute any
proceeding under the Indenture, unless:
(1) the holder's Note is in the Controlling Class,
(2) the holder previously has given to the Indenture Trustee written
notice of a continuing Event of Default,
(3) the holders of not less than 25% in aggregate principal amount of
the outstanding Notes of the Controlling Class, have made written request
of the Indenture Trustee to institute a proceeding in its own name as
Indenture Trustee,
(4) the holder or holders have offered the Indenture Trustee
reasonable indemnity,
(5) the Indenture Trustee has for 60 days failed to institute a
proceeding, and
(6) no direction inconsistent with the written request has been given
to the Indenture Trustee during the 60-day period by the holders of a
majority in aggregate outstanding principal amount of the Controlling
Class.
If an Event of Default occurs and is continuing with respect to any series
of Notes and if it is known to the Indenture Trustee, the Indenture Trustee will
mail notice of the Event of Default to each Noteholder of that series within 90
days after it occurs. Except in the case of a failure to make any required
payment of principal or interest on any Note, the Indenture Trustee may withhold
the notice beyond the 90 day period if and so long as it determines in good
faith that withholding the notice is in the interests of the Noteholders of the
related series.
In addition, the Indenture Trustee and each Noteholder and Note Owner, by
accepting a Note (or interest of a Note), will covenant that they will not, for
a period of one year and one day after the termination of the Indenture,
institute against the Trust or Transferor any bankruptcy, reorganization or
other proceeding under any federal or state bankruptcy or similar law.
Neither the Indenture Trustee in its individual capacity nor the Owner
Trustee in its individual capacity, nor any holder of a Certificate, including
the Transferor, nor any of their respective owners, beneficiaries, agents,
officers, directors, employees, affiliates, successors or assigns will, in the
absence of an express agreement to the contrary, be personally liable for the
payment of the principal of or interest on the Notes or for the agreements of
the Trust contained in the Indenture or in any Series Supplement.
CERTAIN COVENANTS. The Indenture provides that the Trust may not
consolidate with or merge into any other entity, unless, among other things:
(1) the entity formed by or surviving the merger or the consolidation
is organized under the laws of the United States, any state or the
District of Columbia,
(2) the entity expressly assumes the Trust's obligation to make due
and punctual payments on the Notes and the performance or observance of
every agreement and covenant of the Trust under the Indenture and each
Series Supplement,
32
(3) no Event of Default shall have occurred and be continuing
immediately after the merger or consolidation,
(4) the Trust has been advised that the ratings of the Notes would
not be reduced or withdrawn by any nationally recognized rating agency
designated by the Transferor in the related Series Supplement or otherwise
then rating the Notes of that series (each a "RATING AGENCY" and,
together, the "RATING AGENCIES") as a result of the merger or
consolidation, and
(5) the Trust has received an opinion of counsel to the effect that
the merger or consolidation would not have material adverse tax
consequences to the Trust or to any holder of Notes.
The Trust will not, among other things, except as expressly permitted by
the Indenture, the Series Supplements, the Transfer and Servicing Agreements or
the Trust Sale and Servicing Agreement (collectively, the "RELATED DOCUMENTS"),
(1) sell, transfer, exchange or otherwise dispose of any of the
assets of the Trust,
(2) claim any credit on or make any deduction from the principal or
interest payable in respect of the Notes (other than amounts withheld
under the U.S. Internal Revenue Code or applicable state law) or assert
any claim against any present or former holder of the Notes because of the
payment of taxes levied or assessed upon the Trust,
(3) dissolve or liquidate in whole or in part,
(4) permit the validity or effectiveness of the Indenture to be
impaired or permit any person to be released from any covenants or
obligations with respect to the Notes under the Indenture except as may be
expressly permitted thereby, or
(5) permit any lien, charge, excise, claim, security interest,
mortgage or other encumbrance to be created on or extend to or otherwise
arise upon or burden the Trust Estate or any part thereof, or any interest
therein or the proceeds thereof.
Except as specified in the related prospectus supplement, the Trust may
not engage in any activity other than as described above under "THE TRUST." The
Trust will not incur, assume or guarantee any indebtedness other than
indebtedness incurred pursuant to the Notes, the Indenture, or otherwise in
accordance with the Transfer and Servicing Agreements.
ANNUAL COMPLIANCE STATEMENT. The Trust will be required to file annually
with the Indenture Trustee a written statement as to the fulfillment of its
obligations under the Indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT. The Indenture Trustee will be required
to mail each year to all Noteholders, to the extent required under the Trust
Indenture Act of 1939, a brief report relating to:
(1) its eligibility and qualification to continue as Indenture
Trustee under the Indenture,
(2) any amounts advanced by it under the Indenture,
(3) the amount, interest rate and maturity date of specified
indebtedness owing by the Trust to the Indenture Trustee in its individual
capacity,
33
(4) the property and funds physically held by the Indenture Trustee
as trustee, and
(5) any action taken by it that materially affects the Notes and that
has not been previously reported.
SATISFACTION AND DISCHARGE OF INDENTURE. The Indenture will be discharged
with respect to the Notes of any series upon the delivery of all the Notes of
that series to the Indenture Trustee for cancellation or upon deposit of funds
sufficient for the payment in full of all of the Notes of that series with the
Indenture Trustee.
EXCLUDED SERIES
A series of Notes may be designated as an excluded series (an "EXCLUDED
SERIES") with respect to a series of Notes previously issued by the Trust as to
which the Accumulation Period or Controlled Amortization Period has commenced
(the previously issued series being the "PAIRED SERIES").
Each Excluded Series will be prefunded with an initial deposit to a
prefunding account in an amount equal to the initial principal balance of the
Excluded Series and primarily from the proceeds of the offering of the Excluded
Series. The prefunding account will be held for the benefit of the Excluded
Series and not for the benefit of the Paired Series. As funds are accumulated in
the Principal Funding Account for the Paired Series or are distributed to
holders of Notes of the Paired Series, an equal amount of funds on deposit in
any prefunding account for the prefunded Excluded Series will be released (which
funds will be distributed to the Transferor). Until payment in full of the
Paired Series, no Interest Collections, Principal Collections, Defaulted Amounts
or Miscellaneous Payments will be allocated to the Excluded Series. In addition,
it is expected that any Excluded Series will be excluded from the calculation of
the Required Participation Amount as described under "THE TRANSFER AND SERVICING
AGREEMENTS - ADDITION OF ACCOUNTS."
COLLECTION ACCOUNT
The Servicer has established and will maintain an Eligible Deposit Account
for the benefit of the Noteholders in the name of the Indenture Trustee (the
"COLLECTION ACCOUNT") into which the Servicer will deposit collections as
described in " - ALLOCATION OF COLLECTIONS; DEPOSITS IN COLLECTION ACCOUNT."
"ELIGIBLE DEPOSIT ACCOUNT" means either
(a) a segregated account with an Eligible Institution or
(b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of
the United States or any one of the states thereof (or any domestic
branch of a foreign bank), having corporate trust powers and acting
as trustee for funds deposited in the account, so long as any of the
securities of the depository institution has a credit rating from
each Rating Agency in one of its generic rating categories which
signifies investment grade.
"ELIGIBLE INSTITUTION" means
(a) the corporate trust department of the Indenture Trustee or
34
(b) a depository institution organized under the laws of the
United States or any one of the states thereof, or the District of
Columbia (or a domestic branch of a foreign bank), which at all
times:
(1) has either:
(x) a long-term unsecured debt rating of A2 or better
by Moody's Investors Service, Inc. ("MOODY'S") and of AAA
or better by Standard & Poor's Ratings Services ("STANDARD
& POOR'S") or
(y) a certificate of deposit rating of P-1 by
Moody's or A-1 by Standard & Poor's
and
2) is a member of the Federal Deposit Insurance
Corporation.
Funds in the Collection Account generally will be invested in Eligible
Investments.
"ELIGIBLE INVESTMENTS" means any of the following, in each case with a
remaining term of no more than one year:
(a) direct obligations of, and obligations guaranteed as to full and
timely payment by, the United States or any agency or instrumentality of the
United States the obligations of which are backed by the full faith and credit
of the United States (other than the Government National Mortgage Association);
(b) direct obligations of, or obligations fully guaranteed by, the
Federal National Mortgage Association or any state then rated with the highest
available credit rating of the Rating Agencies for such obligations; the
obligations must also be, at the time of investment, otherwise acceptable to
each Rating Agency;
(c) certificates of deposit, demand or time deposits of, bankers'
acceptances issued by, or federal funds sold by any depository institution or
trust company, including the Indenture Trustee, incorporated under the laws of
the United States or any state and subject to supervision by federal and/or
state banking authorities, and whose deposits are fully insured by the Federal
Deposit Insurance Corporation, so long as at the time of the investment either
such depository institution or trust company has the Required Rating or the
Indenture Trustee shall have received a letter from each Rating Agency to the
effect that such investment would not result in the qualification, downgrading
or withdrawal of the ratings then assigned to the Rated Securities;
(d) repurchase obligations held by the Indenture Trustee that are
acceptable to the Indenture Trustee for any security described in clause (a)
above or (f) below, or any other security issued or guaranteed by any agency or
instrumentality of the United States, in either case entered into with a federal
agency or depository institution or trust company, including the Indenture
Trustee, acting as principal, whose obligations, if they had the same maturity
as a repurchase agreement, would be Eligible Investments under clause (b) or (c)
above; however, the repurchase obligations entered into with any particular
depository institution or trust company, including the Indenture Trustee, will
not be Eligible Investments to the extent that the aggregate principal amount of
such repurchase obligations with such
35
depository institution or trust company held by the Indenture Trustee on behalf
of the Trust exceeds 10% of either the aggregate net investment value or the
aggregate unpaid principal balance or face amount, of all Eligible Investments
held by the Indenture Trustee for the Trust;
(e) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any State so
long as at the time of such investment either the long-term, unsecured debt of
such corporation has the highest available rating from the Rating Agencies or
the Indenture Trustee shall have received a letter from each Rating Agency
stating that the investment would not result in the qualification, downgrading
or withdrawal of the ratings then assigned to any Rated Securities, or
commercial paper or other short-term debt having the Required Rating; however,
any such commercial paper or other short-term debt may have a remaining term to
maturity of no longer than 30 days after the date of such investment, and
securities issued by any particular corporation will not be Eligible Investments
to the extent that the investment will cause the then outstanding principal
amount or face amount, of securities issued by such corporation and held by the
Indenture Trustee on behalf of the Trust to exceed 10% of either the aggregate
net investment value or the aggregate unpaid principal balance or face amount of
all Eligible Investments held by the Indenture Trustee for the Trust;
(f) interests in any open-end or close-end management type investment
company or investment trust registered under the Investment Company Act, whose
portfolio is limited to the obligations of, or guaranteed by, the United States
and to agreements to repurchase such obligations, which agreements, for
principal and interest, are at least 100% collateralized by such obligations
marked to market on a daily basis and the investment company or investment trust
shall take delivery of such obligations either directly or through an
independent custodian designated in accordance with the Investment Company Act
and acceptable to each Rating Agency, as approved in writing by each Rating
Agency, as collateral for securities having ratings equivalent to the ratings of
the Rated Securities on the closing date;
(g) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation, as approved in writing by each Rating Agency, as
will not result in the qualification, downgrading or withdrawal of the ratings
then assigned to the Rated Securities by each Rating Agency;
(h) investments in Eligible Investments maintained in "sweep
accounts," short-term asset management accounts and the like utilized for the
investment, on an overnight basis, of residual balances in investment accounts
maintained at the Indenture Trustee or any other depository institution or trust
company organized under the laws of the United States or any state that is a
member of the Federal Deposit Insurance Corporation, the short-term debt of
which has the highest available credit rating of the Rating Agencies;
(i) guaranteed investment contracts entered into with any financial
institution having a final maturity of not more than one month from the date of
acquisition, the short-term debt securities of which institution have the
Required Rating;
(j) funds classified as money market funds or invested in money
market instruments consisting of: U.S. Treasury bills, other obligations issued
or guaranteed by the U.S. government, its agencies or instrumentalities;
certificates of deposit; banker's acceptances; and commercial paper (including
variable master demand notes); PROVIDED, HOWEVER, that the fund or the
investment in the fund shall be rated with the highest available credit rating
of Moody's and Standard & Poor's and redemptions shall be permitted on a daily
or next business day basis; and
36
(k) other investments acceptable to each Rating Agency, as approved
in writing by each Rating Agency, as will not result in the qualification,
downgrading or withdrawal of the ratings then assigned to any Rated Securities
by such Rating Agency.
Notwithstanding anything to the contrary contained in the foregoing
definition:
(a) no Eligible Investment may be purchased at a premium;
(b) any of the foregoing which constitutes a certificated security
shall not be considered a Eligible Investment unless
(1) in the case of a certificated security that is in bearer
form, the Indenture Trustee acquires physical possession of such
certificated security, or a person, other than a securities
intermediary, acquires possession of such certificated security on
behalf of the Indenture Trustee; and
(2) in the case of a certificated security that is in registered
form,
(A) the Indenture Trustee acquires physical
possession of the certificated security, a person, other
than a securities intermediary, acquires possession of the
certificated security for the Indenture Trustee, or a
securities intermediary acting for the Indenture Trustee
acquires possession of the certificated security and the
certificated security has been specially indorsed to the
Indenture Trustee, and
(B) the certificated security is indorsed to the
Indenture Trustee or in blank by an effective Indorsement,
or the certificated security is registered in the name of
the Indenture Trustee;
(c) any of the foregoing that constitutes an uncertificated security
shall not be considered an Eligible Investment unless
(1) the Indenture Trustee is registered by the issuer as the
owner of the Eligible Investment,
(2) a person, other than a securities intermediary, becomes the
registered owner of the uncertificated security on behalf of the
Indenture Trustee, or
(3) the issuer of the uncertificated security agrees that it
will comply with the instructions originated by the Indenture Trustee
without further consent by any registered owner of the uncertificated
security;
(d) any of the foregoing that constitutes a security entitlement
shall not be considered an Eligible Investment unless the Indenture Trustee
becomes the entitlement holder thereof, or the securities intermediary has
agreed to comply with the entitlement orders originated by the Indenture Trustee
without further consent by the entitlement holder; and
(e) any of the foregoing shall not constitute an Eligible Investment
unless the Indenture Trustee has given value, and does not have notice of a
materially adverse claim.
37
For purposes of this definition, any reference to the highest
available credit rating of an obligation shall mean the highest available credit
rating for such obligation (excluding any "+" signs associated with such
rating), or such lower credit rating (as approved in writing by each Rating
Agency) as will not result in the qualification, downgrading or withdrawal of
the rating then assigned to any Rated Securities by such Rating Agency.
"RATED SECURITIES" means each class of securities that has been rated
by a Rating Agency at the request of the Transferor.
"REQUIRED RATING" means a rating on commercial paper or other short
term unsecured debt obligations of Prime-1 by Moody's so long as Moody's is a
Rating Agency and A-1 by Standard & Poor's so long as Standard & Poor's is a
Rating Agency; and any requirement that deposits or debt obligations have the
"Required Rating" shall mean that such deposits or debt obligations have the
foregoing required ratings from Moody's and Standard & Poor's.
Any earnings (net of losses and investment expenses) on funds in the
Collection Account will be credited to the Collection Account. The Servicer will
have the revocable power to instruct the Indenture Trustee to make withdrawals
and payments from the Collection Account for the purpose of carrying out its
duties under the Indenture. The Servicer may select an appropriate agent as
representative of the Servicer for the purpose of designating investments.
EXCESS FUNDING ACCOUNT
The prospectus supplement relating to a series of Notes may provide that
the proceeds of the issuance of the Notes of the series not invested in
Receivables (the "EXCESS FUNDED AMOUNT"), if any, will be maintained in a trust
account to be established with the Indenture Trustee for the benefit of that
series of Notes (an "EXCESS FUNDING ACCOUNT"). The Excess Funded Amount will
initially equal the excess, if any, of the initial principal balance of the
Notes of that series over the Initial Invested Amount of that series. Funds on
deposit in the Excess Funding Account for a series of Notes will be invested by
the Indenture Trustee at the direction of the Servicer generally in Eligible
Investments. The investments must mature on or prior to the next Payment Date.
The Servicer may select an appropriate agent as representative of the Servicer
for the purpose of designating the investments.
Funds on deposit in the Excess Funding Account for a series of Notes will
be withdrawn and paid to the Transferor or allocated to one or more other series
of Notes which are in Controlled Amortization, Early Amortization, Investment or
Accumulation Periods to the extent of any increases in the Invested Amount of
the series in question as a result of the addition of Receivables to the Trust,
a reduction in the Certificateholder's Interest, or a reduction in the Initial
Invested Amount of any other series. Additional amounts will be deposited in the
Excess Funding Account for a series of Notes on a Payment Date to the extent
that the sum of the Noteholders' Interest of the series in the principal balance
of the Receivables and the amount on deposit in the Excess Funding Account, if
any, for that series prior to the deposit on that Payment Date is less than the
outstanding principal balance of the Notes of the series, but only to the extent
that funds are available therefor as provided in the related Series Supplement.
The allocation of additional Receivables to increase the Invested Amount of each
series of Notes that provides for an Excess Funding Account or similar
arrangement involving fluctuating levels of investment in the Receivables will
generally be based on the proportion that the amount on deposit in the Excess
Funding Account for that series bears to the amounts on deposit in the Excess
Funding Accounts of all series providing for Excess Funding Accounts or similar
arrangements or to amounts otherwise similarly available; and the deposit of
amounts in the Excess Funding Accounts for each series will be based on the
38
proportion that the Adjusted Invested Amount of that series bears to the
Adjusted Invested Amounts of all series providing for Excess Funding Accounts or
similar arrangements.
On each Payment Date, all investment income earned on amounts in the
Excess Funding Account for any series of Notes since the preceding Payment Date
will be withdrawn from the Excess Funding Account and applied as described in
this prospectus and in the related prospectus supplement.
Funds on deposit in the Excess Funding Account for a series of Notes will
be distributed to the Noteholders of the related series or class or deposited in
the Principal Funding Account for that series or class as provided in the
related Series Supplement on the earliest of:
(1) the commencement of an Investment Period for that series,
(2) the commencement of an Early Amortization Period for that series
and
(3) the Payment Date or Payment Dates specified in or determined in
the manner provided in the Series Supplement for that series
Generally, no funds will be deposited in the Excess Funding Account for a series
of Notes during an Early Amortization Period or Investment Period for that
series or for any Collection Period following the Collection Period specified in
or determined in the manner provided in the Series Supplement for that series.
ALLOCATION PERCENTAGES
ALLOCATIONS AMONG SERIES. Pursuant to the Indenture, during each
Collection Period the Servicer will allocate to each outstanding series its
share of Interest Collections, Principal Collections, Defaulted Receivables and
Miscellaneous Payments based on the applicable Series Allocable Interest
Collections, Series Allocable Principal Collections, Series Allocable Defaulted
Amount and Series Allocable Miscellaneous Payments.
