<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 18, 1996
REGISTRATION NO. 333-11449
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
WORLD OMNI 1996-B AUTOMOBILE LEASE
SECURITIZATION TRUST
(Issuer with respect to the Certificates)
WORLD OMNI LEASE SECURITIZATION L.P.
(Originator of the Trust described herein)
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7515 63-1120743
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
---------------------
6150 OMNI PARK DRIVE
MOBILE, ALABAMA 36609
(334) 639-7500
(Address, including zip code, and telephone number, including area code, of
Originator's principal executive offices)
---------------------
A. TUCKER ALLEN
120 NORTHWEST 12TH AVENUE
DEERFIELD BEACH, FLORIDA 33442
(954) 429-2200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES TO:
<TABLE>
<S> <C>
JERRY L. SHULMAN, ESQ. DALE W. LUM, ESQ.
WILLIAMS & CONNOLLY BROWN & WOOD LLP
725 TWELFTH STREET, N.W. 555 CALIFORNIA STREET
WASHINGTON, D.C. 20005 SAN FRANCISCO, CALIFORNIA 94104
</TABLE>
---------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
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. / /
---------------------
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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
WORLD OMNI LEASE SECURITIZATION L.P.
WORLD OMNI 1996-B AUTOMOBILE LEASE SECURITIZATION TRUST
---------------------
CROSS REFERENCE SHEET FURNISHED
PURSUANT TO RULE 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM AND CAPTION IN FORM S-1 CAPTION OR LOCATION IN PROSPECTUS
------------------------------------------- -------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Cover Page of Prospectus......... Forepart of Registration Statement; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............. Summary; Risk Factors
4. Use of Proceeds............................ Use of Proceeds
5. Determination of Offering Price............ *
6. Dilution................................... *
7. Selling Security Holders................... *
8. Plan of Distribution....................... Underwriting
9. Description of Securities to be
Registered............................... Summary; The Trust and the SUBI; The
Contracts; Maturity, Prepayment and Yield
Considerations; Description of the
Certificates; Security for the
Certificates
10. Interests of Named Experts and Counsel..... *
11. Information With Respect to the
Registrant............................... The Seller
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. *
</TABLE>
- ---------------
* Answer negative or item inapplicable.
<PAGE> 3
$750,057,988
WORLD OMNI 1996-B AUTOMOBILE LEASE SECURITIZATION TRUST
$260,000,000
5.95% AUTOMOBILE LEASE ASSET BACKED CERTIFICATES, CLASS A-1
$280,000,000
6.20% AUTOMOBILE LEASE ASSET BACKED CERTIFICATES, CLASS A-2
$210,057,988
6.25% AUTOMOBILE LEASE ASSET BACKED CERTIFICATES, CLASS A-3
WORLD OMNI LEASE SECURITIZATION L.P.
(SELLER)
WORLD OMNI FINANCIAL CORP.
(SERVICER)
------------------
The Automobile Lease Asset Backed Certificates (the "Certificates") will
represent undivided interests in the World Omni 1996-B Automobile Lease
Securitization Trust (the "Trust") formed pursuant to a Securitization Trust
Agreement between World Omni Lease Securitization L.P. (the "Seller") and
First Bank National Association, as trustee (the "Trustee"). The property
of the Trust will consist of an undivided 99.8% interest in a Special
Unit of Beneficial Interest (the "SUBI"), which, in turn, will evidence
a beneficial interest in certain specified assets of World Omni LT,
an Alabama trust (the "Origination Trust"), monies on deposit in the
Reserve Fund, the Residual Value Surplus Account and in certain
other accounts and certain other assets, as described more fully
under "The Trust and the SUBI". The assets of the Origination
Trust (the "Origination Trust Assets") will consist of retail
closed-end lease contracts assigned to the Origination Trust by
dealers in the World Omni Financial Corp. ("World Omni") network
of dealers, the automobiles and light duty trucks relating
thereto and payments made under certain insurance policies
relating to such lease contracts, the related lessees and
such leased vehicles and certain other assets, as more
fully described under "The Origination Trust -- Property
of the Origination Trust". World Omni will service the
lease contracts included in the Origination Trust Assets.
(Cover continued on next page)
------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN
INVESTMENT IN THE CLASS A CERTIFICATES, SEE "RISK FACTORS" ON PAGE 21 HEREIN.
------------------
THE CLASS A CERTIFICATES WILL REPRESENT BENEFICIAL INTERESTS IN THE TRUST
AND WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF WORLD OMNI LEASE
SECURITIZATION L.P., WORLD OMNI LT, WORLD OMNI FINANCIAL CORP. OR
ANY OF THEIR RESPECTIVE AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions(2) the Seller(1)(3)
---------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A-1 Certificate......................... 99.843750% 0.210% 99.633750%
Per Class A-2 Certificate......................... 99.890625% 0.210% 99.680625%
Per Class A-3 Certificate......................... 99.828125% 0.210% 99.618125%
Total............................................. $748,984,451 $1,575,122 $747,409,329
</TABLE>
(1) Plus accrued interest, if any, calculated at the related Certificate Rate
from the date of initial issuance.
(2) The Seller and World Omni have agreed to indemnify the Underwriters against
certain liabilities under the Securities Act of 1933. See "Underwriting".
(3) Before deducting expenses payable by the Seller estimated to be $750,000.
------------------
The Class A Certificates are offered by the Underwriters when, as and if
issued by the Seller, delivered to and accepted by the Underwriters and subject
to their right to reject orders in whole or in part. It is expected that
delivery of the Class A Certificates in book-entry form, will be made through
the facilities of The Depository Trust Company, Cedel Bank, societe anonyme and
the Euroclear System, on or about October 24, 1996, against payment in
immediately available funds.
CS First Boston
Merrill Lynch & Co.
BA Securities, Inc.
Salomon Brothers Inc
The date of this Prospectus is October 18, 1996.
<PAGE> 4
(Cover continued from previous page)
The SUBI initially will evidence a beneficial interest in a specified
portion of the Origination Trust Assets, including certain lease contracts, the
automobiles and light duty trucks relating to such lease contracts, certain
monies due under or payable in respect of such lease contracts and leased
vehicles on or after September 1, 1996, payments made under certain insurance
policies relating to such lease contracts, the related lessees and such leased
vehicles and certain other Origination Trust Assets, as more fully described
under "The Trust and the SUBI -- The SUBI" (collectively, the "SUBI Assets").
From time to time until principal is first distributed to the
Certificateholders, as described below, principal collections on or in respect
of the SUBI Assets will be reinvested in additional lease contracts assigned to
the Origination Trust by dealers in the World Omni network of dealers, together
with the automobiles and light duty trucks relating thereto, which at the time
of reinvestment will become SUBI Assets. The SUBI will not evidence a direct
interest in the SUBI Assets, nor will it represent a beneficial interest in all
of the Origination Trust Assets. Payments made on or in respect of the
Origination Trust Assets not represented by the SUBI will not be available to
make payments on the Certificates. For further information regarding the Trust,
the SUBI and the Origination Trust, see "The Trust and the SUBI" and "The
Origination Trust".
The Certificates will consist of three classes of senior certificates
(respectively, the "Class A-1 Certificates", the "Class A-2 Certificates" and
the "Class A-3 Certificates", and collectively, the "Class A Certificates") and
one class of subordinated certificates (the "Class B Certificates"). The Class A
Certificates are the only Certificates offered hereby. The initial principal
amount of the Class B Certificates will be $44,598,043, and the Class B
Certificates will be subordinated to the Class A Certificates to the extent
described herein. The Class A-1 Certificates, Class A-2 Certificates, Class A-3
Certificates and Class B Certificates initially will respectively evidence in
the aggregate 32.06%, 34.53%, 25.91% and 5.5% undivided interests in the 99.8%
interest in the SUBI to the extent described herein. The Seller will own the
undivided interest in the Trust not represented by the Certificates (the "Seller
Interest"). The initial principal amount of the Seller Interest will be
$16,217,470, and the Seller Interest will be subordinated to the Certificates as
described herein. For further information regarding the Certificates, see
"Description of the Certificates".
Interest on the Class A-1 Certificates, the Class A-2 Certificates and the
Class A-3 Certificates will accrue at the respective fixed per annum interest
rates specified above (the "Class A-1 Certificate Rate", the "Class A-2
Certificate Rate" and the "Class A-3 Certificate Rate", respectively) and will
be distributed to holders of the Class A Certificates on the fifteenth day of
each month (or, if such day is not a Business Day, on the next succeeding
Business Day), beginning November 15, 1996 (each, a "Distribution Date").
Principal will be distributed to holders of the Certificates to the extent
described herein on each Distribution Date beginning in November 1997, or, in
certain limited circumstances, earlier, as more fully described herein. In
general, no principal payments will be made on the Class A-2 Certificates until
the Class A-1 Certificates have been paid in full and no principal payments will
be made on the Class A-3 Certificates until the Class A-1 Certificates and the
Class A-2 Certificates have been paid in full. The Final Scheduled Distribution
Date will occur in November 2002.
There currently is no secondary market for the Class A Certificates and
there is no assurance that one will develop. The Underwriters expect, but will
not be obligated, to make a market in each Class of Class A Certificates. There
is no assurance that any such market will develop, or if one does develop, that
it will continue.
As more fully described under "Ratings of the Class A Certificates", it is a
condition of issuance that each of Moody's Investors Service, Inc. and Standard
& Poor's Ratings Services rates each Class of Class A Certificates in its
highest rating category.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF EACH CLASS OF CLASS
A CERTIFICATES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
AVAILABLE INFORMATION
The Seller, as originator of the Trust, has filed with the Securities and
Exchange Commission (the "Commission") on behalf of the Trust a Registration
Statement on Form S-1 (together with all amendments and exhibits thereto, the
"Registration Statement"), of which this Prospectus is a part, under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Class A Certificates being offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which have been omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement, which is available for inspection without charge at the public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and the regional offices of the Commission at
Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661-2511 and Suite 1300, Seven World Trade Center, New York, New York 10048.
Copies of such information can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission at http://www.sec.gov. The Servicer, on
behalf of the Trust, will also file or cause to be filed with the Commission
such periodic reports as are required under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules and regulations of the Commission
thereunder.
2
<PAGE> 5
INDEX
<TABLE>
<CAPTION>
SECTION PAGE
- -------------------------------------------------------- ----
<S> <C>
Available Information................................... 2
Index................................................... 3
Overview of Transaction................................. 4
Summary................................................. 5
Risk Factors............................................ 21
Limited Liquidity; Absence of Secondary Market......... 21
Maturity and Prepayment Considerations................. 21
Possible Early Termination of Revolving Period....... 21
Reimbursement of Certain Losses...................... 21
Sequential Payment of Principal on the
Certificates....................................... 22
Payment Rate in Respect of Contracts and
Leased Vehicles.................................... 23
Structural Considerations.............................. 23
Two-Tiered Structure................................. 23
Allocation of Origination Trust Liabilities.......... 24
Third-Party Liens on SUBI Assets..................... 24
Back-up Security Interest in Certain SUBI Assets..... 25
Consumer Protection Laws............................... 26
ERISA Liabilities...................................... 26
Vicarious Tort Liability............................... 27
Insolvency of World Omni; Substantive Consolidation
with World Omni...................................... 28
Legal Proceedings...................................... 29
The Trust and the SUBI.................................. 29
General................................................ 29
The Trust.............................................. 29
The SUBI............................................... 30
The Origination Trust................................... 31
General................................................ 31
ALFI and ALFI L.P...................................... 31
The Origination Trustee................................ 31
Property of the Origination Trust...................... 32
Contract Origination; Titling of Leased Vehicles....... 32
Use of Proceeds......................................... 33
The Seller.............................................. 33
World Omni.............................................. 33
General................................................ 33
Lease Contract Underwriting Procedures................. 34
Insurance.............................................. 36
Collection, Repossession and Disposition Procedures.... 36
Delinquency, Repossession and Loss Data................ 36
The Contracts........................................... 39
General................................................ 39
Characteristics of the Contracts....................... 42
General.............................................. 42
Distribution of the Initial Leased Vehicles by
Make............................................... 42
Distribution of the Initial Contracts by Lease
Rate............................................... 43
Distribution of the Initial Contracts by Maturity.... 43
Distribution of the Initial Contracts by State....... 43
Representations, Warranties and Covenants.............. 43
Maturity, Prepayment and Yield Considerations........... 45
Class A Certificate Factors and Trading Information;
Reports to Class A Certificateholders.................. 49
Description of the Certificates......................... 50
General................................................ 50
Transfer of the SUBI Interest.......................... 51
Reallocation Payments and Reallocation Deposit
Amounts.............................................. 51
Calculation of Investor Percentage and Seller
Percentage........................................... 51
Certain Payments to the Seller......................... 52
Distributions on the Certificates...................... 53
General.............................................. 53
Distributions of Interest............................ 53
Application and Distributions of Principal........... 56
Early Amortization Events.............................. 58
Statements to Certificateholders....................... 59
Termination of the Trust; Retirement of the
Certificates......................................... 61
Book-Entry Registration................................ 61
Definitive Certificates................................ 64
Security for the Certificates........................... 65
General................................................ 65
The Accounts........................................... 65
The Distribution Account............................. 65
The SUBI Collection Account.......................... 65
The Residual Value Surplus Account................... 67
Maintenance of the Accounts.......................... 67
<CAPTION>
SECTION PAGE
- -------------------------------------------------------- ----
<S> <C>
Permitted Investments................................ 67
The Reserve Fund..................................... 68
The Contingent and Excess Liability Insurance
Policies............................................. 71
Additional Document Provisions.......................... 72
Additional Agreement Provisions........................ 72
No Petition.......................................... 72
Amendment............................................ 72
List of Certificateholders........................... 72
The Trustee.......................................... 73
Governing Law........................................ 73
The SUBI Trust Agreement............................... 73
The SUBI, the Other SUBIs and the UTI................ 73
Special Obligations of ALFI L.P. as Beneficiary and
Grantor............................................ 74
Origination Trustee Duties and Powers; Fees and
Expenses........................................... 75
Indemnity of Trustee and Trust Agents................ 76
Termination.......................................... 76
No Petition.......................................... 76
Amendment............................................ 76
Governing Law........................................ 77
Trustee as Third-Party Beneficiary................... 77
The Servicing Agreement................................ 77
General.............................................. 77
Custody of Contract Documents and Certificates of
Title.............................................. 77
Collections.......................................... 77
Notification of Liens and Claims..................... 78
Advances............................................. 78
Security Deposits.................................... 78
Insurance on Leased Vehicles......................... 79
Realization Upon Charged-off Contracts............... 79
Matured Leased Vehicle Inventory..................... 80
Records, Servicer Determinations and Reports......... 80
Evidence as to Compliance............................ 80
Compliance with ERISA................................ 81
Servicing Compensation............................... 81
Servicer Resignation and Termination................. 82
Indemnification by the Servicer...................... 82
Events of Servicing Termination...................... 82
Rights Upon Event of Servicing Termination........... 83
No Petition.......................................... 83
Amendment............................................ 83
Termination.......................................... 83
Governing Law........................................ 84
Certain Legal Aspects of the Origination Trust and the
SUBI................................................... 84
The Origination Trust.................................. 84
The SUBI............................................... 84
Insolvency Related Matters............................. 84
Certain Legal Aspects of the Contracts and the Leased
Vehicles............................................... 85
Back-up Security Interests............................. 85
Vicarious Tort Liability............................... 85
Repossession of Leased Vehicles........................ 86
Deficiency Judgments................................... 86
Consumer Protection Laws............................... 87
Other Limitations...................................... 88
Certain Income Tax Considerations....................... 88
Federal Taxation....................................... 88
General.............................................. 88
Characterization of the Class A Certificates as
Indebtedness....................................... 88
Taxation of Interest and Discount Income............. 89
Sales of Class A Certificates........................ 90
Federal Income Tax Consequences to Foreign
Investors.......................................... 91
Backup Withholding................................... 91
Florida Income Taxation................................ 91
ERISA Considerations.................................... 92
Underwriting............................................ 94
Notice to Canadian Residents............................ 95
Ratings of the Class A Certificates..................... 96
Legal Matters........................................... 97
Index of Capitalized Terms.............................. 98
Global Clearance, Settlement and Tax Documentation
Procedures............................................. 100
</TABLE>
3
<PAGE> 6
OVERVIEW OF TRANSACTION
[GRAPH]
4
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. See the Index of
Capitalized Terms for the location herein of certain capitalized terms.
Overview................... Certain motor vehicle dealers ("Dealers") in the
World Omni Financial Corp. ("World Omni") network
of dealers have assigned, and will assign,
closed-end retail automobile and light duty truck
leases to World Omni LT, an Alabama trust (the
"Origination Trust"). The Origination Trust was
created in 1993 to avoid the administrative
difficulty and expense associated with retitling
leased vehicles in the securitization of automobile
and light duty truck leases. The Origination Trust
has issued to Auto Lease Finance L.P. ("ALFI L.P.")
an Undivided Trust Interest (the "UTI")
representing the entire beneficial interest in the
unallocated assets of the Origination Trust. ALFI
L.P. will instruct the trustee of the Origination
Trust to allocate a separate portfolio of leases
and leased vehicles within the Origination Trust
and create a special unit of beneficial interest
(the "SUBI") which will represent the entire
beneficial interest in such portfolio. Upon its
creation, such portfolio will no longer be a part
of the Origination Trust Assets represented by the
UTI. ALFI L.P. will sell its interest in the SUBI
to World Omni Lease Securitization L.P. (the
"Seller") and the Seller will in turn contribute a
99.8% interest in the SUBI to the World Omni 1996-B
Automobile Lease Securitization Trust (the
"Trust"). In return, the Trust will issue four
classes of Certificates, including the Class A-1
Certificates, Class A-2 Certificates and Class A-3
Certificates being offered hereby. The undivided
interest in the Trust not evidenced by the
Certificates will be permanently retained by the
Seller. ALFI L.P. has caused and from time to time
in the future may cause additional special units of
beneficial interest similar to the SUBI ("Other
SUBIs") to be created out of the UTI and sold to
the Seller or one or more other entities. The Trust
and the Certificateholders will have no interest in
the UTI, any Other SUBI or any assets of the
Origination Trust evidenced by the UTI or any Other
SUBI.
The Trust.................. The Trust will be formed pursuant to a
securitization trust agreement to be dated as of
October 1, 1996 (the "Agreement"), between the
Seller and First Bank National Association ("First
Bank"), as trustee (in such capacity, the
"Trustee"). The property of the Trust will consist
primarily of an undivided 99.8% interest (the "SUBI
Interest") in the SUBI, which will evidence a
beneficial interest in certain specified assets of
the Origination Trust, and monies on deposit in the
Reserve Fund, the Residual Value Surplus Account
and in certain other accounts established as
described herein.
The Origination Trust was formed by ALFI L.P., as
grantor and initial beneficiary, and VT Inc., as
trustee (the "Origination Trustee"). The sole
general partner of ALFI L.P. is Auto Lease Finance,
Inc., a Delaware corporation which is a wholly
owned, special purpose subsidiary of World Omni
("ALFI"). ALFI may not transfer its general
partnership interest in ALFI L.P. so long as any
financings involving interests in the Origination
Trust (including the transaction described herein)
are outstanding. The sole limited partner of ALFI
L.P. is World Omni. VT Inc. is an Alabama
corporation and a wholly owned, special
5
<PAGE> 8
purpose subsidiary of First Bank that was organized
solely for the purpose of acting as Origination
Trustee. VT Inc. is not affiliated with World Omni
or any affiliate thereof. For further information
regarding the Origination Trustee, see "The
Origination Trust -- The Origination Trustee".
The Origination Trust Assets consist of retail
closed-end lease contracts assigned to the
Origination Trust by Dealers, the automobiles and
light duty trucks relating thereto and all proceeds
thereof and payments made under certain insurance
policies relating to such contracts, the related
lessees or such leased vehicles. The SUBI initially
will evidence a beneficial interest in a specified
portion of the Origination Trust Assets, including
certain lease contracts (the "Initial Contracts")
originated by Dealers located throughout the United
States, the automobiles and light duty trucks
relating thereto (the "Initial Leased Vehicles"),
certain monies due under or payable in respect of
the Initial Contracts and the Initial Leased
Vehicles on or after September 1, 1996 (the
"Initial Cutoff Date"), payments made under certain
insurance policies relating to the Initial
Contracts, the related lessees and the Initial
Leased Vehicles and certain related assets and
rights (collectively, the "SUBI Assets"). For
further information regarding the SUBI Assets, see
"The Trust and the SUBI -- The SUBI".
Prior to the time when principal is first
distributed to Certificateholders as described
herein, payments made on or in respect of the SUBI
Assets allocable to principal will be reinvested in
additional retail closed-end lease contracts (the
"Subsequent Contracts" and, together with the
Initial Contracts, the "Contracts") originated and
assigned to the Origination Trust by Dealers
located throughout the United States and the
automobiles and light duty trucks relating thereto
(the "Subsequent Leased Vehicles" and, together
with the Initial Leased Vehicles, the "Leased
Vehicles"). At the time of such reinvestment, the
related Subsequent Contracts and Subsequent Leased
Vehicles will become SUBI Assets. For further
information regarding the Subsequent Contracts and
Subsequent Leased Vehicles, see "Summary -- The
Revolving Period; Subsequent Contracts and
Subsequent Leased Vehicles" and "The Trust and the
SUBI -- The SUBI".
The Dealers comprising the sources for Contracts
and Leased Vehicles are members of World Omni's
network of dealers. Predominantly Toyota
dealerships, these Dealers offer automobiles and
light duty trucks for lease pursuant to World
Omni-approved terms and documentation. For further
information regarding World Omni's lease business,
see "World Omni".
The SUBI will not evidence a direct interest in the
SUBI Assets, nor will it represent a beneficial
interest in any Origination Trust Assets other than
the SUBI Assets. Payments made on or in respect of
the Origination Trust Assets other than the SUBI
Assets will not be available to make payments on
the Certificates.
The 0.2% interest in the SUBI not transferred to
the Trustee will be permanently retained by the
Seller (the "Retained SUBI Interest"). Accordingly,
the Seller will be entitled to receive 0.2% of all
payments made on or in respect of the SUBI Assets
and will share in 0.2% of all
6
<PAGE> 9
losses and liabilities incurred by the SUBI Assets.
Any payments made in respect of the Retained SUBI
Interest will not be available to make payments on
the Certificates. For further information regarding
the SUBI, see "Summary -- Security for the
Certificates -- The SUBI", "The Trust and the
SUBI -- The SUBI" and "The Origination Trust".
The Seller................. The Seller is a Delaware limited partnership, the
sole general partner of which is World Omni Lease
Securitization, Inc., a Delaware corporation
("WOLSI"), which is a wholly owned, special purpose
subsidiary of World Omni. WOLSI may not transfer
its general partnership interest in the Seller so
long as any financings involving interests formerly
or partially held by it in the Origination Trust
(including the transaction described herein) are
outstanding. The sole limited partner of the Seller
is World Omni.
World Omni................. World Omni is a Florida corporation that is a
wholly owned subsidiary of JM Family Enterprises,
Inc., a Delaware corporation ("JMFE"). JMFE also
wholly owns Southeast Toyota Distributors, Inc.
("SET"), which is the exclusive distributor of
Toyota automobiles and light duty trucks in
Florida, Alabama, Georgia, North Carolina and South
Carolina (the "Five State Area"). As more fully
described under "World Omni", World Omni provides
consumer lease and installment contract financing
to retail customers of, and floorplan and other
dealer financing to, Dealers that are located
throughout the United States. World Omni wholly
owns both ALFI and WOLSI.
Pursuant to an amended and restated servicing
agreement dated as of July 1, 1994, as amended, to
be supplemented by a servicing supplement dated as
of October 1, 1996 (collectively, the "Servicing
Agreement"), each between World Omni and the
Origination Trustee, World Omni will act as the
initial servicer of the Origination Trust Assets,
including the SUBI Assets (in such capacity, the
"Servicer"). The Trustee will be a third party
beneficiary of the Servicing Agreement.
Securities Offered......... The Automobile Lease Asset Backed Certificates (the
"Certificates") will represent fractional undivided
interests in the Trust. The Certificates will
consist of three classes of senior certificates
(the "Class A-1 Certificates", the "Class A-2
Certificates" and the "Class A-3 Certificates",
respectively, and collectively, the "Class A
Certificates") and one class of subordinated
certificates (the "Class B Certificates").
Principal payments generally will not be made in
respect of the Class A-2 Certificates until the
Class A-1 Certificates have been paid in full and
no principal payments will be made on the Class A-3
Certificates until the Class A-1 Certificates and
the Class A-2 Certificates have been paid in full,
in each case as more fully described under
"Description of the Certificates -- Distributions
on the Certificates -- Application and
Distributions of Principal -- Amortization Period".
The Class B Certificates will be subordinated to
the Class A Certificates so that (i) interest
payments generally will not be made in respect of
the Class B Certificates until interest in respect
of the Class A Certificates has been paid, (ii)
principal payments generally will not be made in
respect of the Class B Certificates until the Class
A-1 and Class A-2 Certificates have been paid in
full and (iii) if other sources available to make
payments of principal and interest on the Class A-3
Certificates are insufficient, amounts that
otherwise would be paid in respect of the Class B
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<PAGE> 10
Certificates generally will be available for that
purpose, as more fully described under "Description
of the Certificates -- Distributions on the
Certificates". The undivided interest in the Trust
not represented by the Certificates will be
permanently retained by the Seller (the "Seller
Interest"). The Seller Interest will be
subordinated to the Certificates as described under
"Summary -- Security for the
Certificates -- Subordination of the Seller
Interest". Only the Class A Certificates are being
offered hereby. The Class A Certificates will be
issued in book-entry form in minimum denominations
of $1,000 and integral multiples thereof. The Class
B Certificates will be sold in one or more private
placements. Additional information regarding the
Class A Certificates is set forth under
"Description of the Certificates -- Book-Entry
Registration" and "-- Definitive Certificates".
Each Certificate will represent the right to
receive monthly payments of interest at the related
Certificate Rate and, to the extent described
herein, monthly payments of principal during the
Amortization Period. These payments will be funded
from a portion of the payments received by the
Trust on or in respect of the SUBI Interest (i.e.,
from a portion of 99.8% of the payments received on
or in respect of the Contracts and the Leased
Vehicles) and, in certain circumstances, from
Excess Collections, monies on deposit in the
Reserve Fund, monies on deposit in the Residual
Value Surplus Account, the Servicing Fee (so long
as World Omni is the Servicer) and monies that
otherwise would be distributable in respect of the
Seller Interest. Interests in the assets of the
Trust will be allocated among the Class A-1
Certificateholders (the "Class A-1 Interest"), the
Class A-2 Certificateholders (the "Class A-2
Interest"), the Class A-3 Certificateholders (the
"Class A-3 Interest" and, together with the Class
A-1 Interest and the Class A-2 Interest, the "Class
A Interest"), the Class B Certificateholders (the
"Class B Interest" and, together with the Class A
Interest, the "Investor Interest") and the Seller
Interest.
On the date of initial issuance of the Certificates
(the "Closing Date"), the Trust will issue
$260,000,000 aggregate principal amount of Class
A-1 Certificates (the "Initial Class A-1
Certificate Balance"), $280,000,000 aggregate
principal amount of Class A-2 Certificates (the
"Initial Class A-2 Certificate Balance"),
$210,057,988 aggregate principal amount of Class
A-3 Certificates (the "Initial Class A-3
Certificate Balance" and, together with the Initial
Class A-1 Certificate Balance and the Initial Class
A-2 Certificate Balance, the "Initial Class A
Certificate Balance") and $44,598,043 aggregate
principal amount of Class B Certificates (the
"Initial Class B Certificate Balance" and, together
with the Initial Class A Certificate Balance, the
"Initial Certificate Balance"). The aggregate
principal amount of the Class A-1, Class A-2 and
Class A-3 Certificates and the Class B Certificates
will, except in certain circumstances described
under "Summary -- The Revolving Period; Subsequent
Contracts and Subsequent Leased Vehicles", remain
fixed at their respective Initial Certificate
Balances during the Revolving Period and, to the
extent described herein, will decline thereafter
during the Amortization Period as principal is paid
on the Certificates. The "Class Certificate
Balance" of any Class of Certificates on any day
will equal the Initial Class Certificate Balance,
reduced by the sum of all distributions made in
respect of principal (including any
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<PAGE> 11
reimbursements of Loss Amounts allocable to such
Class and Certificate Principal Loss Amounts in
respect of such Class) on or prior to such day on
the related Class of Certificates and those
Certificate Principal Loss Amounts in respect of
such Class, if any, which have not been reimbursed
as described herein. The "Class A Certificate
Balance" will mean the sum of the Class A-1, Class
A-2 and Class A-3 Certificate Balances. The
"Certificate Balance" with respect to the
Certificates will mean the sum of the Class A
Certificate Balance and the Class B Certificate
Balance.
The amount of the Seller Interest will initially
equal $16,217,470 (which amount will equal 2% of
99.8% of the Aggregate Net Investment Value as of
the Initial Cutoff Date) and on any day will equal
the difference between 99.8% of the Aggregate Net
Investment Value, calculated as described under
"Summary -- Security for the Certificates -- The
SUBI -- The Contracts", and the Certificate
Balance. As more fully described under "Description
of the Certificates -- General", the Aggregate Net
Investment Value can change daily. Because the
Seller Interest will represent the interest in the
Trust not represented by the Certificates, the
amount of the Seller Interest can decrease daily as
the Aggregate Net Investment Value decreases and
can increase on a Distribution Date to reflect
reductions in the Certificate Balance, but will
never exceed the initial amount of the Seller
Interest.
Registration of the
Certificates............... Each Class of Class A Certificates initially will
be represented by one or more certificates
registered in the name of Cede & Co. ("Cede"), as
the nominee of The Depository Trust Company
("DTC"). A person acquiring an interest in the
Class A Certificates (each, a "Certificate Owner")
may elect to hold his or her interest through DTC,
in the United States of America, or Cedel Bank,
societe anonyme ("Cedel") or the Euroclear System
("Euroclear"), in Europe. Transfers within DTC,
Cedel or Euroclear, as the case may be, will be in
accordance with the usual rules and operating
procedures of the relevant system. Cross-market
transfers between persons holding directly or
indirectly through DTC, on the one hand, and
counterparties holding directly or indirectly
through Cedel or Euroclear, on the other, will be
effected in DTC through Citibank, N.A. or Morgan
Guaranty Trust Company of New York, the relevant
depositaries (collectively, the "Depositaries") of
Cedel or Euroclear, respectively, and each a
participating member of DTC. No Certificate Owner
will be able to receive a definitive certificate
representing such person's interest, except in the
limited circumstances described under "Description
of the Certificates -- Definitive Certificates".
Unless and until definitive certificates are
issued, Certificate Owners will not be recognized
as holders of record of Class A Certificates and
will be permitted to exercise the rights of such
holders only indirectly through DTC. For further
information regarding book-entry registration of
the Class A Certificates, see "Description of the
Certificates -- General" and "-- Book-Entry
Registration".
Interest................... On the fifteenth day of each month or, if such day
is not a Business Day, on the next succeeding
Business Day, beginning November 15, 1996 (each, a
"Distribution Date"), distributions in respect of
the Class A Certificates will be made to the
holders of record of the Class A-1, Class A-2 and
Class A-3 Certificates (respectively, the "Class
A-1
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<PAGE> 12
Certificateholders", the "Class A-2
Certificateholders" and the "Class A-3
Certificateholders", and collectively, the "Class A
Certificateholders") as of the day immediately
preceding such Distribution Date or, if Definitive
Certificates are issued, the last day of the
immediately preceding calendar month (each such
date, a "Record Date"). On each Distribution Date,
the Trustee will distribute interest for the
related Interest Period to the Class A
Certificateholders, based on the related Class
Certificate Balance as of the immediately preceding
Distribution Date (after giving effect to
reductions in such Class Certificate Balance as of
such immediately preceding Distribution Date) or,
in the case of the first Distribution Date, on the
Initial Class Certificate Balance, in the case of
(i) the Class A-1 Certificates, at an annual
percentage rate equal to 5.95% (the "Class A-1
Certificate Rate"), (ii) the Class A-2
Certificates, at an annual percentage rate equal to
6.20% (the "Class A-2 Certificate Rate") and (iii)
the Class A-3 Certificates, at an annual percentage
rate equal to 6.25% (the "Class A-3 Certificate
Rate"). Interest in respect of the Class A
Certificates will accrue for the period from and
including the Distribution Date in each month to
but excluding the Distribution Date in the
immediately succeeding month (or, in the case of
the first Distribution Date, from and including
October 24, 1996) (each, an "Interest Period"). All
such payments will be calculated on the basis of a
360-day year consisting of twelve 30-day months.
The final scheduled Distribution Date for the
Certificates (the "Final Scheduled Distribution
Date") will be the November 2002 Distribution Date.
A "Business Day" will be a day other than a
Saturday or Sunday or a day on which banking
institutions in the States of Alabama, Florida,
Illinois or New York are authorized or obligated by
law, or executive order or government decree to be
closed. As described under "Description of the
Certificates -- Distributions on the
Certificates -- Distributions of Interest",
distributions in respect of interest on the Class B
Certificates will be subordinated to distributions
in respect of interest on the Class A Certificates
under certain circumstances.
The Revolving Period;
Subsequent Contracts and
Subsequent Leased
Vehicles................. No principal will be payable on the Certificates
until the November 1997 Distribution Date or, upon
the occurrence of an Early Amortization Event,
until the Distribution Date in the month
immediately succeeding the month in which such
Early Amortization Event occurs. From the Closing
Date and ending on the day immediately preceding
the commencement of the Amortization Period (the
"Revolving Period"), all Principal Collections and
reimbursements of Loss Amounts will be reinvested
in Subsequent Contracts and Subsequent Leased
Vehicles so as to maintain the Class A-1, Class
A-2, Class A-3 and Class B Certificate Balances at
constant levels during the Revolving Period, except
to the extent there are unreimbursed Certificate
Principal Loss Amounts in respect of any such
Class, in which case the Certificate Balance of the
related Class of Certificates will decrease until
such time, if any, as such Certificate Principal
Loss Amounts are reimbursed as described under
"Description of the Certificates -- Distributions
on the Certificates -- Distributions of Interest".
The events that might lead to the termination of
the Revolving Period prior to its scheduled
termina-
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<PAGE> 13
tion date are described under "Description of the
Certificates -- Early Amortization Events".
Prior to the twenty-fifth calendar day (i) in each
month (beginning November 1996) during the
Revolving Period and (ii) if no Early Amortization
Event has occurred, in the month in which the
Amortization Date occurs, on one or more days
selected by the Servicer (each, a "Transfer Date"),
the Servicer will direct the Origination Trustee to
reinvest Principal Collections in certain lease
contracts and the related leased vehicles of the
Origination Trust that are not evidenced by the
SUBI or any Other SUBI. Upon such reinvestment, the
related Subsequent Contracts and Subsequent Leased
Vehicles will become SUBI Assets. If on the
twenty-fifth calendar day of any month (beginning
November 1996) during the Revolving Period the
amount of Principal Collections as of the last day
of the immediately preceding month that have not
been reinvested in Subsequent Contracts and
Subsequent Leased Vehicles exceeds $1,000,000, an
Early Amortization Event will occur, the Revolving
Period will terminate as of such day and all
unreinvested Principal Collections will be
distributed as principal to the Trust and then to
Certificateholders on the immediately succeeding
Distribution Date. For further details concerning
the application of Principal Collections, see
"Summary -- Amortization Period; Principal
Payments", "The Trust and the SUBI -- The SUBI" and
"Description of the Certificates -- Distributions
on the Certificates -- Application and
Distributions of Principal -- Revolving Period".