"SERIES ALLOCABLE INTEREST COLLECTIONS," "SERIES ALLOCABLE PRINCIPAL
COLLECTIONS," "SERIES ALLOCABLE DEFAULTED AMOUNT" and "SERIES ALLOCABLE
MISCELLANEOUS PAYMENTS" mean, for any series for any Collection Period,
the product of the Series Allocation Percentage for that series and the
amount of Interest Collections and Principal Collections, the Defaulted
Amount and Miscellaneous Payments, respectively, for the Collection
Period.
"MISCELLANEOUS PAYMENTS" for any Collection Period means the sum of
(a) Adjustment Payments and Transfer Deposit Amounts received for the
Collection Period and (b) Unallocated Principal Collections on the Payment
Date available to be treated as Miscellaneous Payments as described below
under " - PRINCIPAL COLLECTIONS FOR ALL SERIES."
"SERIES ALLOCATION PERCENTAGE" means, for a series for any Collection
Period, the percentage equivalent of a fraction, the numerator of which is
the Adjusted Invested Amount of that series as of the last day of the
immediately preceding Collection Period and the denominator of which is
the Trust Adjusted Invested Amount as of the last day.
"ADJUSTED INVESTED AMOUNT" means, for a series for any date, an
amount equal to the sum of (a) the Initial Invested Amount of that series,
minus the amount of unreimbursed receivable charge-
39
offs for that series as specified in the related prospectus supplement
("INVESTOR CHARGE-OFFS") and (b) the Available Subordinated Amount for
that series (after giving effect to the allocations, distributions,
withdrawals and deposits to be made on the Payment Date during the
Collection Period in which that date occurs).
"TRUST ADJUSTED INVESTED AMOUNT" means, for any Collection Period,
the sum of the Adjusted Invested Amounts for all outstanding series.
"INITIAL INVESTED AMOUNT" means, for any series and for any date, the
amount specified in the related Series Supplement. The Initial Invested
Amount for any series may be increased or decreased from time to time as
specified in the related Series Supplement, including as a result of
deposits to or withdrawals from the Excess Funding Account, if any, for
that series.
ALLOCATION BETWEEN THE NOTEHOLDERS AND THE CERTIFICATEHOLDERS. The
Servicer will allocate amounts initially allocated to each series between the
Noteholders' Interest and the Certificateholder's Interest for each Collection
Period as described in the prospectus supplement for that series. If a series of
Notes consists of more than one class, the amounts allocated to the Noteholders'
Interest of that series will be further allocated between the classes as
described in the prospectus supplement for that series.
PRINCIPAL COLLECTIONS FOR ALL SERIES. Principal Collections allocated to
the Noteholders' Interest of any series, for any Collection Period for any
Accumulation Period, Controlled Amortization Period, Investment Period or Early
Amortization Period for that series or a class of that series, will first be
allocated to make required payments of principal to the Principal Funding
Account or to the Noteholders of that series or a class of that series, in each
case if and to the extent specified in the Series Supplement for that series.
The Servicer will determine the amount of available noteholder principal
collections for each series and any Collection Period remaining after the
required payments, if any ("EXCESS PRINCIPAL COLLECTIONS"). The Servicer will
allocate Excess Principal Collections to cover any principal distributions to
Noteholders of any series which are either scheduled or permitted and which have
not been covered out of Principal Collections and other specified amounts
allocated to that series ("PRINCIPAL SHORTFALLS"). Excess Principal Collections
will generally not be used to cover Investor Charge-Offs for any series. If
Principal Shortfalls exceed Excess Principal Collections for any Collection
Period, Excess Principal Collections generally will be allocated pro rata among
the applicable series based on the relative amounts of Principal Shortfalls. To
the extent that Excess Principal Collections exceed Principal Shortfalls, the
balance will be distributed to the Certificateholders in accordance with the
Trust Agreement if the Transferor's Participation Amount (determined after
giving effect to any Receivables transferred to the Trust on that date) exceeds
the Trust Available Subordinated Amount for the immediately preceding
Determination Date (after giving effect to the allocations, distributions,
withdrawals and deposits to be made on the Payment Date immediately following
that Determination Date). Any amount not allocated to the Certificateholders
because the Transferor's Participation Amount does not exceed the Trust
Available Subordinated Amount will be held unallocated ("UNALLOCATED PRINCIPAL
COLLECTIONS") until the Transferor's Participation Amount exceeds the Trust
Available Subordinated Amount, at which time such amount will be allocated to
the Certificateholders, or until an Early Amortization Period, Accumulation
Period, Controlled Amortization Period or Investment Period commences for any
series, after which such amount will be treated as a Series Allocable
Miscellaneous Payment.
40
ALLOCATION OF COLLECTIONS; DEPOSITS IN COLLECTION ACCOUNT
The Servicer, no later than two business days after the processing date,
will deposit all collections received with respect to the Receivables (excluding
portions allocable to the Transferor) in each calendar month (each, a
"COLLECTION PERIOD") into the Collection Account. Notwithstanding the foregoing
requirement for daily deposits, for so long as:
(1) World Omni remains the Servicer under the Trust Sale and
Servicing Agreement,
(2) no Servicing Default has occurred and is continuing, and
(3) (a) World Omni has and maintains a short-term debt rating of at
least A-1 by Standard & Poor's and P-1 by Moody's, (b) World Omni arranges
for and maintains a letter of credit or other form of Enhancement for the
Servicer's obligation to make deposits of collections on the Receivables
in the Collection Account that is acceptable in form and substance to each
Rating Agency or (c) World Omni otherwise obtains the Rating Agency
confirmations described below, then, subject to any limitations in the
confirmations referred to below,
World Omni need not deposit collections into the Collection Account on the day
indicated in the preceding sentence but may use for its own benefit all of those
collections until the Payment Date, at which time World Omni will make the
deposits in an amount equal to the net amount of the deposits and withdrawals
which would have been made had the conditions of this sentence not applied;
PROVIDED, HOWEVER, that prior to ceasing daily deposits as described above the
Transferor shall have delivered to the Indenture Trustee written confirmation
from the applicable Rating Agencies that the failure by World Omni to make daily
deposits will not result in a reduction or withdrawal of the rating of any
outstanding series or class of Notes. In addition, during any Collection Period
the Servicer will generally be required to deposit Interest Collections and
Principal Collections into the Collection Account only to the extent of the
distributions required to be made to Noteholders, the amounts required to be
deposited into any deposit, trust, reserve or similar account maintained for the
benefit of Noteholders of any series and other specified parties and the amounts
required to be paid to any Enhancement Provider on the Payment Date relating to
that Collection Period and if, at any time prior to that Payment Date, the
amount of collections deposited in the Collection Account exceeds the amount
required to be deposited, the Servicer will be permitted to withdraw the excess
from the Collection Account.
On any date on which collections are deposited in the Collection Account,
the Servicer will distribute to the Certificateholders in accordance with the
Trust Agreement the amount of the Interest Collections allocable to each series
specified in the related Series Supplement and described in the related
prospectus supplement if the Transferor's Participation Amount (determined after
giving effect to any Receivables transferred to the Trust on that date) exceeds
the Trust Available Subordinated Amount for the immediately preceding
Determination Date (after giving effect to the allocations, distributions,
withdrawals and deposits to be made on the Payment Date immediately following
that Determination Date). In addition, during the Revolving Period for any
series of Notes, subject to specified limitations, the Servicer will distribute
to the Certificateholders on each that date of deposit the amount of Principal
Collections allocable to each series of Notes described in the related
prospectus supplement if the Transferor's Participation Amount (determined after
giving effect to any Receivables transferred to the Trust on that date) exceeds
the Trust Available Subordinated Amount for the immediately preceding
Determination Date (after giving effect to the allocations, distributions,
withdrawals and deposits to be made on the Payment Date immediately following
that Determination Date).
41
LIMITED SUBORDINATION OF CERTIFICATEHOLDER'S INTEREST; ENHANCEMENTS.
SUBORDINATION OF CERTIFICATEHOLDER'S INTEREST. The Certificateholder's
Interest will be subordinated to the rights of Noteholders of each series of
Notes to the limited extent described in the related prospectus supplement. The
amount of the subordination for any series of Notes is referred to herein as the
"AVAILABLE SUBORDINATED AMOUNT" for that series. The Available Subordinated
Amount for any series of Notes will be subject to decrease and increase if and
to the extent described in the related prospectus supplement. The prospectus
supplement for each series of Notes will describe the manner in which
collections attributable to the Available Subordinated Amount for that series
may be drawn upon to make payments to or for the benefit of the holders of
Certificates of that series. If so provided in the related Series Supplements,
the Available Subordinated Amount for a series of Notes may be structured so as
to be available to more than one series of Notes.
ENHANCEMENTS. In addition to the subordination described above, for any
series of Notes, Enhancements may be provided for one or more classes of Notes.
Enhancements for one or more classes of a series of Notes may include a letter
of credit, surety bond, cash collateral account, spread account, guaranteed rate
agreement, swap or other interest protection agreement, repurchase obligation,
cash deposit or another form of credit enhancement described in the related
prospectus supplement or any combination of the foregoing. Enhancements may also
be provided to a series or class or classes of a series by subordination
provisions which require that distributions of principal and/or interest be made
with respect to the Notes of that series, class or classes before distributions
are made to one or more other series or classes. If so specified in the related
prospectus supplement, any form of Enhancement may be structured so as to be
available to more than one class or series to the extent described therein.
If Enhancement is provided for a series of Notes, the related prospectus
supplement will include a description of
o the amount payable under that Enhancement,
o any conditions to payment thereunder not otherwise described herein,
o the conditions under which the amount payable under that Enhancement
may be reduced and the conditions under which that Enhancement may be
terminated or replaced, and
o any material provisions of any agreement applicable relating to that
Enhancement.
Additionally, in specified cases, the related prospectus supplement may
set forth information for the applicable Enhancement Provider, including
o a brief description of its principal business activities,
o its principal place of business, place of organization and the
jurisdiction under which it is chartered or licensed to do business,
o if applicable, the identity of regulatory agencies which exercise
primary jurisdiction over the conduct of its business, and
o its total assets, and its stockholders' equity or policyholders'
surplus, if applicable, as of a date specified in the related
prospectus supplement.
42
LIMITATIONS ON SUBORDINATION AND ENHANCEMENTS. The presence of an
Available Subordinated Amount or Enhancement for a series or class of Notes is
intended to enhance the likelihood of receipt by Noteholders of that series or
class of the full amount of principal of and interest on that series or class
and to decrease the likelihood that the Noteholders will experience losses.
However, neither subordination of the Certificateholder's Interest nor the
Enhancement for that series or class will provide protection against all risks
of loss or will guarantee repayment of the entire principal balance of and
interest on the Notes. If losses occur which exceed the amount covered by the
subordination or Enhancement or which are not covered by the subordination or
Enhancement, Noteholders will bear their allocable share of deficiencies. In
addition, if specific Enhancement is provided for the benefit of more than one
class or series, Noteholders of that class or series will be subject to the risk
that the Enhancement will be exhausted by the claims of Noteholders of other
classes or series.
DISTRIBUTIONS
Payments to Noteholders of a series or a class will be made from the
Collection Account and any accounts established for the benefit of Noteholders
of that series or class as described in the related prospectus supplement.
NEW ISSUANCES
The Indenture provides that the Trust may issue additional series of Notes
pursuant to one or more Series Supplements, which shall specify, among other
things, for any series of Notes:
(1) its name or designation,
(2) its initial principal amount (or method for calculating its
initial principal amount),
(3) its interest rate (or the method for determining its interest
rate),
(4) a date on which it will begin its Accumulation Period or
Controlled Amortization Period, if any,
(5) the method for allocating principal and interest to the
Noteholders of that series,
(6) the percentage used to calculate monthly servicing fees,
(7) the issuer and terms of any Enhancement for that series or the
level of subordination provided by the Certificateholder's Interest,
(8) the terms on which the Notes of the series may be exchanged for
Notes of another series, be subject to repurchase, optional redemption or
mandatory redemption by the Transferor or be remarketed by any remarketing
agent,
(9) the final payment date for that series, and
(10) any other terms permitted by the Indenture (all the foregoing
terms, the "PRINCIPAL TERMS" of that series).
43
The Transferor may offer any series of Notes to the public under a prospectus or
other disclosure document (a "DISCLOSURE DOCUMENT") in transactions either
registered under the Securities Act of 1933 or exempt from registration,
directly or through one or more underwriters or placement agents. There is no
limit to the number of series of Notes that may be issued under the Indenture.
The Indenture provides that the Transferor may specify Principal Terms of
a new series of Notes that differ substantially from any other series. Further,
one or more series of Notes may be in their Investment Periods, Early
Amortization Periods, Controlled Amortization Periods or Accumulation Periods
while other series are not. Thus, some series of Notes may be amortizing or
accumulating principal, while other series are not. Moreover, different series
of Notes may have the benefits of different forms of Enhancement issued by
different entities. Under the Indenture, the Indenture Trustee will hold each
form of Enhancement only on behalf of the series of Notes (or a particular class
within a series) to which it relates. The Indenture also provides that the
Transferor may specify different certificate rates and Monthly Servicing Fees
for each series of Notes (or a particular class within a series). In addition,
the Transferor has the option under the Indenture to vary among series of Notes
(or classes within a series) the terms upon which that series (or classes within
a series) may be repurchased by the Transferor.
Under the Indenture and pursuant to a Series Supplement, a new series of
Notes may be issued only upon the satisfaction of specified conditions. However,
the terms of any new series of class will not be subject to prior review by or
consent of the Noteholders of any previously issued series of Notes. The
Transferor may cause the issuance of a new series by notifying the Indenture
Trustee at least five business days in advance of the applicable Series Issuance
Date. The notice shall state the designation of any series of Notes (and classes
within a series, if any). The Indenture provides that the Indenture Trustee will
issue a new series only upon delivery to it of the following:
(1) a Series Supplement in form satisfactory to the Indenture Trustee
signed by the Owner Trustee on behalf of the Trust and specifying the
Principal Terms of the series,
(2) the form of any Enhancement and any related agreement,
(3) an opinion of counsel to the effect that, for federal income and
Florida income tax purposes, the issuance will not adversely affect the
characterization of the Notes of any outstanding series or class of Notes
as debt of the Transferor, the issuance will not cause a taxable event to
any Noteholders (an opinion of counsel to the effect referred to in the
two prior clauses with respect to any action is referred to herein as a
"TAX OPINION") and new series of Notes will be characterized as debt of
the Transferor, and
(4) written confirmation from the applicable Rating Agencies that the
issuance will not result in a reduction or withdrawal of the rating of any
outstanding series or class of Notes.
Each new issuance is also subject to the conditions that:
(1) the Transferor shall have represented and warranted that the
issuance shall not, in the reasonable belief of the Transferor, cause an
Early Amortization Event or Investment Event to occur for any outstanding
series of Notes and
(2) after giving effect to the issuance, the Certificateholder's
Interest in the Pool Balance shall not be less than 2% of the Pool
Balance.
44
Upon satisfaction of all the foregoing conditions, the Indenture Trustee will
issue the new series of Notes.
THE INDENTURE TRUSTEE
, a , will serve as trustee under the Indenture
(the "INDENTURE TRUSTEE"). The principal executive offices of the Indenture
Trustee are located at , and its telephone number is .
The Indenture Trustee may give notice of its intent to resign at any time,
in which event the Trust will be obligated to appoint a successor trustee. The
Trust may also remove the Indenture Trustee if the Indenture Trustee ceases to
be eligible to continue as Indenture Trustee under the Indenture, becomes
insolvent, or otherwise becomes incapable of acting. In these circumstances, the
Trust will be obligated to appoint a successor trustee. The holders of a
majority of the aggregate principal amount of the outstanding Notes will also be
entitled to remove the Indenture Trustee and appoint a successor. Any
resignation or removal of the Indenture Trustee and appointment of a successor
trustee does not become effective until acceptance of the appointment by the
successor trustee.
REPORTS TO NOTEHOLDERS
On or prior to each Payment Date for a series or class of Notes, the
Servicer will prepare and provide to the Indenture Trustee a statement to be
delivered to the related Noteholders on the Payment Date. For each series of
Notes, the statement will include the following information as to the Notes with
respect to that Payment Date or the period since the previous Payment Date, as
applicable:
(1) the amount, if any, of the distribution allocable to principal
on each class of Notes;
(2) the amount, if any, of the distribution allocable to interest on
each class of Notes;
(3) the aggregate outstanding principal balance for each class of
Notes, after giving effect to all payments reported under (1) above on
that date;
(4) if applicable, the amount of outstanding Servicer Advances on
that date;
(5) the amount of the Monthly Servicing Fee paid to the Servicer with
respect to the related Collection Period or Periods, as the case may be;
(6) the interest rate applicable for the next Interest Payment Date
for any classes of Notes with variable or adjustable rates;
(7) the amount, if any, withdrawn from or credited to any reserve or
similar account, if any, specified in the prospectus supplement;
(8) the accumulated interest shortfalls, if any, on each class of
Notes and the change in those amounts from the preceding Payment Date;
(9) the Investor Charge-Offs allocated to each class of Notes and the
change in those amounts from the preceding Payment Date; and
45
(10) the balance of the Reserve Account, if any, for each class or
series on that date, after giving effect to changes therein on that date.
Each amount set forth pursuant to subclauses (1), (2) and (9) will be
expressed as a dollar amount per $1,000 of the initial principal balance of the
Notes.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during which any Notes are outstanding, the Indenture
Trustee will furnish (or cause to be furnished) to each person or entity who at
any time during the preceding calendar year was a holder of record of a Note
(initially Cede, as the nominee of DTC), and received any payment thereon from
the Trust, a statement containing information for the purpose of assisting the
Noteholders in the preparation of their federal income tax returns. As long as
the holder of record of the Notes is Cede, as nominee of DTC, beneficial owners
of Notes will receive tax and other information from Participants and Indirect
Participants rather than from the Indenture Trustee. See "CERTAIN FEDERAL INCOME
TAX CONSEQUENCES" in this prospectus.
BOOK-ENTRY REGISTRATION
The Depository Trust Company ("DTC") is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to Section
17A of the Securities Exchange Act of 1934. DTC was created to hold securities
for its participating organizations ("PARTICIPANTS") and to facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entries, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations. Indirect access to the DTC system also is
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("INDIRECT PARTICIPANTS").
Owners of beneficial interest in Notes sold under this prospectus ("NOTE
OWNERS") that are not Participants or Indirect Participants but desire to
purchase, sell or otherwise transfer ownership of or interests in Notes
generally may do so only through Participants and Indirect Participants. In
addition, Note Owners will receive all distributions of principal and interest
through Participants. Under a book-entry format, Note Owners may experience some
delay in their receipt of payments since such payments will be forwarded by the
Indenture Trustee to Cede & Co. ("CEDE"), as nominee for DTC. DTC will forward
such payments to Participants, which thereafter will forward them to Indirect
Participants or Note Owners. It is anticipated that the only "Noteholder" of
record will be Cede, as nominee of DTC. Note Owners will not be recognized by
the Indenture Trustee as Noteholders, as such term is used in the Indenture, and
Note Owners will be permitted to exercise the rights of Noteholders only
indirectly through DTC and its Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers of Notes among
Participants on whose behalf it acts with respect to the Notes and to receive
and transmit payments of principal of, and interest on, the Notes. Participants
and Indirect Participants with which Note Owners have accounts with respect to
the Notes similarly are required to make book-entry transfers and receive and
transmit such payments on behalf of their respective Note Owners. Accordingly,
although Note Owners will not possess Notes, these rules provide a mechanism by
which Note Owners will receive payments and will be able to transfer their
interests in Notes.
46
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and some banks, the ability of a holder to
pledge Notes to persons or entities that do not participate in the DTC system,
or to otherwise act with respect to such Notes, may be limited due to the lack
of a physical certificate for such Notes.
DTC has advised the Transferor that it will take any action permitted to
be taken by a Noteholder under the Indenture or other Related Document only at
the direction of one or more Participants to whose accounts with DTC the Notes
are credited. DTC may take conflicting actions with respect to other undivided
interests to the extent that such actions are taken on behalf of Participants
whose holdings include such undivided interests.
In addition to holding Notes through Participants or Indirect Participants
of DTC in the United States as described above, holders of Notes may hold their
Notes through Cedelbank or Euroclear in Europe if they are participants of such
systems, or indirectly through organizations which are participants in such
systems.
Cedelbank and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in Cedelbank's and
Euroclear's names on the books of their respective depositories which in turn
will hold such positions in customers' securities accounts in the depositories'
names on the books of DTC.
Transfers between the organization participating in the Cedelbank system
(the "CEDELBANK PARTICIPANTS") and the Euroclear system (the "EUROCLEAR
PARTICIPANTS") will occur in accordance with their respective rules and
operating procedures. Cross-market transfers between persons holding directly or
indirectly through DTC, on the one hand, and directly or indirectly through
Cedelbank Participants or Euroclear Participants, on the other hand, will be
effected in DTC in accordance with DTC rules on behalf of the relevant European
international clearing systems by its depositary. Cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Cedelbank Participants and
Euroclear Participants may not deliver instructions directly to the
depositories.
Because of time-zone differences, credits of securities received in
Cedelbank or Euroclear as a result of a transaction with a Participant will be
made during subsequent securities settlement processing and dated the Business
Day following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedelbank Participants on such Business Day. Cash received in
Cedelbank or Euroclear as a result of sales of securities by or through a
Cedelbank Participant or a Euroclear Participant to a Participant will be
received with value on the DTC settlement date but will be available in the
relevant Cedelbank or Euroclear cash account only as of the Business Day
following settlement in DTC. For information with respect to tax documentation
procedures, see "CERTAIN FEDERAL INCOME TAX CONSEQUENCES - TAX CHARACTERIZATION
AND TREATMENT OF NOTES - TAX CONSEQUENCES TO FOREIGN NOTEHOLDERS."
Cedelbank is incorporated under the laws of Luxembourg as a professional
depository. Cedelbank holds securities for the Cedelbank Participants and
facilitates the clearance and settlement of securities transactions between
Cedelbank Participants through electronic book-entry changes in accounts of
47
Cedelbank Participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in Cedelbank in any of 28 currencies,
including United States dollars. Cedelbank provides to Cedelbank Participants,
among other things, services for safekeeping, administration, clearance and
settlement of internationally traded securities and securities lending and
borrowing. Cedelbank interfaces with domestic markets in several countries. As a
professional depository, Cedelbank is subject to regulation by the Luxembourg
Monetary Institute. Cedelbank Participants are recognized financial institutions
around the world, including underwriters, securities brokers and dealers, banks,
trust companies, clearing corporations and other organizations and may include
the underwriters of the Notes. Indirect access to Cedelbank is also available to
others, such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Cedelbank Participant, either
directly or indirectly.
Euroclear was created in 1968 to hold securities for the Euroclear
Participants and to clear and settle transactions between Euroclear Participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in any of 29 currencies, including United States dollars. Euroclear
includes various other services, including securities lending and borrowing and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. Euroclear is
operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of New
York (the "EUROCLEAR OPERATOR"), under contract with Euro-clear Clearance
Systems S.C., a Belgian cooperative corporation (the "COOPERATIVE"). All
operations are conducted by the Euroclear Operator, and all Euroclear securities
clearance accounts and Euroclear cash accounts are accounts with the Euroclear
Operator, not the Cooperative. The Cooperative establishes policy for Euroclear
on behalf of Euroclear Participants. Euroclear Participants include banks
(including central banks), securities brokers and dealers and other professional
financial intermediaries and may include the Underwriters. Indirect access to
Euroclear is also available to other firms that clear through or maintain a
custodial relationship with a Euroclear Participant, either directly or
indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and the applicable
Belgian law. These terms and conditions govern transfers of securities and cash
with Euroclear, withdrawals of securities and cash from Euroclear, and receipts
of payments with respect to securities in Euroclear. All securities in Euroclear
are held on a fungible basis without attribution of specific certificates to
specific securities clearance accounts. The Euroclear Operator acts under these
terms and conditions only on behalf of Euroclear Participants, and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Notes held through Cedelbank or Euroclear
will be credited to the cash accounts of Cedelbank Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES - TAX CHARACTERIZATION AND
TREATMENT OF NOTES - INFORMATION REPORTING AND BACKUP WITHHOLDING." Cedelbank or
the Euroclear Operator, as the case may be, will take any other
48
action permitted to be taken by a Noteholder under the Indenture or other
Related Document on behalf of a Cedelbank Participant or Euroclear Participant
only in accordance with its relevant rules and procedures and subject to its
depositary's ability to effect such actions on its behalf through DTC.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Notes among participants of DTC,
Cedelbank and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
Except as required by law, neither the Administrator, the Owner Trustee
nor the Indenture Trustee will have any liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of the
Notes of any series held by Cede, as nominee for DTC, by Cedelbank or by
Euroclear in Europe, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
DEFINITIVE NOTES
Notes generally will be issued in fully registered, certificated form
("DEFINITIVE NOTES") to Noteholders or their nominees, rather than to the
Depository or its nominee, only if
(1) the Administrator advises the Indenture Trustee in writing that
the Depository is no longer willing or able to discharge properly its
responsibilities with respect to the Notes and the Trust is unable to
locate a qualified successor,
(2) the Administrator, at its option, elects to terminate the
book-entry system through the Depository, or
(3) after the occurrence of an Event of Default or a Servicing
Default, Note Owners representing beneficial interests aggregating at
least a majority of the outstanding principal amount of the Controlling
Class advise the appropriate trustee through the Depository in writing
that the continuation of a book-entry system through the Depository (or a
successor thereto) is no longer in the best interest of such Note Owners.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Depository will notify the Note Owners and the Indenture Trustee
of such occurrence and of the availability of Definitive Notes. Upon surrender
by the Depository of the definitive certificates representing the Notes and
receipt of instructions for re-registration, the Indenture Trustee will reissue
the related Notes as Definitive Notes to holders thereof.
Payments of principal of, and interest on, the Definitive Notes will
thereafter be made in accordance with the procedures set forth in the Indenture
directly to holders of Definitive Notes in whose names the Definitive Notes were
registered at the close of business on the last day of the preceding month. Such
payments will be made by check mailed to the address of such holder as it
appears on the register maintained by the Indenture Trustee. The final payment
on any Definitive Note, however, will be made only upon presentation and
surrender of such Definitive Note at the office or agency specified in the
notice of final payment to the holders thereof.
Definitive Notes will be transferable and exchangeable at the offices of
the appropriate trustee or of a registrar named in a notice delivered to holders
of Definitive Notes. No service charge will be imposed
49
for any registration of transfer or exchange, but the appropriate trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith.
THE TRANSFER AND SERVICING AGREEMENTS
The following summary describes terms of:
(1) the Receivables Purchase Agreement under which the Transferor
will purchase Receivables from World Omni,
(2) the Trust Sale and Servicing Agreement under which the Trust will
acquire those Receivables from the Transferor and the Servicer will agree
to service the Receivables,
(3) the Trust Agreement under which the Trust will be created and
Certificates will be issued; and
(4) the Administration Agreement, dated as of the Initial Closing
Date, among the Owner Trustee, the Indenture Trustee and World Omni as
Administrator (the "ADMINISTRATIVE AGREEMENT"), under which World Omni, as
administrator, will undertake specified administrative duties for the
Trust and the Indenture.
Collectively, these four agreements are referred to as the "TRANSFER AND
SERVICING AGREEMENTS."
Forms of the Transfer and Servicing Agreements have been filed as exhibits
to the registration statement of which this prospectus forms a part. The
Transferor will provide a copy of the Transfer and Servicing Agreements (without
exhibits) upon request of a Noteholder. This summary does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Transfer and Servicing Agreements. Where particular
provisions or terms used in the Transfer and Servicing Agreements are referred
to, the actual provisions are incorporated by reference as part of the summary.
RECEIVABLES PURCHASE AGREEMENT
SALE OF RECEIVABLES. Pursuant to the Receivables Purchase Agreement, World
Omni sells and transfers to the Transferor all of its right, title and interest
in and to all of the Receivables and related Collateral Security. As described
herein, pursuant to the Trust Sale and Servicing Agreement, the Transferor
transfers to the Trust all of its right, title and interest in and to the
Receivables Purchase Agreement. All new Receivables arising under the Accounts
during the term of the Trust will be sold to the Transferor and transferred by
the Transferor to the Trust. Accordingly, the aggregate amount of Receivables in
the Trust will fluctuate from day to day as new Receivables are generated and as
existing Receivables are collected, charged off as uncollectible or otherwise
adjusted.
In connection with its sale of Receivables to the Transferor, World Omni
indicates in its computer files that the Receivables have been sold to the
Transferor and that the Receivables have been transferred by the Transferor to
the Trust. In addition, World Omni will deliver to the Transferor a list
specifying all of the Receivables, identifying the principal balances of the
Receivables as of the Initial Closing Date and delivered to the Transferor all
documents, if any, evidencing the Receivables which constitute "instruments" (as
defined in the Uniform Commercial Code). As a precautionary measure, World Omni
50
has filed financing statements for the Receivables meeting the requirements of
Florida state law. Otherwise, however, World Omni retains all records relating
to Receivables and does not segregate those records from the records relating to
other accounts. Further, World Omni will not stamp or mark the physical records
to reflect the transfer of the Receivables to the Trust. See "RISK FACTORS
- -RECEIVABLES MAY BE UNCOLLECTIBLE DUE TO SUPERIOR INTERESTS" and "CERTAIN LEGAL
ASPECTS OF THE RECEIVABLES - TRANSFER OF RECEIVABLES."
REPRESENTATIONS AND WARRANTIES. World Omni has represented to the
Transferor that:
(1) as of the Initial Closing Date, and each Series Issuance Date, it
was duly incorporated and in good standing and that it has the authority
to consummate the transactions contemplated by the Receivables Purchase
Agreement, and
(2) as of the Initial Closing Date (or, in the case of an Additional
Account, as of the Additional Cut-Off Date and Addition Date), each
Account or Additional Account was an Eligible Account.
World Omni also represents to the Transferor regarding the Receivables
that:
(1) as of the Initial Closing Date and each Series Issuance Date,
each of the Accounts was or is an Eligible Account or, if it was or is an
Ineligible account on that date, the Account is being removed from the
Trust to the extent required by the Trust Sale and Servicing Agreement,
(2) the amount of Receivables that are reported as Ineligible
Receivables transferred to the Transferor or the Trust on the Initial
Closing Date, or any Additional Cut-Off Date for the purpose of
facilitating the administration and reporting obligations of the Servicer,
is correct and there are no other Receivables that are Ineligible
Receivables except as so reported, and
(3) as of the date any new Receivable is created, the Receivable
(unless identified by World Omni as an Ineligible Receivables on that
date) is an Eligible Receivable.
In the event of a breach of representation in the preceding paragraph
results in a Disqualified Receivable and the requirement that the Transferor
accept retransfer of that Disqualified Receivable pursuant to the Trust Sale and
Servicing Agreement, then World Omni will repurchase that Disqualified
Receivable from the Transferor on the date of the retransfer. The purchase price
for the Disqualified Receivables will be the face amount of the Disqualified
Receivable, of which at least the amount of any cash deposit required to be made
by the Transferor under the Trust Sale and Servicing Agreement for the
retransfer of the Disqualified Receivables will be paid in cash.
World Omni also represents to the Transferor that as of the Initial
Closing Date and each Series Issuance Date, as applicable,
(1) the Receivables Purchase Agreement constitutes a legal, valid and
binding obligation of World Omni, and
(2) the Receivables Purchase Agreement constitutes a valid sale or
transfer to the Transferor of all right, title and interest of World Omni
in and to the Receivables, whether then existing or thereafter created in
the Accounts, the Collateral Security and the proceeds thereof which is
effective as to each Receivable upon the creation thereof.
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If the breach of either representation (1) or (2) results in the
obligation of the Transferor under the Trust Sale and Servicing Agreement to
accept retransfer of the Receivables, World Omni will repurchase the Receivables
retransferred to World Omni for an amount of cash equal to the amount of cash
the Transferor is required to deposit under the Trust Sale and Servicing
Agreement in connection with the retransfer.
COVENANTS OF WORLD OMNI. In the Receivables Purchase Agreement, World Omni
agrees to perform its obligations under the agreements relating to the
Receivables and the Accounts in conformity with its then-current policies and
procedures relating to the Receivables and the Accounts.
World Omni also agrees that, except for the transactions occurring
pursuant to the Transfer and Servicing Agreements, World Omni will not sell,
pledge, assign or transfer any interest in the Receivables to any other person.
World Omni also agrees to defend and indemnify the Transferor for any loss,
liability or expense incurred by the Transferor in connection with a breach by
World Omni of any of its representations, warranties or covenants in the
Receivables Purchase Agreement.
World Omni will not realize upon any security interest in a Vehicle that
it may have for advances or loans to Dealers other than the related Receivable
until the Trust has fully realized on its security interest in that Vehicle.
In addition, World Omni has expressly acknowledges and consents to the
Transferor's assignment of its rights relating to the Receivables under the
Receivables Purchase Agreement to the Indenture Trustee.
TERMINATION. The Receivables Purchase Agreement will terminate immediately
after the Trust terminates. In addition, if World Omni becomes party to any
bankruptcy or similar proceeding (other than as a claimant), World Omni will
immediately cease to sell or transfer Receivables to the Transferor and will
promptly give notice of that event to the Transferor, the Trust and the
Indenture Trustee. World Omni may, however, resume sales upon satisfying
specified conditions.
CONVEYANCE OF RECEIVABLES AND COLLATERAL SECURITY
On the Initial Closing Date, the Transferor will transfer and assign to
the Trust all of its right, title and interest in and to the Receivables and the
related Collateral Security as of the Initial Cut-Off Date, all Receivables
thereafter created in the Accounts and its interests in the related Collateral
Security and the Receivables Purchase Agreement, and the proceeds of all of the
foregoing.
The Transferor is required to provide to the Trust and to the Indenture
Trustee a true and complete list showing for each Account, as of the Initial
Cut-Off Date or the applicable Additional Cut-Off Date,
o its account number,
o the outstanding balance of the Receivables in the Account, and
o the outstanding principal balance of Receivables in the Account.
"ADDITION DATE" means, for an Additional Account, the close of
business on the date on which World Omni first transfers the Receivables
in the Additional Account to the Transferor.
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"ADDITIONAL CUT-OFF DATE" means, for an Additional Account, the close
of business on the date on which World Omni selects and designates the
Additional Account for transfer to the Transferor.
"REPRESENTATION DATE" means:
(1) for each Account, each Series Cut-Off Date and Series
Issuance Date,
(2) for each Additional Account, the applicable Additional
Cut-Off Date and Addition Date.
(3) for each Receivable in an Account, each Series Cut-Off Date
and the Transfer Date for the Receivable, and
(4) for each Receivable in an Additional Account, the applicable
Addition Date.
"SERIES CUT-OFF DATE" means, for a series of Notes, the date on which
the Revolving Period for that series will commence, which date will be
designated as the Series Cut-Off Date in the related prospectus
supplement.
"SERIES ISSUANCE DATE" means, for a series of Notes, the date on
which the Trust issues the series.
"TRANSFER DATE" means, for a Receivable arising after the Initial
Cut-Off Date, the date on which the Receivable is originated, unless the
Receivable arose in an Additional Account prior to the applicable Addition
Date, in which case "Transfer Date" means the Addition Date.
REPRESENTATIONS AND WARRANTIES BY THE TRANSFEROR
The Transferor represents to the Trust relating to the Accounts, the
Receivables and the Collateral Security that:
(1) for each Account, including each Additional Account, as of each
of the applicable Representation Dates, the Account or Additional Account
was an Eligible Account,
(2) for each Receivable in an Account, including each Receivable in
an Additional Account, the Receivable is an Eligible Receivable or, if the
Receivable is not an Eligible Receivable, the Receivable is conveyed to
the Trust as described below under " - INELIGIBLE RECEIVABLES AND EXCESS
RECEIVABLES,"
(3) each Receivable and all Collateral Security conveyed to the Trust
on the Transfer Date, and all of the Transferor's right, title and
interest in the Receivables Purchase Agreement, have been conveyed to the
Trust free and clear of any liens, and
(4) all appropriate consents and governmental authorizations required
to be obtained by the Transferor in connection with the conveyance of each
Receivable or Collateral Security have been duly obtained.
53
If the Transferor breaches any representation described in the preceding
paragraph and the breach remains uncured for 30 days or such longer period as
may be agreed to by the Indenture Trustee, after the earlier to occur of the
discovery of the breach by the Transferor or the Servicer or receipt of written
notice of the breach by the Transferor or the Servicer, and the breach has a
materially adverse effect on the Noteholders' Interest in any Receivable or
Account, the Noteholders' Interest in the Receivable or, in the case of a breach
relating to an Account, all Receivables in the related Account ("DISQUALIFIED
RECEIVABLES") will be reassigned to the Transferor on the terms and conditions
set forth below and the Account shall no longer be included as an Account.