The Subsequent Contracts and Subsequent Leased
Vehicles will be selected from the Origination
Trust's portfolio of lease contracts and related
vehicles that are not allocated to (or reserved for
allocation to) any Other SUBI, based on the same
criteria as are applicable to the Initial Contracts
and the other criteria described under the "The
Contracts -- Representations, Warranties and
Covenants". The reinvestment of Principal
Collections (and reimbursement of Loss Amounts)
will be made in the available lease contracts with
the earliest origination dates, except that lease
contracts booked from September 1, 1996 through
September 27, 1996 shall be reserved for allocation
to the SUBI and will be used first, and if
allocations are being made in respect of any one or
more previous Other SUBIs at the same time out of
the Origination Trust's general pool of unreserved
lease contracts, reinvestment will be made first in
respect of such previous Other SUBI(s). For further
information regarding the Subsequent Contracts and
Subsequent Leased Vehicles, see "The Contracts".
"Principal Collections" will mean, with respect to
any Collection Period, all Collections allocable to
the principal component of any Contract (including
any payment in respect of the related Leased
Vehicle, but other than any payment as to which a
Loss Amount has been realized and allocated during
any prior Collection Period), discounted to the
extent required below. A "Collection Period" will
be each calendar month (or, with respect to the
first Collection Period, the months of September
and October 1996). For purposes of determining
Principal Collections, the principal component of
all payments made on or in respect of a Contract
(or the related Leased Vehicle) with a Lease Rate
less than 8.7% (each, a "Discounted Contract") will
be discounted at a
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<PAGE> 14
rate of 8.7%, thereby effectively reallocating a
portion of the payments received in respect of the
principal component of the Contracts to Interest
Collections and providing additional credit
enhancement for the benefit of the
Certificateholders. "Collections" with respect to
any Collection Period will include all net
collections collected or received in respect of the
Contracts and Leased Vehicles during such
Collection Period, such as Monthly Payments
(including amounts in the SUBI Collection Account
that previously constituted Payments Ahead but
which represent Monthly Payments due during such
Collection Period), Prepayments, Advances, Net
Matured Leased Vehicle Proceeds (including amounts
withdrawn from the Residual Value Surplus Account
to offset certain Residual Value Losses in respect
of Leased Vehicles relating to Matured Contracts
and certain Matured Leased Vehicle Expenses, but
not including any Residual Value Surplus deposited
into the Residual Value Surplus Account in respect
of such Collection Period), Net Repossessed Vehicle
Proceeds and other Net Liquidation Proceeds, less
an amount equal to the sum of (i) Payments Ahead
with respect to one or more future Collection
Periods, (ii) amounts paid to the Servicer in
respect of outstanding Advances and (iii)
Additional Loss Amounts in respect of such
Collection Period. In addition, if such Collection
Period occurs during the Revolving Period, amounts
otherwise payable to the Certificateholders on the
related Distribution Date as reimbursement of Loss
Amounts allocable to the Investor Interest (as
described under "Description of the
Certificates -- Distributions on the
Certificates -- Distributions of Interest") will be
treated as Principal Collections and reinvested in
Subsequent Contracts and Subsequent Leased Vehicles
as described above. "Interest Collections" with
respect to any Collection Period generally will
equal the amount by which Collections exceed
Principal Collections. "Net Repossessed Vehicle
Proceeds" will equal Repossessed Vehicle Proceeds
net of Repossessed Vehicle Expenses, and "Net
Liquidation Proceeds" will equal Liquidation
Proceeds net of Liquidation Expenses.
Amortization Period;
Principal
Payments................. The "Amortization Period" shall commence on the
earlier of October 1, 1997 (the "Amortization
Date") or the day on which an Early Amortization
Event occurs, and will end when each Class of
Certificates has been paid in full and all
Certificate Principal Loss Amounts and Class B
Certificate Principal Carryover Shortfalls, if any,
have been repaid in full, together with accrued
interest thereon, or when the Trust otherwise
terminates. During the Amortization Period,
Principal Collections will no longer be reinvested
in Subsequent Contracts and Subsequent Leased
Vehicles as described above. Instead, on each
Distribution Date beginning with the Distribution
Date in the month following the month in which the
Amortization Period commences and ending on the
Distribution Date on which the Class A-2
Certificates have been paid in full, all Principal
Collections for the related Collection Period that
are allocable to the Investor Interest will be
distributed as principal payments first to the
Class A-1 Certificateholders until the Class A-1
Certificates have been paid in full, second, to the
Class A-2 Certificateholders until the Class A-2
Certificates have been paid in full and thereafter
the Class A Percentage and the Class B Percentage
of any remaining such Principal Collections will be
distributed as principal payments to the Class A-3
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<PAGE> 15
Certificateholders and to the holders of record of
the Class B Certificates (the "Class B
Certificateholders"), respectively. On each
Distribution Date after the Class A-2 Certificates
have been paid in full, the Class A Percentage and
the Class B Percentage of Principal Collections for
the related Collection Period allocable to the
Investor Interest will be distributed to the Class
A-3 Certificateholders and the Class B
Certificateholders, respectively, until the related
Class of Certificates has been paid in full. The
"Class A Percentage" will mean the Class A
Certificate Balance immediately after the Class A-2
Certificates have been paid in full, as a
percentage of the Certificate Balance at such time,
and the "Class B Percentage" will mean the Class B
Certificate Balance immediately after the Class A-2
Certificates have been paid in full, as a
percentage of the Certificate Balance at such time.
The Class A Percentage and the Class B Percentage
will not change after they are set.
In no event will the principal distributed in
respect of any Class of Certificates exceed its
Certificate Balance. In addition, under certain
circumstances, (i) Class A Certificateholders will
be entitled to receive reimbursement of an
allocable percentage of Loss Amounts as a
distribution of principal from sources other than
Principal Collections and (ii) principal allocable
to the Class B Certificates may instead be
distributed in respect of Loss Amounts allocable to
the Class A-3 Certificates, Class A-3 Certificate
Principal Loss Amounts and accrued and unpaid
interest thereon, as described under "Description
of the Certificates -- Distributions on the
Certificates -- Distributions of Interest",
"-- Application and Distributions of Principal" and
"Risk Factors -- Maturity and Prepayment
Considerations -- Reimbursement of Certain Losses".
See "Description of the Certificates -- Early
Amortization Events" for a description of the
events that might lead to the commencement of the
Amortization Period prior to the Amortization Date.
During the Amortization Period, the amount of
Principal Collections allocable to the Investor
Interest in respect of a Collection Period (the
"Principal Allocation") generally will mean the
Principal Collections in respect of such Collection
Period allocable to the SUBI Interest multiplied by
the Investor Percentage for such Principal
Collections. The "Investor Percentage" for purposes
of the Principal Allocation will equal the
percentage equivalent of a fraction (not to exceed
100%), the numerator of which is the Certificate
Balance and the denominator of which is 99.8% of
the Aggregate Net Investment Value, calculated as
described under "Summary -- Security for the
Certificates -- The SUBI -- The Contracts", as of
the last day of the last Collection Period (i)
preceding the Amortization Date or (ii) preceding
the month, if any, during which an Early
Amortization Event occurs. See "Description of the
Certificates -- Calculation of Investor Percentage
and Seller Percentage" for a description of
calculation of the Investor Percentage relating to
Interest Collections and Loss Amounts.
Allocations based upon the Principal Allocation for
Principal Collections during the Amortization
Period may result in distributions of principal
with respect to a Collection Period during the
Amortization Period to Certificateholders in
amounts that are greater relative to the declining
balance of the Certificate Balance than would be
the case if no fixed
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<PAGE> 16
Investor Percentage were used to determine the
percentage of Principal Collections distributed in
respect of the Certificates. Additionally, to the
extent that on any Distribution Date during the
Amortization Period any portion of the Investor
Percentage of Interest Collections in respect of
the related Collection Period allocable to the SUBI
Interest remains after required distributions have
been made, such excess interest will be deposited
into the Reserve Fund until the amount on deposit
therein equals the Reserve Fund Cash Requirement.
Any remaining excess interest, up to but not
exceeding the product of (i) one-twelfth of 0.25%,
(ii) 99.8% and (iii) the Aggregate Net Investment
Value as of the last day of such Collection Period
(the "Accelerated Principal Distribution Amount"),
will be distributed as an additional payment of
principal to the Certificateholders in the same
manner and priority as principal is distributed in
respect of the Certificates as described in the
preceding paragraphs. See "Description of the
Certificates -- Distributions on the
Certificates -- Distributions of Interest" and
"Security for the Certificates -- The
Accounts -- The SUBI Collection
Account -- Withdrawals from the SUBI Collection
Account" for further information regarding the
foregoing matters.
Optional Purchase.......... The Certificates will be subject to purchase at the
option of the Seller on any Distribution Date if,
either before or after giving effect to any payment
of principal required to be made on such
Distribution Date, the Certificate Balance has been
reduced to an amount less than or equal to 10% of
the Initial Certificate Balance at a purchase price
determined as described under "Description of the
Certificates -- Termination of the Trust;
Retirement of the Certificates".
Security for the
Certificates............... The security for the Certificates will consist
primarily of the following:
A. The SUBI.............. The SUBI will evidence a beneficial interest in the
SUBI Assets. The Origination Trust was created
pursuant to a trust agreement (the "Origination
Trust Agreement"), among ALFI L.P., as grantor and
initial beneficiary, the Origination Trustee and
First Bank, as trust agent (in such capacity, the
"Trust Agent"). The SUBI Interest will be evidenced
by a certificate (the "SUBI Certificate")
evidencing a 99.8% beneficial interest in the SUBI
Assets that will be issued by the Origination Trust
pursuant to a supplement to the Origination Trust
Agreement to be dated as of October 1, 1996 (the
"SUBI Supplement" and, together with the
Origination Trust Agreement, the "SUBI Trust
Agreement"). The Trustee will be a third party
beneficiary of the SUBI Trust Agreement. The Seller
will permanently hold the Retained SUBI Interest,
representing the 0.2% beneficial interest in the
SUBI Assets not evidenced by the SUBI Certificate.
The Origination Trust Assets evidenced by the SUBI
will primarily include the Contracts and the Leased
Vehicles. The SUBI will not evidence an interest in
any Origination Trust Assets other than the SUBI
Assets, and payments made on or in respect of all
other Origination Trust Assets will not be
available to make payments on the Certificates. For
more information regarding the SUBI, see "The Trust
and the SUBI" and "The Origination Trust".
1. The Contracts......... The Contracts will consist of a pool of retail
closed-end lease contracts originated by Dealers
located throughout the United States, each of
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<PAGE> 17
which will have an original term of not more than
60 months. Each Contract will be a finance lease
for accounting purposes and will have been written
for a "capitalized cost" (which may exceed the
manufacturer's suggested retail price), plus an
implicit rate in each Lease calculated as an annual
percentage rate (the "Lease Rate") on a constant
yield basis. The Contracts will provide for equal
monthly payments (the "Monthly Payments") such that
at the end of the related Contract term such
capitalized cost will have been amortized to an
amount equal to the residual value of the related
Leased Vehicle established at the time of
origination of such Contract (the "Residual
Value"). The amount to which the capitalized cost
of a Contract has been amortized at any point in
time is referred to herein as its "Outstanding
Principal Balance".
The Initial Contracts consist of 35,016 lease
contracts. As of the Initial Cutoff Date, the Lease
Rate of the Initial Contracts ranged from 2.01% to
12.87%, with a weighted average Lease Rate of
7.74%. The aggregate of the original principal
balances of the Initial Contracts as of their
respective dates of origination was $858,054,687.
As of the Initial Cutoff Date, the aggregate
Outstanding Principal Balance of the Initial
Contracts was $831,416,020, the aggregate Residual
Value of the Initial Leased Vehicles was
$523,477,146 and the Initial Contracts had a
weighted average original term of 40.38 months and
a weighted average remaining term to scheduled
maturity of 36.79 months. See "The Contracts" for
further information regarding the Initial
Contracts.
The Initial Contracts were, and the Subsequent
Contracts will be, identified by the Servicer from
the Origination Trust's portfolio of lease
contracts originated by Dealers located throughout
the United States that are not evidenced by (or
reserved for allocation to) any Other SUBI, based
upon the criteria specified in the SUBI Trust
Agreement and described under "The
Contracts -- Characteristics of the Contracts" and
"-- Representations, Warranties and Covenants".
The "Aggregate Net Investment Value" as of any day
will equal the sum of (i) the Discounted Principal
Balance of all Contracts other than Charged-off,
Liquidated, Matured and Additional Loss Contracts,
(ii) the aggregate Residual Value of all Leased
Vehicles to the extent that the related Contracts
have reached their scheduled maturities (each, a
"Matured Contract") within the three immediately
preceding Collection Periods but which Leased
Vehicles as of the last day of the most recent
Collection Period have remained unsold and not
otherwise disposed of by the Servicer for no more
than two full Collection Periods (the "Matured
Leased Vehicle Inventory") and (iii) during the
Revolving Period, the amount of Principal
Collections, if any, that have not been reinvested
in Subsequent Contracts and Subsequent Leased
Vehicles. The "Discounted Principal Balance" of (i)
a Discounted Contract will equal its Outstanding
Principal Balance, discounted by 8.70%, and (ii)
all Contracts other than Discounted Contracts will
equal their Outstanding Principal Balance. As of
the Initial Cutoff Date, the aggregate Discounted
Principal Balance of the Initial Contracts and the
Aggregate Net Investment Value was $812,498,498.
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<PAGE> 18
2. The Leased Vehicles... The Leased Vehicles will be comprised of
automobiles and light duty trucks. As of the times
of origination of the Contracts, the related Leased
Vehicles will be either new vehicles, dealer
demonstrator vehicles or manufacturers' program
vehicles, as described under "The Contracts --
General".
The certificates of title to the Initial Leased
Vehicles have been, and the certificates of title
to the Subsequent Leased Vehicles will be,
registered at all times in the name of the
Origination Trustee (in its capacity as trustee of
the Origination Trust). Such certificates of title
will not reflect the indirect interest of the
Trustee in the Leased Vehicles by virtue of its
beneficial interest in the SUBI. Therefore, if the
Class A Certificates were recharacterized as
secured loans, the Trustee would not have a
perfected lien in the Leased Vehicles, although it
would be deemed to have a perfected security
interest in the SUBI Certificate and the Contracts
and Contract Rights. For further information
regarding the titling of the Leased Vehicles and
the interest of the Trustee therein, see "Risk
Factors -- Structural Considerations" and "Certain
Legal Aspects of the Contracts and the Leased
Vehicles -- Back-up Security Interests".
B. The Accounts.......... The Origination Trustee will maintain the SUBI
Collection Account and the Residual Value Surplus
Account for the benefit of the holders of interests
in the SUBI. Within two Business Days of receipt,
payments made on or in respect of the Contracts or
the Leased Vehicles generally will be deposited by
the Servicer into the SUBI Collection Account. Such
payments will include, but will not be limited to,
Monthly Payments made by lessees, Monthly Payments
determined by the Servicer to be due in one or more
future Collection Periods (each, a "Payment
Ahead"), Prepayments, proceeds from the sale or
other disposition of Leased Vehicles relating to
Matured Contracts, including payments for excess
mileage and excess wear and use ("Matured Leased
Vehicle Proceeds"), proceeds received in connection
with the sale or other disposition of Leased
Vehicles that have been repossessed ("Repossessed
Vehicle Proceeds") and other amounts received in
connection with the realization of the amounts due
under any Contract (together with Matured Leased
Vehicle Proceeds and Repossessed Vehicle Proceeds,
"Liquidation Proceeds"). The Servicer will be
entitled to reimbursement for expenses incurred in
connection with the realization of Matured Leased
Vehicle Proceeds ("Matured Leased Vehicle
Expenses"), Repossessed Vehicle Proceeds
("Repossessed Vehicle Expenses") and other
Liquidation Proceeds (such expenses, together with
Matured Leased Vehicle Expenses and Repossessed
Vehicle Expenses, "Liquidation Expenses"), either
from amounts on deposit in the SUBI Collection
Account or, to the extent described herein, the
Residual Value Surplus Account, or as a deduction
from Matured Leased Vehicle Proceeds, Repossessed
Vehicle Proceeds or other Liquidation Proceeds, as
appropriate, deposited into the SUBI Collection
Account. For further details regarding these
deposits and reimbursements, see "Security for the
Certificates -- The Accounts -- The SUBI Collection
Account" and "-- The Residual Value Surplus
Account".
On the Business Day immediately preceding each
Distribution Date (each, a "Deposit Date"), the
following amounts will be deposited into
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the SUBI Collection Account: (i) Advances by the
Servicer, (ii) Reallocation Payments by World Omni
(together with, under certain circumstances during
the Amortization Period, Reallocation Deposit
Amounts) in respect of certain Contracts as to
which an uncured breach of certain representations
and warranties or certain servicing covenants has
occurred and (iii) certain amounts in respect of
the Residual Value of Leased Vehicles relating to
Matured Contracts withdrawn from the Residual Value
Surplus Account. Thereafter, 99.8% of Interest
Collections (and, with respect to the Deposit Date
in any month following the month during which the
Amortization Period commences, 99.8% of Principal
Collections) on deposit in the SUBI Collection
Account in respect of the related Collection Period
will be allocable to the SUBI Interest and
deposited into the Distribution Account maintained
with the Trustee for the benefit of the
Certificateholders and the Seller. The Required
Amount will be withdrawn from the Reserve Fund and
deposited into the Distribution Account on each
Deposit Date. All payments to Certificateholders
will be made from the Distribution Account. The
remaining 0.2% of Collections will be distributed
on such Distribution Date to the Seller in respect
of the Retained SUBI Interest, which amounts in no
event will be available to make payments on the
Certificates. Any funds remaining in the
Distribution Account on a Distribution Date in
respect of the related Collection Period following
the payment of amounts required to be paid
therefrom will be deposited into the Reserve Fund
until the amount on deposit therein equals the
Reserve Fund Cash Requirement, and thereafter
generally will be paid to the Seller. For further
information regarding these deposits and payments,
see "Security for the Certificates -- The
Accounts -- The Distribution Account" and "-- The
SUBI Collection Account".
On each Deposit Date, if Matured Leased Vehicle
Proceeds received during the related Collection
Period with respect to Leased Vehicles relating to
Matured Contracts that were sold or otherwise
disposed of during such Collection Period, net of
related Matured Leased Vehicle Expenses incurred
during such Collection Period ("Net Matured Leased
Vehicle Proceeds"), exceed the aggregate Residual
Value of the related Leased Vehicles (the "Residual
Value Surplus"), then such excess will be deposited
into the Residual Value Surplus Account maintained
with the Origination Trustee for the benefit of
holders of interests in the SUBI. On each Deposit
Date, funds on deposit in the Residual Value
Surplus Account, if any, will be withdrawn and
deposited into the SUBI Collection Account up to an
amount equal to the sum of (a) the aggregate of the
Residual Values of those Leased Vehicles that were
a part of Matured Leased Vehicle Inventory but that
had remained unsold and not otherwise disposed of
for at least two full Collection Periods as of the
last day of the most recent Collection Period and
(b) the amount by which Net Matured Leased Vehicle
Proceeds (after application of amounts withdrawn
pursuant to the next sentence) for the related
Collection Period are less than the aggregate of
the Residual Values of all Leased Vehicles included
in Matured Leased Vehicle Inventory that were sold
or otherwise disposed of during such Collection
Period. Also on each Deposit Date, funds will be
withdrawn and paid to the Servicer in reimbursement
for any Matured Leased Vehicle Expenses incurred
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<PAGE> 20
during such Collection Period, but only to the
extent that, after such reimbursement (but
exclusive of any other reimbursement from any other
source), Net Matured Leased Vehicle Proceeds would
be no more than the aggregate of the Residual
Values of Leased Vehicles sold or otherwise
disposed of during such Collection Period. For
further information regarding the Residual Value
Surplus Account, see "Security for the
Certificates -- The Accounts -- The Residual Value
Surplus Account".
C. The Reserve Fund...... The Trust will have the benefit of the Reserve Fund
maintained with the Trustee for the benefit of the
Certificateholders and the Seller. The Reserve Fund
is designed to provide additional funds for the
benefit of the Certificateholders in the event that
on any Distribution Date Interest Collections
allocable to the Investor Interest for the related
Collection Period are insufficient to pay, among
other things, the sum of (i) accrued interest and
any overdue interest (with interest thereon) at the
applicable Certificate Rate on the Certificates on
such Distribution Date, (ii) any Loss Amount for
such Collection Period allocable to the Investor
Interest, calculated as described under
"Description of the Certificates -- Calculation of
Investor Percentage and Seller Percentage", and
(iii) any unreimbursed Certificate Principal Loss
Amounts, together with interest thereon at the
applicable Certificate Rate (any such deficiency,
the "Required Amount"). Monies on deposit in the
Reserve Fund also will be available to
Certificateholders should Collections ultimately be
insufficient to pay in full any Class of
Certificates. For further information regarding the
Reserve Fund, see "Security for the
Certificates -- The Accounts -- The Reserve Fund".
The Reserve Fund will be created with an initial
deposit by the Seller of $28,380,573 (the "Initial
Deposit") (which amount will equal 3.5% of 99.8% of
the Aggregate Net Investment Value as of the
Initial Cutoff Date). On each Distribution Date,
the funds in the Reserve Fund will be supplemented
by (i) certain excess Interest Collections, as more
fully described under "Description of the
Certificates -- Distributions on the
Certificates -- Distributions of Interest", (ii)
income realized on the investment of amounts on
deposit in the Reserve Fund and (iii) the deposit
of monies in respect of the related Collection
Period remaining in the Distribution Account after
making all payments required to be made therefrom
on such Distribution Date prior to such deposit,
including monies that would otherwise be
distributed or applied in respect of the Seller
Interest, until the amount on deposit in the
Reserve Fund equals the Reserve Fund Cash
Requirement then in effect, calculated as described
under "Security for the Certificates -- The
Accounts -- The Reserve Fund -- The Reserve Fund
Cash Requirement".
On each Deposit Date relating to a Distribution
Date on which withdrawals must be made from the
Reserve Fund, the Seller may be required under
certain circumstances to deposit funds into the
Reserve Fund in an amount equal to the Reserve Fund
Supplemental Requirement to the extent of any
Reserve Fund Deficiency. For a description of the
circumstances under which the Seller will be
required to make such deposits, see "Security for
the Certificates -- The Accounts -- The Reserve
Fund". For further information regarding deposits
into the
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<PAGE> 21
Reserve Fund, see "Description of the
Certificates -- Distributions on the
Certificates -- Distributions of Interest".
After giving effect to all payments from the
Reserve Fund on a Distribution Date, monies on
deposit therein that are in excess of the Reserve
Fund Cash Requirement will be paid to the Seller,
free and clear of any lien of the Trust. However,
the Seller will remain responsible to fund the
Reserve Fund under certain circumstances described
under "Security for the Certificates -- The
Accounts -- The Reserve Fund -- Reserve Fund
Supplemental Requirement".
D. Subordination of the
Seller Interest....... The Seller Interest will initially equal
$16,217,470, and will represent the interest in the
Trust not represented by the Investor Interest.
However, to provide additional credit enhancement
for the Certificates, on each Distribution Date, no
payments will be made to the Seller in respect of
the Seller Interest until all payments required to
be made on such Distribution Date that are
described under "Description of the
Certificates -- Distributions on the
Certificates -- Distributions of Interest" have
been made and the amount on deposit in the Reserve
Fund equals the Reserve Fund Cash Requirement. For
a description of certain payments made to the
Seller, see "Description of the Certificates --
Certain Payments to the Seller".
Advances................... On each Deposit Date the Servicer will be obligated
to make, by deposit into the SUBI Collection
Account, an advance equal to the aggregate Monthly
Payments due but not received during the related
Collection Period with respect to Contracts that
are 31 days or more past due as of the end of such
Collection Period, and the Servicer may (but shall
not be required to) make such an advance with
respect to Contracts that are one or more days, but
less than 31 days, past due as of the end of such
Collection Period (each, an "Advance"). The
Servicer will not be required to make an Advance to
the extent that it determines that such Advance may
not be ultimately recoverable by the Servicer from
Net Liquidation Proceeds or otherwise. For further
information regarding Advances, see "Additional
Document Provisions -- The Servicing
Agreement -- Advances".
Servicing Compensation..... The Servicer will be entitled to receive a monthly
fee with respect to the SUBI Assets allocable to
the SUBI Interest (the "Servicing Fee"), payable on
each Distribution Date, equal to one-twelfth of 1%
of 99.8% of the Aggregate Net Investment Value as
of the first day of the related Collection Period
(or, in the case of the first Distribution Date,
one-twelfth of 1% of 99.8% of the Aggregate Net
Investment Value as of the Initial Cutoff Date).
The Servicer also will be entitled to additional
servicing compensation in the form of, among other
things, late fees and other administrative fees or
similar charges under the Contracts. For further
information regarding Servicer compensation, see
"Additional Document Provisions -- The Servicing
Agreement -- Servicing Compensation".
Tax Status................. Brown & Wood LLP, special federal income tax
counsel to the Seller and counsel for the
Underwriters, will deliver an opinion to the effect
that the Class A Certificates will be characterized
as indebtedness for federal income tax purposes.
Each Class A Certificateholder, by its
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<PAGE> 22
acceptance of a Class A Certificate, and each
Certificate Owner by its acquisition of an interest
in the Class A Certificates, will agree to treat
the Class A Certificates as indebtedness for
federal, state and local income tax purposes.
Prospective investors are advised to consult their
own tax advisors regarding the federal income tax
consequences of the purchase, ownership and
disposition of Class A Certificates, and the tax
consequences arising under the laws of any state or
other taxing jurisdiction. For further information
regarding material federal income tax
considerations with respect to the Class A
Certificates, see "Certain Income Tax
Considerations -- Federal Taxation".
ERISA Considerations....... As more fully described under "ERISA
Considerations", an employee benefit plan subject
to the requirements of the fiduciary responsibility
provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the
provisions of Section 4975 of the Internal Revenue
Code of 1986, as amended, contemplating the
purchase of Class A Certificates should consult its
counsel before making a purchase and the fiduciary,
and such legal advisors should consider the
application of the ERISA prohibited transaction
exemption described herein.
Ratings.................... It is a condition of issuance that each of Moody's
Investors Service, Inc. ("Moody's") and Standard &
Poor's Ratings Services ("Standard & Poor's" and,
together with Moody's, the "Rating Agencies") rates
each Class of Class A Certificates in its highest
rating category. The ratings of the Class A
Certificates address the likelihood of the payment
of principal of and interest on the Class A
Certificates pursuant to their terms. For further
information concerning the ratings assigned to the
Class A Certificates, see "Ratings of the Class A
Certificates".
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<PAGE> 23
RISK FACTORS
LIMITED LIQUIDITY; ABSENCE OF SECONDARY MARKET
There is currently no market for the Class A Certificates. The Underwriters
expect, but will not be obligated, to make a market in each Class of Class A
Certificates. There can be no assurance that a secondary market for the Class A
Certificates will develop or, if one does develop, that it will provide the
related Certificateholders with liquidity of investment or will continue for the
life of the related Class A Certificates.
MATURITY AND PREPAYMENT CONSIDERATIONS
Possible Early Termination of Revolving Period
No principal will be paid to the Class A Certificateholders until the
November 1997 Distribution Date or, upon the occurrence of an Early Amortization
Event, until the Distribution Date in the month immediately succeeding the month
in which such Early Amortization Event occurs. During the Revolving Period,
Principal Collections will be reinvested in Subsequent Contracts and Subsequent
Leased Vehicles. Accordingly, the continuation of the Revolving Period will be
dependent, in part, upon the continued origination and assignment to the
Origination Trust of lease contracts and leased vehicles meeting the eligibility
criteria described herein. An unexpectedly high rate of Principal Collections
(including Prepayments) received during the Revolving Period or a significant
decline in the number of qualifying lease contracts available to be assigned to
the Origination Trust could result in the occurrence of an Early Amortization
Event and the commencement of the Amortization Period prior to the Amortization
Date. The retail automobile and light duty truck leasing business in the United
States may be affected by a variety of social, economic and geographic factors.
Economic factors include interest rates, unemployment levels, the rate of
inflation and consumer perception of economic conditions. However, it is not
possible to determine or predict whether or to what extent economic, geographic
or social factors will affect retail automobile and light duty truck leasing in
general, or that of the Dealers in particular. As a result, there can be no
assurance that the Revolving Period will not terminate prior to the Amortization
Date due to the occurrence of an Early Amortization Event. Since an Early
Amortization Event would result in the commencement of distributions of
principal to Class A-1 Certificateholders on the Distribution Date in the
succeeding month, it could shorten the final maturity of and affect the yield on
each Class of Class A Certificates. See "Description of the
Certificates -- Early Amortization Events" for a description of the events that
might lead to the early commencement of the Amortization Period and a
description of the results of an Early Amortization Event.
Reimbursement of Certain Losses
In the event that Loss Amounts are incurred in respect of the Contracts and
the Leased Vehicles during a Collection Period, if the related Distribution Date
occurs during the Revolving Period, an amount equal to the Investor Percentage
of such Loss Amounts will be treated as Principal Collections received during
the Collection Period in which such Distribution Date occurs and accordingly, to
the extent reimbursed out of Excess Collections or otherwise, as described
herein, will be available for reinvestment in Subsequent Contracts and
Subsequent Leased Vehicles. If the related Distribution Date occurs during the
Amortization Period, the Class A-1 Certificateholders will be entitled to
receive the Class A-1 Allocation Percentage of the Investor Percentage of such
Loss Amounts, the Class A-2 Certificateholders will be entitled to receive the
Class A-2 Allocation Percentage of the Investor Percentage of such Loss Amounts
and the Class A-3 Certificateholders will be entitled to receive the Class A-3
Allocation Percentage of the Investor Percentage of such Loss Amounts, in each
case as a distribution of principal from, to the extent available, Excess
Collections, amounts on deposit in the Reserve Fund and the Residual Value
Surplus Account, the Servicing Fee (so long as World Omni is the Servicer),
amounts otherwise payable to the Seller in respect of the Seller Interest and,
in the case of the Class A-3 Certificates, amounts otherwise payable as
principal to the Class B Certificateholders. With respect to any Distribution
Date, the "Class A-1 Allocation Percentage" will mean the Class A-1 Certificate
Balance as a percentage of the Certificate Balance, calculated as of the last
day of the related Collection Period. The "Class A-2 Allocation Percentage" and
the "Class A-3 Allocation Percentage" will be calculated in the same manner as
the Class A-1 Allocation Percentage, appropriately
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<PAGE> 24
modified to relate to the Class A-2 or Class A-3 Certificates, as the case may
be. Higher Loss Amounts that occur during the Amortization Period may therefore
accelerate the rate of return of principal on the Certificates. To the extent
that Principal Collections and reimbursements of Loss Amounts are reinvested in
Subsequent Contracts during the Revolving Period, the aggregate Residual Value
of the Leased Vehicles as a percentage of the Aggregate Net Investment Value may
increase. Furthermore, to the extent that Loss Amounts (including Residual Value
Loss Amounts) ultimately exceed the sources available for repayment thereof,
investors in the Class A Certificates could incur a loss on their investment.
"Loss Amounts" will include Charged-off Amounts, Residual Value Loss
Amounts and Additional Loss Amounts. The "Residual Value Loss Amount" for any
Collection Period generally will represent the aggregate net losses on
dispositions of Matured Leased Vehicle Inventory, and will be equal to the sum
of (a) the aggregate of the Residual Values of all those Leased Vehicles that
were included in Matured Leased Vehicle Inventory but that had remained unsold
and not otherwise disposed of by the Servicer for at least two full Collection
Periods as of the last day of such Collection Period and (b) the excess, if any,
of (i) the aggregate of the Residual Values of all Leased Vehicles previously
included in Matured Leased Vehicle Inventory but that were sold or otherwise
disposed of during such Collection Period over (ii) Net Matured Vehicle Proceeds
for such Collection Period, but only to the extent that such sum exceeds the
amount on deposit in the Residual Value Surplus Account on the last day of such
Collection Period. For a discussion of the recent leased vehicle residual value
loss experience of World Omni, see "World Omni -- Delinquency, Repossession and
Loss Data". The amount of Residual Value losses will vary based on a variety of
factors, including the effect of World Omni's pro-active lease termination
program, more fully described under "Maturity, Prepayment and Yield
Considerations", and the supply of, and demand for, vehicles similar to the
Leased Vehicles in the used car market. Uncollected payments for excess mileage
or excess wear and use also could affect the amount of Residual Value losses. No
assurance can be given as to the likely levels of Residual Value losses over the
life of the Certificates.
Sequential Payment of Principal on the Certificates
In general, no principal payments will be made on the Class A-2, Class A-3
or Class B Certificates until the Class A-1 Certificates have been paid in full
or on the Class A-3 or Class B Certificates until the Class A-1 and Class A-2
Certificates have been paid in full. On each Distribution Date during the
Amortization Period, all Principal Collections for the related Collection Period
that are allocable to the Investor Interest will be distributed first to the
Class A-1 Certificateholders until the Class A-1 Certificates have been paid in
full, second to the Class A-2 Certificateholders until the Class A-2
Certificates have been paid in full and thereafter the Class A Percentage and
the Class B Percentage of any such remaining Principal Collections will then be
distributed as principal payments to the Class A-3 Certificateholders and the
Class B Certificateholders, respectively.
Principal payments in respect of the Class A-3 and Class B Certificates
will be based on the fixed Class A Percentage and Class B Percentage, which will
be calculated when the Class A-1 and Class A-2 Certificates have been paid in
full. The Investor Percentage of Loss Amounts will be allocated among the
Certificateholders on a pro rata basis, based on the Class A-1, Class A-2, Class
A-3 and Class B Allocation Percentages, as the case may be, and then reimbursed
out of available funds in the amounts and order of priority described in
"Description of the Certificates -- Distributions on the
Certificates -- Distributions of Interest". As a result, Class A-2 Certificates
may be allocated more Loss Amounts than the Class A-1 Certificates as a relative
percentage of their respective Initial Certificate Balances, and Class A-3
Certificates may be allocated more Loss Amounts than the Class A-1 or Class A-2
Certificates as a relative percentage of their respective Initial Certificate
Balances, primarily because Loss Amounts will be allocated on each Distribution
Date based on the then-current Class A-2 and Class A-3 Allocation Percentages,
both of which will increase as the Certificate Balance of each Class of Class A
Certificates senior in priority of payment decreases during the Amortization
Period.
In addition, the Investor Percentage of the net proceeds of any sale or
other disposition of the SUBI Interest, the SUBI Certificate or other property
of the Trust, which may occur under certain circumstances involving an
Insolvency Event with respect to the Seller (as described under "Description of
the Certificates -- Early Amortization Events"), to the extent such net proceeds
constitute Principal Collections, will be
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<PAGE> 25
distributed first, on a pro rata basis, to the Class A Certificateholders based
on their respective Class Certificate Balances until the Class A Certificates
have been paid in full, and second, to the Class B Certificateholders.
Payment Rate in Respect of Contracts and Leased Vehicles
The rate of payment of principal on the Certificates during the
Amortization Period will depend on the rate of payments on or in respect of the
Contracts and the Leased Vehicles (including scheduled payments on and
prepayments and liquidations of the Contracts) and losses with respect thereto,
which cannot be predicted with certainty. In addition, because payments made on
or in respect of the Contracts and the Leased Vehicles that are allocable to the
SUBI Interest will ordinarily be distributed to Certificateholders during the
Amortization Period according to the timing of their receipt, the rate of
principal payments on the Class A Certificates and the yield to maturity of the
Class A Certificates generally will be directly related to the rate at which
payments on or in respect of the Contracts and the Leased Vehicles are made.
Moreover, if on any Distribution Date relating to the Amortization Period any
Excess Collections exist at a time when the amount on deposit in the Reserve
Fund is at least equal to the Reserve Fund Cash Requirement, the related
Accelerated Principal Distribution Amount will be distributed as principal to
Certificateholders as more fully described under "Description of the
Certificates -- Distributions on the Certificates -- Distributions of Interest".
The rate of payment of principal of the Class A Certificates may also be
affected by payment by World Omni of Reallocation Payments (together with, under
certain circumstances during the Amortization Period, Reallocation Deposit
Amounts) in respect of certain Contracts as to which an uncured breach of
certain representations and warranties or certain servicing covenants has
occurred and the exercise by the Seller of its right to purchase the SUBI
Interest represented by the SUBI Certificate at its option under certain
circumstances pursuant to the Agreement, thereby retiring the Certificates. A
substantial increase in the rate of payments on or in respect of the Contracts
and Leased Vehicles (including prepayments and liquidations of the Contracts)
during the Amortization Period may shorten the final maturity of and may
significantly affect the yields on each Class of Class A Certificates. See
"Description of the Certificates -- Termination of the Trust; Retirement of the
Certificates", "The Contracts -- Representations, Warranties and Covenants" and
"Additional Document Provisions -- The Servicing Agreement -- Collections" for
further information regarding these matters.
Each of the Contracts may be prepaid by the related lessee without penalty
in full or in part at any time upon payment of a $250 processing fee. As more
fully described under "Maturity, Prepayment and Yield Considerations", World
Omni actively encourages lessees under lease contracts with remaining terms of
less than one year to either buy, trade in or refinance the related leased
vehicles prior to the scheduled maturities of such lease contracts. As also more
fully described under "Maturity, Prepayment and Yield Considerations", World
Omni estimates that over calendar years 1993, 1994 and 1995 and the first six
months of 1996, an average of approximately 86% of the number of retail
automobile and light duty truck lease contracts in its portfolio (including
lease contracts owned by certain special purpose finance subsidiaries of World
Omni) with scheduled maturities during this period terminated prior to maturity.
Such early terminations primarily were due either to voluntary prepayments or to
repossession of the leased vehicles due to default by the lessees under the
related lease contracts. No assurance can be given that the Contracts will
experience the same rate of prepayment or default or any greater or lesser rate
than World Omni's historical rate for the retail automobile and light duty truck
lease contracts in its portfolio (including lease contracts owned by certain
special purpose finance subsidiaries of World Omni).
For further information regarding these topics and related yield
information, see "Maturity, Prepayment and Yield Considerations".
STRUCTURAL CONSIDERATIONS
Two-Tiered Structure
Unlike many structured financings in which the holders of the related
securities have a direct ownership interest or a perfected security interest in
the underlying assets being securitized, the Trust will not own
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directly the SUBI Assets. Instead, the Origination Trustee, acting on behalf of
the beneficiaries from time to time of the Origination Trust, will own the
Origination Trust Assets, including the SUBI Assets. The Trustee, acting on
behalf of the beneficiaries from time to time of the Trust (i.e., the
Certificateholders and the Seller), will own the assets of the Trust, the
primary asset of which will be the SUBI Certificate evidencing a 99.8%
beneficial interest in the SUBI Assets. The SUBI Assets will be segregated from
the Origination Trust Assets on the books and records of the Origination Trustee
but will remain at all times owned by the Origination Trustee. Except under the
limited circumstances described under "Risk Factors -- Structural
Considerations -- Allocation of Origination Trust Liabilities", neither the
Servicer nor any holders of other beneficial interests in the Origination Trust
will have rights in the SUBI Assets, and payments made on or in respect of any
Origination Trust Assets other than the SUBI Assets will not be available to
make payments on the Certificates or to cover expenses of the Origination Trust
allocable to the SUBI Assets. As more fully described under "Risk
Factors -- Structural Considerations -- Back-up Security Interest in Certain
SUBI Assets" and "The Trust and the SUBI -- The SUBI", the SUBI will not
evidence a direct interest in the SUBI Assets, nor will it represent a
beneficial interest in all of the Origination Trust Assets. Beneficial interests
in the Contracts and Leased Vehicles, rather than direct legal ownership
thereof, will be transferred in order to avoid the administrative difficulty and
expense of retitling the Leased Vehicles in the name of the transferee.
Allocation of Origination Trust Liabilities
Pursuant to the Origination Trust Agreement, the liabilities of the
Origination Trust, as among the holders of beneficial interests in the
Origination Trust, will be allocated to and charged against the SUBI Assets,
certain Origination Trust Assets ("Other SUBI Assets") allocated among Other
SUBIs or all other Origination Trust Assets other than the SUBI Assets and the
Other SUBI Assets (the "UTI Assets"), respectively, if specifically incurred
with respect thereto, or pro rata among the Origination Trust Assets if incurred
with respect to the Origination Trust Assets generally. The Origination Trustee
and the beneficiaries of the Origination Trust and their assignees and pledgees
will be bound by the foregoing allocation.
In particular, ALFI L.P. has pledged (and may in the future pledge) the UTI
as security for obligations to third-party lenders, and has created and sold and
may in the future create and sell or pledge Other SUBIs in connection with
financings similar to the transaction described herein. Each holder or pledgee
of the UTI and any Other SUBI will be required to expressly disclaim any
interest in the SUBI Assets, and to fully subordinate any claims to the SUBI
Assets in the event that this disclaimer is not given effect. Although no
assurance can be given, in the unlikely event of a bankruptcy of ALFI L.P., the
Seller believes that the SUBI Assets would not be treated as part of ALFI L.P.'s
bankruptcy estate and that, even if they were so treated, the subordination by
holders and pledgees of the UTI and Other SUBIs should be enforceable. In
addition, the pledge of the UTI will not impair the Origination Trustee's
ability to reallocate leases and leased vehicles out of the UTI Assets as
Subsequent Contracts and Subsequent Leased Vehicles during the Revolving Period.
Under the foregoing allocation, any liability to third parties arising from
or in respect of a Contract or Leased Vehicle will be borne by the holders of
interests in the SUBI (including the Trust). If any such liability arises from a
contract or leased vehicle that is an Other SUBI Asset or a UTI Asset, the
Origination Trust Assets (including the SUBI Assets) will not be subject to such
liability unless such Other SUBI Assets or UTI Assets are insufficient to pay
the liability. In such event, because there will be no other assets from which
to satisfy any such liability, to the extent that it is owed to entities other
than the Origination Trustee and the beneficiaries of the Origination Trust, the
other Origination Trust Assets, including the SUBI Assets, will be available to
satisfy such liabilities. Under such circumstances, investors in the Class A
Certificates could incur a loss on their investment.
Third-Party Liens on SUBI Assets
Because the Trustee will not own directly the SUBI Assets, and since its
interest therein generally will be an indirect beneficial ownership interest,
perfected liens of third-party creditors of the Origination Trust in one or more
SUBI Assets will take priority over the interest of the Trustee in such SUBI
Assets. With respect to claims relating to the SUBI Assets, this result is no
different than would be the case if a claim were made
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<PAGE> 27
against the Trust and the Trust directly owned the SUBI Assets. However, because
the Origination Trust also will hold Other SUBI Assets and UTI Assets, and
third-party creditors of the Origination Trust will not be bound by the
allocation of liabilities described above, a general creditor of the Origination
Trust may obtain a lien on one or more SUBI Assets regardless of whether its
claim would be allocated to such SUBI Assets under the terms of the Origination
Trust Agreement. Such liens could include tax liens arising against the Seller
or the Trust, liens arising under various federal and state criminal statutes,
certain liens in favor of the Pension Benefit Guaranty Corporation (the "PBGC"),
judgment liens arising from successful claims under federal and state consumer
protection laws and Lemon Laws with respect to leases and leased vehicles
included in the Origination Trust Assets and judgment liens arising from
successful claims against the Origination Trust arising from the operation of
the leased vehicles constituting Origination Trust Assets. See "Risk
Factors -- Consumer Protection Laws", "-- ERISA Liabilities" and "-- Vicarious
Tort Liability" for a further discussion of these risks.
The Origination Trust Agreement will provide that, to the extent that such
a third-party claim is satisfied out of one or more SUBI Assets rather than
Other SUBI Assets or UTI Assets, as the case may be, the Origination Trustee
will reallocate the remaining Origination Trust Assets (i.e., the Other SUBI
Assets and the UTI Assets) so that each portfolio will bear the expense of the
claim as nearly as possible as if the claim had been allocated as provided in
the Origination Trust Agreement as set forth under "Additional Document
Provisions -- The SUBI Trust Agreement -- The SUBI, the Other SUBIs and the
UTI". However, if the third-party claim exceeds the value of the portfolio or
portfolios of Origination Trust Assets to which it should be allocated,
investors in the Class A Certificates could incur a loss on their investment.
Back-up Security Interest in Certain SUBI Assets
The Certificates will represent beneficial interests in the assets of the
Trust. Since the primary asset of the Trust will be the SUBI Interest, the
holders of the Certificates will have an indirect beneficial ownership interest,
rather than a security interest, in the SUBI Assets. Except as otherwise
described below, the Trustee generally will not have a perfected security
interest in the property of the Trust or the SUBI Assets and in no circumstances
will the Trustee have a perfected security interest in any Leased Vehicle.
As described under "Risk Factors -- Insolvency of World Omni; Substantive
Consolidation with World Omni", the transfer of the SUBI Certificate by the
Seller to the Trust is intended to constitute a sale of the SUBI Certificate and
of the beneficial interest in the SUBI Assets evidenced thereby, subject in each
case to the rights of the Seller as the holder of the Seller Interest and the
Retained SUBI Interest. Although deemed highly unlikely by the Seller,
theoretically it is possible that a court could recharacterize (for accounting
and general state law purposes) the transactions contemplated by the SUBI Trust
Agreement as a financing secured by a pledge of the SUBI Certificate, or even
the underlying SUBI Assets, to the Trustee on behalf of the Certificateholders,
rather than as a sale. In such an event, absent prior perfection of the
Trustee's security interest in the SUBI Assets, the holder of a perfected lien
in one or more SUBI Assets would have priority over the interest of the Trustee
in such SUBI Assets. Therefore, certain actions have been taken to ensure that,
were the Certificates to be so recharacterized as secured loans, the Trustee
would be deemed to have a perfected security interest in the SUBI Certificate
(and the SUBI Interest evidenced thereby) and in the Contracts and the Contract
Rights susceptible of perfection under the Uniform Commercial Code (the "UCC")
in effect in the States of Alabama, Illinois and Florida. The "Contract Rights"
will be comprised of all rights relating to the Contracts and the proceeds
thereof, including but not limited to the documents evidencing such Contracts,
Monthly Payments received or due on or after the related Cutoff Date, Security
Deposits to the extent provided for in the Contracts and partial prepayments,
Prepayments, Liquidation Proceeds and Insurance Proceeds (to the extent
constituting proceeds of the related Contract rather than proceeds of the
related Leased Vehicle) received on or after the related Cutoff Date.
As described above, if the Certificates were to be recharacterized as loans
secured by the SUBI Certificate (and the SUBI Interest evidenced thereby) or the
SUBI Assets, the Trustee would be deemed to have a perfected security interest
in the SUBI Certificate (and the SUBI Interest evidenced thereby) and certain of
the SUBI Assets. The SUBI Certificate will constitute an "instrument" under the
UCC and, by virtue of its possession thereof, the Trustee would be deemed to
have a perfected security interest therein (and
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the SUBI Interest evidenced thereby). Therefore, no UCC-1 financing statements
will be filed in favor of the Trustee with respect to its interest in the SUBI
Certificate (or the SUBI Interest evidenced thereby). The Contracts will not be
stamped to reflect the Trustee's indirect interest therein. On or prior to the
Closing Date, however, "protective" UCC-1 financing statements will be filed in
Alabama, Illinois and Florida with respect to the Contracts and the Contract
Rights to reflect the perfection of any security interest that the Trustee would
be deemed to have therein. However, no action will be taken to perfect the lien
that the Trustee would be deemed to have in the Leased Vehicles in the event of
such a recharacterization. Therefore, to the extent that a valid lien is imposed
by a third party against a Leased Vehicle, the interest of the lienholder will
be superior to the unperfected beneficial interest of the Trustee in such Leased
Vehicle. Although the Servicing Agreement will require the Servicer to contest
all such liens and cause the removal of any liens that may be imposed, if any
such liens are imposed against the Leased Vehicles, investors in the Class A
Certificates could incur a loss on their investment. For further information
relating to potential liens on the SUBI Assets, see "Additional Document
Provisions -- The Servicing Agreement -- Notification of Liens and Claims" and
"Certain Legal Aspects of the Origination Trust and the SUBI -- The SUBI".
As previously noted, various liens could be imposed upon all or part of the
SUBI Assets that, by operation of law, would take priority over the Trustee's
interest therein. Such liens would include tax liens arising against the Seller
or the Trust, mechanic's, repairmen's, garagemen's and motor vehicle accident
liens and certain liens for personal property taxes, in each case arising with
respect to a particular Leased Vehicle, liens arising under various state and
federal criminal statutes and certain liens, more fully described under "Risk
Factors -- ERISA Liabilities", in favor of the PBGC. Additionally, any perfected
security interest of the Trustee in all or part of the property of the Trust
could also be subordinate to claims of any trustee in bankruptcy or debtor-in-
possession in the event of a bankruptcy of the Seller prior to any perfection of
the transfer of the assets transferred by the Seller to the Trust pursuant to
the Agreement, as more fully described under "Risk Factors -- Insolvency of
World Omni; Substantive Consolidation with World Omni".
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws, including the federal
Consumer Leasing Act of 1976 and Regulation M promulgated by the Board of
Governors of the Federal Reserve System, impose requirements on retail lease
contracts such as the Contracts. These laws apply to the Origination Trust as
the assignee and co-lessor of the Contracts and may also apply to the Trust as
owner of the SUBI Certificate which represents a beneficial interest in, among
other things, the Contracts. The failure by the Origination Trust to comply with
such requirements may give rise to liabilities on the part of the Origination
Trust, and claims by such parties may be subject to set-off as a result of such
noncompliance. Many States, including each of the States in the Five State Area,
have adopted Lemon Laws that provide vehicle users certain rights in respect of
substandard vehicles which may apply to one or more of the Leased Vehicles. A
successful claim under a Lemon Law could result in, among other things, the
termination of the related Contract and/or require the refunding of a portion of
payments that previously have been paid. For further information regarding
consumer protection laws, see "Certain Legal Aspects of the Contracts and the
Leased Vehicles -- Consumer Protection Laws".
ERISA LIABILITIES
It is possible that the Origination Trust Assets, including the SUBI
Assets, could become subject to liens in favor of the PBGC to satisfy unpaid
ERISA obligations of any member of an "affiliated group" that includes World
Omni, SET, JMFE and their respective affiliates. The ratings of the Class A
Certificates may be downgraded in the event of any unfunded ERISA liability of
any member of such affiliated group, as described under "Additional Document
Provisions -- The Servicing Agreement -- Compliance with ERISA". The ratings of
the Class A Certificates address the likelihood of the payment of principal of
and interest on the Class A Certificates pursuant to their terms, as described
under "Ratings of the Class A Certificates". However, the Seller believes that
the likelihood of any such liability being asserted against the Origination
Trust Assets or, if so asserted, being successfully pursued, is remote. In
particular, the Seller believes that the Origination Trust should, as a legal
matter, be treated as a distinct entity separate and apart from such
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affiliated group, and not considered part of such affiliated group under ERISA's
"common control" provisions. Additionally, such affiliated group maintains only
one plan (which is neither a multi-employer or multiple employer plan) that
would subject it to a lien if the plan were to terminate with assets
insufficient to cover its liabilities. That plan historically has had assets
that significantly exceeded its liabilities. However, no assurance can be given
that any of these conditions will continue in the future.
VICARIOUS TORT LIABILITY
Although the Origination Trust will own the Leased Vehicles and the Trust
will have an interest therein evidenced by the SUBI, they will be operated by
the related lessees and their respective invitees. State laws differ as to
whether anyone suffering injury to person or property involving a leased vehicle
may bring an action against the owner of the vehicle merely by virtue of that
ownership. To the extent that applicable State law permits such an action, the
Origination Trust and the Origination Trust Assets may be subject to liability
to such an injured party. However, the laws of many States, including each of
the States in the Five State Area, either do not permit such suits, or the
lessor's liability is capped at the amount of any liability insurance that the
leasee was required to, but failed to, maintain. For further information in this
regard, see "Certain Legal Aspects of the Contracts and the Leased
Vehicles -- Vicarious Tort Liability". Notwithstanding the foregoing, in the
event that vicarious liability on the Origination Trust as owner of a Leased
Vehicle were imposed and the coverage provided by the Contingent and Excess
Liability Insurance Policies were insufficient to cover such a loss with respect
to a Leased Vehicle or, in certain circumstances, a leased vehicle that is an
Other SUBI Asset or a UTI Asset, investors in the Class A Certificates could
incur a loss on their investment. See "Risk Factors -- Structural
Considerations -- Allocation of Origination Trust Liabilities", "-- Third-Party
Liens on SUBI Assets" and "Security for the Certificates -- The Contingent and
Excess Liability Insurance Policies".
All of the Contracts will contain provisions requiring the lessees to
maintain levels of insurance satisfying applicable state law, and the Servicing
Agreement will require the Servicer to police compliance by the lessees
therewith. In addition, in the event that any such insurance has lapsed, has not
been maintained in full force and effect or the Servicer has failed to maintain
the right to receive the proceeds of such insurance, the Servicing Agreement
will require World Omni to pay all such amounts as would otherwise have been
recoverable as Insurance Proceeds. For further information regarding insurance
matters, see "World Omni -- Insurance" and "Additional Document
Provisions -- The Servicing Agreement -- Insurance on Leased Vehicles".
Under Florida law, the owner of a motor vehicle that is subject to a lease
having an initial term of at least one year is exempt from liability arising out
of an accident in which the leased vehicle is involved if the lessee is required
by the lease to maintain certain specific levels of insurance, and such
insurance is maintained either by the lessee or the lessor, as further described
under "Certain Legal Aspects of the Contracts and the Leased
Vehicles -- Vicarious Tort Liability". However, a court applying the law of
another jurisdiction might reach another result. Moreover, actions by third
parties might arise against the owner of a leased vehicle based on legal
theories other than negligence, such as a product defect or improper vehicle
preparation prior to the origination of the related lease contract. Even if the
Origination Trust were to be the subject of an action for damages as a result of
its ownership of a Leased Vehicle, however, it will be the beneficiary of the
Contingent and Excess Liability Insurance Policies with respect thereto, as more
fully described under "Security for the Certificates -- The Contingent and
Excess Liability Insurance Policies". Although the Origination Trust's insurance
coverage exceeds $10 million per claim, with an allowance for multiple claims in
any policy period, in the event that all such insurance coverage were exhausted
and damages were assessed against the Origination Trust, claims could be imposed
against the assets of the Origination Trust, including the Leased Vehicles. If
any such claims are imposed against any SUBI Assets or, in certain limited
circumstances, any Other SUBI Assets or UTI Assets, investors in the Class A
Certificates could incur a loss on their investment. For further information
regarding the potential for third-party claims against the Origination Trust
Assets, see "Risk Factors -- Structural Considerations -- Allocation of
Origination Trust Liabilities", "-- Third-Party Liens on SUBI Assets" and
"Certain Legal Aspects of the Contracts and the Leased Vehicles -- Vicarious
Tort Liability".
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INSOLVENCY OF WORLD OMNI; SUBSTANTIVE CONSOLIDATION WITH WORLD OMNI
The Seller has taken steps in structuring the transactions contemplated
hereby that are intended to ensure that the voluntary or involuntary application
for relief under the United States Bankruptcy Code or similar applicable state
laws ("Insolvency Laws") by World Omni will not result in the consolidation of
the assets and liabilities of ALFI, ALFI L.P., WOLSI, the Seller, the
Origination Trust or the Trust with those of World Omni. With respect to WOLSI
and ALFI, these steps include their creation as separate, special purpose
finance subsidiaries of World Omni pursuant to articles of incorporation
containing certain limitations (including the requirement that each must have at
all times at least two "independent directors" and restrictions on the nature of
their respective businesses and on their ability to commence a voluntary case or
proceeding under any Insolvency Law without the affirmative vote of a majority
of their respective directors, including each independent director). With
respect to the Seller and ALFI L.P., these steps include their creation as
separate, special purpose limited partnerships of which WOLSI and ALFI,
respectively, are the sole general partners, pursuant to limited partnership
agreements containing certain limitations (including restrictions on the nature
of their respective businesses and on their ability to commence a voluntary case
or proceeding under any Insolvency Law without the affirmative vote of all of
the directors of their respective general partners, including each independent
director).
Reallocation Payments made by World Omni in respect of certain Contracts as
to which an uncured breach of certain representations and warranties or certain
servicing covenants has occurred (and, if during the Amortization Period such
payment would cause the Seller Interest to be less than zero, payment of the
related Reallocation Deposit Amount), payments made by World Omni in respect of
certain insurance policies required to be obtained and maintained by lessees
pursuant to the Contracts and unreimbursed Advances made by World Omni, as
Servicer, pursuant to the Servicing Agreement, may be recoverable by World Omni
as debtor-in-possession or by a creditor or a trustee in bankruptcy of World
Omni as a preferential transfer from World Omni if such payments were made
within one year prior to the filing of a bankruptcy case in respect of World
Omni. In addition, the insolvency of World Omni could result in the replacement
of World Omni as Servicer, which could result in a temporary interruption of
payments on the Certificates and an Event of Servicing Termination under the
Servicing Agreement.
Additionally, if prior to the Amortization Date a conservator, receiver or
bankruptcy trustee were appointed by the Seller, or if certain other events
relating to the bankruptcy or insolvency of the Seller were to occur (each, an
"Insolvency Event"), the Amortization Period would commence and the Trustee may,
and upon receipt of written instructions from holders of Certificates evidencing
Voting Interests of not less than 51% of the Class A Certificates (voting
together as a single class) or 51% of the Class A Certificates and the Class B
Certificates (voting together as a single class) will, attempt to sell the SUBI
Interest, the SUBI Certificate and the other property of the Trust. The
consummation of such sale would result in an early termination of the Trust and
a pro rata loss to the Class A-1, Class A-2 and Class A-3 Certificateholders if
the Investor Percentage of the net proceeds of such sale were insufficient to
pay in full the Class A-1, Class A-2 and Class A-3 Certificate Balances,
together with any unreimbursed Class A-1, Class A-2 and Class A-3 Certificate
Principal Loss Amounts, with accrued and unpaid interest thereon at the Class
A-1, Class A-2 and Class A-3 Certificate Rates, respectively.
On the Closing Date, Williams & Connolly, counsel to ALFI, ALFI L.P., the
Seller, WOLSI and World Omni, will render an opinion based on a reasoned
analysis of analogous case law (although there is no precedent based on directly
similar facts) that, subject to certain facts, assumptions and qualifications
specified therein, under present reported decisional authority and statutes
applicable to federal bankruptcy cases, if World Omni were to become a debtor in
a case under the Bankruptcy Code, it would not be a proper exercise by a federal
bankruptcy court of its equitable discretion to disregard the independent forms
so as to substantively consolidate the assets and liabilities of ALFI, ALFI
L.P., the Seller, WOLSI, the Origination Trust or the Trust with those of World
Omni. In addition, on the Closing Date, counsel to the Seller will render an
opinion to the effect that (i) the transfer of the SUBI Certificate by the
Seller to the Trust constitutes a sale of the SUBI Certificate and the SUBI
Assets evidenced thereby, subject in each case to the rights of the Seller as
the holder of the Seller Interest and the Retained SUBI Interest, or (ii) if
such transfer does not constitute a sale, then the Agreement creates a valid
perfected security interest, for the benefit of
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Certificateholders, in the Seller's right, title and interest in the SUBI
Certificate. For further information regarding the risk of insolvency, see
"Certain Legal Aspects of the Origination Trust and the SUBI -- Insolvency
Related Matters".
The Origination Trust has been registered under the business trust
provisions of certain state laws, including those of Alabama and Florida. As
such, the Origination Trust may be subject to the Insolvency Laws, and claims
against the Origination Trust Assets could have priority over the beneficial
interest therein represented by the SUBI. In addition, claims of a third party
against the Origination Trust Assets, including the SUBI Assets, to the extent
such claims are not covered by insurance, would take priority over the holders
of beneficial interests in the Origination Trust, such as the Trustee, as more
fully described under "Security for the Certificates -- The Contingent and
Excess Liability Insurance Policies" and "Certain Legal Aspects of the Contracts
and Leased Vehicles -- Vicarious Tort Liability".
LEGAL PROCEEDINGS
None of ALFI, ALFI L.P., the Seller or WOLSI is a party to any legal
proceeding. World Omni is a party to, and is vigorously defending, numerous
legal proceedings, all of which (except as described below) it believes
constitute ordinary routine litigation incidental to the business and activities
conducted by World Omni. The Origination Trustee, on behalf of the Origination
Trust, has been named as a defendant in various cases which it believes
constitute ordinary routine litigation incidental to the business and activities
conducted by the Origination Trustee as an assignee of lease contracts and
leased vehicles. As of the date of this Prospectus, World Omni, SET, various
other JMFE-related entities and various officers and employees thereof also are
defendants in a lawsuit brought by former Dealers located in the Five State
Area. In a second such case, World Omni and its affiliated defendants obtained
summary judgment in their favor dismissing all of plaintiffs' claims and
awarding attorneys' fees to World Omni. Plaintiffs have appealed this summary
judgment. These cases focus generally on or arise from alleged vehicle
allocation, sales reporting, marketing and freight charge practices, principally
by SET. While there are uncertainties as to the final disposition of these
cases, management of World Omni believes that, although an adverse final
judgment in these cases could have a material adverse effect on its operations
and financial condition, such a result will not cause any material impairment of
the ability of World Omni to perform its obligations and its duties under the
Servicing Agreement. However, there can be no assurance of this result.
THE TRUST AND THE SUBI
GENERAL
The Trust and the Certificateholders will have no interest in the UTI, any
Other SUBI or any assets of the Origination Trust evidenced by the UTI or any
Other SUBI. Payments made on or in respect of the Origination Trust Assets not
represented by the SUBI will not be available to make payments on the
Certificates. For further information regarding the Origination Trust, see "The
Origination Trust".
THE TRUST
Pursuant to the Agreement, the Seller will establish the Trust by
transferring and assigning the SUBI Interest, represented by the SUBI
Certificate, to the Trustee in exchange for the Certificates and a certificate
evidencing the Seller Interest. (Agreement, Section 2.02). The property of the
Trust will primarily include (i) the SUBI Interest which evidences a beneficial
interest in certain specified Origination Trust Assets (i.e., the SUBI Assets),
(ii) such amounts as from time to time may be held in the Distribution Account
and the Reserve Fund, and investments of such amounts and (iii) the Trustee's
rights as a third-party beneficiary to the Servicing Agreement and the SUBI
Trust Agreement. The Trust also will have a beneficial interest in such amounts
as from time to time may be held in the SUBI Collection Account and the Residual
Value Surplus Account and investments of such amounts.
If the protection provided to the Class A Certificateholders by (i) the
Investor Percentage of certain excess Interest Collections; (ii) available
monies on deposit in the Reserve Fund and the Residual Value
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Surplus Account; (iii) amounts otherwise payable to the Seller in respect of the
Seller Interest; (iv) so long as World Omni is the Servicer, amounts otherwise
payable in respect of the Servicing Fee; (v) the subordination of interest
payments otherwise payable to the Class B Certificateholders; and (vi) in the
case of the Class A-3 Certificates, the subordination of principal payments
otherwise payable to the Class B Certificateholders is insufficient, the Class A
Certificateholders ultimately will have to look to (a) payments made on or in
respect of the Contracts and the Leased Vehicles (including under certain
related insurance policies) and (b) the proceeds of Dealer repurchase
obligations, if any, to make distributions on or in respect of the SUBI Assets
allocable to the SUBI Interest to the Trustee which in turn will be distributed
to the Certificateholders. In such event, certain factors, such as the fact that
the Trust will not have a direct ownership interest in the Contracts or the
Leased Vehicles or a perfected security interest in the Leased Vehicles (which
will be titled in the name of the Origination Trustee, in its capacity as
trustee of the Origination Trust) may limit the amount realized to less than the
amount due from the related lessees. Investors in the Class A Certificates may
thus be subject to delays in payment and may incur losses on their investment in
the Class A Certificates as a result of defaults or delinquencies by lessees and
because of depreciation in the value of the related Leased Vehicles. See "Risk
Factors -- Structural Considerations", "Security for the Certificates -- The
Accounts -- The Reserve Fund", "Additional Document Provisions -- The Servicing
Agreement -- Insurance on Leased Vehicles" and "Certain Legal Aspects of the
Contracts and the Leased Vehicles" for a discussion of these matters.
THE SUBI
The SUBI will be issued pursuant to the SUBI Trust Agreement and will
evidence a beneficial interest in certain specified Origination Trust Assets
consisting of (i) the Contracts, the Leased Vehicles and all proceeds or
payments received or due on or after the related Cutoff Date; and (ii) all other
related Origination Trust Assets, including (A) the SUBI Collection Account and
Residual Value Surplus Account, (B) the right to receive payments made to World
Omni, the Origination Trust or the Origination Trustee under any insurance
policy relating to the Contracts, the related lessees or the Leased Vehicles,
(C) the right to receive the proceeds of any Dealer repurchase obligations in
respect of the Contracts or Leased Vehicles, and (D) all proceeds of the
foregoing (collectively, the "SUBI Assets"). (SUBI Trust Agreement, Sections
4.02, 11.01 and 11.02).
As described under "Summary -- The Revolving Period; Subsequent Contracts
and Subsequent Leased Vehicles" and "Description of the
Certificates -- Distributions on the Certificates -- Application and
Distributions of Principal", during the Revolving Period, Principal Collections
and reimbursement of Loss Amounts will be reinvested in Subsequent Contracts and
Subsequent Leased Vehicles which will become SUBI Assets at the time of such
reinvestment. The SUBI will not represent a direct interest in the SUBI Assets,
nor will it represent an interest in any Origination Trust Assets other than the
SUBI Assets. Payments made on or in respect of such other Origination Trust
Assets will not be available to make payments on the Certificates or to cover
expenses of the Origination Trust allocable to the SUBI Assets.
Pursuant to the SUBI Trust Agreement, on the Closing Date the Origination
Trustee will issue the SUBI Certificate, which will evidence the SUBI Interest,
to the Seller. Simultaneously therewith, the Origination Trustee will issue to
the Seller a certificate evidencing the Retained SUBI Interest, which will
represent the 0.2% interest in the SUBI not evidenced by the SUBI Certificate,
and the Seller will transfer and assign the SUBI Certificate to the Trustee
pursuant to the Agreement. The certificate evidencing the Retained SUBI Interest
will be permanently retained by the Seller and payments made in respect thereof
will not be available to make payments on the Certificates.
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THE ORIGINATION TRUST
GENERAL
The Origination Trust is an Alabama trust formed pursuant to the
Origination Trust Agreement. The primary business purpose of the Origination
Trust is to take assignments of, and serve as record holder of title to,
substantially all of the fixed rate retail closed-end lease contracts and the
related leased vehicles originated through Dealers in the World Omni network of
dealers since November 1993. Pursuant to the Servicing Agreement, World Omni
will service the lease contracts included in the Origination Trust Assets,
including the Contracts. For further information regarding the Origination Trust
and the servicing of the Origination Trust Assets, see "Additional Document
Provisions -- The SUBI Trust Agreement" and "-- The Servicing Agreement" and
"Certain Legal Aspects of the Origination Trust and the SUBI -- The Origination
Trust".
Except as otherwise described under "Additional Document Provisions -- The
SUBI Trust Agreement", pursuant to the Origination Trust Agreement the
Origination Trust has not and will not (i) issue interests therein or securities
thereof other than the SUBI Interest, the Retained SUBI Interest, the SUBI
Certificate, the certificate representing the Retained SUBI Interest, Other
SUBIs representing divided interests in Other SUBI Assets and certificates (the
"Other SUBI Certificates") representing Other SUBIs or portions thereof, and one
or more certificates (the "UTI Certificates") representing the UTI or portions
thereof; (ii) borrow money (except from World Omni) in connection with funds
used to acquire lease contracts and the related leased vehicles; (iii) make
loans; (iv) invest in or underwrite securities, other than Permitted Investments
or as otherwise permitted by the Origination Trust Agreement or the SUBI Trust
Agreement; (v) offer securities in exchange for property (other than the SUBI
Certificate, the Other SUBI Certificates and the UTI Certificates); or (vi)
repurchase or otherwise reacquire its securities except in connection with
financing or refinancing the acquisition of lease contracts and the related
leased vehicles or as otherwise permitted by each such financing or refinancing.
(SUBI Trust Agreement, Section 5.01). The Origination Trust will not be
permitted to acquire lease contracts otherwise than through dealers in the World
Omni network of Dealers, unless such lease contracts are (in World Omni's
reasonable judgment) originated generally in accordance with World Omni's
then-current lease contract underwriting standards. (SUBI Trust Agreement,
Section 2.01). The Origination Trust Agreement will permit the Origination
Trust, in the course of its activities, to incur certain liabilities relating to
its assets other than the SUBI Assets, or relating to its assets generally, and
to which, in certain circumstances, the SUBI Assets may be subject, as more
fully described under "Risk Factors -- Structural Considerations -- Allocation
of Origination Trust Liabilities" and "-- Third-Party Liens on SUBI Assets".
However, the Origination Trust Agreement will require the holders from time to
time of Other SUBI Certificates and any UTI Certificates to waive any claim that
they might otherwise have with respect to the SUBI Assets and to fully
subordinate any claims to the SUBI Assets in the event that this waiver is not
given effect. Similarly, by virtue of holding Certificates or a beneficial
interest in the Certificates, Certificateholders and Certificate Owners will be
deemed to have waived any claim that they might otherwise have with respect to
Other SUBI Assets and the UTI Assets.
ALFI AND ALFI L.P.
ALFI is a wholly owned, special purpose finance subsidiary of World Omni
and was organized solely for the purpose of acting as general partner of ALFI
L.P. ALFI L.P. was organized solely for the purpose of being grantor and initial
beneficiary of the Origination Trust, holding the UTI and the UTI Certificate,
acquiring interests in the SUBI and the Other SUBIs and engaging in related
transactions. ALFI's articles of incorporation and ALFI L.P.'s limited
partnership agreement limit their respective activities to the foregoing
purposes and to any activities incidental to and necessary for such purposes.
ALFI may not transfer its general partnership interest in ALFI L.P. so long as
any financings involving interests in the Origination Trust (including the
transaction described herein) are outstanding.
THE ORIGINATION TRUSTEE
The Origination Trustee is a wholly owned, special purpose subsidiary of
First Bank that was organized in 1993 solely for the purpose of acting as
Origination Trustee. First Bank, as Trust Agent, serves as agent for the
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Origination Trustee to perform certain functions of the Origination Trustee
pursuant to the Origination Trust Agreement. (Origination Trust Agreement,
Section 5.03). The Origination Trust Agreement provides that in the event that
First Bank no longer can be the Trust Agent, the designee of ALFI L.P. (who may
not be ALFI L.P. or any affiliate thereof) will have the option to purchase the
stock of the Origination Trustee for a nominal amount. If ALFI L.P.'s designee
does not timely exercise this option, then the Origination Trustee will appoint
a new trust agent, and that new trust agent (or its designee) will next have the
option to purchase the stock of the Origination Trustee. If none of these
options is timely exercised, First Bank may sell the stock of the Origination
Trustee to another party. (Origination Trust Agreement, Section 6.10).