Each such Disqualified Receivable shall be reassigned to the Transferor on
or before the end of the Collection Period in which the reassignment obligation
arises by the Transferor directing the Servicer to deduct the principal balance
of the Receivable from the Pool Balance. In the event that the deduction would
cause (1) the difference of (a) the Pool Balance minus the aggregate of the
amounts (each, an "INVESTED AMOUNT") specified for each outstanding series of
Notes in the related prospectus supplement as the Invested Amount for that
series (the difference, the "TRANSFEROR'S PARTICIPATION AMOUNT") to be less than
(2) the aggregate of the Available Subordinated Amounts for each outstanding
series of Notes specified in the related prospectus supplement for that series
(the aggregate amount, the "TRUST AVAILABLE SUBORDINATED AMOUNT") on the
preceding Determination Date (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on that Payment Date), on the
date on which the reassignment is to occur the Transferor will be obligated to
make a deposit into the Collection Account in immediately available funds in an
amount equal to the amount by which the Transferor's Participation Amount would
be less than the Trust Available Subordinated Amount (the amount of the deposit
being referred to herein as a "TRANSFER DEPOSIT AMOUNT"), PROVIDED that if the
Transfer Deposit Amount is not so deposited, the principal balance of the
related Receivables will be deducted from the Pool Balance only to the extent
the Transferor's Participation Amount is not reduced below the Trust Available
Subordinated Amount and any principal balance not so deducted will not be
reassigned and will remain part of the Trust. The reassignment of the Receivable
to the Transferor and the payment of any related Transfer Deposit Amount will be
the sole remedy for any breach of the representations and warranties described
in the preceding paragraph with respect to the Receivable available to
Noteholders or the Indenture Trustee on behalf of Noteholders.
The Transferor will also represent to the Trust that as of each Series
Issuance Date
(a) it is duly organized and in good standing, it has the authority
to consummate the transactions contemplated by the Trust Sale and
Servicing Agreement and the Trust Sale and Servicing Agreement constitutes
a valid, binding and enforceable agreement of the Transferor, and
(b) the Trust Sale and Servicing Agreement constitutes a valid sale,
transfer and assignment to the Trust of all right, title and interest of
the Transferor in the Receivables and the Collateral Security, whether
then existing or thereafter created, the Receivables Purchase Agreement,
and the proceeds thereof (including proceeds in any of the accounts
established for the benefit of the Noteholders of any series), under the
Uniform Commercial Code as then in effect in the State of Florida, which
is effective as to each Receivable existing on the Initial Closing Date
(or as of the Addition Date, if applicable) or, as to each Receivable
arising thereafter, upon the creation thereof and until termination of the
Trust.
In the event that the breach of either representation (a) or (b) has a
materially adverse effect on the Noteholders' Interest in the Receivables,
either the Indenture Trustee or the holders of Notes evidencing not less than a
majority of the aggregate unpaid principal amount of Controlling Class of each
series of
54
Notes, by written notice to the Transferor and the Servicer (and to the
Indenture Trustee and the issuer or provider of any Enhancement (an "ENHANCEMENT
PROVIDER") if given by Noteholders), may direct the Transferor to accept the
reassignment of the Noteholders' Interest of all series of Notes within 60 days
of that notice, or within such longer period specified in the notice. The
Transferor will be obligated to accept the reassignment of the Noteholders'
Interest on a Payment Date occurring within the 60-day period. The reassignment
will not be required to be made, however, if at the end of the applicable
period, the representations and warranties shall then be true and correct in all
material respects and any materially adverse effect caused by the breach shall
have been cured. The price for the reassignment will generally be equal to the
aggregate Invested Amounts of all series of Notes on the Determination Date
preceding the Payment Date on which the purchase is scheduled to be made plus
accrued and unpaid interest on the unpaid principal amount of the Notes at the
applicable interest rate (together with interest on overdue interest) plus, for
any particular series of Notes, any other amounts specified in the Series
Supplement therefor. The payment of the reassignment price for all outstanding
series of Notes, in immediately available funds, will be considered a payment in
full of the Noteholders' Interest. Those funds will be distributed to the
Noteholders entitled thereto upon presentation and surrender of the Notes. If
the Indenture Trustee or the Noteholders give a notice as provided above, the
obligation of the Transferor to make the deposit will constitute the sole remedy
respecting a breach of the representations and warranties available to
Noteholders or the Indenture Trustee on behalf of the Noteholders.
ELIGIBLE ACCOUNTS AND ELIGIBLE RECEIVABLES
An "ELIGIBLE ACCOUNT" is defined to mean each wholesale financing
revolving line of credit extended by World Omni to a Dealer, which line of
credit, as of the date of determination thereof:
(1) is established by World Omni in the ordinary course of business
pursuant to a dealer financing agreement,
(2) is in favor of a Dealer which is an eligible dealer (which
excludes dealers subject to voluntary or involuntary bankruptcy
proceedings or voluntary or involuntary liquidation),
(3) is in existence and maintained and serviced by World Omni (or a
successor Servicer), and
(4) in respect of which no amounts have been charged off as
uncollectible.
An "ELIGIBLE RECEIVABLE" is defined to mean each Receivable:
(1) which was originated or acquired by World Omni in the ordinary
course of business,
(2) which arose under an Account that at the time was an Eligible
Account,
(3) which is owned by World Omni at the time of sale by World Omni to
the Transferor,
(4) which represents the obligation of a Dealer to repay an advance
made to or on behalf of the Dealer to finance Vehicles,
(5) which, at the time of creation and at the time of transfer to the
Trust (except, on the Initial Closing Date, for Receivables relating to
Vehicles that have already been sold), is secured by a perfected first
priority security interest in the Vehicles relating thereto,
55
(6) which was created in compliance in all respects with all
requirements of law applicable thereto and pursuant to a dealer financing
agreement which complies in all respects with all requirements of law
applicable to any party thereto,
(7) for which all material consents and governmental authorizations
required to be obtained by World Omni or the Transferor in connection with
the creation of the Receivable or the transfer thereof to the Trust or the
performance by World Omni of the dealer financing agreement pursuant to
which the Receivable was created, have been duly obtained,
(8) as to which at all times following the transfer of the Receivable
to the Trust, the Trust will have good and marketable title thereto free
and clear of all liens arising prior to the transfer or arising at any
time, other than liens permitted pursuant to the Trust Sale and Servicing
Agreement,
(9) which has been the subject of a valid transfer and assignment
from the Transferor to the Trust of all the Transferor's interest therein
(including any proceeds thereof),
(10) which will at all times be the legal and assignable payment
obligation of the Dealer relating thereto, enforceable against the Dealer
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy or other similar laws,
(11) which at the time of transfer to the Trust is not subject to any
right of rescission, setoff, or any other defense (including defenses
arising out of violations of usury laws) of the Dealer,
(12) as to which, at the time of transfer of the Receivable to the
Trust, World Omni and the Transferor have satisfied all their respective
obligations relating to that Receivable required to be satisfied at that
time,
(13) as to which, at the time of transfer of the Receivable to the
Trust, neither World Omni nor the Transferor has taken or failed to take
any action which would impair the rights of the Trust or the Noteholders
therein,
(14) which constitutes an "instrument," "account," "chattel paper" or
a "general intangible" as defined in Article 9 of the Uniform Commercial
Code as then in effect in the State of Florida, and
(15) which was transferred to the Trust with all applicable
governmental authorization.
It is not required or anticipated that the Trust or the Indenture Trustee
will make any initial or periodic general examination of the Receivables or any
records relating to the Receivables for the purpose of establishing the presence
or absence of defects, compliance with representations and warranties of the
Transferor or for any other purpose. In addition, it is not anticipated or
required that the Trust or the Indenture Trustee will make any initial or
periodic general examination of the Servicer for the purpose of establishing the
compliance by the Servicer with its representations or warranties, the
observation of its obligations under the Trust Sale and Servicing Agreement or
for any other purpose.
INELIGIBLE RECEIVABLES AND EXCESS RECEIVABLES
For the purpose of facilitating the administration and reporting
requirements of the Servicer under the Trust Sale and Servicing Agreement, all
Receivables that are not Eligible Receivables ("INELIGIBLE RECEIVABLES") arising
in an Eligible Account shall be transferred to the Trust, PROVIDED that, if the
Series
56
Supplement for a series of Notes so provides, the Incremental Subordinated
Amount for that series will be adjusted by the portion of the aggregate
principal amount of Ineligible Receivables included therein allocable to the
Noteholders' Interest of that series. The Incremental Subordinated Amount also
will be increased by the portion of the aggregate principal amount allocable to
the Noteholders' Interest of all Receivables arising in Eligible Accounts which
are no longer Eligible Accounts. See "THE NOTES ALLOCATION OF COLLECTIONS;
DEPOSITS IN COLLECTION ACCOUNT" and " - LIMITED SUBORDINATION OF TRANSFEROR
INTEREST; ENHANCEMENTS - SUBORDINATION OF TRANSFEROR'S INTEREST."
In addition, if the Series Supplement for a series of Notes so provides,
the Incremental Subordinated Amount for that series will be adjusted to reflect,
on each Payment Date, the aggregate principal amount of Receivables in the Trust
on that Payment Date that are Excess Receivables (the "EXCESS RECEIVABLES
AMOUNT") allocable to the Noteholders' Interest of that series.
"EXCESS RECEIVABLES" means:
(1) the aggregate amount by which the principal balance of
Receivables relating to used Vehicles exceeds 35% of the aggregate amount
of the principal balance of Receivables included in the Trust, calculated
as of the last day of the preceding Collection Period,
(2) the aggregate amount of the principal balance of Receivables in
Eligible Accounts that have been placed on finance hold,
(3) the aggregate amount by which the principal balance of
Receivables arising in Eligible Accounts relating to World Omni's "Auction
Advantage Program" exceeds 5% of the aggregate amount of the principal
balance of Receivables included in the Trust or, without duplication, the
aggregate amount by which the principal balance of Receivables in any
Eligible Account exceeds $250,000,
(4) the aggregate amount by which the principal balance of
Receivables arising under Eligible Accounts under World Omni's delayed
payment privilege program exceeds 2%, and
(5) the aggregate amount of interest payments on Receivables under
specified inventory financing agreements with Dealers exceeds $500,000 per
month,
These percentages and dollar limits may be increased periodically subject to
each Rating Agency confirming that the increase will not result in a downgrade
or withdrawal of its ratings assigned to the Notes.
ADDITION OF ACCOUNTS
Subject to the conditions described below, the Transferor has the right to
designate additional accounts to be included as Accounts (the "ADDITIONAL
ACCOUNTS"). In addition, the Transferor is required to add the Receivables of
Additional Accounts if the Pool Balance on the last day of any Collection Period
is less than the Required Participation Amount as of the following Payment Date
(after giving effect to the allocations, distributions, withdrawals and deposits
to be made on that Payment Date). In that case, unless specified insolvency
events have occurred relating to the Transferor or World Omni, World Omni under
the Receivables Purchase Agreement will be required to sell to the Transferor,
and the Transferor under the Trust Sale and Servicing Agreement will be required
to transfer and assign to the
57
Trust, within 10 business days after the end of that Collection Period,
interests in all Receivables arising in the Additional Accounts, whether the
Receivables are then existing or thereafter created.
Any designation of Additional Accounts is subject to the following
conditions, among others:
(1) each Additional Account must be an Eligible Account;
(2) the Transferor shall represent and warrant that the addition of
the Additional Accounts shall not, in the reasonable belief of the
Transferor, cause an Early Amortization Event or Investment Event to occur
for any series;
(3) the Transferor shall not select Additional Accounts in a manner
that it believes is adverse to the interests of the Noteholders or any
Enhancement Provider;
(4) the Transferor shall deliver the required opinions of counsel
relating to the addition of the Additional Accounts to the Owner Trustee,
the Indenture Trustee, the Rating Agencies and any Enhancement Provider;
and
(5) the applicable Rating Agencies shall have provided written
confirmation that the addition will not result in a reduction or
withdrawal of the rating of any outstanding series or class of Notes.
Notwithstanding the foregoing, the Transferor may, at its discretion, and
subject only to the limitations specified in this paragraph, designate
Additional Accounts. (Additional Accounts designated in accordance with the
provisions described in this paragraph are referred to herein as "AUTOMATIC
ADDITIONAL ACCOUNTS".) Unless each Rating Agency otherwise consents, the number
of Automatic Additional Accounts designated for any of the three consecutive
Collection Periods beginning in January, April, July and October of each
calendar year shall not exceed 15% of the number of Accounts as of the first day
of the calendar year during which the Collection Periods commence and the number
of Automatic Additional Accounts designated during any calendar year shall not
exceed 20% of the number of Accounts as of the first day of that calendar year.
On or before the first business day of each Collection Period beginning in
January, April, July and October of each calendar year, the Transferor shall
have requested and obtained notification from each Rating Agency of any
limitations to the right of the Transferor to designate Eligible Accounts as
Automatic Additional Accounts during any period which includes the Collection
Period. On or before January 31, April 30, July 31, October 31 of each calendar
year, the Trustee shall have received confirmation from each Rating Agency that
the addition of all Automatic Additional Accounts included as Accounts during
the three consecutive Collection Periods ending in the calendar month prior to
that date shall not have resulted in any applicable Rating Agency reducing or
withdrawing its rating of any outstanding series or class of Notes. On or before
January 31 and July 31 of each calendar year (or on or before the last day of
each month in specified circumstances), the Transferor shall have delivered to
the Owner Trustee, the Indenture Trustee, each Rating Agency and any Enhancement
Provider an opinion of counsel relating to the Automatic Additional Accounts
included as Accounts during the preceding calendar year confirming the validity
and perfection of each transfer of the Automatic Additional Accounts. If the
Rating Agency confirmation or opinion of counsel relating to any Automatic
Additional Accounts is not so received, the Automatic Additional Accounts will
be removed from the Trust.
Each Additional Account (including each Automatic Additional Account) must
be an Eligible Account at the time of its addition. However, since Additional
Accounts may not have been a part of the initial portfolio of World Omni, the
Additional Accounts may not be of the same credit quality as the
58
initial Accounts. Additional Accounts may have been originated by World Omni at
a later date using credit criteria different from those which were applied to
the initial Accounts or may have been acquired by World Omni from another
wholesale lender that had different credit criteria. In addition, the Transferor
will be permitted to designate as Additional Accounts which contain receivables
that have been sold or pledged to third parties; however, following the
applicable Additional Cut-Off Date, no Receivables thereafter arising in any
such accounts shall be sold or pledged to any third parties.
"REQUIRED PARTICIPATION AMOUNT" for any date means an amount equal
to:
(a) the sum of the amounts for each Series (other than any
Series or portion thereof which is designated in the relevant Series
Supplement as being an Excluded Series until the Invested Amount of
the Series relating to the Excluded Series is reduced to $0) obtained
by multiplying the Required Participation Percentage for that series
by the Initial Invested Amount for that series at that time,
plus
(b) the Trust Available Subordinated Amount on the immediately
preceding Determination Date (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the Payment
Date following that Determination Date).
"REQUIRED PARTICIPATION PERCENTAGE" shall mean, for a particular
Series, the percentage provided in the related Series Supplement.
REMOVAL OF ACCOUNTS
The Transferor shall have the right at any time to remove Eligible
Accounts from the Trust. To remove any Eligible Account, the Transferor (or the
Servicer on its behalf) shall, among other things:
(a) furnish to the Indenture Trustee, any Enhancement Provider and
the Rating Agencies a written notice (the "REMOVAL NOTICE") specifying the
Determination Date on which removal of one or more Accounts will commence
(a "REMOVAL COMMENCEMENT DATE") and the Accounts to be removed from the
Trust (the "DESIGNATED ACCOUNTS"),
(b) determine on the Removal Commencement Date the aggregate
principal balance of Receivables in respect of each Designated Account
(the "DESIGNATED BALANCE"),
(c) from and after the Removal Commencement Date, cease to transfer
to the Trust Receivables arising in the Designated Accounts,
(d) from and after the Removal Commencement Date, allocate all
Principal Collections in respect of each Designated Account, first to the
oldest outstanding principal balance of the Designated Account, until the
Determination Date on which the Designated Balance in the Designated
Account is reduced to zero (the "REMOVAL DATE"),
(e) on each business day from and after the Removal Commencement Date
to and until the related Removal Date, allocate:
59
(1) to the Trust (to be further allocated pursuant to the Trust
Sale and Servicing Agreement), Interest Collections in respect of
each Designated Account for Receivables in all Designated Accounts
transferred to the Trust, and
(2) to the Transferor the remainder of the Interest Collections
in the Designated Accounts,
(f) represent and warrant that the removal of the Eligible Account on
any Removal Date shall not, in the reasonable belief of the Transferor,
cause an Early Amortization Event or Investment Event to occur for any
series of Notes or cause the Pool Balance to be less than the Required
Participation Amount,
(g) represent and warrant that no selection procedures believed by
the Transferor to be adverse to the interests of the Noteholders were
utilized in selecting the Designated Accounts,
(h) represent and warrant that the removal will not result in a
reduction or withdrawal of the rating of any outstanding series or class
of Notes, and
(i) on or before the related Removal Date, deliver to the Indenture
Trustee and any Enhancement Provider an officers' certificate confirming
the items set forth in clauses (f), (g) and (h) above.
No Designated Accounts shall be removed if the removal will result in a
reduction or withdrawal of the rating of any outstanding series or class of
Notes.
On any date on which an Account becomes an Ineligible Account (which date
will be deemed the Removal Commencement Date for the Account), the Transferor
will commence the removal of the Account from the Trust by taking each of the
actions specified in clauses (a) through (e) of the preceding paragraph for the
Ineligible Account.
Upon satisfaction of the above conditions, on the Removal Date for the
Designated Account, the Transferor will cease the allocation of collections of
Receivables from the Designated Account and the Designated Account shall be
deemed removed from the Trust for all purposes (a "REMOVED ACCOUNT").
In addition to the removal rights described above, the Transferor shall
have the right at any time to remove Accounts from the Trust and, in connection
therewith, repurchase the then existing Receivables in the Accounts. To remove
Accounts and repurchase the then existing Receivables in the Accounts, the
Transferor (or the Servicer on its behalf) shall, among other things:
(1) furnish to the Trust and the Indenture Trustee, each Enhancement
Provider and the Rating Agencies a Removal Notice specifying the
Designated Accounts which are to be removed, and the then existing
Receivables in the Designated Accounts (the "DESIGNATED RECEIVABLES")
which are to be repurchased from the Trust and the Determination Date on
which the removal of the Designated Accounts and the purchase of the
Designated Receivables will occur (a "REMOVAL AND REPURCHASE DATE"),
(2) deliver to the Trust on the Removal and Repurchase Date a
computer file or microfiche or written list containing a true and complete
list of the Removed Accounts specifying for each such Account its account
number and the aggregate amount of Receivables outstanding in such
Account,
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(3) deposit into the Collection Account on the Removal and Repurchase
Date funds in an amount equal to the aggregate outstanding balance of the
Designated Receivables on such date (the "REPURCHASED RECEIVABLES PURCHASE
PRICE"),
(4) represent and warrant that the removal of any such Eligible
Account and the repurchase of the Receivables then existing in such
Account on any Removal and Repurchase Date shall not, in the reasonable
belief of the Transferor, cause an Early Amortization Event or Investment
Event to occur for any series of Notes or cause the Pool Balance to be
less than the Required Participation Amount,
(5) represent and warrant that no selection procedures believed by
the Transferor to be adverse to the interests of the Noteholders were
utilized in selecting the Designated Accounts,
(6) represent and warrant as of the Removal and Repurchase Date that
the list of Removed Accounts delivered pursuant to clause (2) above, as of
the Removal and Repurchase Date, is true and complete in all material
respects,
(7) represent and warrant that such removal and repurchase will not
result in a reduction or withdrawal of the rating of any outstanding
series or class of Notes by the applicable Rating Agencies, and
(8) deliver to the Trust, the Indenture Trustee and any Enhancement
Providers an officers' certificate confirming the items set forth in
clauses (4) through (7) above.
No Designated Accounts shall be removed and no Designated Receivables
shall be repurchased unless each Rating Agency shall have notified the
Transferor, the Servicer, the Trust and the Indenture Trustee in writing that
such removal and repurchase will not result in a reduction or withdrawal of such
Rating Agency's rating of any outstanding series or class of Notes.
Upon satisfaction of the above conditions, on the Removal and Repurchase
Date for any such Designated Account and Designated Receivables, such Designated
Account shall be deemed removed, and such Designated Receivables ("REPURCHASED
RECEIVABLES") shall be deemed repurchased, from the Trust for all purposes.
On each Payment Date, any amounts on deposit in the Collection Account on
such Payment Date resulting from payment by the Transferor of the Repurchased
Receivables Purchase Price will be applied,
FIRST, to fund any unpaid Miscellaneous Payment due on or prior to such
Payment Date and
SECOND, an amount equal to the product of:
(1) the amount of any Repurchased Receivables Purchase Price
initially deposited by the Transferor in the Collection Account
pursuant to such repurchase
and
(2) a fraction, the numerator of which is the amount of
Principal Collections for the immediately preceding Collection Period
and the denominator of which is the daily average Pool Balance for
such collection Period (such fraction, the "MONTHLY PAYMENT RATE"),
61
shall be treated as Principal Collections collected in the immediately preceding
Collection Period.
In addition to the foregoing provisions, the Transferor shall have the
right to require the reassignment to it of all the Trust's right, title and
interest in, to and under the Receivables then existing and thereafter created,
all monies due or to become due and all amounts received with respect thereto
and all proceeds thereof in or for the Accounts ("AUTOMATIC REMOVED ACCOUNTS")
designated by the Transferor, upon satisfaction of the following conditions:
(a) on or before the fifth business day immediately preceding the
date upon which such Accounts are to be removed, the Transferor shall have
given the Trust and the Indenture Trustee, a Removal Notice specifying the
date for removal of the Automatic Removed Accounts (the "AUTOMATIC REMOVAL
DATE");
(b) on or prior to the date that is five business days after the
Automatic Removal Date, the Transferor shall have delivered to the Trust
and the Indenture Trustee a computer file or microfiche or written list
containing a true and complete list of the Automatic Removed Accounts
specifying for each such Account, as of the removal notice date, its
account number and the aggregate amount of Receivables outstanding in such
Account;
(c) the Transferor shall have represented and warranted as of each
Automatic Removal Date that the list of Automatic Removed Accounts
delivered pursuant to clause (b) above, as of the Automatic Removal Date,
is true and complete in all material respects; and
(d) if any of the Accounts to be removed is not liquidated and does
not have a zero balance:
(1) the Indenture Trustee shall have received confirmation from
each Rating Agency that such removal will not result in a reduction
or withdrawal of such Ratings Agency's rating of any outstanding
series or class of Notes; and
(2) the Transferor shall have delivered to the Indenture
Trustee, each Rating Agency and any Enhancement Providers an
officers' certificate, dated the Automatic Removal Date, to the
effect that the Transferor reasonably believes that such removal will
not cause an Early Amortization Event or Investment Event to occur
for any series of Notes.
Upon satisfaction of the above conditions, on the Automatic Removal Date
all the right, title and interest of the Trust in and to the Receivables arising
in the Automatic Removed Accounts, all monies due and to become due and all
amounts received with respect thereto and all proceeds thereof shall be deemed
removed from the Trust for all purposes.
THE CERTIFICATES
The Transfer and Servicing Agreements provide that the Transferor may
exchange a portion of the certificate evidencing its interest in the Trust (the
"TRANSFEROR CERTIFICATE") for one or more additional certificates (each a
"SUPPLEMENTAL CERTIFICATE") for transfer or assignment to a person designated by
the Transferor upon the execution and delivery of a supplement to the Trust
Agreement (which supplement shall be subject to the amendment section of the
Trust Agreement to the extent that it amends any of the terms of the Trust
Agreement); provided that:
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(a) the Transferor shall at the time of such exchange and after
giving effect thereto have an interest in the Pool Balance of not less
than % of the Pool Balance,
(b) the Transferor shall have delivered to the Owner Trustee, the
Indenture Trustee, the Rating Agencies and any Enhancement Provider a Tax
Opinion for such exchange, and
(c) the Transferor shall have delivered to the Owner Trustee and the
Indenture Trustee written confirmation from the applicable Rating Agencies
that such exchange will not result in a reduction or withdrawal of the
rating of any outstanding series or class of Notes.
Any subsequent transfer or assignment of a Supplemental Certificate is also
subject to the conditions described in clauses (b) and (c) in the preceding
sentence.
DISTRIBUTIONS
Payments to Noteholders of a series or a class will be made from the
Collection Account and any accounts established for the benefit of such
Noteholders as described in the related prospectus supplement.
DEFAULTED RECEIVABLES AND RECOVERIES
"DEFAULTED RECEIVABLES" on any Determination Date are:
(1) all Receivables which were charged off as uncollectible in
respect of the immediately preceding Collection Period and
(2) all Receivables which were Eligible Receivables when transferred
to the Trust, which arose in an Account which became an Ineligible Account
after the date of transfer of such Receivables to the Trust and which were
not Eligible Receivables for any six consecutive Determination Dates
thereafter.
The "DEFAULTED AMOUNT" for any Collection Period will be an amount (which
shall not be less than zero) equal to:
(a) the principal amount of Receivables that became Defaulted
Receivables during the preceding Collection Period
MINUS
(b) the SUM of:
(1) the full amount of any Defaulted Receivables subject to
reassignment to the Transferor or purchase by the Servicer for such
Collection Period unless specified events of bankruptcy, insolvency
or receivership have occurred for either of the Transferor or the
Servicer, in which event the Defaulted Amount will not be reduced for
those Defaulted Receivables
and
63
(2) the excess, if any, for the immediately preceding
Determination Date of the amount determined pursuant to this clause
(b) for such Determination Date over the amount determined pursuant
to clause (a) for such Determination Date.
Receivables will be charged off as uncollectible in accordance with the
Servicer's customary and usual policies and procedures for servicing its own
comparable revolving dealer wholesale loan accounts. A portion of the Series
Allocable Defaulted Amount for each series of Notes and Collection Period will
be allocated between the Noteholders of such series and the Transferor as
provided in the related Series Supplement. The portion of the Defaulted Amount
allocated to the Noteholders of a series is referred to as the "INVESTOR DEFAULT
AMOUNT" for such series. The Investor Default Amount for any series of Notes
that consists of more than one class will be further allocated between such
classes as provided in the related Series Supplement and described in the
related prospectus supplement.
If the Servicer adjusts the amount of any Receivable because of a rebate,
billing error or other noncash items to a Dealer, or because such Receivable was
created in respect of inventory which was refused or returned by a Dealer, the
principal amount of each of the Certificateholder's Interest and the Pool
Balance will be reduced by the amount of the adjustment or charge-off.
Furthermore, to the extent that the reduction in the Certificateholder's
Interest would reduce the Transferor's Participation Amount below the Trust
Available Subordinated Amount for the immediately preceding Determination Date
(after giving effect to the allocations, distributions, withdrawals and deposits
to be made on the Payment Date immediately following such Determination Date),
the Transferor will deposit a cash amount equal to such deficiency into the
Collection Account in immediately available funds (an "ADJUSTMENT PAYMENT") on
the day on which such adjustment occurs.
OPTIONAL REPURCHASE
If so provided in a prospectus supplement relating to a series of Notes,
on any Payment Date occurring after the Invested Amount of the Notes of such
series is reduced to the percentage of the initial outstanding principal amount
of the Notes of such series specified therein, The Transferor will have the
option, subject to specified conditions, to repurchase the Noteholders' Interest
of such series. The purchase price will generally be equal to:
(1) the Invested Amount of such series on the Determination Date
preceding the Payment Date on which such repurchase will be made
PLUS
(2) accrued and unpaid interest on the unpaid principal amount of the
Notes of such series at the applicable interest rate (together with
interest on overdue interest),
PLUS
(3) any other amounts specified in the related Series Supplement.
The purchase price will be deposited in the Collection Account in immediately
available funds on the Payment Date on which The Transferor exercises such
option. Following any such purchase, the Noteholders of such series will have no
further rights in the Noteholders' Interest of such series, other than the right
to receive the final distribution on the Notes of that series. In the event that
The Transferor
64
fails for any reason to deposit such purchase price, payments will continue to
be made to the Noteholders of such series as described in the related prospectus
supplement.
INVESTMENT EVENTS AND EARLY AMORTIZATION EVENTS
Commencing on the first Payment Date following the Collection Period in
which an Investment Event has occurred for any series of Notes, Principal
Collections allocable to the Noteholders' Interest of such series will no longer
be paid to the Transferor or allocated to any other series but instead will be
deposited to the Principal Funding Account for such series monthly on each
Payment Date, and the Controlled Deposit Amount or Controlled Amortization
Amount, if any, will no longer apply to distributions of principal in respect of
the Notes of such series, in each case except as described below or provided in
the related Series Supplement. An "INVESTMENT EVENT" refers to, for any series
of Notes, any of the events so defined in the Series Supplement relating to that
series and described in the related prospectus supplement.
Upon the occurrence of any event so defined, an Investment Event will be
deemed to have occurred for such series without any notice or other action on
the part of any other party immediately upon the occurrence of such event. The
Investment Period for such series will commence as of the close of business on
the business day immediately preceding the day on which the Investment Event is
deemed to have occurred. Monthly deposits of principal to the Principal Funding
Account for such series will, except as described below or provided in the
related Series Supplement, begin on the first Payment Date following the
Collection Period in which a Investment Period has commenced for such series.
Commencing on the first Payment Date following the Collection Period in
which an Early Amortization Event has occurred for any series of Notes,
Principal Collections allocable to the Noteholders' Interest of such series will
no longer be paid to the Transferor, allocated to any other series or retained
in the Principal Funding Account for such series but instead will be distributed
to Noteholders of such series monthly on each Payment Date and the Controlled
Deposit Amount or Controlled Amortization Amount, if any, will no longer apply
to distributions of principal on the Notes of such series, in each case except
as described below or provided in the related Series Supplement.
An "EARLY AMORTIZATION EVENT" refers to, for any series of Notes, any
of the events so defined in the Series Supplement relating to the series
and described in the related prospectus supplement, as well as either of
the following events:
(1) the occurrence of specified events of bankruptcy, insolvency
or receivership relating to the Trust or the Transferor; and
(2) the Trust or the Transferor becomes an investment company
within the meaning of the Investment Company Act of 1940.
Upon the occurrence of any event described above or in the prospectus
supplement for a series of Notes, an Early Amortization Event will be deemed to
have occurred for such series without any notice or other action on the part of
any other party immediately upon the occurrence of such event. The Early
Amortization Period for such series will commence as of the close of business on
the business day immediately preceding the day on which the Early Amortization
Event is deemed to have occurred. Monthly distributions of principal to the
Noteholders of such series will begin on the first Payment Date following the
Collection Period in which an Early Amortization Period has commenced for such
series, except as described below. The failure of the Trust to pay the
outstanding principal amount of the Notes
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of any series or class by the Expected Payment Date therefor will have the same
consequences as the occurrence of an Early Amortization Event for such series or
class; and all references herein to Early Amortization Events shall be deemed to
include such a failure.
Notwithstanding the commencement of an Investment Period or an Early
Amortization Period for a series of Notes, such period may terminate and the
Revolving Period for such series and any class thereof may commence when the
event giving rise to the commencement of such Investment Period or Early
Amortization Period no longer exists, whether as a result of the distribution of
principal to Noteholders of such series or otherwise, in each case if and to the
extent provided in the Series Supplement for such series.
In addition to the consequences of an Investment Event or an Early
Amortization Event for any series of Notes discussed above, if the Transferor
violates its covenant not to create any lien on any Receivable as provided in
the Trust Sale and Servicing Agreement, on the day of such violation, the
Transferor will (subject to the actions of the Noteholders) immediately cease to
transfer Receivables to the Trust and promptly give notice to the Indenture
Trustee of such violation, as applicable. Under the terms of the Trust Sale and
Servicing Agreement, within 15 days the Indenture Trustee will publish a notice
of such violation stating that the Indenture Trustee intends to sell, liquidate
or otherwise dispose of the Receivables in a commercially reasonable manner and
on commercially reasonable terms, unless within a specified period of time
holders of Notes of each outstanding series representing more than 50% of the
aggregate unpaid principal amount of the Notes of each such series (or, for any
series with two or more classes, the Notes of each such class) and each person
holding a Supplemental Certificate, instruct the Indenture Trustee not to sell,
dispose of or otherwise liquidate the Receivables and to continue transferring
Receivables as before such insolvency event or violation, as applicable. If the
portion of such proceeds allocated to the Noteholders' Interest and the proceeds
of any collections on the Receivables in the Collection Account allocable to the
Noteholders' Interest are not sufficient to pay the aggregate unpaid principal
balance of the Notes in full plus accrued and unpaid interest thereon,
Noteholders will incur a loss.
TERMINATION; FULLY FUNDED DATE
TERMINATION. The Indenture will terminate on the earlier to occur of:
(a) the day following the Payment Date on which the aggregate
Invested Amounts for all series of Notes is zero, and
(b) the date on which proceeds from the sale, disposal or other
liquidation of the Receivables are distributed to the Noteholders
following any violation by the Transferor of its covenant not to create
any lien on any Receivable as provided in the Trust Sale and Servicing
Agreement and as described above under "THE NOTES - INVESTMENT EVENTS AND
EARLY AMORTIZATION EVENTS."
Upon termination of the Indenture, all right, title and interest in the
Receivables and other funds of the Trust (other than amounts in the Collection
Account, any Principal Funding Account, Interest Funding Account, Excess Funding
Account or other account for the final distribution of principal and interest to
Noteholders) will be conveyed and transferred to the Trust.
In any event, the last payment of principal and interest on any series of
Notes will be due and payable no later than the date specified in the related
prospectus supplement (the "SERIES TERMINATION DATE").
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FULLY FUNDED DATE. Following the occurrence of the Fully Funded Date for
any series of Notes, Noteholders of that series will no longer have any interest
in the Receivables and all the representations and covenants of the Transferor
and the Servicer relating to the Receivables, as well as other specified
provisions of the Indenture and all remedies for breaches thereof, will no
longer accrue to the benefit of the Noteholders of that series, in each case,
unless the Revolving Period for such series recommences as provided in the
related Series Supplement. Those representations, covenants and other provisions
include the conditions to the exchange of the Transferor Certificate described
under "THE TRANSFER AND SERVICING AGREEMENTS - THE CERTIFICATES," the conditions
to the issuance of a new series of Notes described under "THE NOTES - NEW
ISSUANCES," the representations described under "THE TRANSFER AND SERVICING
AGREEMENTS - REPRESENTATIONS AND WARRANTIES BY THE TRANSFEROR" to the extent
they relate to the Receivables and the Collateral Security, the limitations on
additions and removals of Accounts described under "THE TRANSFER AND SERVICING
AGREEMENTS - ADDITION OF ACCOUNTS" and " - REMOVAL OF ACCOUNTS," respectively,
and the obligations of the Servicer to service the Receivables described under
"THE TRANSFER AND SERVICING AGREEMENTS - COLLECTION AND OTHER SERVICING
PROCEDURES" and " - SERVICER COVENANTS." In addition, upon the occurrence of the
Fully Funded Date for any series of Notes, no Interest Collections, Principal
Collections, Defaulted Receivables or Miscellaneous Payments will be allocated
to that series, unless the Revolving Period with respect thereto recommences as
described above. Notwithstanding the foregoing, when the final distribution has
been made for each series of Notes or the Fully Funded Date has occurred with
respect thereto, all right, title and interest in the Receivables will be
conveyed and transferred to the Transferor.
INDEMNIFICATION
The Trust Sale and Servicing Agreement provides that the Servicer will
indemnify the Trust, the Owner Trustee and the Indenture Trustee from and
against any loss, liability, expense, damage or injury suffered or sustained
arising out of any acts, omissions or alleged acts or omissions arising out of
activities of the Trust, the Owner Trustee, the Indenture Trustee or the
Servicer pursuant to the Trust Sale and Servicing Agreement; PROVIDED, that the
Trust, the Owner Trustee or the Indenture Trustee will not be so indemnified if
such acts, omissions or alleged acts or omissions constitute fraud, gross
negligence, breach of fiduciary duty or willful misconduct by the Trust, the
Owner Trustee or Indenture Trustee. However, the Servicer will not indemnify the
Trust, the Owner Trustee, the Indenture Trustee or the Noteholders for any act
taken by the Indenture Trustee at the request of the Noteholders or for any tax
required to be paid by the Trust or the Noteholders.
The Trust Sale and Servicing Agreement provides that, except as described
above, and except for other specified exceptions, neither the Transferor, the
Servicer nor any of their directors, officers, employees or agents will be under
any liability to the Trust, the Owner Trustee, the Indenture Trustee, the
Noteholders or any other person for taking any action, or for refraining from
taking any action, pursuant to the Trust Sale and Servicing Agreement. However,
neither the Transferor, the Servicer nor any of their directors, officers,
employees or agents will be protected against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence of any such person in the performance of their duties or by reason of
reckless disregard of their obligations and duties thereunder.
In addition, the Trust Sale and Servicing Agreement provides that the
Servicer is not under any obligation to appear in, prosecute or defend any legal
action which is not incidental to its servicing responsibilities under the Trust
Sale and Servicing Agreement. The Servicer may, in its sole discretion,
undertake any such legal action which it may deem necessary or desirable for the
benefit of the
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Noteholders with respect to the Trust Sale and Servicing Agreement and the
rights and duties of the parties thereto and the interest of the Noteholders
thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Trust Sale and Servicing Agreement, the Servicer is
responsible for servicing, collecting, enforcing and administering the
Receivables in accordance with customary and usual procedures for servicing its
own revolving credit line dealer wholesale loans, except where the failure to so
act would not materially and adversely affect the rights of the Trust.
World Omni covenants that it may only change the terms relating to the
Accounts if, in the Servicer's reasonable judgment, no Early Amortization Event
or Investment Event will occur for any series of Notes as a result of the change
and the change is made applicable to the comparable segment of the portfolio of
dealer wholesale financing revolving line of credit accounts with similar
characteristics owned or serviced by World Omni and not only to the Accounts.