PROPERTY OF THE ORIGINATION TRUST
The property of the Origination Trust consists of (i) fixed rate retail
closed-end lease contracts originated primarily in the Five State Area and
assigned to the Origination Trust by World Omni or Dealers since November 1993
and all monies due from lessees thereunder; (ii) the automobiles and light duty
trucks leased pursuant thereto and all proceeds thereof; (iii) all of World
Omni's rights (but not its obligations) with respect to such lease contracts and
leased vehicles, including the right to receive proceeds of Dealer repurchase
obligations, if any; (iv) the rights to proceeds from residual value, physical
damage, credit life, disability and all other insurance policies, if any,
covering the lease contracts, the related lessees or the leased vehicles,
including, but not limited to, the Contingent and Excess Liability Insurance
Policies; (v) all security deposits with respect to such lease contracts to the
extent due to the lessor thereunder; and (vi) all proceeds of the foregoing
(collectively, the "Origination Trust Assets"). From time to time after the date
of this Prospectus, World Omni will cause Dealers to originate additional retail
closed-end lease contracts and to assign such lease contracts to the Origination
Trustee on behalf of the Origination Trust and, as described below, title the
related leased vehicles in the name of the Origination Trustee on behalf of the
Origination Trust. (Origination Trust Agreement, Section 2.01).
CONTRACT ORIGINATION; TITLING OF LEASED VEHICLES
All lease contracts originated by the Origination Trust have been, or will
be, underwritten using the underwriting criteria described under "World
Omni -- Lease Contract Underwriting Procedures". In connection with the
origination of each lease contract, the Origination Trustee, on behalf of the
Origination Trust, will be listed as the owner of the related leased vehicle on
the related certificate of title. Liens will not be placed on such certificates
of title, and new certificates of title will not be issued, to reflect the
interest of the Trustee, as holder of the SUBI Certificate, in the Leased
Vehicles. The certificates of title to the Leased Vehicles will, however,
reflect a first lien recorded in favor of Bank of America Trust Company of
Florida, N.A. or AL Holding Corp. (collectively, the "Administrative
Lienholders"). Such lien (the "Administrative Lien") will exist solely to assure
delivery of the certificates of title to the Leased Vehicles to the Servicer.
Neither of the Administrative Lienholders will have any interest in any of the
Leased Vehicles.
Pursuant to agreements between World Omni and the Dealers, each Dealer is
obligated, after origination of lease contracts and assignment thereof to the
Origination Trustee on behalf of the Origination Trust, to repurchase such lease
contracts which do not meet certain representations and warranties made by such
Dealer. These representations and warranties relate primarily to the origination
of the lease contracts and the titling of the related leased vehicles, and do
not typically relate to the creditworthiness of the related lessees or the
collectibility of such lease contracts. The Dealer agreements do not generally
provide for recourse to the Dealer for unpaid amounts in respect of a defaulted
lease contract, other than in connection with the breach of the foregoing
representations and warranties. The rights of World Omni to receive proceeds of
such Dealer repurchase obligations will constitute Origination Trust Assets (and
accordingly will constitute SUBI Assets to the extent they relate to the
Contracts and Leased Vehicles), although the related Dealer agreements will not
constitute Origination Trust Assets.
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<PAGE> 35
USE OF PROCEEDS
The net proceeds from the sale of the Class A Certificates (i.e., the
proceeds of the public offering of the Class A Certificates minus expenses
relating thereto) will be applied by the Seller to purchase the SUBI Certificate
from ALFI L.P.
THE SELLER
The Seller is a limited partnership formed under the laws of Delaware in
June 1994. The sole general partner of the Seller, WOLSI, is a wholly owned,
special purpose finance subsidiary of World Omni and was incorporated under the
laws of Delaware in March 1994. WOLSI may not transfer its general partnership
interest in the Seller so long as any financings involving interests formerly or
partially held by it in the Origination Trust (including the transaction
described herein) are outstanding. World Omni is the sole limited partner of the
Seller. The principal office of the Seller is located at 6150 Omni Park, Mobile,
Alabama 36609 and its telephone number is (334) 639-7500.
The Seller and WOLSI were organized solely for the purpose of acquiring
interests in the SUBI and the Other SUBIs, issuing certificates similar to the
Certificates and engaging in related transactions. The limited partnership
agreement of the Seller and the certificate of incorporation of WOLSI limit
their respective activities to the foregoing purposes and to any activities
incidental to and necessary for such purposes.
A support agreement dated as of October 1, 1995, as amended (the "Support
Agreement"), between the Seller and World Omni provides that World Omni will
retain 100% ownership of the Seller and that under certain circumstances World
Omni will make contributions or loans or provide or arrange for financial
assistance to the Seller in order to ensure that the Seller maintains positive
partners' capital. The Support Agreement currently provides that World Omni's
total obligations thereunder will not exceed $30 million. The Support Agreement
does not constitute a guarantee by World Omni of the Certificates or any other
obligations of the Seller. The Support Agreement provides that no person other
than the Seller and WOLSI may take any action to enforce the Support Agreement.
Although World Omni intends to comply with all of its obligations under the
Support Agreement, because (as described above) it can only be enforced by the
Seller and WOLSI, there can be no assurance that the Trustee or the
Certificateholders would be able to enforce the Support Agreement directly
against World Omni.
WORLD OMNI
GENERAL
The Initial Contracts were, and the Subsequent Contracts will be, assigned
to the Origination Trust by Dealers. World Omni is a Florida corporation and a
wholly owned subsidiary of JM Family Enterprises, Inc. ("JMFE"), a Delaware
corporation. JMFE is primarily engaged, through its subsidiaries, in providing
Toyota dealerships in the Five State Area, as well as other automotive
dealerships within and outside the Five State Area, with a full range of
distribution and financial services. In January 1993, a predecessor corporation
to World Omni merged with its sister automobile leasing company, World Omni
Leasing, Inc., in connection with which the name World Omni Financial Corp. was
retained. WOLSI and ALFI are wholly owned, special purpose finance subsidiaries
of World Omni.
In addition to the lease contract financing described below, World Omni
provides retail installment contract financing to retail customers of certain
automotive dealers and wholesale floorplan financing and capital and mortgage
loans to dealers and customers of Southeast Toyota Distributors, Inc. ("SET"),
World Omni's sister corporation, as well as to other automotive dealers within
and outside the Five State Area.
SET is the exclusive distributor of Toyota cars and light duty trucks,
parts and accessories in the Five State Area. As such, SET is the sole provider
of Toyotas to Dealers in the Five State Area. SET distributes Toyota vehicles
pursuant to a Distributor Agreement, which first was entered into in 1968 and
has been renewed through October 1999, with Toyota Motor Sales, USA, Inc.
("TMS"), a California corporation that
33
<PAGE> 36
is wholly owned by Toyota Motor Corporation, the largest automotive company in
Japan. Lexus cars, parts and accessories are distributed in the Five State Area
directly by TMS and not by SET. SET's consolidated revenues for the years ended
December 31, 1995, December 31, 1994 and December 31, 1993 were approximately
$3.8 billion, approximately $3.5 billion and approximately $3.0 billion,
respectively. Since March 1996, substantially all financial services provided by
World Omni to, by and through SET's Toyota Dealers in the Five State Area have
been provided under the name "Southeast Toyota Finance".
World Omni (either directly or through the Origination Trust and certain
special purpose finance subsidiaries of World Omni) owns and leases vehicles
primarily through more than 1000 Dealers located throughout the United States.
The Dealers that are the sources for the Contracts and the Leased Vehicles are
predominantly Toyota dealerships. Pursuant to written agreements with World
Omni, each Dealer offers automobiles and light duty trucks for set lease periods
pursuant to World Omni-approved terms and a World Omni-supplied form of
closed-end retail motor vehicle lease and disclosure statement. Each Dealer is
responsible for obtaining certain credit-related information about a prospective
lessee and for forwarding such information to World Omni's central operations
center in Mobile, Alabama (the "Mobile Center") or to Southeast Toyota Finance's
offices in Deerfield Beach, Florida, (the "Deerfield Office"), as applicable. At
the Mobile Center or the Deerfield Office, each application is reviewed,
evaluated and "scored" as described under "World Omni -- Lease Contract
Underwriting Procedures". The results of this computer-based evaluation are then
sent to one of World Omni's purchase offices for final review and credit
evaluation. The related purchase office then advises the Dealer if such
applicant is acceptable to World Omni. If a prospective lessee is accepted, the
Dealer will prepare all necessary paperwork to sell the vehicle from its
inventory to World Omni or its designee, and to enter into a lease contract with
its customer and assign the lease contract to World Omni or, at World Omni's
direction, a different assignee. Substantially all retail lease contracts
originated by World Omni Dealers are assigned to, and the related leased
vehicles are titled in the name of, the Origination Trustee on behalf of the
Origination Trust. For further information regarding the underwriting of lease
contracts, see "World Omni -- Lease Contract Underwriting Procedures".
World Omni's lease contracts are serviced primarily through the Mobile
Center, which handles collection activities, operational accounting, insurance
verification and dealer and customer inquiries for World Omni. In addition, the
Mobile Center and the Deerfield Office verify that all documents supplied by a
Dealer with respect to a lease contract conform with World Omni's requirements.
World Omni initiated operations in 1982, and as of December 31, 1995,
December 31, 1994 and December 31, 1993, World Omni and its affiliates had
approximately 156,900, 115,900 and 75,200 retail lease contracts outstanding,
respectively. Aggregate net outstanding principal balances of retail lease
contracts at such dates (including retail lease contracts that were sold but are
still being serviced by World Omni), were $2.8 billion, $1.8 billion and $1.1
billion, respectively. Of these amounts, the related leased vehicles had an
estimated aggregate residual value as of the end of their lease terms of
approximately $2.0 billion, $1.2 billion and $605 million, respectively. For the
years ended December 31, 1995, December 31, 1994 and December 31, 1993, World
Omni's consolidated gross revenues were approximately $228 million,
approximately $199 million and approximately $171 million, respectively.
The principal executive offices of World Omni are located at 120 Northwest
12th Avenue, Deerfield Beach, Florida 33442 and its telephone number is (954)
429-2200.
LEASE CONTRACT UNDERWRITING PROCEDURES
World Omni has underwritten retail motor vehicle lease contracts since
February 1983. The Initial Contracts were, and the Subsequent Contracts will be,
underwritten by the Origination Trust, in each case through World Omni's
purchase offices.
The World Omni underwriting standards are intended to evaluate a
prospective lessee's credit standing and repayment ability. Generally, a
prospective lessee is required by the Dealer to complete a credit application on
a form prepared or approved by World Omni. As part of the description of the
applicant's financial condition, the applicant is required to provide current
information enumerating, among other things, employment history, residential
status, bank account information, annual income and credit references. The
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<PAGE> 37
Dealer then transmits the completed application to the Mobile Center or the
Deerfield Office, as applicable. Upon receipt, all application data is entered
into a centralized computer network (owned and maintained by a division of JMFE)
that automatically obtains an independent credit bureau report and then "scores"
the application with the use of a scorecard. The scorecard enables World Omni to
review an application and establish the probability that the proposed lease
contract will be paid in accordance with its terms. The credit scores rank-order
applications according to credit risk, which is the likelihood that the account
will be delinquent or repossessed. The application also is evaluated against a
"cutoff score" established by World Omni as the minimum acceptable score to
purchase a lease contract, which is revised from time to time as changes occur
in economic conditions and World Omni's lease contract portfolio.
This numerical credit scoring system was developed by Fair, Isaac & Company
("Fair, Isaac"), a lending and leasing consulting firm, specifically for World
Omni based upon an analysis of the historical performance of the retail
automobile and light duty truck lease and installment sale contract portfolios
of World Omni. To determine the appropriate characteristics for credit scoring,
Fair, Isaac reviewed a random sample of 10,000 retail lease contracts and 10,000
retail installment sale contracts from World Omni's portfolio. Fair, Isaac then
compiled a list of ten to twelve characteristics that cumulatively carried the
most weight in predicting historical performance and assigned point values and
weighting to each of these characteristics. The weighting system is particularly
significant because the weightings are beyond the control of a dealer and cannot
be manipulated. Fair, Isaac determined that the most accurate determinative of
the performance of a lease or installment sale contract was the credit bureau
report. Based on such historical performance, Fair, Isaac prepared two retail
credit and two lease scorecards (which differ according to the geographical
location of the dealer). Each scorecard assigns at least a 50% weighting to the
credit bureau report.
The Fair, Isaac scorecard system was implemented in the fourth quarter of
1990 and has been used for substantially all lease contracts originated
subsequent thereto. Prior to that time, World Omni used a scoring model which,
while not developed specifically for it, was used in the automobile lending
industry. The numerical scoring model is intended to provide a means of analysis
to assist in decision making, but the final decision rests with World Omni's
credit specialists. In general, however, a credit specialist currently may not
override the scorecard analysis by more than 10% of all applications above the
cutoff score and 15% of applications below the cutoff score. Both the number of
overrides granted by each credit specialist and the aggregate number of
overrides granted by all credit specialists are tracked by World Omni daily in
order to insure the statistical validity of the scoring models. Detailed
reporting on all aspects of the numerical scoring model is utilized to track
performance of World Omni's retail automobile and light duty truck lease
contract portfolio and to enable World Omni, with the assistance of Fair, Isaac,
to fine tune the scoring model according to statistical indications in order to
continually assure the statistical validity of the scoring models.
For the years ended December 31, 1995, December 31, 1994 and December 31,
1993, World Omni, either directly or through the Origination Trust and certain
special purpose finance subsidiaries of World Omni, on average, booked
approximately 71%, approximately 75% and approximately 68%, respectively, of all
credit applications relating to leased vehicles. These averages generally
reflect adjustments in underwriting criteria in connection with the use of the
Fair, Isaac scorecard system. Substantially all of the Initial Contracts were,
and substantially all Subsequent Contracts will be, underwritten using the Fair,
Isaac numerical scorecard. See "The Contracts -- Characteristics of the
Contracts" for further information on the identity and characteristics of the
Contracts.
After an application has been approved by a World Omni purchase office and
the prospective lessee has agreed to the terms of the related lease contract,
including an assignment of the lease contract from the Dealer to World Omni (or,
at the direction of World Omni, an assignee thereof), the Mobile Center or the
Deerfield Office, as applicable, receives from the Dealer a lease contract
package containing, among other things, the standard form lease contract between
the Dealer and the lessee, the customer's application, applicable insurance
information (company, agent and additional insured(s), with the lessor named as
loss payee) and
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<PAGE> 38
the customer's first payment and security deposit. The Mobile Center or the
Deerfield Office, as applicable, determines whether such package complies with
its requirements. The specifics of the lease contract are compared to the
application approved by the purchasing department, and the rate,
truth-in-leasing disclosures and purchase price from the Dealer are verified.
INSURANCE
Each lease contract requires the lessee to maintain automobile bodily
injury and property damage liability insurance which must name the dealer's
assignee (with respect to the Contracts, the Origination Trustee on behalf of
the Origination Trust) as additional insured. Each lease contract further
requires the lessee to maintain (all risks) comprehensive and collision
insurance covering damage to the leased vehicle and naming the dealer's assignee
(with respect to the Contracts, the Origination Trustee on behalf of the
Origination Trust) as loss payee. The insurance coverage is verified
independently and tracked by World Omni throughout the term of the lease
contract. If at any point during the term of the lease contract World Omni
cannot verify within 60 days that the required insurance is in place, such lease
contract would, by its terms, be in default and World Omni generally would
repossess the related leased vehicle.
COLLECTION, REPOSSESSION AND DISPOSITION PROCEDURES
Collection efforts are primarily performed through the Mobile Center. These
efforts are enhanced by the use of an automated dialing system. Notwithstanding
the centralization of collection efforts, repossessions continue to be handled
locally, as independent contractors are employed in connection with
repossessions. General guidelines for collection of lease contracts and
repossession of leased vehicles include the following:
<TABLE>
<CAPTION>
NUMBER OF
DAYS DELINQUENT ACTION
- --------------- -----------------------------------------------
<S> <C> <C>
22-45............................... Telephone contact with the lessee is initiated
46-89............................... Telephone and/or field collections continue
60-90............................... The leased vehicle is normally repossessed
</TABLE>
Occasionally, situations occur in the collection process when a lessee has
become delinquent and is willing but unable to bring the related account current
(i.e., a skipped payment). In this situation, at the discretion of collection
department management, but subject to extensive guidelines, the lease contract
may be extended, provided that the lessee pays an extension fee (each, an
"Extension Fee") equal to the lesser of (i) the product of 1.15% multiplied by
the outstanding principal balance of such lease contract, and (ii) one-half of
the related monthly contract payment. In circumstances deemed appropriate by
collection department management, World Omni may reduce or waive the payment by
the lessee of an Extension Fee. However, the Servicing Agreement will require
that all Extension Fees relating to the Contracts be deposited into the SUBI
Collection Account and that a Contract may not be extended more than five times.
Moreover, no extensions of a Contract may be made for more than five months in
the aggregate or to a date later than the last day of the month immediately
preceding the month in which the Final Scheduled Distribution Date occurs, as
described under "Additional Document Provisions -- The Servicing
Agreement -- Collections".
World Omni disposes of off-lease vehicles through several outlets,
including a Toyota "certified" program, in which vehicles are inspected and
given body work, repairs and maintenance as needed, certified as meeting the
program standards, and then sold to automobile dealers primarily in World Omni's
dealer network for retail sale; large regional automobile auctions which are
utilized for off-lease vehicle sales in addition to liquidation of repossessed
vehicles; and negotiated sales of groups of vehicles to rental companies and
fleet lessors.
DELINQUENCY, REPOSSESSION AND LOSS DATA
The following tables set forth certain delinquency, repossession and loss
data with respect to World Omni's retail automobile and light duty truck lease
contract portfolio similar to the Contracts and originated by Dealers located
throughout the United States, including (unless otherwise indicated in such
table) lease contracts assigned to the Origination Trust and lease contracts
owned by World Omni and special purpose
36
<PAGE> 39
finance subsidiaries of World Omni, as of and for the years ended December 31,
1991 through December 31, 1995 and as of and for the six months ended June 30,
1996.
As shown on these tables, World Omni's delinquency rates during 1993 and
1994 were generally consistent, decreasing from 1991 and 1992 largely due to
improved credit quality resulting from stricter underwriting standards
(including the implementation of a new computerized credit evaluation system and
the effects of the implementation of the Fair, Issac credit scoring system in
the fourth quarter of 1990), an improved collection system and the
implementation of centralized collection efforts through the Mobile Center.
Delinquency rates increased in 1995 as compared with 1994 due primarily to
somewhat weaker economic conditions. Delinquencies continued to trend up in
1996, consistent with recent trends in overall consumer credit and, to a lesser
extent, due to some disruption in collection activity caused by the
implementation of a new collection system at the Mobile Center in 1996.
Average Net Repossession Losses per Liquidated Lease Contract were high in
1991 mainly due to a weakened used car market, which increased loss severity.
The lower total Net Repossession Loss figures from that time through 1994 were
attributed to both lower frequency (fewer repossessions as a result of improved
credit quality and a stronger economy) and decreased severity (as the used car
market improved during this period).
Total Net Repossession Losses increased in 1995 and through June 1996 (on
an annualized basis) compared to 1994 primarily as a result of the increasing
number of lease contracts outstanding and the higher Average Net Repossession
Loss per Liquidated Lease Contract. The higher Average Net Repossession Loss per
Liquidated Lease Contract in 1995 and through June 1996 is generally due to
higher average amounts being financed, generally higher residual values and a
shortening of lease terms. In general, as lease terms shorten, the average time
until repossession declines and a higher loss per repossession generally occurs.
World Omni's total losses and average loss per vehicle realized on the
disposition of vehicles in connection with leases that reached scheduled
termination substantially decreased from 1991 to 1994. Management attributes
this decrease primarily to an improved used car market during the same period
and World Omni's pro-active lease termination programs implemented in 1990.
During the year ended December 31, 1995, the ratio of leased vehicles
"returned to and sold" by World Omni to leased vehicles "scheduled to terminate"
(the "Full Termination Ratio" in the table below), as well as total losses on
vehicles that reached scheduled termination and were sold (and related average
losses per vehicle sold), increased primarily as a result of special 18-month
lease programs introduced in the summer of 1993 on certain Toyota light-duty
trucks and vehicles. Vehicles leased under these special programs had higher
than normal returns at lease expiration due to a number of factors relating
particularly to these special programs. This, in turn, increased losses with
respect to these special programs for the year ending December 31, 1995.
Excluding these special programs, for the year ended December 31, 1995, World
Omni would have experienced a Full Termination Ratio of approximately 7%. World
Omni does not believe that any prior period included in the tables below was
materially affected by any similar nonrecurring event.
There are no special 18 month program leases included in the Initial
Contracts, nor will any be included among the Subsequent Contracts. Therefore,
losses in respect of the 18 month special program vehicles have not, and any
additional losses will not, adversely affect Class A Certificateholders.
During the first six months of 1996, World Omni experienced higher returns
and losses on a greater portion of two year leases than in previous years. In
general, management believes that these higher returns and losses on two year
leases resulted from higher residual values that were established with respect
to the vehicles returned. Additionally, the 18 month special program discussed
above had a continued impact on losses through June 1996. These two factors were
the primary reasons for the higher Full Termination Ratio for the first six
months of 1996.
In the spring of 1996, World Omni changed certain characteristics of its
two year lease programs such that the volume of two year leases thereafter was
significantly curtailed. There are no two year lease contracts in the Initial
Contracts, and the amount of two year leases in the Subsequent Contracts, if
any, is expected to be immaterial and not to adversely affect the Class A
Certificateholders. However, World Omni management
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<PAGE> 40
expects that vehicles leased under two year leases will continue to experience
returns and losses for the foreseeable future at rates higher than the total
World Omni lease portfolio.
The new and used car market has experienced growth over the last five
years, showing some weakness towards the end of 1995. This overall growth in the
new and used car market may not continue, which could negatively affect World
Omni's returns and losses in the future. As a result, losses on returned and
sold vehicles may increase and the Full Termination Ratio may increase. Based
upon prior experience however, World Omni does not believe that the effect of
these recent negative trends will materially adversely affect Class A
Certificateholders or World Omni's business. However, no assurances can be given
in this regard.
The data presented in the following tables are for illustrative purposes
only. Delinquency, repossession and loss experience may be influenced by a
variety of economic, social, geographic and other factors. There is no assurance
that World Omni's delinquency, repossession and loss experience with respect to
its retail automobile and light duty truck lease contracts and the related
leased vehicles in the future, or the experience with respect to the Contracts
and the Leased Vehicles, will be similar to that set forth below.
RETAIL VEHICLE LEASE CONTRACT DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, --------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
-------------- -------------- -------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dollar Amount of Lease
Contracts(1).......... $3,697,003 $2,798,830 $1,823,823 $1,039,888 $624,017 $510,518
Ending Number of Lease
Contracts............. 193,600 156,471 114,298 71,198 48,646 45,202
Number and Percentage of
Lease Contracts
Delinquent (2)(3)(4)
31-60 Days............ 2,548 1.32% 1,745 1.12% 1,114 0.97% 625 0.88% 756 1.55% 1,104 2.44%
61-90 Days............ 138 0.07 118 0.08 38 0.03 27 0.04 16 0.03 92 0.20
91 Days or More....... 23 0.01 18 0.01 7 0.01 3 0.00 2 0.00 11 0.02
------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Total........... 2,709 1.40% 1,881 1.21% 1,159 1.01% 655 0.92% 774 1.58% 1,207 2.66%
</TABLE>
- ---------------
(1) Based on the sum of all principal amounts outstanding under lease contracts
originated by World Omni in the United States (inclusive of the residual
values of the related leased vehicles).
(2) Excludes lease contracts the related lessees of which are bankrupt or have
commenced bankruptcy proceedings. As of June 30, 1996, approximately 83
lease contracts involving bankrupt lessees were delinquent for at least 61
days.
(3) The period of delinquency is based on the number of days payments are
contractually past due.
(4) As a percentage of the total number of lease contracts at period end.
38
<PAGE> 41
RETAIL VEHICLE LEASE CONTRACT REPOSSESSION AND LOSS EXPERIENCE
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, ----------------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Dollar Amount of Lease Contracts(1)............ $3,697,003 $2,798,830 $1,823,823 $1,039,888 $624,017 $510,518
Ending Number of Lease Contracts............... 193,600 156,471 114,298 71,198 48,646 45,202
Average Lease Contracts Outstanding............ 176,307 133,069 93,023 58,605 46,013 46,571
Repossessions:
Number of Repossessions...................... 1,741 2,519 1,776 1,287 1,916 2,205
Number of Repossessions as a
Percentage of:
Lease Contracts Outstanding.................. 1.80%(4) 1.61% 1.55% 1.81% 3.94% 4.88%
Average Lease Contracts Outstanding.......... 1.97%(4) 1.89% 1.91% 2.20% 4.16% 4.73%
Losses:
Average Net Receivables
Outstanding................................ $3,278,227 $2,243,790 $1,426,382 $ 817,452 $548,852 $526,197
Net Repossession Losses(2)................... $ 9,247 $ 11,347 $ 6,283 $ 3,811 $ 5,759 $ 10,878
Average Net Repossession Loss per Liquidated
Lease Contract(1)(3)....................... $ 5,311 $ 4,505 $ 3,538 $ 2,961 $ 3,006 $ 4,933
Net Repossession Losses as a Percentage of
Average Net Receivables.................... 0.56%(4) 0.51% 0.44% 0.47% 1.05% 2.07%
</TABLE>
- ---------------
(1) Based on the sum of all principal amounts outstanding under lease contracts
originated by World Omni in the United States (inclusive of the residual
values of the related leased vehicles).
(2) Includes losses on charged-off accounts, but does not include expenses
incurred to dispose of vehicles.
(3) Dollars not in thousands.
(4) Annualized.
RESIDUAL VALUE LOSS EXPERIENCE(1)
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
JUNE 30, -------------------------------------------------
1996 1995 1994 1993 1992 1991
-------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total Number of Leased Vehicles Scheduled to Terminate....... 13,714 25,677 14,775 17,218 15,155 13,541
Number of Leased Vehicles Returned to and Sold by World
Omni....................................................... 2,282 4,611 779 2,050 2,142 2,031
Full Termination Ratio(2).................................... 16.6 % 18.0%(5) 5.3% 11.9% 14.1% 15.0%
Total Losses/(Gains) on Vehicles that Reached Scheduled
Term(3).................................................... $ 1,063 $ 1,893 $ (168) $ 503 $ 894 $ 2,389
Average Loss/(Gain)(4)....................................... $ 466 $ 411 $ (216) $ 245 $ 417 $ 1,176
</TABLE>
- ---------------
(1) Because the terms of the retail closed-end lease contracts originated by
World Omni have gradually shifted from five years to three years since 1991,
the residual value loss experience for the periods in the table may not be
fully comparable.
(2) The ratio of line 2 over line 1 expressed as a percentage.
(3) Includes expenses incurred in disposal of vehicles returned to World Omni in
1991. Due to system changes, figures for periods after 1991 do not include
expenses as such information was not readily available.
(4) Dollars not in thousands.
(5) The ratio for the year ended December 31, 1995 includes special program
vehicles referenced under "Delinquency, Repossession and Loss Data" above.
Excluding those vehicles, the ratio would have been 7.1%.
THE CONTRACTS
GENERAL
The Initial Contracts will consist of a pool of 35,016 closed-end retail
lease contracts, having an aggregate Outstanding Principal Balance as of the
Initial Cutoff Date of $831,416,020, selected from the Origination Trust's
portfolio of retail closed-end automobile and light duty truck lease contracts
that are not evidenced by or reserved for allocation to an Other SUBI. During
the Revolving Period, Principal Collections (and reimbursement of Loss Amounts)
will be reinvested in Subsequent Contracts and Subsequent Leased Vehicles, which
at the time of such reinvestment will become SUBI Assets. See "Description of
the Certificates -- Distributions on the Certificates -- Application and
Distributions of Principal -- Revolving Period". The Initial Contracts were
originated by Dealers located throughout the United States and assigned to the
Origination Trust, and the Subsequent Contracts will be originated by Dealers
located in the United
39
<PAGE> 42
States and assigned to the Origination Trust, in accordance with the
underwriting procedures described under "World Omni -- Lease Contract
Underwriting Procedures". The Initial Contracts have been selected based upon
the criteria specified in the SUBI Trust Agreement and described under "The
Contracts -- Characteristics of the Contracts -- General" and
"-- Representations, Warranties and Covenants". The Subsequent Contracts will be
selected from the other lease contracts of the Origination Trust that were
originated after the Initial Cutoff Date that also meet the foregoing criteria.
Principal Collections (and reimbursements of Loss Amounts) will first be
reinvested in the eligible lease contract with the earliest origination date,
then with the eligible lease contract with the next earliest origination date
and so forth, except that (i) leases booked from September 1, 1996 through
September 27, 1996 have been reserved for allocation to the SUBI, so that
reinvestment of Principal Collections and reimbursement of Loss Amounts will
first be made in such leases to the extent available, (ii) certain leases have
been, and may in the future be, allocated to (or reserved for allocation to)
Other SUBIs and therefore not be available for reinvestment of such amounts from
the SUBI, and (iii) to the extent that reinvestment of such amounts from the
SUBI and any one or more previous Other SUBIs are at any time being made out of
the Origination Trust's general pool of available lease contracts that have not
been so reserved, such reinvestment will first be made with respect to such
previous Other SUBI(s). World Omni will represent and warrant that, except as
otherwise described in the immediately preceding sentence, no adverse selection
procedures were employed or will be employed in selecting the Initial Contracts
or the Subsequent Contracts for inclusion in the SUBI Assets and that it is not
aware of any bias in the selection of such Contracts that would cause the
delinquencies or losses on such Contracts to be worse than other retail
closed-end automobile and light duty truck lease contracts held in the
Origination Trust's portfolio; however, there can be no assurance that the
delinquencies or losses on the Contracts will not be worse. Subsequent Contracts
may be originated by World Omni using different underwriting criteria than those
which were applied to the Initial Contracts. For this reason, the
characteristics of the Subsequent Contracts may vary from those of the Initial
Contracts.
Each Contract will have been written for an original term of not more than
60 months, for a "capitalized cost" (which may exceed the manufacturer's
suggested retail price), plus an implicit Lease Rate. The Initial Contracts
were, and the Subsequent Contracts will be, written on a constant yield basis
and provide for equal Monthly Payments such that at the end of the lease term
the capitalized cost has been amortized to an amount equal to the Residual Value
of the related Leased Vehicle.
At the times of origination of the related Contracts, the related Leased
Vehicles were, in the case of the Initial Contracts, or will be, in the case of
the Subsequent Contracts, new vehicles, dealer demonstrator vehicles driven
fewer than 6,000 miles or manufacturers' program vehicles. Manufacturers'
program vehicles are vehicles which have been sold directly by manufacturers to
rental car companies and returned to the manufacturer for resale, generally
after a period of eight to twelve months. Such vehicles generally are then
resold to dealers through an automobile auction.
All of the Contracts will be closed-end leases. Under a "closed-end lease",
at the end of its term, if the lessee does not elect to purchase the related
leased vehicle by exercise of the purchase option contained in such lease
contract, the lessee is required to return the leased vehicle to or upon the
order of the lessor, at which time the lessee will then owe only incidental
charges for excess mileage, excessive wear and use and other items as may be due
under such lease. In contrast, under an "open-end lease", the lessee is also
obligated to pay at the end of the lease term any deficit between the fair
market value of the leased vehicle at that time and the residual value
established at the time of origination of such lease.
Each lessee will be permitted to purchase the Leased Vehicle at the end of
the term of the related Contract. The purchase price will be a fixed dollar
amount equal to the Residual Value plus any applicable taxes and all other
incidental charges which may be due under the Contract. In addition, each
Contract will allow the related lessee voluntarily to terminate such Contract by
paying certain miscellaneous charges and a termination amount more fully
described below. In most instances, the Contracts are not expected to run to
their full terms, as more fully described under "Risk Factors -- Maturity and
Prepayment Considerations" and "Maturity, Prepayment and Yield Considerations".
40
<PAGE> 43
Each Contract will provide that the lessor may terminate such Contract and
repossess the Leased Vehicle in the event of a default by the lessee. Events of
default under the Contracts will include, but will not be limited to, failure to
make payment when due, certain events of bankruptcy or insolvency, failure to
maintain the insurance required by the Contract, failure to maintain or repair
the Leased Vehicle as required or to comply with any other term or condition of
the Contract and the making of a material misrepresentation by the lessee in the
lease application. World Omni regularly tracks lessees' compliance with their
payment and insurance obligations and monitors the related leases for
noncompliance as more fully described under "World Omni -- Insurance" and
"-- Collection, Repossession and Disposition Procedures".
In the forms of contract used by the Dealers to evidence the Contracts,
upon early termination where the lessee is not in default and does not exercise
its option to purchase the Leased Vehicle, the amount owed by the lessee (the
"Early Termination Charge") will be determined by adding (i) the future Monthly
Payments and any incidental charges owing under the Contract, less unearned
lease charges, (ii) the Residual Value and (iii) a $250 processing fee,
subtracting the "Realized Value" (as described below), from the sale or other
disposition of the related Leased Vehicle and applying the Security Deposit to
reduce any deficiency. In calculating the amount of unearned lease charges under
clause (i) above, the Contracts will provide that the constant yield method will
be used, in which lease charges are earned on a daily basis through the payment
date immediately following the date of early termination. If, instead, there is
an early termination and the lessee is in default, the amount owed by a lessee
in default will be determined by adding (i) the Early Termination Charge, (ii)
payments accrued under the Contract through the date of termination, (iii)
collection, repossession, storage, preparation and sale expenses, (iv)
attorneys' fees and disbursements incurred after default (not exceeding 15% of
the amount owed by the lessee) and (v) simple interest at a 15% annual rate.
The "Realized Value" of a Leased Vehicle is the actual wholesale price or
the wholesale price otherwise determined by World Omni in a commercially
reasonable manner. However, each Contract provides that the lessee has the right
to obtain from an independent third party acceptable to the lessor a
professional appraisal of the wholesale value of the Leased Vehicle that could
be realized at sale. This appraised value then would be used as the wholesale
value for purposes of calculating sums due from the lessee. Although World Omni
cannot predict whether any lessee will challenge the wholesale sale price
determined by World Omni, management of World Omni is unaware of any successful
such challenge by any lessee under its retail closed-end automobile and light
duty truck lease contracts. See "Maturity, Prepayment and Yield Considerations"
for further information relating to the relationship between payments on the
Contracts and the effective yield on the Certificates.
In the event of early termination of a Contract where the lessee is in
default, the amounts collected with respect to such Contract and the related
Leased Vehicle (after deducting the costs and other sums retained by the
Servicer in connection therewith) may be less than the Outstanding Principal
Balance of such Contract, which shortfall can be due to, among other things, the
use of wholesale appraisal of a Leased Vehicle as described above. In the event
that a Contract reaches the date on which the last Monthly Payment is due, as
such date may have been extended (the "Maturity Date"), but the related Leased
Vehicle cannot be sold or otherwise disposed of for a net amount at least equal
to its Residual Value, there may be an additional shortfall in amounts otherwise
expected to be received in respect of the SUBI Interest. In the event that any
of the foregoing shortfalls are not covered from the Investor Percentage of
certain excess Interest Collections, available monies on deposit in the Reserve
Fund and the Residual Value Surplus Account, Net Insurance Proceeds or Net
Liquidation Proceeds, amounts otherwise payable to the Seller in respect of the
Seller Interest, the Servicing Fee otherwise payable to the Servicer (so long as
World Omni is the Servicer), the subordination of interest payments otherwise
payable to the Class B Certificateholders and, in the case of the Class A-3
Certificates, the subordination of principal payments otherwise payable to the
Class B Certificateholders, in each case to the extent described herein,
investors in the Class A Certificates could suffer a loss on their investment.