Servicing activities to be performed by the Servicer include collecting
and recording payments, communicating with dealers, investigating payment
delinquencies, evaluating the increase of credit limits, and maintaining
internal records for each Account. Managerial and custodial services performed
by the Servicer on behalf of the Trust include providing assistance in any
inspections of the documents and records relating to the Accounts and
Receivables by the Trust and the Indenture Trustee pursuant to the Trust Sale
and Servicing Agreement and Indenture, maintaining the agreements, documents and
files relating to the Accounts and Receivables as custodian for the Trust and
providing related data processing and reporting services for Noteholders and on
behalf of the Trust and the Indenture Trustee.
SERVICER COVENANTS
In the Trust Sale and Servicing Agreement the Servicer covenants that:
(1) it will duly satisfy all obligations on its part to be fulfilled
under or in connection with the Receivables and the Accounts, will
maintain in effect all qualifications required in order to service the
Receivables and the Accounts and will comply in all material respects with
all requirements of law in connection with servicing the Receivables and
the Accounts, the failure to comply with which would have a materially
adverse effect on the Noteholders of any outstanding series;
(2) it will not permit any rescission or cancellation of a Receivable
except as ordered by a court of competent jurisdiction or other government
authority;
(3) it will do nothing to impair the rights of the Noteholders in the
Receivables or the Accounts; and
(4) it will not reschedule, revise or defer payments due on any
Receivable except in accordance with its guidelines for servicing dealer
wholesale financing revolving line of credit loans.
Under the terms of the Trust Sale and Servicing Agreement, if the
Transferor or the Servicer discovers, or receives written notice, that any
covenant of the Servicer set forth above has not been complied with in all
material respects and such noncompliance has not been cured within 30 days
thereafter (or such longer period as the Indenture Trustee may agree to) and has
a materially adverse effect on the interests of all Noteholders in any
Receivable or Account, World Omni, as Servicer, will
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purchase such Receivable or all Receivables in such Account, as applicable. If
World Omni is the Servicer, such purchase will be made on the Determination Date
following the expiration of the 30-day cure period and the Servicer will be
obligated to deposit into the Collection Account an amount equal to the amount
of such Receivable plus accrued and unpaid interest thereon. The amount of such
deposit shall be deemed a Transfer Deposit Amount. The purchase by the Servicer
constitutes the sole remedy available to the Noteholders if such covenant or
warranty of the Servicer is not satisfied and the Trust's interest in any such
purchased Receivables shall be automatically assigned to the Servicer,
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and reimbursement
for its expenses with respect to a series of Notes will be a monthly servicing
fee (the "SERVICING FEE") in an amount payable in arrears on each Payment Date
on or before the Series Termination Date of that series and the Fully Funded
Date, if any, of that series (and thereafter during the Revolving Period for
such series, if such Revolving Period recommences) generally equal to
one-twelfth of the PRODUCT of:
(a) the "SERVICING FEE RATE" set forth in such Series Supplement,
(b) the Pool Balance as of the last day of the second preceding
Collection Period, and
(c) the Series Allocation Percentage for such series for the
immediately preceding Collection Period.
The share of the Servicing Fee allocable to Noteholders of any series for
any Payment Date (the "MONTHLY SERVICING FEE") shall generally be equal to
one-twelfth of the product of:
(1) the Servicing Fee Rate, and
(2) the Invested Amount of such series as of the last day of the
second preceding Collection Period.
The remainder of the Servicing Fee with respect to any series shall be paid out
of amounts allocable to the Certificateholders. The Monthly Servicing Fee with
respect to any series shall be payable to the Servicer solely to the extent
amounts are available for distribution therefor in accordance with the terms of
the Trust Sale and Servicing Agreement.
The Servicer will be permitted to waive its right to receive the Servicing
Fee with respect to any series on any Payment Date, so long as it believes that
sufficient Interest Collections will be available on a future Payment Date to
pay the Monthly Servicing Fee relating to such waived Servicing Fee, in which
case the Servicing Fee and the Monthly Servicing Fee for such series and such
Payment Date shall be deemed to be zero.
The Servicer will pay from its servicing compensation specified expenses
incurred in connection with servicing the Accounts and the Receivables including
payment of fees and disbursements of the Indenture Trustee, the Owner Trustee
and independent accountants and all other fees and expenses which are not
expressly stated in the Trust Sale and Servicing Agreement to be payable by the
Trust or the Noteholders other than federal, state and local income and
franchise taxes, if any, of the Trust or the Noteholders.
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CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under the
Trust Sale and Servicing Agreement, except upon determination that such duties
are no longer permissible under applicable law. No such resignation will become
effective until the Indenture Trustee or a successor to the Servicer has assumed
the Servicer's responsibilities and obligations under the Trust Sale and
Servicing Agreement.
Any person into which, in accordance with the Trust Sale and Servicing
Agreement, the Servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which the Servicer is a party, or any person
succeeding to the business of the Servicer, will be the successor to the
Servicer under the Trust Sale and Servicing Agreement.
SERVICING DEFAULT
In the event of any Servicing Default the Indenture Trustee, by written
notice to the Servicer, may terminate all of the rights and obligations of the
Servicer, as servicer, under the Trust Sale and Servicing Agreement and in and
to the Receivables and the proceeds thereof and appoint a new Servicer (a
"SERVICE TRANSFER"). The rights and interest of the Transferor under the Trust
Sale and Servicing Agreement in the Certificateholder's Interest will not be
affected by any Service Transfer. The Indenture Trustee shall as promptly as
possible appoint a successor Servicer and if no successor Servicer has been
appointed by the Indenture Trustee and has accepted such appointment by the time
the Servicer ceases to act as Servicer, all rights, authority, power and
obligations of the Servicer under the Trust Sale and Servicing Agreement shall
pass to and be vested in the Indenture Trustee. Prior to any Service Transfer,
the Indenture Trustee will review any bids obtained from potential servicers
meeting specified eligibility requirements set forth in the Trust Sale and
Servicing Agreement to serve as successor Servicer for servicing compensation
not in excess of the Servicing Fee, plus specified excess amounts payable to the
Transferor.
A "SERVICING DEFAULT" refers to any of the following events:
(1) failure by the Servicer to make any payment, transfer or deposit,
or to give instructions to the Trust or the Indenture Trustee to make any
payment, transfer or deposit, on the date the Servicer is required to do
so under the Trust Sale and Servicing Agreement, which is not cured within
a five business day grace period;
(2) failure on the part of the Servicer duly to observe or perform
any other covenants or agreements of the Servicer in the Trust Sale and
Servicing Agreement which failure has a materially adverse effect on the
Noteholders of any outstanding series and which continues unremedied for a
period of 30 days after the date written notice of such failure shall have
been given to the Servicer by the Indenture Trustee, or the Servicer
delegates its duties under the Trust Sale and Servicing Agreement, except
as specifically permitted thereunder;
(3) any representation, warranty or certification made by the
Servicer in the Trust Sale and Servicing Agreement or in any certificate
delivered pursuant to the Trust Sale and Servicing Agreement proves to
have been incorrect in any material respect when made, has a materially
adverse effect on the rights of the Noteholders of any outstanding series,
and which materially adverse effect continues for a period of 60 days
after written notice thereof shall have been given to the Servicer by the
Indenture Trustee; or
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(4) the occurrence of specified events of bankruptcy, insolvency or
receivership for the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (1) above for a period of ten business days or referred
to under clauses (2) or (3) for a period of 60 business days, shall not
constitute a Servicing Default if such delay or failure was caused by an act of
God or other similar occurrence. Upon the occurrence of any such event, the
Servicer shall not be relieved from using its best efforts to perform its
obligations in a timely manner in accordance with the terms of the Trust Sale
and Servicing Agreement and the Servicer shall provide the Indenture Trustee,
the Trust, any Enhancement Provider, the Transferor and the Noteholders prompt
notice of such failure or delay by it, together with a description of its
efforts to so perform its obligations. The Servicer shall immediately notify the
Trust and the Indenture Trustee in writing of any Servicing Default.
RIGHTS UPON SERVICING DEFAULT
As long as a Servicing Default under the Trust Sale and Servicing
Agreement remains unremedied, the Indenture Trustee or holders of related Notes
evidencing not less than a majority in principal amount of such then outstanding
Notes (or, if the Notes have been paid in full and the Indenture has been
discharged with respect thereto, by the related Owner Trustee or
Certificateholders whose Certificates evidence not less than a majority in
interest of the Trust) may terminate all the rights and obligations of the
Servicer under such Trust Sale and Servicing Agreement, whereupon such Indenture
Trustee will succeed to all the responsibilities, duties and liabilities of the
Servicer under such agreement and will be entitled to similar compensation
arrangements.
If, however, a bankruptcy trustee or similar official has been appointed
for the Servicer, and no Servicing Default other than such appointment has
occurred, such trustee or official may have the power to prevent the Indenture
Trustee or the Owner Trustee or the Certificateholders from effecting a transfer
of servicing. In the event that the Indenture Trustee is unwilling or unable to
so act, it may appoint or petition a court of competent jurisdiction for the
appointment of, a successor with a net worth of at least $100,000,000 and who
otherwise meets the eligibility requirements set forth in such Trust Sale and
Servicing Agreement. The Indenture Trustee may make such arrangements for
compensation to be paid, which in no event may be greater than the servicing
compensation to the Servicer under the Trust Sale and Servicing Agreement.
WAIVER OF PAST DEFAULTS
The holders of Notes evidencing at least a majority in principal amount of
the Controlling Class of each series of Notes then outstanding may, on behalf of
all such Noteholders and any Certificateholders, waive any default by the
Servicer in the performance of its obligations under the Trust Sale and
Servicing Agreement and its consequences, except a Servicing Default in making
any required distributions, payments, transfers or deposits in accordance with
the Trust Sale and Servicing Agreement. No such waiver will impair the rights of
the Indenture Trustee, the Owner Trustee, or the Noteholders for subsequent
defaults.
REPORTS
On the second business day preceding each Payment Date (each, a
"DETERMINATION DATE"), the Servicer will calculate the amounts to be allocated
in respect of Collections on Receivables received with respect to the related
Collection Period to the Noteholders of each outstanding series and class of
Notes
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or to the Transferor and the holder of any Supplemental Certificate in
accordance with the Series Supplement and the Transfer and Servicing Agreements.
On each Payment Date (including each Payment Date that corresponds to an
Interest Payment Date or any Special Payment Date), the Indenture Trustee will
forward to each Noteholder of record of any series a statement (the "PAYMENT
DATE STATEMENT") prepared by the Servicer setting forth information relating to
the Trust and the Notes of such series, as specified in the related Series
Supplement and described in the related prospectus supplement.
For each Interest Payment Date or Special Payment Date, the Payment Date
Statement for any series of Notes will include the following information for the
Notes of such series:
(a) the total amount distributed on the Notes of such series;
(b) the amount of such distribution allocable to principal on the
Notes of such series, and
(c) the amount of such distribution allocable to interest on the
Notes of such series.
On or before March 31 of each calendar year, the Indenture Trustee will
furnish (or cause to be furnished) to each person who at any time during the
preceding calendar year was a Noteholder of record a statement containing the
information required to be provided by an issuer of indebtedness under the U.S.
Internal Revenue Code for such preceding calendar year or the applicable portion
thereof during which such person was a Noteholder, together with such other
customary information as is required to be provided by an issuer of indebtedness
under the U.S. Internal Revenue Code and such other customary information as is
necessary to enable the Noteholders to prepare their tax returns. See "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES."
EVIDENCE AS TO COMPLIANCE
The Trust Sale and Servicing Agreement provides that a firm of independent
public accountants will furnish to the Trust and the Indenture Trustee on or
before March 31 of each year, beginning no later than the first March 31 which
is at least twelve months after the Initial Closing Date, a statement as to
compliance by the Servicer during the preceding twelve months ended December 31
(or in the case of the first such statement, the period from the Initial Closing
Date to December 31 of such year) with specified standards relating to the
servicing of the Receivables, the Servicer's accounting records and computer
files with respect thereto and other matters.
The Trust Sale and Servicing Agreement also provides for delivery to the
Trust and the Indenture Trustee, on or before March 31 of each year, beginning
no later than the first March 31 which is at least twelve months after the
Initial Closing Date, a certificate signed by an officer of the Servicer stating
that the Servicer has fulfilled its obligations under the Trust Sale and
Servicing Agreement throughout the preceding twelve months ended December 31 (or
in the case of the first such certificate, the period from the Initial Closing
Date to December 31 of such year) or, if there has been a default in the
fulfillment of any such obligation, describing each such default. The Servicer
agrees to give the Indenture Trustee and the Owner Trustee notice of Servicing
Defaults under the Trust Sale and Servicing Agreement.
Copies of such statements and certificates may be obtained by Noteholders
by request in writing addressed to the applicable Indenture Trustee or the
Trust.
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AMENDMENTS
Each of the Transfer and Servicing Agreements may be amended by the
parties thereto without the consent of the related Noteholders:
(1) to cure any ambiguity,
(2) to correct or supplement any provision therein that may be
defective or inconsistent with any other provision therein,
(3) to add or supplement any credit, liquidity or other enhancement
arrangement for the benefit of any Noteholders (provided that if any such
addition affects any series or class of Noteholders differently than any
other series or class of Noteholders, then such addition will not, as
evidenced by an opinion of counsel, adversely affect in any material
respect the interests of any series or class of Noteholders),
(4) to add to the covenants, restrictions or obligations of the
Transferor, the Servicer, the Trust, the Owner Trustee or the Indenture
Trustee for the benefit of Noteholders, or
(5) to add, change or eliminate any other provision of such agreement
in any manner that will not, as evidenced by an opinion of counsel,
adversely affect in any material respect the interests of the Noteholders.
Each such Agreement may also be amended by the parties thereto with the
consent of the holders of at least a majority in principal amount of the
Controlling Class of each series of Notes affected thereby and the holders of
Certificates evidencing at least a majority of interest in the Trust for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of such agreement or of modifying in any manner the rights of
such Noteholders, except that no such amendment may:
(1) increase or reduce in any manner the amount of, or accelerate or
delay the timing of, distributions or payments that are required to be
made on any Note or Certificate without the consent of the holder thereof,
(2) adversely affect the rating of any series or class of Notes by
any Rating Agency without the consent of two-thirds of the principal
amount of the outstanding Notes of such series or class, or
(3) reduce the aforesaid percentage required to consent to any such
amendment without the consent of such aforesaid percentage of Noteholders.
INTERCREDITOR ARRANGEMENTS
The agreements governing the Accounts provide for a security interest in
favor of World Omni in the Vehicles related to Receivables thereunder. For the
Receivables to be conveyed to the Trust, World Omni will represent in the
Receivables Purchase Agreement that the security interest in the related
Vehicles is a first priority perfected security interest. The security interest
in favor of World Omni in the Vehicles related to each Account the Receivables
of which are transferred to the Trust will be assigned by World Omni to the
Transferor pursuant to the Receivables Purchase Agreement and assigned to the
Trust by the Transferor pursuant to the Trust Sale and Servicing Agreement. In
its other lending activities,
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World Omni may have made capital loans, real estate loans or other loans to
Dealers that are also secured by a security interest in such Vehicles. In the
Receivables Purchase Agreement, World Omni agrees that any security interests in
such Vehicles that it may have in respect of advances or loans to Dealers other
than the related Receivables shall be junior and subordinate to the security
interests therein granted in connection with the related Receivables and that it
will not realize on any such collateral in a manner materially adverse to the
Transferor or the Trust and the Noteholders until the Transferor and the Trust
have been paid in full in respect of their interests in the Receivables related
to such Vehicles.
In addition, in connection with any such other loans or advances made by
World Omni to a Dealer, World Omni may also have a security interest in property
constituting Collateral Security other than Vehicles. In such cases, World Omni,
in its sole discretion, may realize on such other Collateral Security for its
own benefit in respect of such loans or advances before the Trust or the
Indenture Trustee, on behalf of any Noteholders, is permitted to realize upon
such other Collateral Security and the security interests of the Trust and
Indenture Trustee therein shall be junior and subordinate to the security
interests of World Omni granted in connection with such other loans and
advances. Because of the subordinate position of the Indenture Trustee in
respect of such other Collateral Security, there is no assurance that the Trust
or the Indenture Trustee will realize any proceeds in respect of any such other
Collateral Security.
ADMINISTRATION AGREEMENT
World Omni, in its capacity as administrator (the "ADMINISTRATOR"), will
enter into the Administration Agreement with the Trust and the Indenture Trustee
pursuant to which the Administrator will agree, to the extent provided in such
Administration Agreement, to provide the notices and to perform other
administrative obligations required by the Indenture. As compensation for the
performance of the Administrator's obligations under the Administration
Agreement and as reimbursement for its expenses related thereto, the
Administrator will be entitled to a monthly administration fee in an amount
equal to $1,500, which fee will be paid by the Servicer.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
On the closing date and each day thereafter, World Omni will sell the
Receivables to the Transferor, and the Transferor will immediately transfer the
Receivables to the Trust, which the Trust will pledge to the Indenture Trustee
for the benefit of the Noteholders. The Transferor represents that:
o the sale or transfer to the Trust constitutes a valid transfer and
assignment to the Trust of all right, title and interest of the
Transferor in, to and under the Receivables;
o under applicable Florida law, there exists a valid, ownership
interest in the Receivables; and
o in the event the sale by the Transferor to the Trust is
recharacterized as a grant of a security interest instead of a true
sale, the Trust will have an enforceable first priority perfected
security interest in the Receivables following their transfer to the
Trust.
For a discussion of the Trust's rights arising from a breach of these
representations, see "THE TRANSFER AND SERVICING AGREEMENTS - REPRESENTATIONS
AND WARRANTIES OF THE TRANSFEROR."
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Each of World Omni and the Transferor has represented that the Receivables
are "instruments," "accounts," "chattel paper" or "general intangibles" for
purposes of Florida's Uniform Commercial Code. Any dealer promissory notes
evidencing the Receivables which constitute "instruments" under the Uniform
Commercial Code have been and will continue to be transferred by the Transferor,
to the Trust and to the Indenture Trustee's office located in ,
. However, if the Receivables are deemed to be accounts, chattel paper
or general intangibles and the transfer of the Receivables by World Omni to the
Transferor, by the Transferor to the Trust or by the Trust to the Indenture
Trustee is deemed either to be a sale or to create a security interest, the
Uniform Commercial Code or other applicable law applies. In the case of chattel
paper, the Indenture Trustee, as transferee, would then have to take possession
of the chattel paper or file an appropriate financing statement or statements in
order to perfect its interests in the Receivables. As a precautionary measure,
financing statements covering the Receivables have been filed under the Florida
Uniform Commercial Code by the Transferor, the Trust and the Indenture Trustee
to perfect their respective interests in the Receivables and continuation
statements will be filed, as required, to continue the perfection of their
interests in the Receivables.