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<PAGE> 44
CHARACTERISTICS OF THE CONTRACTS
General
The Initial Contracts were, and the Subsequent Contracts will be, selected
by reference to several criteria, including, as of the related Cutoff Date, that
each Contract (i) is written with respect to a Leased Vehicle that was at the
time of the origination of the related lease contract a new vehicle, a limited
mileage dealer demonstrator vehicle or a manufacturers' program vehicle; (ii)
was originated in the United States after November 1, 1993 in the case of the
Initial Contracts, and on or before September 30, 1997 in the case of the
Subsequent Contracts; (iii) has a Maturity Date on or after June 19, 1998 and no
later than August 12, 2001 in the case of the Initial Contracts, and no later
than September 30, 2002 in the case of the Subsequent Contracts; (iv) fully
amortizes to an amount equal to the Residual Value of the related Leased Vehicle
based on a fixed Lease Rate calculated on a constant yield basis and provides
for level payments over its term (except for payment of the Residual Value); (v)
was not more than 60 days past due as of the Initial Cutoff Date or the related
Subsequent Cutoff Date, as the case may be; and (vi) has never been extended for
more than five months in the aggregate. (SUBI Trust Agreement, Section 10.01).
Appearing below is some additional information regarding the characteristics of
the Initial Contracts:
INITIAL CONTRACTS
<TABLE>
<CAPTION>
AVERAGE MINIMUM MAXIMUM
---------- --------- ----------
<S> <C> <C> <C>
Original Principal Balance........................... $24,504.65 $8,545.00 $98,679.28
Outstanding Principal Balance(1)..................... $23,743.89 $8,389.15 $90,497.55
Residual Value....................................... $14,949.66 $2,951.26 $60,183.50
Lease Rate(1)........................................ 7.74%(2) 2.01% 12.87%
Seasoning (months)(1)................................ 3.60(2) 1 11
Remaining Term (months)(1)........................... 36.79(2) 21 59
</TABLE>
- ---------------
(1) As of the Initial Cutoff Date.
(2) Weighted by Outstanding Principal Balance as of the Initial Cutoff Date.
Distribution of the Initial Leased Vehicles by Make
As of the Initial Cutoff Date, the composition of the Initial Leased
Vehicles by make of vehicle was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF NUMBER OF
VEHICLE MAKE INITIAL CONTRACTS INITIAL CONTRACTS
--------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Toyotas.................................................. 23,294 66.52%
United States manufacturers.............................. 7,977 22.78
Other Japanese manufacturers............................. 142 0.41
Other foreign manufacturers.............................. 3,603 10.29
------- -------
Total.......................................... 35,016 100.00%
============ ============
</TABLE>
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<PAGE> 45
Distribution of the Initial Contracts by Lease Rate
The distribution of the Initial Contracts as of the Initial Cutoff Date by
Lease Rate was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF AGGREGATE
PERCENTAGE OF INITIAL CUTOFF DATE INITIAL CUTOFF DATE
NUMBER OF NUMBER OF OUTSTANDING PRINCIPAL OUTSTANDING PRINCIPAL
LEASE RATE RANGE INITIAL CONTRACTS INITIAL CONTRACTS BALANCE BALANCE
--------------------- ----------------- ----------------- --------------------- -----------------------
<S> <C> <C> <C> <C>
2.00% to 2.99%..... 68 0.19% $ 1,385,809.58 0.17%
3.00% to 3.99%..... 224 0.64 3,778,014.86 0.45
4.00% to 4.99%..... 1,059 3.02 16,879,138.05 2.03
5.00% to 5.99%..... 3,338 9.53 60,771,179.36 7.31
6.00% to 6.99%..... 6,841 19.54 130,222,430.00 15.66
7.00% to 7.99%..... 8,270 23.62 227,700,218.94 27.39
8.00% to 8.99%..... 10,984 31.37 290,622,063.18 34.96
9.00% to 9.99%..... 3,382 9.66 79,491,508.44 9.56
10.00% to 10.99%..... 640 1.83 16,168,563.63 1.94
11.00% to 11.99%..... 199 0.57 4,210,495.92 0.51
12.00% to 12.99%..... 11 0.03 186,598.26 0.02
------- ------- --------------------- -------
Total...... 35,016 100.00% $831,416,020.22 100.00%
============ ============ =============== =================
</TABLE>
Distribution of the Initial Contracts by Maturity
The distribution of the Initial Contracts as of the Initial Cutoff Date by
year of maturity was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF AGGREGATE
PERCENTAGE OF INITIAL CUTOFF DATE INITIAL CUTOFF DATE
NUMBER OF NUMBER OF OUTSTANDING PRINCIPAL OUTSTANDING PRINCIPAL
YEAR OF MATURITY INITIAL CONTRACTS INITIAL CONTRACTS BALANCE BALANCE
--------------------- ----------------- ----------------- --------------------- -----------------------
<S> <C> <C> <C> <C>
1998................. 138 0.40% $ 4,459,743.28 0.53%
1999................. 29,267 83.58 660,220,276.03 79.41
2000................. 4,854 13.86 137,572,474.20 16.55
2001................. 757 2.16 29,163,526.71 3.51
------- ------- --------------------- -------
Total...... 35,016 100.00% $831,416,020.22 100.00%
============ ============ =============== =================
</TABLE>
Distribution of the Initial Contracts by State
The distribution of the Initial Contracts as of the Initial Cutoff Date by
State of origination, broken out for States representing 5% or more of the
number of Initial Contracts, was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF AGGREGATE
PERCENTAGE OF INITIAL CUTOFF DATE INITIAL CUTOFF DATE
NUMBER OF NUMBER OF OUTSTANDING PRINCIPAL OUTSTANDING PRINCIPAL
STATE INITIAL CONTRACTS INITIAL CONTRACTS BALANCE BALANCE
--------------------- ----------------- ----------------- --------------------- -----------------------
<S> <C> <C> <C> <C>
Alabama.............. 2,678 7.65% $ 57,965,541.29 6.97%
Florida.............. 13,140 37.53 283,643,591.21 34.12
Georgia.............. 6,325 18.06 138,763,615.57 16.69
North Carolina....... 6,919 19.76 147,218,588.50 17.71
South Carolina....... 2,050 5.85 45,331,758.17 5.45
All other states..... 3,904 11.15 158,492,925.48 19.06
------- ------- --------------------- -------
Total...... 35,016 100.00% $831,416,020.22 100.00%
============ ============ =============== =================
</TABLE>
REPRESENTATIONS, WARRANTIES AND COVENANTS
The Initial Contracts and Initial Leased Vehicles will be described in a
schedule appearing as an exhibit to the SUBI Trust Agreement, which schedule
will be amended from time to time as Subsequent Contracts
43
<PAGE> 46
and Subsequent Leased Vehicles become SUBI Assets during the Revolving Period
(collectively, the "Schedule of Contracts and Leased Vehicles").
The Schedule of Contracts and Leased Vehicles will identify each Contract
by identification number, will identify each Leased Vehicle by its vehicle
identification number and will set forth as to each such Contract, among other
things, its: (i) date of origination; (ii) Maturity Date; (iii) Monthly Payment;
(iv) original Outstanding Principal Balance; (v) Outstanding Principal Balance
and Discounted Principal Balance as of the related Cutoff Date; and (vi)
Residual Value. (Servicing Agreement, Sections 1.01 and 10.01). In the Servicing
Agreement, representations and warranties will be made with respect to each
Contract and Leased Vehicle to the effect described in the text of the first
paragraph under "The Contracts -- Characteristics of the Contracts -- General",
and certain other representations and warranties will be made, including, among
other things, that each such Contract and, to the extent applicable, the related
Leased Vehicle or lessee: (a) was originated by a Dealer located in the United
States in the ordinary course of its business and in compliance with World
Omni's normal credit and collection policies and practices; (b) is owned by the
Origination Trustee, on behalf of the Origination Trust, free of all liens,
encumbrances or rights of others (other than the Administrative Lien); (c) was
originated in compliance with, and complies with, all material applicable legal
requirements; (d) all material consents, licenses, approvals or authorizations
of, or registrations or declarations with, any governmental authority required
to be obtained, effected or given by the originator of such Contract and the
Origination Trustee in connection with (i) the origination of such Contract,
(ii) the execution, delivery and performance by such originator of the Contract
and (iii) the acquisition by the Origination Trust of such Contract and Leased
Vehicle, have been duly obtained, effected or given and are in full force and
effect as of such date of creation or acquisition; (e) is the legal, valid and
binding obligation of the lessee; (f) to the knowledge of the Servicer, is not
subject to any right of rescission, setoff, counterclaim or any other defense of
the related lessee to pay the Outstanding Principal Balance due under such
Contract and no such right of rescission, offset, defense or counterclaim has
been asserted or threatened; (g) the related Dealer, the Servicer and the
Origination Trustee have each satisfied all obligations required to be fulfilled
on its part with respect thereto; (h) is payable solely in United States dollars
in the United States; (i) the lessee thereunder is located in the United States
and is not (i) ALFI, ALFI L.P., WOLSI, the Seller or any of their respective
affiliates or (ii) the United States or any state or local government thereof,
or any agency, department or instrumentality of the United States or any state
or local government thereof; (j) requires the lessee to maintain insurance
against loss or damage to the related Leased Vehicle under an insurance policy
that names the Origination Trustee as loss payee; (k) the related certificate of
title therefor is registered in the name of the Origination Trustee (or a
properly completed application for such title has been submitted to the
appropriate titling authority); (l) is a closed-end lease that (i) requires
equal monthly payments to be made within 60 months of the date of origination of
such Contract and (ii) requires such payments to be made by the lessee thereof
within 30 days after the billing date for such payment; (m) is fully assignable
and does not require the consent of the lessee as a condition to any transfer,
sale or assignment of the rights of the originator; (n) has a Residual Value
that does not exceed an amount reasonably established by the Servicer consistent
with its policies and practices regarding the setting of residual values as
applied with respect to closed-end retail automobile and light duty truck
leases; (o) has never been extended by more than five months in the aggregate or
otherwise modified except in accordance with World Omni's normal credit and
collection policies and practices; (p) the lessee thereunder has not made a
claim under the Soldiers' and Sailors' Civil Relief Act of 1940; (q) is not an
Other SUBI Asset; (r) the lessee thereunder is not bankrupt or currently the
subject of a bankruptcy proceeding; (s) is not more than 60 days past due; (t)
is a finance lease for accounting purposes; and (u) is a "true lease" for
applicable state law purposes. (SUBI Trust Agreement, Section 10.01; Servicing
Agreement, Sections 8.01 and 9.01).
The Servicing Agreement will provide that the reinvestment of Principal
Collections (and reimbursement of Loss Amounts) in Subsequent Contracts and
Subsequent Leased Vehicles during the Revolving Period will be subject to the
satisfaction of certain conditions precedent, including, among other things,
that, unless the Trustee receives a letter from each Rating Agency to the effect
that the use of a different criteria will not result in the qualification,
reduction or withdrawal of its then-current rating on any Class of Class A
Certificates or the Class B Certificates, after giving effect to such
reinvestment, (i) each Subsequent Contract will be allocated as a SUBI Asset
based upon its Discounted Principal Balance as of the relevant Cutoff Date
44
<PAGE> 47
(i.e., for a Discounted Contract, its Outstanding Principal Balance discounted
by 8.70%, and for each other Contract, its Outstanding Principal Balance), (ii)
the weighted average remaining term of the Contracts (including the Subsequent
Contracts) is not greater than 38 months and (iii) the weighted average Residual
Value of the Leased Vehicles relating to the Contracts (including the Subsequent
Contracts), as a percentage of the aggregate Outstanding Principal Balance of
the Contracts (including the Subsequent Contracts), in each case as of the
related dates of origination, is not greater than 65%. (Servicing Agreement,
Section 8.02).
The Servicing Agreement will provide that upon the discovery by the
Origination Trustee, World Omni, the Trustee or the Seller of a breach of any
representation, warranty or covenant referred to in the second preceding
paragraph that materially and adversely affects the owners of interests in the
SUBI or the Certificateholders in the related Contract or Leased Vehicle, which
breach is not cured in all material respects within 60 days after World Omni
discovers such breach or is given notice thereof, World Omni will be required to
deposit (or cause to be deposited) into the SUBI Collection Account an amount
(the "Reallocation Payment") equal to the Discounted Principal Balance of such
Contract as of the last day of the Collection Period during which the related
cure period ended, plus an amount equal to any imputed lease charge on such
Contract at the related Lease Rate that was delinquent as of the end of such
Collection Period. The foregoing payment obligation will survive any termination
of World Omni as Servicer under the Servicing Agreement. (Servicing Agreement,
Sections 8.03 and 11.01).
MATURITY, PREPAYMENT AND YIELD CONSIDERATIONS
All of the Contracts will be prepayable, in whole or in part, at any time
without penalty. The prepayment experience with respect to the Contracts will
affect the life of the Class A Certificates.
In general, the rate of prepayments on the Contracts may be influenced by a
variety of economic, social, geographic and other factors. The Origination Trust
was formed and began to accept assignments of lease contracts in November 1993.
All of the lease contracts assigned to the Origination Trust for allocation as
SUBI Assets since that time have been, and all of the lease contracts to be
assigned to the Origination Trust subsequent to the date of this Prospectus will
be, assigned by Dealers using World Omni's underwriting standards. Under its
pro-active lease termination program, World Omni actively encourages lessees
under lease contracts with remaining terms of less than one year to either buy,
trade in or refinance the related leased vehicles prior to the related scheduled
maturities of such lease contracts. World Omni estimates that on average over
calendar years 1993, 1994 and 1995, and for the first six months of 1996, an
average of approximately 86% of the number of retail automobile and light duty
truck lease contracts in its portfolio (including those owned by the Origination
Trustee on behalf of the Origination Trust and by certain special purpose
finance subsidiaries of World Omni) that were scheduled to mature during such
period were terminated prior to maturity, either because of voluntary
prepayments or repossession of the leased vehicles due to default by the lessees
under the related lease contracts. World Omni is not aware of any publicly
available industry statistics that set forth termination rates for retail
closed-end automobile and light duty truck lease contracts similar to the
Contracts. The distribution of the Initial Contracts by year of maturity is set
forth under "The Contracts -- Characteristics of the Contracts -- Distribution
of the Initial Contracts by Maturity", and historical levels of lease contract
defaults, leased vehicle repossessions and losses and residual value losses are
discussed under "World Omni -- Delinquency, Repossession and Loss Data". No
assurance can be given that the Contracts will experience the same rate of
prepayment or default or any greater or lesser rate than World Omni's historical
rate, or that the Residual Value experience of Leased Vehicles related to
Contracts that have reached their Maturity Dates will differ from World Omni's
historical residual value loss experience, for all of the retail automobile and
light duty truck lease contracts in its portfolio (including those owned by the
Origination Trustee on behalf of the Origination Trust and by certain special
purpose finance subsidiaries of World Omni).
The effective yield on, and average life of, each Class of Class A
Certificates will depend upon, among other things, the amount of scheduled and
unscheduled payments on or in respect of the Contracts and the Leased Vehicles
and the rate at which such payments are paid to the Class A Certificateholders.
In the event
45
<PAGE> 48
of prepayments of the Contracts (and payment of the Residual Value of the
related Leased Vehicles) or payment of any Accelerated Principal Distribution
Amounts during the Amortization Period, Class A Certificateholders who receive
such amounts may not be able to reinvest the related payments of principal
received on the Class A Certificates at yields as high as the related
Certificate Rate. The timing of changes in the rate of prepayments on the
Contracts and payments in respect of the Leased Vehicles may also affect
significantly an investor's actual yield to maturity and the average life of the
related Class of Class A Certificates. A substantial increase in the rate of
payments on or in respect of the Contracts and Leased Vehicles (including
prepayments and liquidations of the Contracts) during the Amortization Period
may shorten the final maturity of and may significantly affect the yield on the
Class A Certificates.
Additionally, although monies on deposit in the Accounts and Principal
Collections (and reimbursement of Loss Amounts) that have not been reinvested in
Subsequent Contracts and Subsequent Leased Vehicles during the Revolving Period
will be invested in Permitted Investments, and all gain on other income from
such investments will be available for making the distributions described under
"Description of the Certificates -- Distributions on the
Certificates -- Distributions of Interest", no assurance can be made as to the
rate of return that will be realized on such Permitted Investments. Any
reinvestment risk resulting from the rate of prepayment of the Contracts (and
payment of the Residual Value of the related Leased Vehicles), the making of the
foregoing investments or payment of any Accelerated Principal Distribution
Amounts and the distribution of any such amounts to Class A Certificateholders
will be borne entirely by the Class A Certificateholders.
The yield to an investor who purchases Class A Certificates in the
secondary market at a price other than par will vary from the anticipated yield
if the rate of prepayment on the Contracts is actually different than the rate
anticipated by such investor at the time such Class A Certificates were
purchased.
In sum, an investor's expected yield will be affected by the following
factors: (i) the price the investor paid for the Class A Certificates, (ii) the
rate of prepayments in respect of the Contracts and Leased Vehicles and (iii)
the investor's assumed reinvestment rate. These factors do not operate
independently, but are interrelated. For example, if the rate of prepayments on
or in respect of the Contracts and Leased Vehicles is slower than anticipated,
the investor's yield will be lower if interest rates are higher than the
investor anticipated and higher if interest rates are lower than the investor
anticipated. Conversely, if the rate of prepayments on or in respect of the
Contracts and Leased Vehicles is faster than anticipated, the investor's yield
will be higher if interest rates are higher than the investor anticipated and
lower if interest rates are lower than the investor anticipated.
In general, during the Amortization Period, no principal payments will be
received by Class A-2 Certificateholders until the Class A-1 Certificates have
been paid in full or by Class A-3 and Class B Certificateholders until the Class
A-1 and Class A-2 Certificates have been paid in full. In addition, the Class A
Percentage and the Class B Percentage of Principal Collections allocable to the
Investor Interest will be calculated when the Class A-1 and Class A-2
Certificates have been paid in full, and then used to determine the distribution
of principal payments on the Class A-3 Certificates and the Class B
Certificates, as described under "Risk Factors -- Maturity and Prepayment
Considerations -- Sequential Payment of Principal on the Certificates", which
may affect the maturity and yield on the Class A-3 Certificates. The Investor
Percentage of Loss Amounts will be allocated among the Certificateholders on a
pro rata basis, based on the Class A-1, Class A-2, Class A-3 and Class B
Allocation Percentages, as the case may be, and then reimbursed out of available
funds in the amounts and order of priority described in "Description of the
Certificates -- Distributions on the Certificates -- Distributions of Interest".
In addition, the Investor Percentage of the net proceeds of any sale or other
disposition of the SUBI Interest, the SUBI Certificate and other property of the
Trust, which may occur under certain circumstances involving an Insolvency Event
with respect to the Seller (as described under "Description of the
Certificates -- Early Amortization Events"), to the extent such net proceeds
constitute Principal Collections, will be distributed first, on a pro rata
basis, to the Class A Certificateholders based on their respective Class
Certificate Balances until the Class A Certificates have been paid in full, and
second, to the Class B Certificateholders.
The following information is provided solely to illustrate the effect of
prepayments of the Contracts on the Class A-1 Certificate Balance, the Class A-2
Certificate Balance and the Class A-3 Certificate Balance and
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<PAGE> 49
the weighted average life of each Class of Class A Certificates under the
assumptions stated below and is not a prediction of the prepayment rates that
might actually be experienced with respect to the Contracts.
Prepayments on automobile lease contracts may be measured by a prepayment
standard or model. The prepayment model used with respect to the Contracts is
based on a prepayment assumption (the "Prepayment Assumption") expressed in
terms of percentages of ABS. "ABS" refers to a prepayment model which assumes a
constant percentage of the original number of Contracts in a pool prepay each
month. However, as used herein, a 100% Prepayment Assumption assumes that, based
on the assumptions in the next paragraph, the original Outstanding Principal
Balance of a Contract will prepay as follows: (i) 0.55% ABS for the first six
months of the life of the Contract, (ii) 0.70% ABS for the seventh through
twelfth month of the life of the Contract, (iii) 0.85% ABS for the thirteenth
through eighteenth month of the life of the Contract, (iv) 1.15% ABS for the
nineteenth through twenty-fourth month of the life of the Contract and (v) 1.70%
ABS following the twenty-fourth month of the life of the Contract until the
original Outstanding Principal Balance of the Contract has been paid in full.
Neither ABS nor the Prepayment Assumption purports to be a historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of lease contracts, including the Contracts. There can be no
assurance that the Contracts will prepay at the indicated levels of the
Prepayment Assumption or at any other rate.
The tables below were prepared on the basis of certain assumptions,
including that: (i) all Collections (including Monthly Payments and net sale
proceeds in respect of the Leased Vehicles relating to Matured Contracts) are
timely received, and that no Contracts are ever delinquent; (ii) no Reallocation
Payment or Reallocation Deposit Amount is made in respect of any Contract; (iii)
there are no Loss Amounts; (iv) the Seller does not exercise its optional
purchase option of the Certificates as described herein; (v) all distributions
of principal (including any Accelerated Principal Distribution Amount) and
interest on the Class A Certificates are made on the dates specified herein;
(vi) the Servicing Fee is 1% per annum of 99.8% of the Aggregate Net Investment
Value; (vii) all prepayments are full Prepayments; (viii) the Revolving Period
ends on September 30, 1997; (ix) the Initial Contracts have assumed lease rates
of 9.00% and were originated four months prior to the Initial Cutoff Date; and
(x) all Principal Collections in respect of each Collection Period during the
Revolving Period are reinvested, on a Transfer Date that is the fifteenth day of
the following calendar month, in Subsequent Contracts that have stated terms of
three years, Lease Rates of 8.70% and Residual Values equal to 65% of the
original Outstanding Principal Balances thereof, were originated two months
prior to the Closing Date and that otherwise have terms that are substantially
similar to those of the Initial Contracts.
No representation is made as to what the actual levels of losses and
delinquencies on the Contracts will be. Since the tables below were prepared on
the basis of the foregoing assumptions, there will be discrepancies between the
characteristics of the Contracts that actually will be allocated as SUBI Assets
in respect of Principal Collections made during the Revolving Period and the
characteristics of the Contracts assumed in preparing the tables to be allocated
as SUBI Assets in respect of Principal Collections made during the Revolving
Period, as well as other discrepancies between the foregoing assumptions and the
actual experience in respect of the Contracts. Any such discrepancy may increase
or decrease the percentage of the outstanding Class A-1 Certificate Balance, the
Class A-2 Certificate Balance or the Class A-3 Certificate Balance, as the case
may be, and the weighted average lives of each Class of Class A Certificates set
forth in the tables. In addition, since the Contracts will have characteristics
which differ from those assumed in preparing the tables, distributions of
principal on the Class A Certificates may be made earlier or later than set
forth in the tables. Investors are urged to make their investment decisions on a
basis that includes their determination as to anticipated prepayment rates under
a variety of the assumptions discussed herein.
The following tables set forth the percentages of the Initial Certificate
Balance of each Class of Class A Certificates that would be outstanding after
each of the dates shown, based on a rate equal to 0%, 50%, 100%, 150% and 200%
of the Prepayment Assumption. As used in the table, "0% Prepayment Assumption"
assumes
47
<PAGE> 50
no prepayments on a Contract, "50% Prepayment Assumption" assumes that a
Contract will prepay at 50% of the Prepayment Assumption, and so forth.
PERCENTAGE OF INITIAL CLASS A PRINCIPAL BALANCE REMAINING
AND WEIGHTED AVERAGE LIFE OF CLASS A-1 CERTIFICATES
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
-----------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
- ----------------------------------------------------------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
November 1996.............................................. 100% 100% 100% 100% 100%
May 1997................................................... 100 100 100 100 100
November 1997.............................................. 97 95 94 92 89
May 1998................................................... 76 64 49 31 8
November 1998.............................................. 54 27 0 0 0
May 1999................................................... 9 0 0 0 0
November 1999.............................................. 0 0 0 0 0
May 2000................................................... 0 0 0 0 0
November 2000.............................................. 0 0 0 0 0
May 2001................................................... 0 0 0 0 0
Weighted Average Life (Years)(1)........................... 2.1 1.8 1.6 1.4 1.3
=== === === === ===
</TABLE>
- ---------------
(1) The weighted average life of the Class A-1 Certificates is determined by (i)
multiplying the amount of each principal payment by the number of years
from the Closing Date to the related Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the Initial Class A-1 Certificate
Balance.
PERCENTAGE OF INITIAL CLASS A PRINCIPAL BALANCE REMAINING
AND WEIGHTED AVERAGE LIFE OF CLASS A-2 CERTIFICATES
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
-----------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
- ----------------------------------------------------------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
November 1996.............................................. 100% 100% 100% 100% 100%
May 1997................................................... 100 100 100 100 100
November 1997.............................................. 100 100 100 100 100
May 1998................................................... 100 100 100 100 100
November 1998.............................................. 100 100 91 39 0
May 1999................................................... 100 77 31 0 0
November 1999.............................................. 0 0 0 0 0
May 2000................................................... 0 0 0 0 0
November 2000.............................................. 0 0 0 0 0
May 2001................................................... 0 0 0 0 0
Weighted Average Life (Years)(1)........................... 2.8 2.7 2.5 2.0 1.8
=== === === === ===
</TABLE>
- ---------------
(1) The weighted average life of the Class A-2 Certificates is determined by (i)
multiplying the amount of each principal payment by the number of years
from the Closing Date to the related Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the Initial Class A-2 Certificate
Balance.
48
<PAGE> 51
PERCENTAGE OF INITIAL CLASS A PRINCIPAL BALANCE REMAINING
AND WEIGHTED AVERAGE LIFE OF CLASS A-3 CERTIFICATES
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
-----------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
- ----------------------------------------------------------- --- --- --- --- ---
<S> <C> <C> <C> <C> <C>
November 1996.............................................. 100% 100% 100% 100% 100%
May 1997................................................... 100 100 100 100 100
November 1997.............................................. 100 100 100 100 100
May 1998................................................... 100 100 100 100 100
November 1998.............................................. 100 100 100 100 33
May 1999................................................... 100 100 100 50 0
November 1999.............................................. 44 32 17 0 0
May 2000................................................... 25 17 6 0 0
November 2000.............................................. 5 3 0 0 0
May 2001................................................... 0 0 0 0 0
Weighted Average Life (Years)(1)........................... 3.3 3.2 3.0 2.6 2.1
=== === === === ===
</TABLE>
- ---------------
(1) The weighted average life of the Class A-3 Certificates is determined by (i)
multiplying the amount of each principal payment by the number of years
from the Closing Date to the related Distribution Date, (ii) adding the
results, and (iii) dividing the sum by the Initial Class A-3 Certificate
Balance.
CLASS A CERTIFICATE FACTORS AND TRADING INFORMATION;
REPORTS TO CLASS A CERTIFICATEHOLDERS
The "Class A-1 Certificate Factor", the "Class A-2 Certificate Factor" and
the "Class A-3 Certificate Factor" will each be a seven-digit decimal that the
Servicer will compute each month indicating the Class A-1, Class A-2 or Class
A-3 Certificate Balance, as the case may be, as of the close of business on the
Distribution Date in such month as a fraction of the Initial Certificate Balance
of the related Class of Class A Certificates. Each Certificate Factor will
initially be 1.0000000 and will remain unchanged during the Revolving Period,
except in certain limited circumstances where there are unreimbursed Class A-1,
Class A-2 or Class A-3 Certificate Principal Loss Amounts. During the
Amortization Period, each Certificate Factor will decline to reflect reductions
in the related Certificate Balance resulting from distributions of principal and
unreimbursed Class A-1, Class A-2 or Class A-3 Certificate Principal Loss
Amounts, if any. The portion of the Class A Certificate Balance for a given
month allocable to a Class A Certificateholder can be determined by multiplying
the original denomination of the holder's Class A Certificate by the related
Certificate Factor for that month.
Pursuant to the Agreement, First Bank, as Trustee, will provide to all
registered holders of the Class A Certificates (which shall be Cede as the
nominee of DTC unless Definitive Certificates are issued under the limited
circumstances described herein) unaudited monthly reports concerning payments
received on or in respect of the Contracts and the Leased Vehicles, the
Aggregate Net Investment Value, the Investor Percentage, the Class A-1, Class
A-2 and Class A-3 Certificate Factors and various other items of information.
Certificate Owners may obtain copies of such reports upon a request in writing
to the Trustee. In addition, Class A Certificateholders during each calendar
year will be furnished information for tax reporting purposes not later than the
latest date permitted by law. For further details concerning information
furnished to Certificateholders and Certificate Owners, see "Description of the
Certificates -- Statements to Certificateholders" and "-- Book-Entry
Registration".
49
<PAGE> 52
DESCRIPTION OF THE CERTIFICATES
The Certificates will be issued pursuant to the Agreement, a form of which,
together with forms of the SUBI Trust Agreement and the Servicing Agreement, has
been filed as an exhibit to the Registration Statement of which this Prospectus
is a part. The following summaries of all material provisions of the foregoing
documents and the summaries of all material provisions included under "The Trust
and the SUBI", "The Origination Trust -- Property of the Origination Trust",
"The Contracts -- Characteristics of the Contracts -- General" and
"-- Representations, Warranties and Covenants", "Security for the Certificates"
and "Additional Document Provisions" do not purport to be complete and are
subject to, and qualified in their entirety by reference to, the provisions of
such documents. Where particular provisions of or terms used in the Agreement,
the SUBI Trust Agreement and the Servicing Agreement are referred to, the actual
provisions (including definitions of terms and Section references) are
incorporated by reference as part of such summaries.
GENERAL
The Class A Certificates will be issued in denominations of $1,000 and
integral multiples thereof in book-entry form. (Agreement, Section 4.01). The
Class A Certificates will initially be represented by certificates registered in
the name of Cede, the nominee of DTC. No Certificate Owner will be entitled to
receive a certificate representing such owner's Certificate, except as set forth
below. Unless and until Class A Certificates are issued in fully registered
certificated form ("Definitive Certificates") under the limited circumstances
described below, all references herein to distributions, notices, reports and
statements to record owners of Class A Certificates (the "Class A
Certificateholders") will refer to the same actions made with respect to DTC or
Cede, as the case may be, for the benefit of Certificate Owners in accordance
with DTC procedures. (Agreement, Section 4.09). See "Description of the
Certificates -- Book-Entry Registration" and "-- Definitive Certificates".
The outstanding principal amount of each class of Certificates (each, a
"Class") at any time will be equal to the initial principal amount of such Class
of Certificates, less the sum of (i) all principal payments made on or prior to
such date allocable to principal, (ii) the amount of Certificate Principal Loss
Amounts allocable to such Class of Certificates, if any, which have not been
reimbursed as described herein and (iii) in the case of the Class B
Certificates, any unreimbursed Class B Certificate Principal Carryover
Shortfall. (Agreement, Section 1.01). See "Description of the
Certificates -- Distributions on the Certificates". Each Certificate will
represent the right to receive payments of interest at the related Certificate
Rate and, to the extent described herein, payments of principal during the
Amortization Period funded from the Investor Percentage of distributions to the
Trust of Interest Collections and Principal Collections allocable to the SUBI
Interest and Accelerated Principal Distribution Amounts allocable to
Certificates of the related Class, amounts on deposit in the Reserve Fund,
amounts otherwise payable to the Seller in respect of the Seller Interest and,
so long as World Omni is the Servicer, from amounts otherwise payable to the
Servicer in respect of the Servicing Fee, in each case to the extent described
herein. As described under "Description of the Certificates -- Distributions on
the Certificates", the right of the Class B Certificates to receive payments of
interest and principal also will be subordinated to the right of the Class A
Certificates to receive such payments.
The Seller will permanently retain the Seller Interest, which will
represent the interest in the Trust not represented by the Certificates. The
Seller Interest will represent an undivided interest in the Trust, including the
right to receive the Seller Percentage of Interest Collections and Principal
Collections calculated as described under "Description of the
Certificates -- Calculation of Investor Percentage and Seller Percentage". The
Seller Interest will be subordinated to the Certificates to the extent described
under "Description of the Certificates -- Certain Payments to the Seller" and on
any day will equal the difference between 99.8% of the Aggregate Net Investment
Value and the Certificate Balance.
During the Revolving Period, the Certificate Balance will remain constant
except in certain limited circumstances where there are unreimbursed Certificate
Principal Loss Amounts. During the Amortization Period, the Certificate Balance
will decline as the Investor Percentage of Principal Collections allocable to
the SUBI Interest and Accelerated Principal Distribution Amounts are distributed
to the Certificateholders and
50
<PAGE> 53
as Certificate Principal Loss Amounts are incurred and not reimbursed. The
Aggregate Net Investment Value can change daily as principal is paid on or in
respect of the Contracts and the Leased Vehicles, as Reallocation Payments in
respect of certain Contracts as to which an uncured breach of certain
representations and warranties or certain servicing covenants has occurred are
paid by World Omni during the Amortization Period, together with, under certain
circumstances, Reallocation Deposit Amounts, as liquidation losses and other
losses in respect of the Contracts and Leased Vehicles are incurred and as
Leased Vehicles in Matured Leased Vehicle Inventory are sold or otherwise
disposed of. Consequently, the amount of the Seller Interest can change daily as
the Aggregate Net Investment Value changes and may increase on any Distribution
Date to reflect reductions in the Certificate Balance, but will never exceed the
initial amount of the Seller Interest.
TRANSFER OF THE SUBI INTEREST
On the Closing Date, pursuant to the Agreement, the Seller will deliver the
SUBI Certificate to the Trustee and transfer and assign to the Trustee, without
recourse, all of its right, title and interest in and to the SUBI Interest
represented by the SUBI Certificate. The Trustee will, concurrently with such
delivery, transfer and assignment, execute, authenticate and deliver the
Certificates to or upon the order of the Seller. (Agreement, Sections 2.02 and
4.02).
Pursuant to the Agreement, the Seller will represent and warrant that
immediately prior to the transfer and assignment of the SUBI Certificate to the
Trustee, it had good title to, and was the sole legal and beneficial owner of
the SUBI Certificate, free and clear of liens and claims. (Agreement, Section
5.01).
REALLOCATION PAYMENTS AND REALLOCATION DEPOSIT AMOUNTS
As more fully described under "The Contracts -- Representations, Warranties
and Covenants" and "Additional Document Provisions -- The Servicing
Agreement -- Collections", under certain circumstances World Omni will be
required to make Reallocation Payments in respect of certain Contracts (and the
related Leased Vehicles) discovered not to be in compliance with World Omni's
representations or warranties or Contracts as to which certain servicing
procedures have not been followed, in either case that materially and adversely
affects the interests of the owners of interests in the SUBI or the
Certificateholders in the related Contract or Leased Vehicle. Upon any such
payment during the Amortization Period (but not during the Revolving Period),
the Aggregate Net Investment Value will decline by an amount equal to the
Discounted Principal Balance of such Contract, thereby reducing the amount of
the Seller Interest by the same amount, and such Contract and the related Leased
Vehicle will no longer constitute SUBI Assets as they will be reallocated and
become UTI Assets. If such deduction would cause the Seller Interest to become
less than zero, World Omni will be required to deposit (or cause to be
deposited) in the SUBI Collection Account the amount (the "Reallocation Deposit
Amount") by which the Seller Interest would be reduced to less than zero.