There are limited circumstances under the Uniform Commercial Code and
applicable federal law in which prior or subsequent transferees of Receivables
could have an interest in the Receivables with priority over the Trust's and the
Indenture Trustee's interest. A purchaser of the Receivables who gives new value
and takes possession of the documents which evidence the Receivables in the
ordinary course of the purchaser's business may have priority over the Trust's
and the Indenture Trustee's interest in the Receivables. A tax or other
government lien on property of World Omni or the Transferor arising before a
Receivable is conveyed to the Trust or to the Indenture Trustee may also have
priority over the Trust's and the Indenture Trustee's interest in the
transferred Receivable. Under the Receivables Purchase Agreement, World Omni
represents to the Transferor, under the Trust Sale and Servicing Agreement the
Transferor represents to the Trust, and under the Indenture the Trust represents
to the Indenture Trustee that the Receivables have been transferred free and
clear of any third party lien. In addition, the Transferor agrees under the
Trust Sale and Servicing Agreement to deliver to the Trust, and the Trust agrees
under the Indenture to deliver to the Indenture Trustee any necessary
instruments, such as any promissory notes received from Dealers, which evidence
the Receivables. Each of World Omni, the Transferor and the Trust also covenants
that it will not transfer or grant any lien on any Receivable or, except as
described under "THE TRANSFER AND SERVICING AGREEMENTS - THE CERTIFICATES," the
Certificates, or any interest in the Certificateholder's Interest, other than to
the Trust or the Indenture Trustee. In addition, while World Omni is the
Servicer, cash collections on the Receivables may, under specified
circumstances, be commingled with the funds of World Omni prior to each Payment
Date and, in the event of a World Omni bankruptcy, the Trust and the Indenture
Trustee may not have a perfected interest in the commingled collections.
CERTAIN MATTERS RELATING TO BANKRUPTCY
If World Omni were to become a debtor in a bankruptcy case, a creditor or
trustee in bankruptcy of World Omni or World Omni may attempt to characterize
the transfer of the Receivables from World Omni to the Transferor as a pledge of
the Receivables to secure a borrowing by World Omni rather than a true sale of
the Receivables. World Omni represents to the Transferor in the Receivables
Purchase Agreement that the sales of the Receivables by World Omni to the
Transferor are valid sales of the Receivables to the Transferor. In addition,
World Omni and the Transferor agree to treat these transfers as sales of the
Receivables to the Transferor, and World Omni will take all actions that are
required under Florida law to perfect the Transferor's ownership interest in the
Receivables. If these transfers are treated as sales, the Receivables would not
be part of World Omni's bankruptcy estate and would not be available to World
Omni's creditors.
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In OCTAGON GAS SYSTEMS, INC. V. RIMMER, 995 F.2d 948 (10th Cir. 1993), the
United States Court of Appeals for the Tenth Circuit suggested that, even where
a transfer of accounts from a seller to a buyer constitutes a true sale, the
accounts would nevertheless constitute property of the seller's bankruptcy
estate in a bankruptcy of the seller. The Transferor has been advised by counsel
that the reasoning of the Octagon court appears to be inconsistent with
established precedent and the Uniform Commercial Code. In addition, the
Permanent Editorial Board of the Uniform Commercial Code has issued an official
commentary (P&B Commentary No. 14) which characterizes the Octagon court's
interpretation of Article 9 of the Uniform Commercial Code to be erroneous. Such
commentary states that nothing in Article 9 is intended to prevent the transfer
of ownership of accounts or chattel paper.
In addition, if World Omni were to become a debtor in a bankruptcy case, a
creditor or the bankruptcy trustee or World Omni itself might request that World
Omni be substantively consolidated with the Transferor. Delays or reductions in
payments on the Notes could occur while the court decides these issues. In
addition, should a court rule that the Receivables are part of World Omni's
bankruptcy estate, or that World Omni should be substantively consolidated with
the Transferor, additional reductions or delays in payments on the Notes could
result. See "RISK FACTORS - A BANKRUPTCY OF WORLD OMNI OR THE TRANSFEROR MAY
DELAY OR REDUCE PAYMENTS ON THE NOTES."
If the Transferor were to become a bankrupt debtor, an Early Amortization
Event would occur which may result in a lack of funds available to make full and
timely payment on the Notes. The Transferor has attempted to reduce the
likelihood that it will file for bankruptcy. The Transferor's limited liability
company agreement provides that, under specified circumstances, the Transferor
is required to have two independent directors, as such term is defined in its
limited liability company agreement. The Transferor's limited liability company
agreement also provided that the Transferor will not file a voluntary
application for relief under the U.S. Bankruptcy Code without the affirmative
vote of its two independent directors. Under the Trust Sale and Servicing
Agreement, the Indenture Trustee, the Trust, the Owner Trustee, all the
Noteholders and any Enhancement Provider agree that they will not until one year
and one day after termination of the Indenture institute against the Transferor
any bankruptcy, reorganization or other proceedings under any federal or state
bankruptcy or similar law. The Transferor does not intend to file a voluntary
application for relief under the Bankruptcy Code or any similar applicable state
law regarding the Transferor so long as the Transferor is solvent, and the
Transferor does not foresee it becoming insolvent.
If World Omni or the Transferor filed for bankruptcy under the federal
bankruptcy code or any state insolvency laws, then World Omni or the Transferor
may be able to recover payments they made to the Trust to repurchase
Receivables. In general, World Omni or the Transferor might recover any payments
made by them to the Trust during the one-year period before the date World Omni
or the Transferor filed for bankruptcy. The one-year period may be extended by
the court if it determines that the bankrupt entity was insolvent more than one
year prior to filing its bankruptcy petition.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Set forth below is a discussion of the anticipated material United States
federal income tax consequences of the purchase, ownership and disposition of
the Notes offered by this prospectus. This discussion is based upon current
provisions of the U.S. Internal Revenue Code, existing and proposed Treasury
regulations, current administrative rulings, judicial decisions and other
applicable authorities.
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There are no cases or IRS rulings on similar transactions involving debt issued
by a trust with terms similar to those of the Notes. As a result, there can be
no assurance that the IRS will not challenge the conclusions reached in this
section, and no ruling from the IRS has been or will be sought on any of the
issues discussed below. Furthermore, legislative, judicial or administrative
changes may occur, perhaps with retroactive effect, which could affect the
accuracy of the statements and conclusions set forth in this prospectus as well
as the tax consequences to Noteholders.
This discussion does not claim to deal with all aspects of federal income
taxation that may be relevant to the holders of Notes in light of their personal
investment circumstances nor, except for specific limited discussions of
particular topics, to Noteholders subject to special treatment under the federal
income tax laws, such as financial institutions, broker-dealers, life insurance
companies and tax-exempt organizations. This information is directed only to
prospective purchasers who:
o purchase Notes in the initial distribution of the Notes;
o are citizens or residents of the United States, including domestic
corporations, limited liability
companies and partnerships; and
o hold the Notes as "capital assets" within the meaning of Section
1221 of the U.S. Internal Revenue Code.
PROSPECTIVE INVESTORS SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE FEDERAL,
STATE, LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF NOTES.
TAX CHARACTERIZATION AND TREATMENT OF NOTES
CHARACTERIZATION AS DEBT. For each series of Notes, except for any series
which is specifically identified as receiving different tax treatment in the
related prospectus supplement, Kirkland & Ellis, special tax counsel to the
Transferor ("TAX COUNSEL"), will deliver its opinion to the effect that the
Notes will be treated as debt for federal income tax purposes. The Transferor,
the Servicer and each Noteholder, by acquiring an interest in a Note, will agree
to treat the Notes as indebtedness for federal, state and local income and
franchise tax purposes. See "TAX CHARACTERIZATION OF THE TRUST - RISKS OF
ALTERNATIVE CHARACTERIZATION" below for a discussion of the potential federal
income tax consequences to Noteholders if the IRS were successful in challenging
the characterization of the Notes for federal income tax purposes.
TREATMENT OF STATED INTEREST. Based on Tax Counsel's opinion that the
Notes will be treated as debt for federal income tax purposes, and assuming the
Notes are not issued with original issue discount ("OID"), the stated interest
on a Note will be taxable to a Noteholder as ordinary income when received or
accrued in accordance with each Noteholder's method of tax accounting. Interest
received on a Note may constitute "investment income" for purposes of some
provisions in the U.S. Internal Revenue Code limiting the deductibility of
investment interest expense.
ORIGINAL ISSUE DISCOUNT. Except to the extent indicated in the related
prospectus supplement, no series of Notes will be issued with OID. In general,
OID is the excess of the "stated redemption price at maturity" of a debt
instrument over its "issue price," unless the OID is small enough to fall within
a statutorily defined de minimis exception. A Note's "stated redemption price at
maturity" is the total of all payments required to be made under the Note
through maturity except "qualified stated interest." "Qualified stated interest"
is generally interest that is unconditionally payable in cash or property, other
77
than debt instruments of the issuer, at fixed intervals of one year or less
during the entire term of the instrument at specified rates. The "issue price"
will be the initial price at which a substantial amount of the Notes are sold,
excluding sales to bond holders, brokers or similar persons acting as
underwriters, placement agents or wholesalers.
Although it is not anticipated, except to the extent indicated in the
related prospectus supplement, that any series of Notes will be issued at a
greater than DE MINIMIS discount, a series of Notes may nevertheless be deemed
to have been issued with OID. First, under Treasury regulations, interest
payments on a series of Notes may not be deemed "qualified stated interest" if
(i) reasonable legal remedies do not exist to compel timely payment or (ii) the
Notes do not otherwise provide terms and conditions that make the likelihood of
late payment (other than a late payment that occurs within a reasonable grace
period) or nonpayment a remote contingency. If a series of Notes does not pay
qualified stated interest, all of the taxable income thereon would be includible
in income as OID. Second the IRS could take the position (under regulations that
have not yet been issued pursuant to Section 1272(a)(6) of the Code) that a
series of Notes has OID.
If a Note were treated as being issued with OID, a Noteholder would be
required to include OID in its income as interest over the term of the Note
under a constant yield method. In general, OID must be included in income in
advance of the receipt of cash representing that income. Thus, each cash
distribution would be treated as an amount already included in income (to the
extent OID has accrued as of the date of the interest distribution and is not
allocated to prior distributions), or as a repayment of principal. This
treatment would have no significant effect on Noteholders using the accrual
method of accounting. However, cash method Noteholders may be required to report
income with respect to the Notes in advance of the receipt of cash attributable
to such income. In this situation you would have to rely on other sources to pay
the taxes on your OID income. Even if a note has OID falling within the DE
MINIMIS exception, the Noteholder must include such OID in income
proportionately as principal payments are made on such Note.
A holder of a Note which has a fixed maturity date not more than one year
from the issue date of such Note (a "SHORT-TERM NOTE") will generally not be
required to include OID income on the Note as it accrues. However, the foregoing
rule may not apply if such holder does not hold the instrument as part of a
hedging transaction, or as a stripped bond or stripped coupon or if the holder
is:
o an accrual method taxpayer;
o a bank;
o a broker or dealer that holds the Note as inventory;
o a regulated investment company or common trust fund; or
o the beneficial owner of specified pass-through entities specified in the
U.S. Internal Revenue Code.
A holder of a Short-Term Note who is not required to include OID income on the
note as it accrues will instead include the OID accrued on the Note in gross
income upon a sale or exchange of the Note or at maturity, or if the Short-Term
Note is payable in installments, as principal is paid thereon. A holder would be
required to defer deductions for any interest expense on an obligation incurred
to purchase or carry the Short-Term Note to the extent it exceeds the sum of any
interest income and OID accrued on such Note. However, a holder may elect to
include OID in income as it accrues on all obligations having
78
a maturity of one year or less held by the holder in that taxable year or
thereafter, in which case the deferral rule of the preceding sentence will not
apply. For purposes of this paragraph, OID accrues on a Short-Term Note on a
straight-line basis, unless the holder irrevocably elects, under regulations to
be issued by the Treasury Department, to apply a constant interest method, using
the holder's yield to maturity and daily compounding.
A holder who purchases a Note after its initial distribution at a discount
that exceeds a statutorily defined DE MINIMIS amount will be subject to the
"market discount" rules of the U.S. Internal Revenue Code, and a holder who
purchases a Note at a premium will be subject to the bond premium amortization
rules of the U.S. Internal Revenue Code.
DISPOSITION OF NOTES. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of the Note to a particular Noteholder will equal the
holder's cost for the Note, increased by any OID and market discount previously
included by such Noteholder in income with respect to the Note and decreased by
any bond premium previously amortized and any payments of principal and OID
previously received by such Noteholder with respect to such Note. Any gain or
loss on sale will be capital gain or loss if the Note was held as a capital
asset, except for gain representing accrued interest or accrued market discount
not previously included in income. Capital gain or loss will be long-term if the
Note was held by the holder for more than one year and otherwise will be
short-term. Any capital losses realized generally may be used by a corporate
taxpayer only to offset capital gains, and by an individual taxpayer only to the
extent of capital gains plus $3,000 of other income.
NOTES SUBJECT TO CONTINGENCIES. The United States federal income tax
consequences to an owner or seller of Notes that provide for one or more
contingent payments will vary depending on the exact terms of the Notes and
related factors. The Notes may be subject to rules that differ from the general
rules discussed above. The United States federal income tax consequences to a
holder of Notes that provide for contingent payments will be summarized in the
related prospectus supplement.
INFORMATION REPORTING AND BACKUP WITHHOLDING. The Trustee will be required
to report annually to the IRS, and to each related Noteholder of record, the
amount of interest paid on the Notes, and any amount of interest withheld for
federal income taxes, for each calendar year, except as to exempt holders
(generally, corporations, tax-exempt organizations, qualified pension and
profit-sharing trusts, individual retirement accounts, or nonresident aliens who
provide certification as to their status). Each holder will be required to
provide to the Trustee, under penalties of perjury, a certificate containing the
holder's name, address, correct federal taxpayer identification number and a
statement that the holder is not subject to backup withholding. Should a
Noteholder who is not exempt from backup withholding fail to provide the
required certification, the Trustee will be required to withhold, from interest
otherwise payable to the holder, 31% of the holder's interest income and pay the
withheld amount to the IRS as a credit against the holder's federal income tax
liability.
The IRS has issued new regulations governing the backup withholding and
information reporting requirements. The new regulations are generally effective
for payments made after December 31, 2000. Noteholders should consult their tax
advisors with respect to the impact, if any, of the new regulations.
Because the Transferor will, for federal income tax purposes, treat all
Notes as indebtedness issued by the Trust characterized as either a partnership
or a division of whichever entity owns all of its Certificates, the Transferor
will not comply with the tax reporting requirements that would apply under any
alternative characterization of the Trust.
79
TAX CONSEQUENCES TO FOREIGN NOTEHOLDERS. If interest paid or accrued to a
Noteholder who is a nonresident alien, foreign corporation or other non-United
States person (a "FOREIGN PERSON") is not effectively connected with the conduct
of a trade or business within the United States by the foreign person, the
Note's interest generally will be considered "portfolio interest," and generally
will not be subject to United States federal income tax and withholding. This
exemption generally will apply only if the foreign person:
o is not actually or constructively a "10 percent shareholder" of the
Trust or the Transferor (including a holder of 10% of the
outstanding certificates of the Trust) or a "controlled foreign
corporation" for which the Trust or the Transferor is a "related
person" within the meaning of the U.S. Internal Revenue Code; and
o provides an appropriate statement, signed under penalties of perjury,
certifying that the beneficial owner of the Note is a foreign person
and providing that foreign person's name and address.
If the information provided in this statement changes, the foreign person must
inform the Indenture Trustee within 30 days of the change. If the interest were
not portfolio interest, then it would be subject to United States federal income
and withholding tax at a rate of 30 percent, unless such tax were reduced or
eliminated pursuant to an applicable tax treaty. The IRS has amended the
transition period relating to new regulations governing withholding, backup
withholding and information reporting requirements. Withholding certificates or
statements that are valid on December 31, 1999, may be treated as valid until
the earlier of their expiration or December 31, 2000. All existing certificates
or statements will cease to be effective after December 31, 2000.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income and withholding tax, provided that:
o the gain is not effectively connected with the conduct of a trade or
business in the United States by the foreign person; and
o in the case of a foreign individual, the foreign person is not
present in the United States for 183 days or more in the taxable
year.
If the interest, gain or income on a Note held by a foreign person is
effectively connected with the conduct of a trade or business in the United
States by the foreign person, although the holder is exempt from the withholding
tax previously discussed if an appropriate statement is furnished, will
generally be subject to United States federal income tax on the interest, gain
or income at regular federal income tax rates. In addition, if the foreign
person is a foreign corporation, it may be subject to a branch profits tax equal
to 30 percent of its "effectively connected earnings and profits" within the
meaning of the U.S. Internal Revenue Code for the taxable year, subject to
adjustment, unless it qualifies for a lower rate under an applicable tax treaty.
TAX CHARACTERIZATION OF THE TRUST
Depending upon whether Certificates are owned by one or more persons, the
Trust will be treated as a division of the Transferor or as a partnership for
federal income tax purposes. The related prospectus supplement will specify the
treatment of the Trust for federal income tax purposes.
80
If the Trust issues Certificates only to the Transferor, the equity of the
Trust will be wholly-owned by the Transferor. In this case, under the
"check-the-box" Treasury regulations, the Trust will be treated as a division of
the Transferor, and as a disregarded entity for federal income tax purposes. In
other words, for federal income tax purposes, the Transferor will be treated as
the owner of all the assets of the Trust and the obligor of all the liabilities
of the Trust. Accordingly, the Trust would not be directly liable for any
federal income taxes as it would be deemed not to exist for federal income tax
purposes. Under the "check-the-box" Treasury regulations, unless it is treated
as a trust for federal income tax purposes, an unincorporated domestic entity
with more than one equity owner is automatically classified as a partnership for
federal income tax purposes. Because it is a business trust, the Trust will not
qualify as a trust for federal income tax purposes, and accordingly, if
Certificates are sold or issued in any manner which results in there being more
than one equity owner, the Trust will be treated as a partnership.
If Certificates are issued to more than one person, the Transferor and the
Servicer will agree, and the applicable Certificateholders will agree by their
purchase, to treat the Trust as a partnership for purposes of federal, state and
local income and franchise tax purposes, with the partners of such partnership
being the Certificateholders and the Notes being debt of the partnership.
However, the proper characterization of the arrangement involving the
Certificates, the Transferor and the Servicer is not clear because there is no
authority on transactions closely comparable to that contemplated in this
prospectus.
RISK OF ALTERNATIVE CHARACTERIZATION. Under the U.S. Internal Revenue Code
and specified Treasury Regulations (the "PTP REGULATIONS") a partnership may be
classified as a publicly traded partnership ("PTP") if equity interests in the
partnership are traded on an "established securities market" or are "readily
tradeable" on a "secondary market" or its "substantial equivalent." For federal
income tax purposes, a PTP is taxable as a corporation and subject to corporate
income tax. Any corporate income tax could materially reduce or eliminate cash
that would otherwise be distributable for the applicable Notes and Certificates,
and Certificateholders could be liable for any tax that is unpaid by the Trust.