Notwithstanding the foregoing, in the event a Reallocation Deposit Amount is
required to be made, reallocation of the related Contract (and the related
Leased Vehicle) will not be considered to have occurred unless such deposit is
actually made. (Servicing Agreement, Section 8.03).
CALCULATION OF INVESTOR PERCENTAGE AND SELLER PERCENTAGE
Pursuant to the Servicing Agreement, to the extent allocable to the SUBI
Interest, the Servicer will allocate between the Investor Interest and the
Seller Interest, based on the applicable Investor Percentage and the Seller
Percentage for the related Collection Period, all Interest Collections and
(during the Amortization Period) Principal Collections collected or received in
respect of the related Collection Period. In addition, similar allocations will
be made by the Servicer at the end of each Collection Period in respect of (i)
an amount equal to the Discounted Principal Balance of any Contract that became
a Charged-off Contract during such Collection Period (all such amounts in any
Collection Period, the "Charged-off Amount"), (ii) the Residual Value Loss
Amount for such Collection Period and (iii) any Additional Loss Amounts incurred
during such Collection Period. A "Charged-off Contract" will be a Contract (a)
with respect to which the related Leased Vehicle has been repossessed and sold
or otherwise disposed of or (b) which has been written off by the Servicer in
accordance with its normal policies for writing off lease contracts other than
51
<PAGE> 54
with respect to repossession. (SUBI Trust Agreement, Section 10.01; Agreement,
Sections 1.01 and 3.03; Servicing Agreement, Section 9.02).
For convenience, this Prospectus refers to the Investor Percentage with
respect to Interest Collections, Principal Collections, Charged-off Amounts,
Residual Value Loss Amounts and Additional Loss Amounts as if the Investor
Percentage were the same percentage at all times in each case. The Investor
Percentage may be a different percentage for each Collection Period, and will
vary primarily as a result of changes in the Aggregate Net Investment Value.
The Investor Percentage in respect of any Collection Period will mean, with
respect to (i) Charged-off Amounts, Residual Value Loss Amounts and Additional
Loss Amounts (collectively, "Loss Amounts") and Interest Collections, in each
case that are allocable to the SUBI Interest, the percentage equivalent of a
fraction (not to exceed 100%) the numerator of which is the Certificate Balance
on the last day of the immediately preceding Collection Period (or, in the case
of the first Collection Period, the Initial Certificate Balance) and the
denominator of which is 99.8% of the Aggregate Net Investment Value on the last
day of the immediately preceding Collection Period (or, in the case of the first
Collection Period, as of the Initial Cutoff Date) and (ii) Principal Collections
during the Amortization Period, the percentage equivalent of a fraction (not to
exceed 100%) the numerator of which is the Certificate Balance and the
denominator of which is 99.8% of the Aggregate Net Investment Value, in each
case as of the last day of the last Collection Period preceding (a) the
Amortization Date or (b) the date on which an Early Amortization Event occurs.
The "Seller Percentage" will in all cases, be equal to 100% minus the applicable
Investor Percentage. (Agreement, Section 1.01).
As a result of the calculations described above, Interest Collections
allocable to the SUBI Interest in each Collection Period will be allocated to
the Certificateholders based on the relationship of the Certificate Balance to
the Aggregate Net Investment Value (which may change daily and from Collection
Period to Collection Period). As described above, the Investor Percentage
applied when allocating Principal Collections allocable to the SUBI Interest may
vary monthly during the Revolving Period, because the Certificate Balance as a
percentage of the Aggregate Net Investment Value may fluctuate monthly. During
the Amortization Period, however, the Principal Allocation will be determined by
reference to a fixed percentage which will equal the Investor Percentage with
respect to Principal Collections allocable to the SUBI Interest as of the last
day of the Revolving Period.
CERTAIN PAYMENTS TO THE SELLER
On each Distribution Date, the Trustee will pay to the Seller, from amounts
on deposit in the Distribution Account in respect of the related Collection
Period that are allocable to the SUBI Interest, the following amounts (the
"Seller Amounts"): (i) if such Distribution Date is in respect of the Revolving
Period, the Seller Percentage of Interest Collections and (ii) if such
Distribution Date occurs in any month following the month in which the
Amortization Period commences, the Seller Percentage of Interest Collections
and, to the extent that the Seller Interest is equal to or greater than zero,
the Seller Percentage of Principal Collections. The foregoing payments will be
made net of the Seller Percentage of the Servicing Fee, Capped Origination Trust
Administrative Expenses, Capped Trust Administrative Expenses, Capped Contingent
and Excess Liability Premiums and Uncapped Administrative Expenses payable in
respect of the related Collection Period. Any Principal Collections not paid to
the Seller because the Seller Interest is less than or equal to zero
("Unallocated Principal Collections") will be retained in the Distribution
Account for payment to Certificateholders.
Notwithstanding the foregoing, no Seller Amounts will be paid to the Seller
on a Distribution Date unless (i) the amounts described in clauses (i) through
(xv) of the first paragraph under "Description of the
Certificates -- Distributions on the Certificates -- Distributions of Interest"
have been paid in full and (ii) the amount on deposit in the Reserve Fund, after
giving effect to all withdrawals therefrom and other deposits thereto on such
Distribution Date, is at least equal to the Reserve Fund Cash Requirement.
(Agreement, Section 3.03).
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<PAGE> 55
DISTRIBUTIONS ON THE CERTIFICATES
General
On the second Business Day prior to each Distribution Date (each, a
"Determination Date"), the Servicer will inform the Trustee of, among other
things, the amount of Interest Collections and Principal Collections allocable
to the SUBI Interest, the Investor Percentage, the Seller Percentage, the Class
A-1, Class A-2 and Class A-3 Certificate Factors, the Class A-1, Class A-2,
Class A-3 and Class B Allocation Percentages, the amount of Advances to be made
by the Servicer, the Required Amount, if any, to be withdrawn from the Reserve
Fund and the Servicing Fee and other servicing compensation payable to the
Servicer, in each case with respect to the Collection Period immediately
preceding the Collection Period in which such Determination Date occurs. On or
prior to each Determination Date, the Servicer shall also determine the Reserve
Fund Cash Requirement, the amounts to be distributed to the Certificateholders
and to the Seller in respect of the Seller Interest and the Reserve Fund
Supplemental Requirement (if any). (Servicing Agreement, Section 10.01).
Distributions of Interest
On each Distribution Date, the Trustee will make the following payments in
the amounts and order of priority described below. The Trustee will distribute
from amounts on deposit in the Distribution Account the Investor Percentage of
Interest Collections collected during or received in respect of the related
Collection Period allocable to the SUBI Interest, together with the amount
withdrawn from the Reserve Fund in respect of the Required Amount, if any, to
the extent necessary, plus Seller Amounts that would otherwise be payable to the
Seller in respect of the Seller Interest on such Distribution Date and, to the
extent needed to make distributions described in clauses (viii) through (x) to
the Class A-3 Certificateholders during the Amortization Period, amounts that
would otherwise be distributable to the Class B Certificateholders in respect of
the Class B Percentage of the Investor Percentage of Principal Collections in
respect of such Collection Period:
(i) in the event of an Early Amortization Event involving an
Insolvency Event as a result of the Trustee having received written
instructions from holders of Certificates evidencing Voting Interests of
not less than 51% of the Class A Certificates (voting together as a single
class) or 51% of the Class A Certificates and Class B Certificates (voting
together as a single class) to sell or dispose of the SUBI Interest, to the
Trustee, the Investor Percentage of Capped Trust Administrative Expenses;
(ii) to each Class of Class A Certificateholders, interest at the
related Certificate Rate on the Class A-1, Class A-2 or Class A-3
Certificate Balance, as applicable, as of the immediately preceding
Distribution Date (after giving effect to any reduction in such Certificate
Balance on such immediately preceding Distribution Date) or, in the case of
the first Distribution Date, on the Initial Class A-1, Class A-2 or Class
A-3 Certificate Balance, as applicable, for the related Interest Period,
calculated on the basis of a 360-day year consisting of twelve 30-day
months, together with any unpaid Class A-1, Class A-2 or Class A-3 Interest
Carryover Shortfall, as applicable;
(iii) to the Class B Certificateholders, interest at a specified rate
per annum not expected to exceed 8.70% (the "Class B Certificate Rate" and,
together with the Class A-1, Class A-2 and Class A-3 Certificate Rates, the
"Certificate Rates"), on the Class B Certificate Balance as of the
immediately preceding Distribution Date (after giving effect to any
reduction in the Class B Certificate Balance on such immediately preceding
Distribution Date) or, in the case of the first Distribution Date, on the
Initial Class B Certificate Balance, for the related Interest Period,
calculated on the basis of a 360-day year consisting of twelve 30-day
months, together with any unpaid Class B Interest Carryover Shortfall;
(iv) to the Servicer, reimbursement of the Investor Percentage of
Capped Contingent and Excess Liability Premiums;
(v) to the Origination Trustee, the Investor Percentage of Capped
Origination Trust Administration Expenses;
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<PAGE> 56
(vi) in circumstances other than as set forth in clause (i) above, to
the Trustee, the Investor Percentage of Capped Trust Administration
Expenses;
(vii) in the event that World Omni is not the Servicer, to such other
Servicer, the Investor Percentage of (a) the Servicing Fee and (b) any
unpaid Servicing Fees payable in respect of compensation to such other
Servicer with respect to one or more prior Collection Periods;
(viii) to each Class of Class A Certificateholders, an amount equal to
the Class A-1, Class A-2 or Class A-3 Allocation Percentage, as applicable,
multiplied by the Investor Percentage of all Loss Amounts incurred during
the related Collection Period and allocable to the SUBI Interest;
(ix) to each Class of Class A Certificateholders, the aggregate of the
amounts allocable to such Class pursuant to clause (viii) above that were
not previously distributed pursuant to such clause or this clause (each
such amount, a "Class A-1 Certificate Principal Loss Amount", "Class A-2
Certificate Principal Loss Amount" or "Class A-3 Certificate Principal Loss
Amount", respectively);
(x) to each Class of Class A Certificateholders, accrued and unpaid
interest at the related Certificate Rate, on any unreimbursed Class A-1,
Class A-2 and Class A-3 Certificate Principal Loss Amount, as applicable;
(xi) to the Class B Certificateholders, an amount equal to the Class B
Allocation Percentage multiplied by the Investor Percentage of all Loss
Amounts incurred during the related Collection Period and allocable to the
SUBI Interest;
(xii) to the Class B Certificateholders, the aggregate of the amounts
allocable pursuant to clause (xi) above that were not previously
distributed pursuant to such clause or this clause (each such amount, a
"Class B Certificate Principal Loss Amount"), together with any Class B
Certificate Principal Carryover Shortfall;
(xiii) to the Class B Certificateholders, accrued and unpaid interest
at the Class B Certificate Rate on any unreimbursed Class B Certificate
Principal Loss Amount and any unreimbursed Class B Certificate Principal
Carryover Shortfall;
(xiv) in the event that World Omni is the Servicer (and it has not
elected to waive the Servicing Fee with respect to the related Collection
Period), to the Servicer, the Investor Percentage of (a) the Servicing Fee
for the related Collection Period and (b) any unpaid Servicing Fee with
respect to one or more prior Collection Periods; and
(xv) to the Trustee and the Origination Trustee, the Investor
Percentage of all specified expenses incurred with respect to the Trust or
the Origination Trust in excess of the Capped Administrative Expenses that
have been paid but have not yet been reimbursed (the "Uncapped
Administrative Expenses").
Notwithstanding the foregoing, as more fully described under "Description
of the Certificates -- Distributions on the Certificates -- Application and
Distributions of Principal", on any Distribution Date relating to a Collection
Period during the Revolving Period, amounts otherwise payable to
Certificateholders pursuant to clauses (viii), (ix), (xi) and (xii) above will
be treated as Principal Collections for the Collection Period in which such
Distribution Date occurs. Accordingly, such amounts will be available to be
reinvested in Subsequent Contracts and Subsequent Leased Vehicles during the
Revolving Period. (Agreement, Section 3.03).
The balance, if any, of the Interest Collections allocated to the Investor
Interest for the related Collection Period, after giving effect to the
distributions in clauses (i) through (xv) above, will constitute "Excess
Collections". On each Distribution Date, Excess Collections will be deposited
into the Reserve Fund until the amount on deposit therein (after giving effect
to all withdrawals therefrom on such Distribution Date) equals the Reserve Fund
Cash Requirement, and then, if such Distribution Date occurs (i) during the
Revolving Period, any remaining Excess Collections will be paid to the Seller
and (ii) during the Amortization Period, an amount equal to the related
Accelerated Principal Distribution Amount will be paid to Certificateholders as
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a payment of principal and any remaining Excess Collections will be paid to the
Seller. To the extent that an Accelerated Principal Distribution Amount is paid
to Certificateholders on a Distribution Date in any month following the month
during which the Amortization Period commences, such amount will be distributed
first to the Class A-1 Certificateholders until the Class A-1 Certificates have
been paid in full, second, to the Class A-2 Certificateholders until the Class
A-2 Certificates have been paid in full, and thereafter the Class A Percentage
and the Class B Percentage of any remaining amount will be distributed to the
Class A-3 Certificateholders and the Class B Certificateholders, respectively.
If any Seller Amounts are required to be applied to make any of the
distributions in clauses (i) through (xv) above, the Interest Collections that
are part of the Seller Amounts will be applied before any Principal Collections
that are part of the Seller Amounts are so applied. (Agreement, Section 3.03).
In the event on any Distribution Date there remains any shortfall in
amounts required to be distributed to the Class A-1 Certificateholders, the
Class A-2 Certificateholders and Class A-3 Certificateholders under clauses
(ii), (viii), (ix) or (x) above, then the amount available will be distributed
pro rata to such Certificateholders based on the Class A-1 Allocation
Percentage, the Class A-2 Allocation Percentage and the Class A-3 Allocation
Percentage, respectively. (Agreement, Section 3.03).
"Interest Collections" with respect to any Collection Period will be
calculated as described under "Summary -- The Revolving Period; Subsequent
Contracts and Subsequent Leased Vehicles". (SUBI Trust Agreement, Section
10.01).
"Capped Origination Trust Administrative Expenses" will equal the amounts
sufficient to pay specified administrative costs and expenses of the Origination
Trust that are allocable to the SUBI Interest up to but not exceeding $100,000
in any calendar year. "Capped Trust Administrative Expenses" will equal the
amounts sufficient to pay specified administrative costs and expenses associated
with the Certificates such as the Trustee's compensation, the reasonable fees
and disbursements of the Seller's accountants and attorneys up to but not
exceeding $50,000 in any calendar year (or $100,000 in a calendar year in which
an Early Amortization Event occurs with respect to which the Trustee sells or
otherwise disposes of the SUBI Interest). (SUBI Trust Agreement, Section 10.01;
Agreement, Section 1.01).
"Capped Contingent and Excess Liability Premiums" will equal the amounts
sufficient to pay the premiums then due on the portion of the Contingent and
Excess Liability Insurance Policies allocable to the SUBI Interest, up to but
not exceeding $475,000 in any calendar year.
A "Certificate Principal Loss Amount" with respect to any Distribution Date
will equal the sum of any Class A-1, Class A-2, Class A-3 and Class B
Certificate Principal Loss Amount and will represent a loss of principal in
respect of Loss Amounts allocable to the Investor Interest and will arise when
the Investor Percentage of Interest Collections allocable to the SUBI Interest,
the Required Amount, the Seller Amounts, the Servicing Fee (so long as World
Omni is the Servicer) and, with respect to any Class A-3 Certificate Principal
Loss Amount, amounts otherwise payable in respect of principal to the Class B
Certificateholders are not sufficient to cover such loss. As described under
"Description of the Certificates -- General", any Certificate Principal Loss
Amounts allocable to a Class of Class A Certificates which are not reimbursed as
provided herein will reduce the Certificate Balance of such Class of Class A
Certificates. (Agreement, Section 1.01).
The "Class A-1 Interest Carryover Shortfall" with respect to any
Distribution Date will equal the excess, if any, of (i) the amount of interest
distributable on the Class A-1 Certificates for such Distribution Date and any
outstanding Class A-1 Interest Carryover Shortfall from the immediately
preceding Distribution Date plus interest at the Class A-1 Certificate Rate on
such outstanding Class A-1 Interest Carryover Shortfall from such immediately
preceding Distribution Date through the current Distribution Date, over (ii) the
amount of interest distributed to the Class A-1 Certificateholders on such
Distribution Date. The "Class A-2 Interest Carryover Shortfall", the "Class A-3
Interest Carryover Shortfall" and the "Class B Interest Carryover Shortfall"
will be calculated in the same manner as the Class A-1 Interest Carryover
Shortfall, appropriately modified to relate to the Class A-2 Certificates, the
Class A-3 Certificates and the Class B Certificates, respectively. (Agreement,
Section 1.01).
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The "Class B Certificate Principal Carryover Shortfall", with respect to
any Distribution Date relating to the Amortization Period from and after the
Distribution Date on which the Class A-2 Certificates are paid in full, will
equal the amount, if any, of the Class B Percentage of the Investor Percentage
of Principal Collections allocable to the SUBI Interest for such Distribution
Date that is instead applied to the distribution of principal to the Class A
Certificateholders, pursuant to clauses (viii) through (x) above. The Class B
Percentage of the Investor Percentage of Principal Collections allocable to the
SUBI Interest will be applied for such purposes only to the extent that the
other amounts available therefor are insufficient.
The "Class B Allocation Percentage" with respect to any Distribution Date
will mean the Class B Certificate Balance as a percentage of the Certificate
Balance, calculated as of the last day of the related Collection Period.
The amount of funds to be withdrawn from the Reserve Fund on a Distribution
Date and applied to payments to be made as described above will equal the lesser
of (i) the amount on deposit in the Reserve Fund on the related Deposit Date and
(ii) the amount, if any, by which (a) the full amount distributable on such
Distribution Date pursuant to clauses (i) through (xv) above exceeds (b) the
Investor Percentage of Interest Collections allocable to the SUBI Interest for
the related Collection Period. (Agreement, Sections 1.01, 3.03 and 3.04). For
further details regarding the Reserve Fund, see "Summary -- Security for the
Certificates -- The Reserve Fund" and "Security for the Certificates -- The
Accounts -- The Reserve Fund".
Application and Distributions of Principal
Revolving Period. No principal will be payable to the Class A
Certificateholders until the November 1997 Distribution Date or, upon the
occurrence of an Early Amortization Event, until the Distribution Date in the
month immediately succeeding the month in which such Early Amortization Event
occurs.
On a Transfer Date related to any Collection Period during the Revolving
Period, the Servicer will identify lease contracts and the related leased
vehicles of the Origination Trust that meet the eligibility criteria described
under "The Contracts" and are not evidenced by the SUBI or any Other SUBI. On
each Transfer Date, the Servicer, acting on behalf of the Origination Trustee,
will allocate as SUBI Assets additional lease contracts and related leased
vehicles so identified having aggregate Discounted Principal Balances as of the
last day of the preceding Collection Period (or, in the case of the first
Transfer Date, October 31, 1996) (each, a "Subsequent Cutoff Date" and, together
with the Initial Cutoff Date, the "Cutoff Dates") approximately equal to, but
not greater than, all Principal Collections collected or received since the
Initial Cutoff Date that have not yet been reinvested in Subsequent Contracts
and Subsequent Leased Vehicles as described herein. Upon such allocation, the
related lease contracts and leased vehicles will become Subsequent Contracts and
Subsequent Leased Vehicles and accordingly will become SUBI Assets. No partial
interest in lease contracts (and the related leased vehicles) will be so
allocated as SUBI Assets. Coincident with such allocation, the Servicer, acting
on behalf of the Origination Trustee, will transfer from the SUBI Collection
Account an amount of unreinvested Principal Collections equal to the aggregate
Discounted Principal Balances of the related Subsequent Contracts as of the
related Subsequent Cutoff Date to an account maintained by the Origination
Trustee to hold collections with respect to the Origination Trust Assets that
are not SUBI Assets.
Any Principal Collections that are not so reinvested may be reinvested in
additional Subsequent Contracts and Subsequent Leased Vehicles on one or more
subsequent Transfer Dates prior to the end of the Revolving Period. In the event
that on the twenty-fifth day of any month (beginning November 1996) during the
Revolving Period the amount of Principal Collections as of the last day of the
immediately preceding month that have not been reinvested in Subsequent
Contracts and Subsequent Leased Vehicles exceeds $1,000,000, an Early
Amortization Event will occur, the Revolving Period will terminate prior to the
Amortization Date and any unreinvested Principal Collections at the end of the
Revolving Period will be distributed as principal to the Trust and then to
Certificateholders on the immediately succeeding Distribution Date. (Servicing
Agreement, Section 8.02; SUBI Trust Agreement, Section 11.02; Agreement, Section
8.01).
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"Collections" and "Principal Collections" with respect to any Collection
Period will be calculated as described under "Summary -- The Revolving Period;
Subsequent Contracts and Subsequent Leased Vehicles". (SUBI Trust Agreement,
Section 10.01).
Amortization Period. On each Distribution Date beginning with the
Distribution Date in the month following the month in which the Amortization
Period commences and ending on the Distribution Date on which the Class A-1
Certificates have been paid in full, the Trustee will distribute an amount equal
to the Investor Percentage of all Principal Collections collected or received in
respect of the related Collection Period allocable to the Investor Interest as
principal first to the Class A-1 Certificateholders until the Class A-1
Certificates have been paid in full, second, to the Class A-2 Certificateholders
until the Class A-2 Certificates have been paid in full, and thereafter the
Class A Percentage and the Class B Percentage of any such remaining Principal
Collections will be distributed as principal to the Class A-3 Certificateholders
and the Class B Certificateholders, respectively. The Trustee will also
distribute to Class A-1 Certificateholders on the Distribution Date in the month
following the month in which the Amortization Period commences the Class A
Percentage of the Investor Percentage of the sum of (i) any Principal
Collections allocable to the SUBI Interest that were not reinvested in
Subsequent Contracts and Subsequent Leased Vehicles as of the end of the
Revolving Period and (ii) any Unallocated Principal Collections on deposit in
the Distribution Account at the time the Amortization Period commences. The
aggregate distributions of principal to the Certificateholders of each Class of
Class A Certificates will not exceed the Initial Certificate Balances of such
Class of Certificates. (SUBI Trust Agreement, Section 11.02; Agreement, Section
3.03).
In general, no principal payments will be made on the Class A-2
Certificates until the Class A-1 Certificates have been paid in full, or on the
Class A-3 or Class B Certificates until the Class A-1 and Class A-2 Certificates
have been paid in full. The Investor Percentage of Loss Amounts will be
allocated among Certificateholders on a pro rata basis, based on the Class A-1
Allocation Percentage, the Class A-2 Allocation Percentage, the Class A-3
Allocation Percentage and the Class B Allocation Percentage, as the case may be,
and then reimbursed out of available funds in the amounts and order of priority
described in "Description of the Certificates -- Distributions on the
Certificates -- Distributions of Interest". Loss Amounts will not be allocated
or reimbursed to any Certificateholder once the related Certificates have been
paid in full. In addition, the Investor Percentage of the net proceeds of any
sale or other disposition of the SUBI Interest, the SUBI Certificate or other
property of the Trust, which may occur under certain circumstances involving an
Insolvency Event with respect to the Seller (as described under "Description of
the Certificates -- Early Amortization Events"), to the extent such net proceeds
constitute Principal Collections, will be distributed on a pro rata basis,
first, to the Class A-1, Class A-2 and Class A-3 Certificateholders based on
their respective Class Certificate Balances until the Class A Certificates have
been paid in full, and second, to the Class B Certificateholders.
In addition, on any Distribution Date relating to the Amortization Period
from and after the Distribution Date on which the Class A-2 Certificates are
paid in full, but only to the extent that other amounts available therefor are
insufficient, amounts that would otherwise be distributable to the Class B
Certificateholders in respect of the Class B Percentage of the Investor
Percentage of Principal Collections collected or received in respect of the
related Collection Period and allocable to the SUBI Interest will instead be
distributed as principal payments to the Class A-3 Certificateholders up to an
amount equal to the sum of (i) the Class A-3 Allocation Percentage of the
Investor Percentage of Loss Amounts incurred during the related Collection
Period and allocable to the SUBI Interest, (ii) any Class A-3 Certificate
Principal Loss Amounts and (iii) accrued and unpaid interest on any Class A-3
Certificate Principal Loss Amounts, as set forth under "Description of the
Certificates -- Distributions on the Certificates -- Distributions of Interest."
Principal payments made during the Amortization Period in respect of the
Class A-1 Certificates or the Class A-2 Certificates, as applicable, will
consist primarily of the Investor Percentage of all Principal Collections during
the related Collection Period allocable to the SUBI Interest. However, principal
payments made in respect of the Class A-3 Certificates and the Class B
Certificates (once the Class A-1 Certificates and the Class A-2 Certificates
have been paid in full) will be based upon a calculation of the Class A
Percentage and the Class B Percentage of the Investor Percentage of such
Principal Collections.
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EARLY AMORTIZATION EVENTS
As described above, the Revolving Period will continue until the close of
business on the last day of September 1997 and the Amortization Period will
begin on October 1, 1997 and continue to the earlier of the payment in full of
the Certificates and the termination of the Trust, unless an Early Amortization
Event occurs prior to any of such dates, thereby commencing the Amortization
Period. An "Early Amortization Event" will mean any of the following events:
(i) failure by the Servicer (a) to make any payment or deposit
required with respect to the SUBI, the SUBI Interest or the Certificates
under the Agreement, the SUBI Trust Agreement or the Servicing Agreement,
within five Business Days after the date the payment or deposit is required
to be made, or (b) to deliver a Servicer's Certificate within ten Business
Days after any Determination Date;
(ii) failure by the Seller or the Servicer duly to observe or perform
in any material respect any other of its covenants or agreements in the
Agreement (other than those described in clause (i) above), the SUBI Trust
Agreement or the Servicing Agreement, which failure materially and
adversely affects the rights of holders of the SUBI Interest or
Certificateholders and which continues unremedied for 60 days after the
giving of written notice of such failure (a) to the Seller or the Servicer,
as the case may be, by the Trustee or the Origination Trustee or (b) to the
Seller or the Servicer, as the case may be, and to the Trustee by holders
of Certificates evidencing not less than 25% of the Voting Interests of the
Class A Certificates and the Class B Certificates, voting together as a
single class;
(iii) failure to cure the inaccuracy of certain representations,
warranties and certificates of the Seller or the Servicer in the Agreement,
the SUBI Trust Agreement or the Servicing Agreement, which failure
materially and adversely affects the rights of holders of the SUBI Interest
or Certificateholders and which continues uncured for 60 days after notice
is given as described in clause (ii) above; provided that an Early
Amortization Event pursuant to this subparagraph (iii) will not be deemed
to occur if a related Reallocation Payment is due in connection with such
breach and has been paid by the Servicer in accordance with the Servicing
Agreement;
(iv) the occurrence of certain Insolvency Events relating to the
Seller;
(v) creation of any lien or encumbrance not otherwise permitted by the
Agreement, the SUBI Trust Agreement or the Servicing Agreement on the SUBI
Assets, which lien or encumbrance is not released within 60 days of its
creation;
(vi) transfer of, or imposition of a lien or encumbrance on, the
Retained SUBI Interest held by the Seller except as permitted by the
Agreement, which, in the case of the imposition of a lien or encumbrance,
is not released within 30 days of its creation;
(vii) the Seller, the Trust or the Origination Trust becomes subject
to registration as an "investment company" for purposes of the Investment
Company Act of 1940, as amended;
(viii) if on the twenty-fifth day of any month (beginning November
1996) the amount of Principal Collections as of the last day of the
immediately preceding month that have not been reinvested in Subsequent
Contracts and Subsequent Leased Vehicles exceeds $1,000,000;
(ix) an Event of Servicing Termination occurs; or
(x) if on any Distribution Date the aggregate amount withdrawn from
the Reserve Fund and deposited into the Distribution Account on or prior to
such Distribution Date (without giving effect to any deposits into the
Reserve Fund) exceeds $2,027,184 (i.e., 0.25% multiplied by 99.8% of the
Aggregate Net Investment Value as of the Initial Cutoff Date).
The Amortization Period will commence on the day as of which an Early
Amortization Event is deemed to have occurred. (Agreement, Section 8.01). In
such event, distributions of principal to the Certificateholders will begin on
the Distribution Date in the month following the month in which the Early
Amortization Event occurs. If, because of the occurrence of an Early
Amortization Event, the Amortization Period begins earlier than the Amortization
Date, Class A-1 Certificateholders will begin receiving distributions of
principal earlier than they would otherwise have under the Agreement, and Class
A-2 and Class A-3 Certificateholders may
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begin receiving distributions of principal earlier than they would otherwise
have under the Agreement, which may shorten the final maturity of the related
Class of Class A Certificates.
In addition to the consequences of an Early Amortization Event discussed
above, if an Insolvency Event with respect to the Seller were to occur during
the Revolving Period, the Agreement will require the Seller to promptly give
notice of such Insolvency Event to the Trustee. Pursuant to the Agreement,
within 15 days of such notice, the Trustee may, and upon receipt of written
instructions from holders of Certificates evidencing Voting Interests of not
less than 51% of the Class A Certificates (voting together as a single class) or
51% of the Class A Certificates and Class B Certificates (voting together as a
single class) shall, publish a notice of the Insolvency Event stating that the
Trustee intends to sell or dispose of the SUBI Interest and the SUBI Certificate
and the other property of the Trust in a commercially reasonable manner.
Following such publication, unless otherwise prohibited by applicable law, the
Trustee will sell or otherwise dispose of the SUBI Interest, the SUBI
Certificate and such other property in a commercially reasonable manner and on
commercially reasonable terms; provided that such sale shall not be made without
the consent of all the Certificateholders if a net loss would be realized as a
result of such sale. The net sale or disposition proceeds of the SUBI Interest,
the SUBI Certificate and such other property will be deposited into the SUBI
Collection Account and treated as Collections on or in respect of the SUBI
Assets. The interest portion of the Investor Percentage of such proceeds will be
distributed to the Certificateholders in the priority provided for herein, and
the principal portion of the Investor Percentage of such proceeds will be
distributed first, on a pro rata basis, to the Class A-1, Class A-2 and Class
A-3 Certificateholders based on their respective Class Certificate Balances
until the Class A-1, Class A-2 and Class A-3 Certificates have been paid in
full, and second, to the Class B Certificateholders. (Agreement, Section 8.02).
If such proceeds, together with all amounts on deposit in the Accounts, the
Reserve Fund and the Residual Value Surplus Account, amounts otherwise payable
to the Seller in respect of the Seller Interest, the Servicing Fee (if World
Omni is the Servicer) and, in the case of the Class A-3 Certificates, certain
amounts otherwise distributable in respect of the Class B Certificates, are
insufficient to pay the Certificate Balance of a Class of Class A Certificates,
any unreimbursed Certificate Principal Loss Amount in respect of such Class of
Class A Certificates and any accrued and unpaid interest thereon in full, the
related Class A Certificateholders will suffer a corresponding loss.
The "Voting Interests" of the (i) Class A Certificates will be allocated
among the Class A-1, Class A-2, and Class A-3 Certificateholders or Certificate
Owners, as the case may be, in accordance with their respective Class
Certificate Balances, as the context may require, and (ii) Class B Certificates
will be allocated among the Class B Certificateholders in accordance with the
Class B Certificate Balance represented thereby. Notwithstanding the foregoing,
in certain circumstances, any Class A Certificates or Class B Certificates, as
the case may be, held or beneficially owned by ALFI, ALFI L.P., the Seller,
WOLSI, World Omni or any of their respective affiliates shall be excluded from
such determination. (Agreement, Section 1.01).
STATEMENTS TO CERTIFICATEHOLDERS
On each Distribution Date, the Trustee will include with each distribution
to each Certificateholder as of the close of business on the related Record Date
(which, in the case of the Class A Certificates, shall be Cede as the nominee of
DTC unless Definitive Certificates are issued under the limited circumstances
described herein) a statement, setting forth with respect to such Distribution
Date or the related Collection Period, among other things, the following:
(i) the Investor Percentages for Interest Collections and Principal
Collections allocable to the SUBI Interest for such Collection Period;
(ii) the amount being distributed to Certificateholders (the
"Certificate Distribution Amount");
(iii) the amount of the Certificate Distribution Amount allocable to
interest and to principal on each Class of Certificates;
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(iv) the amount of the Certificate Distribution Amount allocable to
any Class A-1 Interest Carryover Shortfall, any Class A-2 Interest
Carryover Shortfall, any Class A-3 Interest Carryover Shortfall and any
Class B Interest Carryover Shortfall;
(v) the amount, if any, of any unpaid Class A-1 Interest Carryover
Shortfall, unpaid Class A-2 Interest Carryover Shortfall, unpaid Class A-3
Interest Carryover Shortfall and unpaid Class B Interest Carryover
Shortfall, after giving effect to distribution of the Certificate
Distribution Amount;
(vi) the Certificate Balance, the Class A-1 Certificate Balance, the
Class A-2 Certificate Balance, the Class A-3 Certificate Balance, the Class
A-1 Certificate Factor, the Class A-2 Certificate Factor, the Class A-3
Certificate Factor, the Class A-1 Allocation Percentage, the Class A-2
Allocation Percentage, the Class A-3 Allocation Percentage and the Class B
Allocation Percentage as of such Distribution Date, in each case after
giving effect to distribution of the Certificate Distribution Amount;
(vii) the aggregate amount, if any, of the reimbursement of Loss
Amounts included in distribution of the Certificate Distribution Amount and
the amount thereof allocated to each Class of Certificateholders;
(viii) the amount of the Certificate Distribution Amount allocable to
reimbursement of previous Class A-1 Certificate Principal Loss Amounts,
Class A-2 Certificate Principal Loss Amounts, Class A-3 Certificate
Principal Loss Amounts and Class B Certificate Principal Loss Amounts, in
each case together with the amount of accrued interest thereon included in
such distribution;
(ix) the amount, if any, of the aggregate unreimbursed Class A-1
Certificate Principal Loss Amounts, Class A-2 Certificate Principal Loss
Amounts, Class A-3 Certificate Principal Loss Amounts and Class B
Certificate Principal Loss Amounts, after giving effect to distribution of
the Certificate Distribution Amount;
(x) the amount of any unreimbursed Class B Certificate Principal
Carryover Shortfall;
(xi) the Investor Percentage of the Servicing Fee;
(xii) the amount of any Required Amount included in the Certificate
Distribution Amount, the balance on deposit in the Reserve Fund on such
Distribution Date, after giving effect to withdrawals therefrom and
deposits thereto on such Distribution Date, the change in such balance from
the immediately preceding Distribution Date, the Reserve Fund Cash
Requirement and the Reserve Fund Supplemental Requirement, if any;
(xiii) the amount of Seller Amounts, if any, included in the
Certificate Distribution Amount;
(xiv) the Aggregate Net Investment Value as of the end of such
Collection Period;
(xv) the aggregate amount of Payments Ahead on deposit in the SUBI
Collection Account and the change in such amount from the immediately
preceding Distribution Date;
(xvi) the amount of Advances made in respect of such Collection Period
and the amount of unreimbursed Advances on such Distribution Date;
(xvii) the balance on deposit in the Residual Value Surplus Account on
the related Deposit Date, after giving effect to the change in such balance
from the immediately preceding Deposit Date, and the aggregate amount of
Residual Value Surplus deposited into or withdrawn from the Residual Value
Surplus Account on the related Deposit Date; and
(xviii) certain information used in determining compliance with the
Reserve Fund Tests, including the Charge-off Rate and the Delinquency Rate.
Each amount set forth pursuant to clauses (ii) through (v) and (vii)
through (x) above will be expressed in the aggregate and as a dollar amount per
$1,000 of original principal balance of a Class A Certificate or Class B
Certificate, as applicable. Copies of such statements may be obtained by
Certificateholders or Certificate Owners by a request in writing addressed to
the Trustee. In addition, within the prescribed period
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of time for tax reporting purposes after the end of each calendar year during
the term of the Agreement, the Trustee will mail to each person who at any time
during such calendar year shall have been a Class A or Class B Certificateholder
or a Certificate Owner, a statement containing the sum of the amounts described
in clauses (ii) through (vi) and (viii) through (xi) above for the purpose of
preparing such person's federal income tax return. (Agreement, Section 3.06).
TERMINATION OF THE TRUST; RETIREMENT OF THE CERTIFICATES
The respective obligations and responsibilities of the Seller and the
Trustee created by the Agreement will terminate upon the earliest to occur of
(i) the maturity, sale or other liquidation, as the case may be, of the last
outstanding Contract and Leased Vehicle evidenced by the SUBI and the
distribution of all proceeds thereof, together with all amounts on deposit in
the Accounts and the Reserve Fund, in the manner to be prescribed in the
Agreement, (ii) the day following the Distribution Date on which the
Certificates have been paid in full and after which there is no unreimbursed
Certificate Principal Loss Amount or Class B Certificate Principal Carryover
Shortfall (together with accrued interest thereon) and (iii) the occurrence of
the event described below. In order to avoid excessive administrative expenses,
the Seller will be permitted at its option to purchase the SUBI Interest
evidenced by the SUBI Certificate from the Trust on any Distribution Date if,
either before or after giving effect to any payment of principal required to be
made on such Distribution Date, the Certificate Balance is less than or equal to
10% of the Initial Certificate Balance. The purchase price will be equal to the
greater of (i) the sum of the Class A Certificate Balance and the Class B
Certificate Balance, in each case plus accrued and unpaid interest thereon at
the related Certificate Rate, plus certain other accrued and unpaid amounts, if
any, due to the Investor Certificateholders or the Servicer, and (ii) 99.8% of
the Aggregate Net Investment Value as of the last day of the preceding
Collection Period. The Trustee will give written notice of termination of the
Trust to each Certificateholder of record. In connection with any such
termination, except as otherwise provided in the Agreement, the Seller will be
deemed to relinquish all claims it may have against the assets of the Trust in
respect of Seller Amounts that were not paid to the Seller. (Agreement, Section
7.01).
The final distribution to any Certificateholder will be made only upon
surrender and cancellation of such Certificateholder's Certificate at an office
or agency of the Trustee specified in the notice of termination. Any funds
remaining that are payable in such final distribution to a Certificateholder,
after the Trustee has taken certain measures to locate such Certificateholder
and such measures have failed, will be distributed to the United Way.
(Agreement, Section 7.01).
BOOK-ENTRY REGISTRATION
Certificate Owners may hold through DTC (in the United States), or Cedel or
Euroclear (in Europe), which in turn hold through DTC, if they are participants
in such systems, or indirectly through organizations that are participants in
such systems ("Participants").
Cede, as nominee for DTC, will hold the Class A Certificates. Cedel and
Euroclear will hold omnibus positions on behalf of their Participants through
customers' securities accounts in the Depositaries which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC. Unless and until Definitive Certificates are issued, it is
anticipated that the only Class A Certificateholder will be Cede, as the nominee
of DTC. Certificate Owners will only be permitted to exercise their rights
indirectly through DTC.
Transfers between Participants in DTC ("DTC Participants") will occur in
accordance with DTC rules. Transfers between Participants in Cedel ("Cedel
Participants") and Participants in Euroclear ("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 Cedel
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of Cedel or Euroclear by its Depositary.
However, each such cross-market transaction will require delivery of
instructions to Cedel or Euroclear by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(European time).
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Cedel or Euroclear 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. Cedel Participants and Euroclear Participants may
not deliver instructions directly to the related Depositaries.
Because of time-zone differences, credits of securities received in Cedel
or Euroclear as a result of a transaction with a DTC 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 Cedel
Participants or Euroclear Participants on such business day. Cash received in
Cedel or Euroclear as a result of sales of Class A Certificates by or through a
Cedel Participant or Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedel or Euroclear cash account only as of the business day following settlement
in DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the UCC in effect in the State of New York and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that DTC Participants deposit with DTC. DTC also facilitates
the clearance and settlement of securities transactions among DTC Participants
through electronic computerized book-entry changes in accounts of DTC
Participants, thereby eliminating the need for physical movement of securities
certificates. DTC Participants include securities brokers and dealers (including
the Underwriters), banks, trust companies, clearing corporations and certain
other organizations. Indirect access to the DTC system also is available to
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a DTC Participant, either directly or indirectly
(the "Indirect DTC Participants"). The rules applicable to DTC and DTC
Participants are on file with the Commission.
Certificate Owners that are not DTC Participants or Indirect DTC
Participants but that desire to purchase, sell or otherwise transfer ownership
of, or an interest in, Class A Certificates under the DTC System may do so only
through DTC Participants or Indirect DTC Participants. DTC Participants will
receive a credit for the Class A Certificates in DTC's records. The ownership
interest of each Certificate Owner in turn will be recorded on the DTC
Participants' and Indirect DTC Participants' respective records. Certificate
Owners will not receive written confirmation from DTC of their purchase, but
Certificate Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the DTC Participant or Indirect DTC Participant through which the
Certificate Owner entered into the transaction. Transfers of ownership interests
in the Class A Certificates will be accomplished by entries made on the books of
DTC Participants acting on behalf of Certificate Owners.
To facilitate subsequent transfers, all Class A Certificates deposited by
DTC Participants with DTC will be registered in the name of Cede, as nominee of
DTC. The deposit of Class A Certificates with DTC and their registration in the
name of Cede will effect no change in beneficial ownership. DTC will have no
knowledge of the actual Certificate Owners and its records will reflect only the
identity of the DTC Participants to whose accounts such Class A Certificates are
credited, which may or may not be the Certificate Owners. DTC Participants and
Indirect DTC Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to DTC Participants,
by DTC Participants to Indirect DTC Participants and by DTC Participants and
Indirect DTC Participants to Certificate Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Principal and interest payments with respect to the Class A Certificates
will be made to DTC. DTC's practice is to credit DTC Participants' accounts on
each Distribution Date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive payment
on such Distribution Date. Payments by DTC Participants and Indirect DTC
Participants to Certificate Owners will
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be governed by standing instructions and customary practices, as in the case
with securities held for the accounts of customers in bearer form or registered
in "street name", and will be the responsibility of such DTC Participant and
Indirect DTC Participant and not of DTC, the Trustee, the Origination Trustee,
the Servicer or the Seller, subject to any statutory or regulatory requirements
as may be in effect from time to time. Payment of principal of and interest on
the Class A Certificates to DTC will be the responsibility of the Trustee,
disbursement of such payments to DTC Participants will be the responsibility of
DTC and disbursement of such payments to Certificate Owners will be the
responsibility of DTC Participants and Indirect DTC Participants. As a result,
under the book-entry format, Certificate Owners may experience some delay in
their receipt of payments.
Because DTC can only act on behalf of DTC Participants, who in turn act on
behalf of Indirect DTC Participants and certain banks, the ability of a
Certificate Owner to pledge Class A Certificates to persons or entities that do
not participate in the DTC system, or otherwise take actions with respect to
such Class A Certificates, may be limited due to the lack of a physical
certificate for such Class A Certificates.
Neither DTC nor Cede will consent or vote with respect to the Class A
Certificates. Under its usual procedures, DTC mails an "Omnibus Proxy" to the
Trustee as soon as possible after any applicable record date for such a consent
or vote. The Omnibus Proxy assigns Cede's consenting or voting rights to those
DTC Participants to whose accounts the Class A Certificates are credited on that
record date (identified in a listing attached to the Omnibus Proxy).
None of the Seller, the Servicer, the Origination Trustee nor the Trustee
will have any liability for any aspect of the records relating to or payments
made on account of beneficial ownership interests of the Class A Certificates
held by Cede, as nominee of DTC, or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for Cedel Participants and facilitates the
clearance and settlement of securities transactions between Cedel Participants
through electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in Cedel in any of 28 currencies, including United States dollars. Cedel
provides to Cedel Participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Cedel interfaces with domestic markets in
several countries. As a professional depositary, Cedel is subject to regulation
by the Luxembourg Monetary Institute. Cedel Participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. Indirect access to Cedel is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for 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 32 currencies, including United States dollars. The Euroclear System
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 Euroclear Clearance System
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 the Euroclear System
on behalf of Euroclear Participants. Euroclear Participants include banks
(including central banks), securities brokers and dealers and other professional
financial intermediaries. Indirect access to the Euroclear System is also
available to other firms that clear through or maintain a custodial relationship
with a Euroclear Participant, either directly or indirectly.
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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 applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within 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 the 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 Class A Certificates held through Cedel or
Euroclear will be credited to the cash accounts of Cedel 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 and withholding in accordance with relevant United
States tax laws and regulations. For further information in this regard, see
"Certain Income Tax Considerations -- Federal Taxation -- Federal Income Tax
Consequences to Foreign Investors" herein and "Global Clearance, Settlement and
Tax Documentation Procedures -- Certain U.S. Federal Income Tax Documentation
Requirements" in Annex I hereto. Cedel or the Euroclear Operator, as the case
may be, will take any other action permitted to be taken by a Class A
Certificateholder on behalf of a Cedel Participant or Euroclear Participant only
in accordance with its relevant rules and procedures and subject to the related
Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Class A Certificates among Participants of
DTC, Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
Definitive Certificates will be issued to Certificate Owners rather than to
DTC only if (i) DTC is no longer willing or able to discharge its
responsibilities with respect to the Class A Certificates, and neither the
Trustee nor the Seller is able to locate a qualified successor, (ii) the Seller,
at its option, elects to terminate the book-entry system through DTC or (iii)
after an Early Amortization Event, Certificate Owners representing in the
aggregate not less than 51% of the Voting Interests of the Class A Certificates
(voting together as a single class) advise the Trustee through DTC or its
successor in writing that the continuation of a book-entry system through DTC or
its successor is no longer in the best interest of Certificate Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Trustee will be required to notify all Certificate
Owners, through Participants, of the availability through DTC of Definitive
Certificates. Upon surrender by DTC of the certificates representing the related
Class A Certificates and the receipt of instructions for re-registration, the
Trustee will issue Definitive Certificates to Certificate Owners, who thereupon
will become Certificateholders for all purposes of the Agreement. (Agreement,
Section 4.11).
Payments on the related Class A Certificates will thereafter be made by the
Trustee directly to holders of such Class A Certificates in accordance with the
procedures set forth herein and to be set forth in the Agreement. Interest
payments and any principal payments on the Definitive Certificates on each
Distribution Date will be made to holders in whose names the Definitive
Certificates were registered at the close of business on the Record Date with
respect to such Distribution Date. Payments will be made by check mailed to the
address of such holders as they appear on the Certificate Register or, under the
circumstances to be provided by the Agreement, by wire transfer to a bank or
depository institution located in the United States and having appropriate
facilities therefor. (Agreement, Section 3.03). The final payment on any Class A
Certificates (whether Definitive Certificates or global certificates registered
in the name of Cede representing
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the Class A Certificates), however, will be made only upon presentation and
surrender of such Definitive Certificates or global certificates at the office
or agency specified in the notice of final distribution to Class A
Certificateholders. (Agreement, Section 7.01).
Definitive Certificates will be transferable and exchangeable at the
offices of the Trustee or the Certificate Registrar to be set forth in the
Agreement. No service charge will be imposed for any registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge imposed in connection therewith. (Agreement,
Section 4.07).
SECURITY FOR THE CERTIFICATES
GENERAL
The property of the Trust will primarily consist of the SUBI Interest
evidenced by the SUBI Certificate, which is more fully described under "The
Trust and the SUBI -- The SUBI". The property of the Trust will also include
such amounts as from time to time are held in the Reserve Fund and the
Distribution Account. The Trust will also have the collateral benefit of monies
on deposit in the SUBI Collection Account and the Residual Value Surplus
Account, the Contingent and Excess Liability Insurance Policies described below
and the Trustee's rights as a third-party beneficiary of the SUBI Trust
Agreement and the Servicing Agreement.
As described under "Risk Factors -- Structural Considerations", the Trustee
generally will be deemed to have ownership of the SUBI Certificate and, through
such ownership, an indirect beneficial ownership interest in the Contracts and
Leased Vehicles. If a court of competent jurisdiction recharacterizes the
transfer of the SUBI Interest to the Trust, the Trustee may instead be deemed to
have a perfected security interest in the SUBI Certificate, the Contracts and
Contract Rights susceptible of perfection under the UCC, but in no event will
the Trustee be deemed to have a perfected security interest in the Leased
Vehicles.
THE ACCOUNTS
The Distribution Account
On or prior to the Closing Date, the Seller will establish a trust account
with the Trustee for the exclusive benefit of the Certificateholders and the
Seller, in its capacity as holder of the Seller Interest, from which all
payments with respect to the Certificates will be made (the "Distribution
Account"). (Agreement, Section 3.01). On each Deposit Date, all Principal
Collections and Interest Collections with respect to the related Collection
Period allocable to the SUBI Interest will be remitted to the Distribution
Account. Such deposits will be made from, among other sources, (i) monies on
deposit in the SUBI Collection Account or the Reserve Fund and (ii) the Seller
in the case of exercise of its right to purchase the SUBI Interest represented
by the SUBI Certificate when the Certificate Balance is less than or equal to
10% of the Initial Certificate Balance.
The SUBI Collection Account
On or prior to the Closing Date, the Origination Trustee will establish a
trust account for the exclusive benefit of the holders of interests in the SUBI
into which collections on or in respect of the Contracts and the Leased Vehicles
generally will be deposited (the "SUBI Collection Account"). (SUBI Trust
Agreement, Section 12.01).
Deposits into the SUBI Collection Account. Deposits into the SUBI
Collection Account will include, but will not be limited to, the following
payments made in respect of the SUBI Assets: (i) Monthly Payments; (ii) early
payments of the Outstanding Principal Balance of a Contract, including an amount
equal to the Residual Value of the related Leased Vehicle (each, a
"Prepayment"); (iii) Matured Leased Vehicle Proceeds, Repossessed Vehicle
Proceeds and other Liquidation Proceeds; (iv) Extension Fees; (v) Payments
Ahead; (vi) Advances made by the Servicer; (vii) Reallocation Payments by World
Omni (together with, under certain circumstances during the Amortization Period,
Reallocation Deposit Amounts) in respect of certain Contracts as to which an
uncured breach of certain representations and warranties or certain servicing
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covenants has occurred; and (viii) certain amounts in respect of certain
shortfalls in the Residual Values of Leased Vehicles relating to Matured
Contracts, as described under "Security for the Certificates -- The
Accounts -- The Residual Value Surplus Account". (Servicing Agreement, Sections
2.02, 8.02, 9.02 and 9.04; SUBI Trust Agreement, Section 12.01).
"Net Insurance Proceeds" will include recoveries pursuant to the Contingent
and Excess Liability Insurance Policies and the comprehensive, collision, public
liability and property damage insurance policy required to be obtained and
maintained by the lessee pursuant to each Contract (or payment by the Servicer
under the Servicing Agreement of such amounts under the circumstances described
in "Additional Document Provisions -- The Servicing Agreement -- Insurance on
Leased Vehicles"), and amounts paid by any insurer under any other insurance
policy relating to the Contracts, the related lessees or the Leased Vehicles, in
each case net of certain sums, if any, applied to the repair of the related
Leased Vehicles. (SUBI Trust Agreement, Section 10.01).
Monthly Payments made by the lessees under the Contracts normally will be
paid by mail and deposited into a lock box maintained by the Servicer, and then
deposited in the SUBI Collection Account within two Business Days after receipt.
Within two Business Days after receipt by the Servicer of all other payments on
or in respect of the Contracts or the Leased Vehicles other than Security
Deposits, including without limitation any Monthly Payments delivered directly
to the Servicer or World Omni (in the event that World Omni is no longer the
Servicer), Matured Leased Vehicle Proceeds, Repossessed Vehicle Proceeds and
other Liquidation Proceeds, Extension Fees, Payments Ahead and Prepayments
(regardless of whether made by lessees or other persons), such payments shall be
remitted to the SUBI Collection Account. (Servicing Agreement, Sections 2.02 and
9.02).
Notwithstanding the foregoing, the Servicer may remit all payments
collected or received by it on or in respect of the Contracts and the Leased
Vehicles to the SUBI Collection Account on a less frequent basis if (i) it
obtains a letter of credit, surety bond or insurance policy (collectively, the
"Servicer Letter of Credit") under which demands for payment may be made to
secure timely remittance of monthly collections to the SUBI Collection Account
and (ii) the Trustee is provided with a letter from each Rating Agency to the
effect that the use of such alternative remittance schedule will not result in
the qualification, reduction or withdrawal of its then-current rating of any
Class of Certificates. (Servicing Agreement, Section 9.02).
Net Deposits. So long as World Omni is the Servicer, the Servicer will be
permitted to deposit in the Distribution Account only the net amount
distributable to the Trustee, as holder of the SUBI Interest, and the Seller on
the related Deposit Date. The Servicer, however, will account to the Trustee,
the Origination Trustee, the Certificateholders and the Seller as if all of the
deposits and distributions described herein were made individually. (Agreement,
Section 3.05; Servicing Agreement, Section 9.02). This "net deposit" provision
will be for the administrative convenience of the parties involved and will not
affect amounts required to be deposited into the Accounts.
Withdrawals from the SUBI Collection Account. On each Deposit Date, all
Principal Collections and Interest Collections in respect of the SUBI Interest
on deposit in the SUBI Collection Account in respect of the related Collection
Period (including that portion of Payments Ahead representing Monthly Payments
due in such Collection Period) will be deposited into the Distribution Account.
During the Revolving Period, however, Principal Collections will be retained in
the SUBI Collection Account for reinvestment in Subsequent Contracts and
Subsequent Leased Vehicles as described under "Description of the
Certificates -- Distributions on the Certificates -- Application and
Distributions of Principal -- Revolving Period". (Agreement, Section 3.02; SUBI
Trust Agreement, Section 12.01; Servicing Agreement, Sections 2.02 and 4.01).
In the event that on any date the Servicer supplies the Origination Trustee
and the Trustee with an officer's certificate setting forth the basis for such
withdrawal, the Origination Trustee shall remit to the Servicer, without
interest and prior to any other distribution from the SUBI Collection Account on
such date, monies from the SUBI Collection Account representing (i) unreimbursed
Matured Leased Vehicle Expenses (after reimbursements thereof from the Residual
Value Surplus Account, if any), Repossessed Vehicle Expenses and other
Liquidation Expenses; (ii) delinquent Monthly Payments with respect to which the
Servicer has made an unreimbursed Advance; and (iii) an amount equal to any
unreimbursed Advances that
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the Servicer has concluded are Nonrecoverable Advances. (Servicing Agreement,
Section 9.02). For further information regarding Nonrecoverable Advances, see
"Additional Document Provisions -- The Servicing Agreement -- Advances".
The Residual Value Surplus Account
On or prior to the Closing Date, the Origination Trustee will establish a
trust account for the exclusive benefit of the holders of interests in the SUBI
into which all Residual Value Surplus with respect to a Collection Period will
be deposited on the related Deposit Date (the "Residual Value Surplus Account"
and, together with the Distribution Account, the SUBI Collection Account and the
Reserve Fund, the "Accounts"). (SUBI Trust Agreement, Section 12.03).
On each Deposit Date funds on deposit in the Residual Value Surplus Account
shall be withdrawn by the Origination Trustee and deposited into the SUBI
Collection Account up to an amount equal to the sum of (a) the aggregate of the
Residual Values of Leased Vehicles that were a part of Matured Leased Vehicle
Inventory but had not been sold or otherwise disposed of for at least two full
Collection Periods as of the end of the related Collection Period, and (b) the
amount by which Net Matured Leased Vehicle Proceeds (after application of
amounts withdrawn pursuant to the next sentence) for the related Collection
Period are less than the aggregate of the Residual Values of Leased Vehicles
that were a part of Matured Leased Vehicle Inventory but were sold or otherwise
disposed of during such Collection Period. In the event that the Servicer
supplies the Origination Trustee and the Trustee with an officer's certificate
setting forth the basis for such withdrawal, such funds will be withdrawn and
paid to the Servicer in reimbursement for any Matured Leased Vehicle Expenses
incurred during such Collection Period, but only to the extent that, after
reimbursement of such Matured Leased Vehicle Expenses (exclusive of any other
reimbursement thereof), Net Matured Leased Vehicle Proceeds would be no more
than the aggregate of the Residual Values of Leased Vehicles sold or otherwise
disposed of from Matured Leased Vehicle Inventory during such Collection Period.
Maintenance of the Accounts
The Distribution Account and the Reserve Fund will be maintained with the
Trustee and the SUBI Collection Account and the Residual Value Surplus Account
will be maintained with the Trust Agent so long as either (i) the short-term
unsecured debt obligations of the Trustee or the Trust Agent, as the case may
be, are rated at least P-1 by Moody's and A-1+ by Standard & Poor's (the
"Required Deposit Ratings") or (ii) the Trustee or the Trust Agent, as the case
may be, is a depository institution or trust company having a long-term
unsecured debt rating from Moody's of at least Baa3 and corporate trust powers
and the related Account is maintained in a segregated trust account in the
corporate trust department of the Trustee or the Trust Agent, as the case may
be. If the Trustee or the Trust Agent at any time does not qualify under either
of these criteria, the Servicer shall, with the assistance of the Trustee or the
Trust Agent, as the case may be, as necessary, cause the related Account to be
moved to a depository institution organized under the laws of the United States
or any state thereof whose short-term unsecured debt obligations are rated at
least equal to the Required Deposit Ratings or moved to a segregated trust
account located in a corporate trust department of a depository institution or
trust company as described above. (Agreement, Sections 3.01 and 3.04; SUBI Trust
Agreement, Sections 12.01 and 12.03; Servicing Agreement, Section 9.02).
Permitted Investments
Upon receipt of directions from the Servicer, the Trustee or the
Origination Trustee, as the case may be, shall invest funds on deposit in the
Accounts in one or more Permitted Investments maturing (i) no later than the
Business Day immediately preceding the Deposit Date immediately succeeding the
date of such investment, in the case of amounts on deposit in the SUBI
Collection Account, the Reserve Fund or the Residual Value Surplus Account or
(ii) on the Business Day immediately preceding the Distribution Date immediately
succeeding the date of such investment in the case of amounts on deposit in the
Distribution Account. Notwithstanding the foregoing, (a) investments on which
the entity at which the related Account is located is the obligor may mature on
the related Deposit Date or Distribution Date, as the case may be, and (b)
investments during the Revolving Period of Principal Collections on deposit in
the SUBI Collection
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Account may mature on such dates as in the Servicer's discretion will maintain
sufficient cash to acquire Subsequent Contracts and Subsequent Leased Vehicles
on the related Transfer Dates.
All income or other gain from the foregoing investments generally shall be
retained in the related Account with such gain in respect of funds in the SUBI
Collection Account and the Distribution Account generally being treated as
Interest Collections received in respect of the related Collection Period. Any
loss resulting from such investments shall be charged to the related Account.
(SUBI Trust Agreement, Sections 11.01 and 12.01; Agreement, Section 3.01;
Servicing Agreement, Section 9.02). "Permitted Investments" will be specified in
the SUBI Trust Agreement and will be limited to investments that meet the
criteria of each Rating Agency from time to time as being consistent with its
then-current rating of each Class of Certificates. (Agreement, Section 1.01).
The Reserve Fund
On or prior to the Closing Date, the Servicer will establish a trust
account with the Trustee for the exclusive benefit of the Certificateholders and
the Seller, as holder of the Seller Interest (the "Reserve Fund"). The monies on
deposit in the Reserve Fund will, as described below, be applied on each
Distribution Date to pay certain shortfalls in respect of amounts collected with
respect to the related Collection Period to be paid from the Distribution
Account and certain other shortfalls in respect of the Residual Values of the
Leased Vehicles. In addition, to the extent not otherwise required to make any
of the payments described under "Description of the
Certificates -- Distributions on the Certificates -- Distributions of Interest",
monies on deposit in the Reserve Fund will be available to make payments to the
Certificateholders should Collections ultimately be insufficient to reduce the
Class A-1 Certificate Balance, the Class A-2 Certificate Balance, the Class A-3
Certificate Balance or the Class B Certificate Balance to zero. (Agreement,
Sections 3.03 and 3.04).
The Reserve Fund Cash Requirement. The Reserve Fund will be created on or
prior to the Closing Date with the deposit by the Seller of the Initial Deposit.
On each Distribution Date, the funds in the Reserve Fund will be supplemented by
(i) all Excess Collections, (ii) all income realized on the investment of
amounts on deposit in the Reserve Fund in Permitted Investments, net of losses
resulting from such investments, and (iii) the deposit of monies in respect of
the related Collection Period remaining in the Distribution Account after making
all payments required to be made therefrom on such Distribution Date prior to
such deposit, including monies that otherwise would be distributed as Seller
Amounts, until the amount on deposit therein equals the Reserve Fund Cash
Requirement then in effect. Except as otherwise described below, the "Reserve
Fund Cash Requirement" with respect to any Distribution Date will equal the
lesser of (i) $28,380,573 (i.e., 3.5% of 99.8% of the Aggregate Net Investment
Value as of the Initial Cutoff Date) and (ii) 5.25% of 99.8% of the Aggregate
Net Investment Value as of the last day of the related Collection Period.
Notwithstanding the foregoing, in no event will the Reserve Fund Cash
Requirement be less than $24,326,205 (i.e., 3.0% of 99.8% of the Aggregate Net
Investment Value as of the Initial Cutoff Date) until such time as the
Certificate Balance as of the related Distribution Date (after giving effect to
reductions in the Certificate Balance on such Distribution Date) is less than
such amount, at which time the Reserve Fund Cash Requirement will equal such
Certificate Balance.
So long as all of the Reserve Fund Tests (as described under "Security for
the Certificates -- The Accounts -- The Reserve Fund -- Reserve Fund Tests") are
satisfied, the Reserve Fund Cash Requirement is expected to be $28,380,573 for
each Distribution Date relating to the Revolving Period.
Reserve Fund Supplemental Requirement. On each Deposit Date on which
withdrawals are to be made from the Reserve Fund in order (a) to deposit into
the Distribution Account an amount equal to the Required Amount, or (b) to make
any other payments to Certificateholders or otherwise from the Reserve Fund, as
described under "Description of the Certificates -- Distributions on the
Certificates -- Distributions of Interest", to the extent that the cash balance
in the Reserve Fund is insufficient to make such deposits or payments (a
"Reserve Fund Deficiency"), the Seller shall be required to deposit into the
Reserve Fund an additional cash amount which is limited to the lesser of (i)
such Reserve Fund Deficiency, and (ii) the sum of (A) $4,054,368 (i.e., 0.5% of
99.8% of the Aggregate Net Investment Value as of the Initial Cutoff Date), plus
(B) the aggregate of all sums previously released to the Seller from the Reserve
Fund as a result of a
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reduction for any reason (other than by reason of the Certificate Balance being
less than $24,326,205) of the Reserve Fund Cash Requirement below the amount of
the Initial Deposit, less (C) all amounts previously deposited by or on behalf
of the Seller into the Reserve Fund to satisfy a Reserve Fund Deficiency (the
"Reserve Fund Supplemental Requirement").
Payment of the Reserve Fund Supplemental Requirement will be an obligation
of the Seller with respect to the Reserve Fund. In the event that there is a
Reserve Fund Deficiency, the Reserve Fund Supplemental Requirement will
supplement the cash available in the Reserve Fund to the limited extent
described above. There can be no assurance that the Seller will have sufficient
cash to fund all or a part of any Reserve Fund Deficiency or to meet its
obligation to pay the Reserve Fund Supplemental Requirement. However, pursuant
to the Support Agreement, World Omni has agreed under certain circumstances to
provide or arrange for financial assistance in order to ensure that the Seller
maintains positive partners' capital. The Support Agreement will not constitute
a guarantee by World Omni of any obligations of the Seller, including payment of
any Reserve Fund Supplemental Requirement. See "The Seller" for further
information in this regard.
Reserve Fund Tests. Notwithstanding the foregoing calculations of the
Reserve Fund Cash Requirement and the Reserve Fund Supplemental Requirement, in
the event that any Residual Value Test, the Charge-off Rate Test or the
Delinquency Test (collectively, the "Reserve Fund Tests") is not satisfied as of
any Determination Date or if the related cure period is in effect, the Reserve
Fund Cash Requirement for the related Distribution Date will be an amount
calculated pursuant to a formula (the "Alternate Reserve Fund Formula") that
will be equal to the lesser of (i) two times the Reserve Fund Cash Requirement
and (ii) the Certificate Balance as of such Distribution Date (after giving
effect to any reduction in the Certificate Balance on such Distribution Date).
The Alternate Reserve Fund Formula will be utilized to determine the Reserve
Fund Cash Requirement on all future Distribution Dates until the Distribution
Date as of which the related Reserve Fund Test is "cured" and all other Reserve
Fund Tests are satisfied or cured, as described below. Notwithstanding the
foregoing, as described under "Additional Document Provisions -- The Servicing
Agreement -- Compliance with ERISA", in the event that the ERISA Compliance Test
is not satisfied on any Determination Date, the Reserve Fund Cash Requirement
shall be unlimited as of the related Distribution Date, and all Excess
Collections and other amounts described above in respect of each Distribution
Date will be deposited in the Reserve Fund until the Distribution Date following
the Determination Date on which the ERISA Compliance Test has been satisfied.
(Agreement, Section 1.01).
The "Residual Value Tests" will be comprised of a Turned-In Vehicle Test, a
Realization Test and an Appraisal Test. The "Turned-In Vehicle Test" will not be
satisfied as of a Determination Date if with respect to the related Collection
Period, the number of Leased Vehicles returned to the Servicer during such
Collection Period relating to Contracts that became Matured Contracts during
such Collection Period is greater than 50% of all Contracts that were Current
Contracts as of the beginning of such Collection Period and had been scheduled
to become Matured Contracts during such Collection Period (provided that at
least 200 such Contracts that were Current Contracts at the beginning of such
Collection Period were scheduled to become Matured Contracts during such
Collection Period). The "Realization Test" will not be satisfied on a
Determination Date if (i) with respect to the related Collection Period the
number of Leased Vehicles returned to the Servicer during such period relating
to Contracts that became Matured Contracts during such period is greater than
25% of all Contracts that were Current Contracts as of the beginning of such
Collection Period and had been scheduled to become Matured Contracts during such
period, and (ii) the average Net Matured Leased Vehicle Proceeds during the
three immediately preceding calendar months (or the months of September and
October 1996 in the case of the November 1996 Determination Date) is less than
75% of the average Residual Values of such Leased Vehicles. The "Appraisal Test"
will not be satisfied if, as of the most recent annual appraisal to be conducted
by an independent forecaster of vehicle wholesale values in October of each
year, beginning October 1997 (the "Annual Appraisal"), the aggregate appraised
residual values of a randomly selected sample of Leased Vehicles relating to
Current Contracts (as determined by such independent forecaster) is less than
75% of the aggregate Residual Values of such Leased Vehicles; provided that any
portion of the appraised value in excess of the related Residual Value will not
be included in the foregoing calculation. (Agreement, Section 1.01).
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The "Charge-off Rate Test" will not be satisfied if, with respect to any
Determination Date the average of the Charge-off Rates for the three immediately
preceding calendar months (or the months of September and October 1996 in the
case of the November 1996 Determination Date) is greater than 2.75%. The
"Delinquency Test" will not be satisfied if, with respect to any Determination
Date the average of the Delinquency Rates for the three immediately preceding
calendar months (or the months of September and October 1996 in the case of the
November 1996 Determination Date) is greater than 1.75%. The "Charge-off Rate"
with respect to any calendar month will be the Discounted Principal Balance of
all Contracts that became Charged-off Contracts during such month, less all Net
Repossessed Vehicle Proceeds and other Net Liquidation Proceeds collected during
such month with respect to Charged-off Contracts, all divided by the average of
the Aggregate Net Investment Value as of the last day of such month and the
preceding month. Such result will then be multiplied by twelve to produce an
annualized rate. The "Delinquency Rate" for any calendar month will be the
number of Current Contracts that are 61 days or more delinquent, whether or not
the related Leased Vehicles have been repossessed (or repossession proceedings
in respect thereof have been initiated), but which have not yet been sold or
otherwise disposed of, divided by the aggregate number of Current Contracts, in
each case as of the last day of such month. (Agreement, Section 1.01).
"Current Contracts" will be all Contracts other than Charged-off,
Liquidated, Matured and Additional Loss Contracts. A "Liquidated Contract" will
be a Contract that has been the subject of a Prepayment in full or otherwise has
been paid in full. An "Additional Loss Contract" will be a Contract that has
been sold or otherwise disposed of by the Servicer, acting on behalf of the
Origination Trust, to pay an Additional Loss Amount.
The Reserve Fund Cash Requirement for a Distribution Date will no longer be
required to be calculated pursuant to the Alternate Reserve Fund Formula if the
related Reserve Fund Test has been cured and all other Reserve Fund Tests have
been satisfied or cured. Any previously failed Turned-In Vehicle Test or
Realization Test will be cured if such Reserve Fund Test has been satisfied on
average for a period of 12 consecutive calendar months as of the Distribution
Date falling on the annual anniversary of the occurrence of such failure or, if
not then satisfied, as of each Distribution Date falling semiannually
thereafter, and has met or exceeded the minimum percentage requirements for each
of the three immediately preceding calendar months. Notwithstanding the
foregoing, only the second clause of the Realization Test need be satisfied to
cure a previously failed Realization Test. Any previously failed Appraisal Test,
Charge-off Rate Test or Delinquency Test will be cured on any subsequent
Distribution Date as of which such test is satisfied. (Agreement, Section 1.01).
The Seller may, from time to time after the date of this Prospectus,
request each Rating Agency to approve (a) a formula for determining the Reserve
Fund Cash Requirement and/or the Reserve Fund Supplemental Requirement that is
different from the one described above (including using different Reserve Fund
Tests or different cures for failures thereof) that would result in a decrease
in the amount of the Reserve Fund Cash Requirement and/or the Reserve Fund
Supplemental Requirement or (b) a change in the manner by which the Reserve Fund
is funded, which change could include borrowings by the Seller to fund all or a
portion of the Initial Deposit (which borrowings would be payable from assets or
cash flow otherwise payable to the Seller) or to meet the Reserve Fund Cash
Requirement and/or the Reserve Fund Supplemental Requirement. If each Rating
Agency delivers a letter to the Trustee to the effect that the use of any such
new formula or change will not result in a qualification, reduction or
withdrawal of its then-current rating of any Class of Certificates, then such
new formula or change will be implemented and, to the extent necessary, the
Agreement will be amended, without the consent of any Certificateholder or
Certificate Owner. (Agreement, Section 9.01).
Withdrawals from the Reserve Fund. On each Deposit Date the Trustee shall
withdraw from the Reserve Fund, to the extent available, and deposit in the
Distribution Account an amount equal to the Required Amount. Amounts on deposit
in the Reserve Fund will also be available to make certain other payments to
Certificateholders and the Seller as described under "Security for the
Certificates -- The Accounts -- The Reserve Fund". Monies on deposit in the
Reserve Fund on a Distribution Date in excess of the Reserve Fund Cash
Requirement will be released to the Seller. Any such amounts received by the
Seller shall be free of any claim of the Trust, the Trustee or the Investor
Certificateholders and shall not be available
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to the Trustee or the Trust for the purpose of making deposits to the Reserve
Fund or making payments to the Investor Certificateholders, nor shall the Seller
be required to refund any amount properly received by it. (Agreement, Sections
3.03 and 3.04).