However, the Trust will comply with available safe harbors under the PTP
Regulations to avoid PTP characterization. Furthermore, even if the Trust were
classified as a PTP, it would avoid taxation as a corporation if 90% or more of
its annual income constituted "qualifying income" not derived in the conduct of
a "financial business." It is unclear whether the Trust's income would be so
classified. However, Tax Counsel will deliver its opinion that the Trust will
not be classified as a publicly traded partnership taxable as a corporation.
STATE AND LOCAL TAX CONSEQUENCES
The above discussion does not address the tax treatment of any series of
Notes or the holders of Notes under any state or local tax laws. The activities
to be undertaken by the Servicer in servicing and collecting the Receivables
will take place throughout the United States and, therefore, many different tax
regimes could apply to this transaction. Prospective investors are urged to
consult with their tax advisors regarding the state and local tax treatment of
the Trust as well as any state and local tax consequences to investors by
purchasing, holding and disposing of Notes.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the U.S. Internal Revenue Code
prohibit a pension, profit-sharing or other employee benefit plan, as well as
individual retirement accounts and some types of Keogh Plans (each a "BENEFIT
PLAN"), from engaging in specified transactions with persons that are
81
"parties in interest" under ERISA or "disqualified persons" under the U.S.
Internal Revenue Code with respect to such Benefit Plan. A violation of these
"prohibited transaction" rules may result in an excise tax or other penalties
and liabilities under ERISA and the U.S. Internal Revenue Code for such persons.
Some transactions involving the Trust might be deemed to constitute
prohibited transactions under ERISA and the U.S. Internal Revenue Code for a
Benefit Plan that purchased Notes if assets of the Trust were deemed to be
assets of the Benefit Plan. Under a regulation issued by the United States
Department of Labor (the "PLAN ASSETS REGULATION"), the assets of the Trust
would be treated as plan assets of a Benefit Plan for the purposes of ERISA and
the U.S. Internal Revenue Code only if the Benefit Plan acquired an "equity
interest" in the Trust and none of the exceptions contained in the Plan Assets
Regulation was applicable. An equity interest is defined under the Plan Assets
Regulation as an interest other than an instrument which is treated as
indebtedness under applicable local law and which has no substantial equity
features. Although there is little guidance on the subject, the Transferor
believes the Notes of the Trust should be treated as indebtedness without
substantial equity features for purposes of the Plan Assets Regulation. Other
exceptions, if any, from application of the Plan Assets Regulation available for
any Notes will be discussed in the related prospectus supplement.
However, disregarding whether Notes are treated as equity interests for
Plan Asset Regulation purposes, the acquisition or holding of Notes by or on
behalf of a Benefit Plan could be considered to give rise to a prohibited
transaction if the Transferor, the Servicer, the Trust or any of their
respective affiliates is or becomes a party in interest or a disqualified person
with respect to such Benefit Plan. Limited exemptions from the prohibited
transaction rules could be applicable to the purchase and holding of Notes by a
Benefit Plan depending on the type and circumstances of the plan fiduciary
making the decision to acquire the Notes. Included among these exemptions are:
o Prohibited Transaction Class Exemption ("PTCE") 90-1, regarding
investments by insurance company pooled separate accounts;
o PTCE 91-38, regarding investments by bank collective investment
funds;
o PTCE 84-14, regarding transactions effected by qualified professional
asset managers;
o PTCE 95-60, regarding transactions by life insurance company general
accounts; and
o PTCE 96-23, regarding transactions affected by in-house asset
managers.
Employee benefit plans that are governmental plans, as defined in Section
3(32) of ERISA, and some church plans, as defined in Section 3(33) of ERISA, are
not subject to ERISA requirements.
A plan fiduciary considering the purchase of Notes should consult its tax
and/or legal advisors regarding whether the assets of the Trust would be
considered plan assets and the possibility of exemptive relief from the
prohibited transaction rules as well as related issues and their potential
consequences.
PLAN OF DISTRIBUTION
The Transferor will sell each series of Notes offered for sale, on the
terms and conditions set forth in an underwriting agreement (each, an
"UNDERWRITING AGREEMENT"). For each offering, the Transferor will agree to sell
to each of the underwriters named in the Underwriting Agreement and in the
related
82
prospectus supplement and each of the underwriters will severally agree to
purchase from the Transferor, the principal amount of Notes set forth in the
Underwriting Agreement and in the related prospectus supplement.
In each Underwriting Agreement, the underwriters will agree, subject to
the terms and conditions set forth in the Underwriting Agreement, to purchase
all the Notes described in the Underwriting Agreement which are offered by this
prospectus and by the related prospectus supplement, if any of the Notes are
purchased. In the event of a default by any underwriter, each Underwriting
Agreement will provide that, in specified circumstances, purchase commitments of
the nondefaulting underwriters may be increased or the Underwriting Agreement
may be terminated.
Each prospectus supplement will either:
(1) set forth the price at which each series or class of Notes being
offered by the prospectus supplement will be offered to the public and any
concessions that may be offered to the dealers participating in the
offering of the Notes; or
(2) specify that the Notes are to be resold by the Underwriters in
negotiated transactions at varying prices to be determined at the time of
such sale.
After the initial public offering of any Notes, the public offering price and
such concessions may be changed.
The extent, if any, to which the closing of any series of Notes is
conditioned upon the closing of any other series of Notes will be set forth in
the related prospectus supplement.
Each Underwriting Agreement will provide that the Transferor will
indemnify the underwriters against specified liabilities, including liabilities
under the Securities Act of 1933.
The Indenture Trustee may invest the funds in the Eligible Deposit
Accounts in Eligible Investments acquired from the underwriters.
The place and time of delivery for the Notes for which this prospectus is
delivered will be set forth in the related prospectus supplement.
LEGAL OPINIONS
Certain legal matters relating to the Notes will be passed upon for the
Trust, the Transferor and World Omni by Kirkland & Ellis, special counsel to the
Trust, the Transferor and World Omni. Certain federal income tax matters will be
passed upon for the Trust, the Transferor and the Servicer by Kirkland & Ellis.
WHERE YOU CAN FIND MORE INFORMATION
The Transferor, as originator of the Trust, filed a registration statement
relating to the Notes with the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933. This prospectus is part of the registration
statement, but the registration statement includes additional information.
83
The Transferor will file with the SEC all required annual, monthly and
special SEC reports and other information about the Trust.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room at 450 Fifth Street, Washington, D.C. 20549.
You can request copies of these documents, upon payment of a duplicating fee, by
writing to the SEC. Please call the SEC at (800) SEC-0330 for further
information on the operation of the public reference rooms. These SEC filings
are also available to the public on the SEC Internet site (http://www.sec.gov).
INCORPORATION BY REFERENCE
The SEC allows information filed with it to be "incorporate by reference"
into this prospectus, which means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus. Information that the
Transferor files with the SEC after the date of this prospectus will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in this
prospectus or the prospectus supplement.
The Transferor incorporates by reference any future annual, monthly and
special reports and proxy materials filed by or on behalf of the Trust with the
SEC until the offering of the Notes is terminated. The Transferor's Annual
Report on Form 10-K for the year ended December 31, 1998 (File No. 000- 25118)
was filed with the SEC and is incorporated by reference into and made a part of
this prospectus. The Transferor is not required to file reports pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, except for the
filing of Current Reports on Form 8-K. The Transferor's Current Reports on Form
8-K dated March 3, 1999, April 5, 1999, May 7, 1999 and June 4, 1999 are
incorporated by reference into and made a part of this prospectus.
As a recipient of this prospectus, you may request a copy of any document
incorporated by reference into this prospectus, except exhibits to the documents
(unless the exhibits are specifically incorporated by reference), at no cost, by
writing or calling: World Omni Financial Corp., 120 N.W. 12th Avenue, Deerfield
Beach, Florida 33442, Attention: Corporate Secretary, telephone: (954) 429-2200.
84
INDEX OF TERMS
The following is a list of the defined terms used in this prospectus and
any prospectus supplement and the pages on which the definitions of such terms
may be found in this prospectus.
Accounts.........................................................................................................15
Accumulation Period..........................................................................................26, 27
Addition Date....................................................................................................52
Additional Accounts..............................................................................................57
Additional Cut-Off Date..........................................................................................53
Adjusted Invested Amount.........................................................................................39
Adjustment Payment...............................................................................................64
Administrator....................................................................................................74
Auction Advantage Program........................................................................................57
Automatic Additional Accounts....................................................................................58
Automatic Removal Date...........................................................................................62
Automatic Removed Account........................................................................................62
Available Subordinated Amount....................................................................................42
Benefit Plan.....................................................................................................81
Book Review......................................................................................................22
Cede.............................................................................................................46
Cedelbank Participants...........................................................................................47
Certificateholders' Interest.....................................................................................16
Certificates.....................................................................................................16
Class I Dealers..................................................................................................20
Class II Dealers.................................................................................................20
Class III Dealers................................................................................................20
Class IV Dealers.................................................................................................20
Collateral Security..............................................................................................15
Collection Account...............................................................................................34
Collection Period................................................................................................41
Collections......................................................................................................15
Controlled Amortization Amount...................................................................................26
Controlled Amortization Period...................................................................................26
Controlled Deposit Amount........................................................................................26
Controlling Class................................................................................................29
Cooperative......................................................................................................48
Dealers..........................................................................................................15
Defaulted Amount.................................................................................................63
Defaulted Receivable.............................................................................................63
Definitive Note..................................................................................................49
Depository.......................................................................................................25
Designated Account...............................................................................................59
Designated Balance...............................................................................................59
Designated Receivables...........................................................................................60
Determination Date...............................................................................................71
Disclosure Document..............................................................................................44
Disqualified Receivables.........................................................................................54
DTC..............................................................................................................46
Early Amortization Event.........................................................................................65
Early Amortization Period........................................................................................27
Eligible Account.................................................................................................55
Eligible Deposit Account.........................................................................................34
Eligible Institution.............................................................................................34
Eligible Investments.............................................................................................35
Eligible Portfolio...............................................................................................24
Eligible Receivable..............................................................................................55
Enhancement......................................................................................................15
Enhancement Provider.............................................................................................55
Euroclear Operator...............................................................................................48
Euroclear Participants...........................................................................................47
Events of Default................................................................................................30
Excess Funded Amount.............................................................................................38
Excess Funding Account...........................................................................................38
Excess Principal Collections.....................................................................................40
Excess Receivable................................................................................................57
Excess Receivables Amount........................................................................................57
Excluded Series..................................................................................................34
Expected Payment Date............................................................................................26
Financial Statement Review...................................................................................19, 22
foreign person...................................................................................................80
Fully Funded Date................................................................................................27
Indenture........................................................................................................24
Indenture Trustee.............................................................................................6, 45
Indirect Participant.............................................................................................46
Ineligible Receivable............................................................................................56
Initial Closing Date.............................................................................................15
Initial Cut-Off Date.............................................................................................15
Initial Invested Amount..........................................................................................40
Insolvency Laws..................................................................................................14
Interest Collections.............................................................................................15
Interest Funding Account.........................................................................................25
Interest Payment Dates...........................................................................................25
Invested Amount..................................................................................................54
Investment Event.................................................................................................65
Investment Period................................................................................................27
Investment Period Commencement Date..............................................................................27
Investor Charge-Offs.............................................................................................40
Investor Default Amount..........................................................................................64
issue price......................................................................................................78
Issuer............................................................................................................6
JM Family Enterprises............................................................................................14
85
LIBOR............................................................................................................21
Miscellaneous Payments...........................................................................................39
Monthly Payment Rate.............................................................................................61
Monthly Servicing Fee............................................................................................69
Moody's..........................................................................................................35
Non-Vehicle Collateral Security..................................................................................23
Note Owner.......................................................................................................46
Noteholder.......................................................................................................25
Noteholders' Interest............................................................................................16
Notes............................................................................................................16
OID..............................................................................................................77
Owner Trustee.................................................................................................6, 15
Paired Series....................................................................................................34
Participants.....................................................................................................46
Payment Date.....................................................................................................25
Payment Date Statement...........................................................................................72
Plan Assets Regulation...........................................................................................82
Pool Balance.....................................................................................................16
Principal Collections............................................................................................15
Principal Commencement Date......................................................................................26
Principal Funding Account........................................................................................26
Principal Shortfall..............................................................................................40
Principal Terms..................................................................................................43
PTCE.............................................................................................................82
PTP..............................................................................................................81
PTP Regulations..................................................................................................81
qualified stated interest........................................................................................77
Rated Securities.................................................................................................38
Receivables......................................................................................................15
Receivables Purchase Agreement...................................................................................15
Related Document.................................................................................................33
related person...................................................................................................80
Removal and Repurchase Date......................................................................................60
Removal Commencement Date........................................................................................59
Removal Date.....................................................................................................59
Removal Notice...................................................................................................59
Removed Account..................................................................................................60
Representation Date..............................................................................................53
Repurchased Receivable...........................................................................................61
Repurchased Receivables Purchase Price...........................................................................61
Required Participation Amount....................................................................................59
Required Participation Percentage................................................................................59
Required Rating..................................................................................................38
Revolving Period.................................................................................................26
SEC..............................................................................................................83
Series Allocable Defaulted Amount................................................................................39
Series Allocable Interest Collections............................................................................39
Series Allocable Miscellaneous Payments..........................................................................39
Series Allocable Principal Collections...........................................................................39
Series Allocation Percentage.....................................................................................39
Series Cut-Off Date..............................................................................................53
Series Issuance Date.............................................................................................53
Series Supplement................................................................................................24
Series Termination Date..........................................................................................66
Service Transfer.................................................................................................70
Servicer......................................................................................................6, 14
Servicing Default................................................................................................70
Servicing Fee....................................................................................................69
Servicing Fee Rate...............................................................................................69
Short-Term Note..................................................................................................78
Special Payment Date.............................................................................................25
Standard & Poor's................................................................................................35
SuperWRAP Program................................................................................................23
Supplemental Certificate.........................................................................................62
Tax Counsel......................................................................................................77
Tax Opinion......................................................................................................44
Transfer Date....................................................................................................53
Transfer Deposit Amount..........................................................................................54
Transferor....................................................................................................6, 14
Transferor Certificate...........................................................................................62
Transferor's Participation Amount................................................................................54
Trust.........................................................................................................6, 14
Trust Adjusted Invested Amount...................................................................................40
Trust Agreement..................................................................................................14
Trust Available Subordinated Amount..............................................................................54
Unallocated Principal Collections................................................................................40
Underwriting Agreement...........................................................................................82
Vehicles.........................................................................................................15
Wholesale Portfolio..............................................................................................24
WOFCO............................................................................................................14
86
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the securities being registered, other
than underwriting discounts and commissions.
Securities and Exchange Commission registration fee..................... $278
Accounting fees and expenses............................................ *
Legal fees and expenses................................................. *
Trustee's fees and expenses............................................. *
Printing and engraving.................................................. *
Blue sky fees and expenses (including counsel).......................... *
Rating Agency Fees...................................................... *
Miscellaneous........................................................... $*
---
Total........................................................ $*
===
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
WODFI LLC was formed under the laws of Delaware. The limited liability
company agreement of WODFI LLC 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 WODFI LLC 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 WODFI
LLC, where such person is a party because such person is or was a member,
director, officer, employee, or agent of the WODFI LLC. WODFI LLC'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, WODFI LLC 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, WODFI LLC 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 WODFI LLC 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 WODFI LLC for or in connection with (1) the receipt of a financial
benefit to which the person is not entitled; (2)
II-1
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 WODFI LLC 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 WODFI LLC shall be
liable to WODFI LLC or any other person who has an interest in WODFI LLC 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 WODFI LLC
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 WODFI LLC, 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 WODFI LLC for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of WODFI LLC pursuant to the foregoing provisions, WODFI LLC 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.
WODFI LLC also maintains insurance providing for payment, subject to
certain exceptions, on behalf of officers, directors and managers of WODFI LLC
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 WODFI LLC against specified liabilities, including liabilities under
the Securities Act of 1933.
ITEM 16. EXHIBITS.
(a) Exhibits:
The exhibits to this Registration Statement are listed in the
Exhibit Index below.
(b) Financial Statements Schedules: Not applicable with respect to
the Registrant.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, unless the information required to be
included in such post-effective amendment is contained in a periodic
report filed with or furnished to the Securities and Exchange
Commission
II-2
by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 and incorporated herein by reference;
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement, unless the information required to be included
in a post-effective amendment is contained in periodic reports filed by
the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated herein by
reference;
(c) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this 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.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The registrant hereby undertakes to file an application for the purpose
of determining the eligibility of the Indenture Trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Securities and Exchange 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 has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Deerfield Beach, State of Florida, on August 5, 1999.
WODFI LLC
As originator of the Trust described
herein and registrant
By: /s/ A. TUCKER ALLEN
--------------------------------------
A. Tucker Allen
Vice President and Treasurer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints A. Tucker Allen, Patrick C. Ossenbeck and
Jon A. Brilliant, and each of them, his or her true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him and her
and in his or her name, place and stead, in any and all capacities (including
his or her capacity as a director, manager and/or officer of WODFI LLC, to sign
and file any and all amendments (including post-effective amendments) to this
registration statement or any registration statement relating to this offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary in connection with such matters as he or she might or could do in
person and hereby ratifying and confirming all that each of such
attorneys-in-fact and agents or their or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement and power of attorney has been signed on August 5, 1999,
by the following persons in the capacities indicated.
SIGNATURES CAPACITY
- ---------- --------
/s/ A. Tucker Allen Vice-President and Treasurer (principal financial
- -------------------------- and accounting officer)
A. Tucker Allen
/s/ Patricia G. Moran Director
- --------------------------
Patricia G. Moran
/s/ Colin W. Brown Director
- --------------------------
Colin W. Brown
/s/ Louis R. Feagles President (principal executive officer) and
- -------------------------- Director
Louis R. Feagles
/s/ Jeffrey B. Shapiro Director
- --------------------------
Jeffrey B. Shapiro
/s/ Christopher C. Wheeler Director
- --------------------------
Christopher C. Wheeler
II-4
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
*1.1 Form of Underwriting Agreement for Notes.
*3.1 Certificate of Formation of WODFI LLC.
*3.2 Limited Liability Company Agreement of WODFI LLC.
*4.1 Form of Indenture between the Trust and the Indenture Trustee.
*4.2 Form of Series Supplement (included in Exhibit 4.1 hereto).
*5.1 Opinion of Kirkland & Ellis with respect to legality.
*8.1 Opinion of Kirkland & Ellis with respect to tax matters.
24.1 Power of Attorney (included on page II-4).
**25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of the
Indenture Trustee.
*99.1 Form of Trust Sale and Servicing Agreement between WODFI LLC, World
Omni Financial Corp. and the Trust.
*99.2 Form of Receivables Purchase Agreement between World Omni Financial
Corp. and WODFI LLC.
*99.3 Form of Administration Agreement between World Omni Financial Corp., the
Trust and the Indenture Trustee.
*99.4 Form of Trust Agreement between WODFI LLC and the Trust.
*To be filed by amendment.
**To be filed in accordance with Section 305 of the Trust Indenture Act.
II-5