THE CONTINGENT AND EXCESS LIABILITY INSURANCE POLICIES
In addition to the physical damage and liability insurance coverage
required to be obtained and maintained by the lessees pursuant to the Contracts,
and as additional protection in the event that any lessee fails to maintain all
such required insurance, World Omni maintains contingent liability insurance
with Gulf Insurance Company which provides coverage of up to $2.0 million per
occurrence (with no annual or aggregate cap on the number of claims thereunder)
for bodily injury and property damage suffered by third persons caused by any
vehicle owned by any insured. World Omni also maintains substantial amounts of
excess insurance coverage for which the Origination Trustee is an additional
named insured (together with the aforementioned primary contingent liability
insurance policy, the "Contingent and Excess Liability Insurance Policies").
These insurance policies collectively provide insurance coverage in excess of
$10 million per accident, and permit multiple claims in any policy period. To
the extent that such coverage were exhausted and damages were assessed against
the Origination Trust, claims could be imposed against the assets of the
Origination Trust. In such event, investors in the Class A Certificates could
incur a loss on their investment. However, the Origination Trustee will be an
additional named insured under the Contingent and Excess Liability Insurance
Policies and payments made thereunder will constitute SUBI Assets. To the extent
that payments under the Contingent and Excess Liability Insurance Policies are
made to third party claimants, they will reduce the Additional Loss Amounts that
otherwise would be required to be paid out of the SUBI Assets. See "Risk
Factors -- Vicarious Tort Liability", "-- Structural
Considerations -- Allocation of Origination Trust Liabilities" and
"-- Third-Party Liens on SUBI Assets" and "Certain Legal Aspects of the
Contracts and the Leased Vehicles -- Vicarious Tort Liability" for a discussion
of related risks.
With respect to damage to the Leased Vehicles, each lessee is required by
the related Contract to maintain comprehensive and collision insurance. As more
fully described under "Additional Document Provisions -- The Servicing
Agreement -- Insurance on Leased Vehicles", World Omni will be required to
police the maintenance of lessee-required insurance and, under certain
circumstances, will be required to make payments in respect thereof. In the
event that all of the foregoing insurance coverage were exhausted and no
third-party reimbursement for such damage to a Leased Vehicle were available,
investors in the Class A Certificates could incur a loss on their investment.
The Servicing Agreement will provide that so long as any Certificates are
outstanding, neither the Origination Trustee nor World Omni may terminate or
cause the termination of any Contingent and Excess Liability Insurance Policy
unless a replacement insurance policy providing at least the same amount of
coverage and which does not provide for any annual or aggregate cap on payments
thereunder is obtained and each Rating Agency has delivered a letter to the
Trustee to the effect that the obtaining of any such replacement insurance will
not cause its then-current rating of any Class of Certificates to be qualified,
reduced or withdrawn. The foregoing obligations of World Omni will survive any
termination of World Omni as Servicer under the Servicing Agreement. (Servicing
Agreement, Section 9.10).
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ADDITIONAL DOCUMENT PROVISIONS
ADDITIONAL AGREEMENT PROVISIONS
Certain provisions of the Agreement are described under "Description of the
Certificates". The following summarizes certain additional provisions of the
Agreement.
No Petition
The Trustee will agree not to institute, or join in, any bankruptcy or
similar proceeding against the Seller, WOLSI, ALFI L.P., ALFI, the Origination
Trust or the Origination Trustee until one year and one day after the later of
(i) payment of the Certificates in full and (ii) final payment of all other
financings involving interests in the Origination Trust (including the
transaction described herein and all other transactions involving the UTI and
each Other SUBI). (Agreement, Section 6.16).
Amendment
The Agreement may be amended by the Seller and the Trustee, without the
consent of the Certificateholders, to cure any ambiguity, to correct or
supplement any provision therein which may be inconsistent with any other
provision therein, to add any other provisions with respect to matters or
questions arising under the Agreement which are not inconsistent with the
provisions of the Agreement or to add or amend any provision therein in
connection with permitting transfers of the Class B Certificates; provided that
any such action will not, in the good faith judgment of the parties, materially
and adversely affect the interest of any Certificateholder and the Trustee shall
have been furnished with an opinion of counsel to the effect that such amendment
will not adversely and materially affect the interest of any Certificateholder.
(Agreement, Section 9.01). See "Security for the Certificates -- The
Accounts -- The Reserve Fund -- The Reserve Fund Cash Requirement".
The Agreement may also be amended from time to time by the Seller and the
Trustee (including with respect to changing the formula for determining the
Reserve Fund Cash Requirement and/or the Reserve Fund Supplemental Requirement,
the manner in which the Reserve Fund or Residual Value Surplus Account is
funded, the need for the Residual Value Surplus Account, changing the remittance
schedule for collection deposits in the Distribution Account or changing the
definition of "Permitted Investments") if (a) the Trustee has been furnished
with a letter from each Rating Agency to the effect that such amendment would
not cause its then-current rating on any Class of Certificates to be qualified,
reduced or withdrawn or (b) the Trustee has received the consent of the holders
of Certificates evidencing not less than 51% of the Voting Interests of the
Class A Certificates and the Class B Certificates, voting together as a single
class, for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Agreement or of modifying in any manner
the rights of each Class of Certificateholders; provided, however, that (y) no
such amendment shall increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on the SUBI or the
SUBI Certificate or distributions that shall be required to be made on any Class
of Certificates or the applicable Certificate Rate and (z) no amendment of any
type shall reduce the percentage of the aggregate Voting Interests of the
Certificates of any Class required to consent to any such amendment, in each
case without the consent of all Certificateholders and Certificate Owners.
List of Certificateholders
Upon a written request of the Servicer, the Trustee, as Certificate
Registrar, will provide to the Servicer within 15 days after receipt of such
request a list of the names and addresses of all Certificateholders. In
addition, three or more Certificateholders or holders of Certificates evidencing
not less than 25% of the Voting Interests of any Class of Certificates, upon
compliance by such Certificateholders with certain provisions of the Agreement,
may request that the Trustee, as Certificate Registrar, afford such
Certificateholders access during business hours to the current list of
Certificateholders for purposes of communicating with other Certificateholders
with respect to their rights under the Agreement. (Agreement, Section 4.06). See
"Description of the Certificates -- Book-Entry Registration" and "-- Definitive
Certificates".
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The Agreement will not provide for the holding of any annual or other
meetings of Certificateholders.
The Trustee
First Bank will be the Trustee under the Agreement. The Corporate Trust
Office of the Trustee is located at 400 North Michigan Avenue, Chicago, Illinois
60611. First Bank is not affiliated with World Omni, although it does act as a
service provider to World Omni.
The Trustee may resign at any time, in which event the Seller will be
obligated to appoint a successor Trustee. The Seller may also remove the Trustee
if the Trustee ceases to be eligible to continue as such under the Agreement,
becomes legally unable to act or becomes insolvent. In such circumstances, the
Seller will be obligated to appoint a successor Trustee. Any resignation or
removal of the Trustee and appointment of a successor Trustee will not become
effective until acceptance of the appointment by such successor Trustee.
(Agreement, Section 6.07).
The Trustee must be a corporation organized under the laws of a state of
the United States, the District of Columbia or the Commonwealth of Puerto Rico,
authorized to exercise corporate trust powers under those laws, and subject to
supervision or examination by federal or state laws, with a combined capital and
surplus of at least $50,000,000 and a long-term deposit rating no lower than
Baa3 by Moody's, or must be otherwise acceptable to each Rating Agency. A
co-trustee or separate trustee appointed as described above need not meet these
eligibility requirements. (Agreement, Sections 6.06 and 6.10).
Holders of Certificates evidencing not less than 25% of the Voting
Interests of the Class A Certificates and the Class B Certificates, voting
together as a single class, generally will have the power to direct any
proceeding for any remedy available to the Trustee under the Agreement, and the
exercise of any trust or power conferred on the Trustee by the Agreement
(including actions by the Trustee in its capacity as a party to, or a
third-party beneficiary of, the SUBI Trust Agreement or the Servicing
Agreement). However, the Trustee will not be required to follow such a direction
if, after being advised by counsel, it concludes that the action is unlawful, or
if it in good faith determines that the proceedings directed would be illegal,
would subject it to personal liability or would be unduly prejudicial to the
rights of other Certificateholders. (Agreement, Section 6.15).
A Certificateholder may institute proceedings under the Agreement, but only
if such holder previously has given to the Trustee written notice of default and
unless the holders of Certificates evidencing not less than 25% of the Voting
Interests of the Class A Certificates and the Class B Certificates, voting
together as a single class, have made written request upon the Trustee to
institute such proceeding in its own name as Trustee and have offered to the
Trustee reasonable indemnity and the Trustee for 30 days has neglected or
refused to institute any such proceeding. (Agreement, Section 9.03). The Trustee
will be under no obligation to exercise any of the trusts or powers vested in it
by the Agreement or to make any investigation of matters arising thereunder or
to institute, conduct or defend any litigation thereunder or in relation thereto
at the request, order or direction of any of the Certificateholders, unless such
holders have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or thereby.
(Agreement, Section 6.02). Certificateholders will have no express right to
institute a proceeding directly under the SUBI Trust Agreement or the Servicing
Agreement.
Governing Law
The Agreement will be governed by the laws of the State of Illinois.
THE SUBI TRUST AGREEMENT
The SUBI, the Other SUBIs and the UTI
ALFI L.P. is the grantor and (as holder of the UTI) a beneficiary of the
Origination Trust. In its capacity as grantor, ALFI L.P. will from time to time
assign, transfer, grant and convey (or cause to be assigned, transferred,
granted and conveyed) to the Origination Trustee in trust the Origination Trust
Assets. (SUBI Trust Agreement, Section 2.01). ALFI L.P. will hold the UTI, which
represents a beneficial interest in all
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Origination Trust Assets other than the SUBI Assets and the Other SUBI Assets.
(SUBI Trust Agreement, Section 4.01). ALFI L.P. has pledged (and may in the
future pledge) the UTI as security for obligations to third-party lenders, and
has created and sold (and may in the future create and sell or pledge) Other
SUBIs in connection with financings similar to the transaction described herein.
Each holder or pledgee of the UTI and any Other SUBI will be required to
expressly disclaim any interest in the Origination Trust Assets other than the
UTI Assets or the Other SUBI Assets, respectively, and to fully subordinate any
claims to such other Origination Trust Assets in the event that this disclaimer
is not given effect. Except under the limited circumstances described under
"Risk Factors -- Structural Considerations -- Allocation of Origination Trust
Liabilities", the SUBI Assets will not be available to make payments in respect
of, or pay expenses relating to, the UTI or any Other SUBIs, and the Other SUBI
Assets evidenced by any Other SUBIs will not be available to make payments on,
or pay expenses relating to, the SUBI, the UTI or any other Other SUBI.
Each Other SUBI will be created pursuant to a supplement to the Origination
Trust Agreement (each, an "Other SUBI Supplement") which will amend the
Origination Trust Agreement only with respect to the Other SUBI to which it
relates. The SUBI Supplement will amend the Origination Trust Agreement only as
it relates to the SUBI and no Other SUBI Supplement will amend the Origination
Trust Agreement as it relates to the SUBI. (SUBI Trust Agreement, Section 4.02).
All Origination Trust Assets, including the SUBI Assets, will be owned by
the Origination Trustee on behalf of the beneficiaries of the Origination Trust.
The SUBI Assets will be segregated from the rest of the Origination Trust Assets
on the books and records of the Origination Trustee and the Servicer and the
holders of other beneficial interests in the Origination Trust (including the
UTI and any Other SUBIs) will have no rights to the SUBI Assets. Liabilities of
the Origination Trust shall be allocated to the SUBI Assets, the UTI Assets or
Other SUBI Assets, respectively, if incurred with respect thereto, or will be
allocated pro rata among all Origination Trust Assets if incurred with respect
to the Trust Assets generally. (SUBI Trust Agreement, Section 7.01; Servicing
Agreement, Section 2.02).
Additional Loss Amounts will be incurred in the event of any uninsured
liability to third parties (i.e., litigation risk) on the part of the
Origination Trust as ultimately is borne by the SUBI Assets, whether such
liability is incurred (i) with respect to the SUBI Assets and is therefore
allocated to the SUBI Assets pursuant to the SUBI Trust Agreement, (ii) with
respect to the Origination Trust Assets generally and therefore a pro rata
portion of such liability is allocated to the SUBI Assets pursuant to the SUBI
Trust Agreement or (iii) with respect to UTI Assets or Other SUBI Assets if such
UTI Assets or Other SUBI Assets are insufficient to pay such liability. See
"Risk Factors -- Structural Considerations -- Allocation of Origination Trust
Liabilities" and " -- Third-Party Liens on SUBI Assets" for a discussion of
related risks. For purposes of making calculations with respect to distributions
on the Certificates, "Additional Loss Amounts" will include both losses incurred
with respect to the foregoing uninsured liabilities and monies reserved within
the SUBI Collection Account against future losses in respect of such liabilities
by the Servicer on behalf of the Trustee. (SUBI Trust Agreement, Sections 7.01
and 10.01).
Special Obligations of ALFI L.P. as Beneficiary and Grantor
ALFI L.P., as grantor, will be liable for all debts and obligations arising
with respect to the Origination Trust Assets or the operation of the Origination
Trust; provided, however, that its liability with respect to any pledge of the
UTI and any assignee or pledgee of a SUBI or SUBI Certificate or Other SUBI or
Other SUBI Certificate shall be as set forth in the financing documents relating
thereto. ALFI, as the general partner of ALFI L.P., the grantor, is required at
all times to maintain a minimum net worth of $10 million. To the extent that
ALFI L.P. shall have paid or suffered any liability or expense with respect to
the Origination Trust Assets or the operation of the Origination Trust, ALFI
L.P. shall be indemnified, defended and held harmless out of the assets of the
Origination Trust against any such liability or expense (including reasonable
attorneys' fees and expenses). (SUBI Trust Agreement, Section 4.03).
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Origination Trustee Duties and Powers; Fees and Expenses
Pursuant to the SUBI Trust Agreement, the Origination Trustee will be
required to, among other things, (i) apply for and maintain (or cause to be
applied for and maintained) all licenses, permits and authorizations necessary
and appropriate to accept assignments of the Contracts and the Leased Vehicles
and to carry out its duties as Origination Trustee, including motor vehicle
dealer licenses, and (ii) file (or cause to be filed) applications for
certificates of title as are necessary and appropriate so as to cause the
Origination Trustee to be recorded as the holder of legal title of record to the
Leased Vehicles. (SUBI Trust Agreement, Section 5.01). In carrying out the
foregoing duties, the Origination Trustee will be required to exercise the same
degree of care and skill as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs. (SUBI Trust
Agreement, Section 5.02).
The Origination Trustee may be replaced by ALFI L.P. only if it ceases to
be qualified in accordance with the terms of the SUBI Trust Agreement and shall
be removed if certain representations and warranties made by the Origination
Trustee therein prove to have been materially incorrect when made, or in certain
events of bankruptcy or insolvency. (SUBI Trust Agreement, Section 6.03). The
Securitization Trustee, as holder of the SUBI Certificate, on behalf of the
Certificateholders may, or at the direction of holders of Certificates
evidencing not less than 51% of the Voting Interests of the Class A Certificates
and the Class B Certificates, voting together as a single class, will, exercise
its powers under the Origination Trust Agreement to cause the Trust Agent to be
removed or replaced for a material breach of its obligations. (SUBI Trust
Agreement, Sections 5.03 and 10.02).
The Origination Trustee will make no representations as to the validity or
sufficiency of the SUBI, the SUBI Certificate or the Retained SUBI Interest
(other than the execution and authentication of the SUBI Certificate and the
certificate evidencing the Retained SUBI Interest), or of any Contract, Leased
Vehicle or related document, will not be responsible for performing any of the
duties of ALFI L.P. or the Servicer and will not be accountable for the use or
application by any owners of beneficial interests in the Origination Trust
Assets of any funds paid in respect of the Origination Trust Assets, or the
investment of any of such monies before such monies are deposited into the
accounts relating to the SUBI, the Other SUBIs and the UTI. The Origination
Trustee will not independently verify the Contracts or the Leased Vehicles.
(SUBI Trust Agreement, Section 5.04). The duties of the Origination Trustee will
generally be limited to the acceptance of assignments of lease contracts, the
titling of the related leased vehicles in the name of the Origination Trustee,
the creation of the SUBI, the Other SUBIs and the UTI, the maintenance of the
SUBI Collection Account, the Residual Value Surplus Account and accounts
relating to the Other SUBIs and the UTI and the receipt of the various
certificates, reports or other instruments required to be furnished to the
Origination Trustee under the SUBI Trust Agreement, in which case it will only
be required to examine them to determine whether they conform to the
requirements of the SUBI Trust Agreement. (SUBI Trust Agreement, Section 5.01).
The Origination Trustee will be under no obligation to exercise any of the
rights or powers vested in it by the SUBI Trust Agreement or to make any
investigation of matters arising thereunder or to institute, conduct or defend
any litigation thereunder or in relation thereto at the request, order or
direction of ALFI L.P., the Servicer or by the holders of a majority in interest
in the SUBI, unless such party or parties have offered to the Origination
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby. The reasonable expenses of
every such exercise of rights or powers or examination shall be paid by the
party or parties requesting such exercise or examination or, if paid by the
Origination Trustee, shall be a reimbursable expense of the Origination Trustee.
(SUBI Trust Agreement, Sections 5.03 and 6.08).
The Origination Trustee may enter from time to time into one or more agency
agreements (each, an "Agency Agreement") with such person or persons, including
without limitation any affiliate of the Origination Trustee (each, a "Trust
Agent"), as are by experience and expertise qualified to act in a trustee
capacity and otherwise acceptable to ALFI. The Origination Trustee has engaged
First Bank as the Trust Agent. Pursuant to the Agency Agreement, the Trust Agent
shall perform each and every obligation of the Origination Trustee under the
SUBI Trust Agreement. (SUBI Trust Agreement, Section 5.03).
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The Origination Trustee shall be paid out of Origination Trust Assets
reasonable compensation and reimbursement of all reasonable expenses (including
reasonable attorneys' fees). (SUBI Trust Agreement, Section 6.08). However, with
regard to the SUBI Assets allocable to the SUBI Interest, this requirement is
subject to the provisions regarding Capped Origination Trust Administrative
Expenses described under "Description of the Certificates -- Distributions on
the Certificates -- Distributions of Interest".
Indemnity of Trustee and Trust Agents
The Origination Trustee and each Trust Agent will be indemnified and held
harmless out of and to the extent of the Origination Trust Assets with respect
to any loss, liability or expense, including reasonable attorneys' fees and
expenses (collectively "Claims"), arising out of or incurred in connection with
(i) any of the Origination Trust Assets (including without limitation any Claims
relating to lease contracts or leased vehicles of the Origination Trust, any
personal injury or property damage claims arising with respect to any such
leased vehicle or any claim with respect to any tax arising with respect to any
Origination Trust Asset) or (ii) the Origination Trustee's or the Trust Agent's
acceptance or performance of the trusts and duties contained in the Agreement or
any Agency Agreement. Notwithstanding the foregoing, neither the Origination
Trustee nor any Trust Agent will be indemnified or held harmless out of the
Origination Trust Assets as to any Claim (i) for which World Omni shall be
liable pursuant to the Servicing Agreement, (ii) incurred by reason of the
Origination Trustee's or such Trust Agent's willful misfeasance, bad faith or
negligence or (iii) incurred by reason of the Origination Trustee's or Trust
Agent's breach of its respective representations and warranties pursuant to the
SUBI Trust Agreement or the Servicing Agreement. Such indemnities may result in
Additional Loss Amounts to the extent payable in respect of the SUBI Assets or
allocated to the SUBI. (SUBI Trust Agreement, Section 5.05).
Termination
The Origination Trust and the respective obligations and responsibilities
of ALFI L.P. and the Origination Trustee shall terminate upon the last to occur
of (i) the payment to ALFI L.P. and each permitted purchaser, assignee and
pledgee of any of ALFI L.P.'s interests in the Origination Trust (including the
Trustee, with respect to the SUBI Interest) of all amounts and obligations
required to be paid to them, and the expiration or termination of all financings
secured by the Origination Trust Assets by their respective terms and (ii) the
maturity or liquidation and the disposition of all Origination Trust Assets and
the disposition to or upon the order of ALFI L.P. or any permitted purchaser,
assignee or pledgee of all net proceeds thereof. (SUBI Trust Agreement, Section
8.01).
No Petition
The Origination Trustee and the Trust Agent will agree not to institute, or
join in, any bankruptcy or similar proceeding against the Seller, WOLSI, ALFI
L.P. or ALFI until one year and one day after final payment of all financings
involving interests in the Origination Trust. (SUBI Trust Agreement, Section
6.09). Each pledgee or assignee of any UTI or other SUBI must give a similar
non-petition covenant. (SUBI Trust Agreement, Sections 4.01 and 4.02).
Amendment
The SUBI Trust Agreement may be amended by written agreement between ALFI
L.P. and the Origination Trustee, with the approval of the Trustee (which may be
given in the circumstances described under "Additional Document
Provisions -- Additional Agreement Provisions -- Amendment"). To the extent that
any such amendment relates to or affects the UTI or any Other SUBI in addition
to the SUBI, the SUBI Certificate or the SUBI Assets, such amendment may require
certain other approvals. (SUBI Trust Agreement, Sections 9.01 and 13.01).
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Governing Law
The SUBI Trust Agreement will be governed by the laws of the State of
Alabama. (SUBI Trust Agreement, Sections 9.02 and 13.02).
Trustee as Third-Party Beneficiary
As the holder of the SUBI Interest, the Trustee will be a third-party
beneficiary of the SUBI Trust Agreement. Therefore, the Trustee may, and, upon
the direction of Certificateholders representing at least 51% of the Voting
Interests of the Class A Certificates and the Class B Certificates (voting
together as a single class) will, exercise any right conferred by the SUBI Trust
Agreement upon a holder of any interest in the SUBI. (SUBI Trust Agreement,
Section 10.02).
THE SERVICING AGREEMENT
General
Pursuant to the Servicing Agreement, the Servicer will perform on behalf of
the Origination Trustee all of the obligations of the lessor under the
Contracts, including, but not limited to, collecting and posting payments,
responding to inquiries of the lessees, investigating delinquencies, sending
payment statements and reporting tax information to the lessees, paying costs of
disposition of Leased Vehicles related to Charged-off Contracts, Matured
Contracts and Additional Loss Contracts and policing the Contracts, commencing
legal proceedings to enforce a Contract on behalf of the Origination Trust,
administering the Contracts, including accounting for collections and furnishing
monthly and annual statements to the Origination Trustee with respect to
distributions and generating federal income tax information. The Origination
Trustee will furnish the Servicer with all powers of attorney and other
documents necessary or appropriate to enable the Servicer to carry out such
servicing and administrative duties under the Servicing Agreement. The Trustee
will be a third-party beneficiary of the Servicing Agreement. (Servicing
Agreement, Sections 2.01 and 12.12).
Custody of Contract Documents and Certificates of Title
To assure uniform quality in servicing the Contracts and World Omni's own
portfolio of automobile and light duty truck lease contracts and to reduce
administrative costs, the Origination Trustee will appoint World Omni, as
Servicer, to be its agent, bailee and custodian of the Contracts, the
certificates of title relating to the Leased Vehicles and insurance policies and
other documents relating to the Contracts, the related lessees and the Leased
Vehicles. Such documents will not be physically segregated from other automobile
and light duty truck lease contracts, certificates of title and insurance
policies and other documents relating to such lease contracts and leased
vehicles of World Omni, or those which World Omni services for others, including
those leased vehicles constituting Origination Trust Assets that are not
evidenced by the SUBI. The accounting records and computer systems of World Omni
will reflect the interests of the holders of interest in the SUBI in the Initial
Contracts, the Subsequent Contracts, the Initial Leased Vehicles, the Subsequent
Leased Vehicles and all related Contract Rights, and "protective" UCC financing
statements reflecting certain interests in the Contracts and the Contract Rights
will be filed, as more fully described under "Risk Factors -- Structural
Considerations -- Back-up Security Interest in Certain SUBI Assets" and under
"Certain Legal Aspects of the Contracts and Leased Vehicles -- Back-up Security
Interests". The Servicer will be responsible for filing all periodic sales and
use tax or property (real or personal) tax reports, periodic renewals of
licenses and permits, periodic renewals of qualification to act as a trust and a
business trust and other periodic governmental filings, registration or
approvals arising with respect to or required of the Origination Trustee or the
Origination Trust. (Servicing Agreement, Section 2.01).
Collections
The Servicer will service, administer and collect all amounts due on or in
respect of the Contracts. The Servicer will make reasonable efforts to collect
all such amounts and, in a manner consistent with the Servicing Agreement, will
be obligated to service the Contracts generally in accordance with customary and
usual procedures of institutions which service closed-end automobile and light
duty truck lease contracts and,
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to the extent more exacting, the procedures used by the Servicer in respect of
lease contracts serviced by it for its own account. (Servicing Agreement,
Sections 2.01 and 2.02).
Consistent with its usual procedures, the Servicer may, in its discretion,
extend the Maturity Date of any Contract by up to five months in the aggregate,
provided that no Contract may be extended more than five times and that the new
Maturity Date of any Contract so extended must not be later than the last day of
the month immediately preceding the month in which the Final Scheduled
Distribution Date occurs. The amount of any Extension Fee received by the
Servicer in connection with the extension of a Contract will be deposited into
the SUBI Collection Account. In the event that the Servicer extends a Contract
in contravention of the foregoing, the Servicing Agreement will require the
Servicer to deposit into the SUBI Collection Account an amount equal to the
Reallocation Payment in respect of such Contract on the Deposit Date relating to
the Collection Period in which such extension was granted, at which time such
Contracts and the related Leased Vehicles will no longer constitute SUBI Assets
as they will be reallocated as UTI Assets. (Servicing Agreement, Sections 2.02
and 9.02). See "World Omni -- Collection, Repossession and Disposition
Procedures" for further details regarding collection procedures.
As more fully described under "Security for the Certificates -- The
Accounts -- The SUBI Collection Account", unless the Servicer obtains a Servicer
Letter of Credit, the Servicer will deposit or cause to be deposited all
payments received on or in respect of the Contracts and the Leased Vehicles
(other than Security Deposits) into the SUBI Collection Account within two
Business Days after receipt.
Notification of Liens and Claims
The Servicer will be required to notify the Seller (in the event that World
Omni is not acting as the Servicer), the Trustee and the Origination Trustee as
soon as practicable of all liens or claims of whatever kind made by a third
party that would materially adversely affect the interests of, among others, the
Seller, the Origination Trust or any SUBI Asset (with respect to, among other
things, any Contract or Leased Vehicle). Following its learning of any such lien
or claim with respect to any Leased Vehicle, the Servicer will take whatever
actions it deems reasonably necessary to cause such lien or claim to be removed.
(Servicing Agreement, Sections 2.08 and 9.09). See "Risk Factors -- Structural
Considerations" for a discussion of the risk of liens on SUBI Assets and other
Origination Trust Assets.
Advances
On each Deposit Date, the Servicer will be obligated to make, by deposit
into the SUBI Collection Account, an advance in an amount equal to the aggregate
Monthly Payments due but not received during the related Collection Period with
respect to Contracts that are 31 days or more past due as of the end of the
related Collection Period, and the Servicer may (but shall not be required to)
make such an advance with respect to Contracts that are one or more days, but
less than 31 days, past due as of the end of the related Collection Period
(collectively, an "Advance"). (Servicing Agreement, Section 9.04).
Notwithstanding the foregoing, the Servicer will not be required to make an
Advance to the extent that such Advance would constitute a Nonrecoverable
Advance. (Servicing Agreement, Section 9.04). A "Nonrecoverable Advance" will be
any Advance that, in the reasonable judgment of the Servicer, may not be
ultimately recoverable by the Servicer from Net Liquidation Proceeds or
otherwise. (Servicing Agreement, Section 6.01). In making Advances, the Servicer
will assist in maintaining a regular flow of scheduled principal and interest
payments on the Contracts, rather than to guarantee or insure against losses.
Accordingly, all Advances shall be reimbursable to the Servicer, without
interest, if and when a payment relating to a Contract with respect to which an
Advance has previously been made is subsequently received. In addition, the
Servicer will be reimbursed for all Nonrecoverable Advances from collections on
or in respect of the Contracts and Leased Vehicles in general. (Servicing
Agreement, Section 9.02).
Security Deposits
The Contract Rights will include all rights under the Contracts to the
security deposits paid by the lessees at the time of origination of the
Contracts (the "Security Deposits"). As part of its general servicing
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obligations, the Servicer will retain possession of each Security Deposit
remitted by the lessees as an agent for the Origination Trust and will apply the
proceeds of such Security Deposits in accordance with the terms of the
Contracts, its customary and usual servicing procedures and applicable law.
However, in the event that any Contract becomes a Charged-off Contract or the
related Leased Vehicle is repossessed, the related Security Deposit will, to the
extent provided by applicable law and such Contract, constitute Liquidation
Proceeds. (Servicing Agreement, Section 2.04). The Origination Trustee may not
have an interest in the Security Deposits that is enforceable against third
parties until such time as they are deposited into the SUBI Collection Account.
The Servicer will not be required to segregate Security Deposits from its own
funds, and any income earned from any investment thereof by the Servicer shall
be for the account of the Servicer as additional servicing compensation.
Insurance on Leased Vehicles
Each lessee is required to maintain in full force and effect during the
term of a Contract a comprehensive collision and physical damage insurance
policy covering the actual cash value of the related Leased Vehicle and naming
the Origination Trustee, on behalf of the Origination Trust, as loss payee. Each
lessee also is required to maintain bodily injury and property damage liability
insurance in amounts equal to the greater of the amount prescribed by applicable
state law or industry standards as set forth in the Contract and naming the
Origination Trustee, on behalf of the Origination Trust, as an additional
insured. (Servicing Agreement, Section 2.11). Since lessees may choose their own
insurers to provide the required coverage, the specific terms and conditions of
their policies vary. If a lessee fails to obtain or maintain the required
insurance, the related Contract will be in default. It is the practice of World
Omni not to obtain insurance on behalf of and at the expense of the related
lessee but rather to repossess the related Leased Vehicle. In the event that a
required insurance policy has lapsed, has not been maintained in full force and
effect or the Servicer has failed to maintain the right to receive the proceeds
thereof for damage to or destruction of the related Leased Vehicle, the
Servicing Agreement will require World Omni to pay promptly into the SUBI
Collection Account all such amounts as would otherwise have been recoverable as
Insurance Proceeds. This obligation will survive any termination of World Omni
as Servicer under the Servicing Agreement. (Servicing Agreement, Section 2.11).
World Omni does not require lessees to carry credit disability, credit life
or credit health insurance or other similar insurance coverage which provides
for payments to be made on the Contracts on behalf of such lessees in the event
of disability or death. To the extent that such insurance coverage is obtained
on behalf of a lessee, payments received in respect of such coverage may be
applied to payments on the related Contract to the extent that the lessee's
beneficiary chooses to do so.
Realization Upon Charged-off Contracts
The Servicer will use commercially reasonable efforts to repossess and
liquidate the Leased Vehicle relating to a Contract that comes into and
continues in default and for which no satisfactory arrangements can be made for
collection of delinquent payments. Such liquidation may be through repossession
of such Leased Vehicle and disposition at a public or private sale, or the
Servicer may take any other action permitted by applicable law. The Servicer may
enforce all rights under any such Contract, sell the Leased Vehicle in
accordance with the Contract and commence and prosecute any proceedings in
connection with the Contract. In connection with any such repossession, the
Servicer will follow such practices and procedures as it deems necessary or
advisable and as are normal and usual for responsible holders of closed-end
automobile and light duty truck lease contracts and, to the extent more
exacting, the practices and procedures used by the Servicer in respect of any
such lease contracts serviced by it for its own account, and in any event in
compliance with all applicable laws. The Servicer will be required to repair the
Leased Vehicle if it reasonably determines that such repairs will increase the
related Net Repossessed Vehicle Proceeds. The Servicer will be responsible for
all costs and expenses incurred in connection with the sale or other disposition
of Leased Vehicles related to Charged-off Contracts and other Contracts as to
which a lessee has defaulted and the related Leased Vehicles, but will be
entitled to reimbursement to the extent that such costs constitute Repossessed
Vehicle Expenses or other Liquidation Expenses or expenses recoverable under an
applicable insurance policy. Proceeds from the sale or other disposition of
repossessed Leased Vehicles will constitute Repossessed Vehicle Proceeds and
will
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be deposited into the SUBI Collection Account. The Servicer will be entitled to
reimbursement of all related Repossessed Vehicle Expenses from amounts on
deposit in the SUBI Collection Account upon presentation to the Trustee of an
officer's certificate of the Servicer and Principal Collections in respect of a
Collection Period will include all Net Repossessed Vehicle Proceeds collected
during such Collection Period. (Servicing Agreement, Sections 2.06 and 9.02).
Matured Leased Vehicle Inventory
Upon the scheduled maturity of a Contract, the related lessee has the
option to acquire the related Leased Vehicle for an amount equal to its Residual
Value plus any applicable taxes and all other incidental charges which may be
due under such Contract. If the lessee chooses not to exercise this option but
instead returns the Leased Vehicle to the Servicer, such Leased Vehicle will be
placed in Matured Leased Vehicle Inventory, and the Servicer, acting on behalf
of the Origination Trust, will sell or otherwise dispose of the Leased Vehicle
in a manner similar to that for a repossessed Leased Vehicle. (Servicing
Agreement, Section 2.06).
Principal Collections in respect of a Collection Period will include all
Net Matured Leased Vehicle Proceeds collected during such Collection Period. All
related Matured Leased Vehicle Proceeds will be deposited into the SUBI
Collection Account. Related Matured Leased Vehicle Expenses may be released from
amounts on deposit in the SUBI Collection Account or the Residual Value Surplus
Account upon presentation of an officer's certificate by the Servicer. Any
Residual Value Surplus for a Collection Period will be deposited into the
Residual Value Surplus Account. (SUBI Trust Agreement, Section 10.01; Servicing
Agreement, Section 9.02).
Records, Servicer Determinations and Reports
The Servicer will retain or cause to be retained all data (including,
without limitation, computerized records, operating software and related
documentation) relating directly to or maintained in connection with the
servicing of the Contracts. Upon the occurrence and continuance of an Event of
Servicing Termination and termination of the Servicer's obligations under the
Servicing Agreement, the Servicer will use commercially reasonable efforts to
effect the orderly and efficient transfer of the servicing of the Contracts to a
successor servicer. (Servicing Agreement, Sections 2.03 and 9.03).
The Servicer will perform certain monitoring and reporting functions on
behalf of the Seller, the Trustee, the Origination Trustee and
Certificateholders, including the preparation and delivery to the Trustee, the
Origination Trustee and each Rating Agency of a monthly certificate, on or
before each Determination Date, setting forth all information necessary to make
all distributions required in respect of the related Collection Period (the
"Servicer's Certificate"), and the preparation and delivery of monthly
statements setting forth information described under "Description of the
Certificates -- Statements to Certificateholders", and an annual officer's
certificate specifying the occurrence and status of any Event of Servicing
Termination. (Servicing Agreement, Section 10.01).
Evidence as to Compliance
The Servicing Agreement will provide that a firm of nationally recognized
independent accountants will furnish to the Trustee on or before April 30 of
each year, beginning April 30, 1997, a statement as to compliance by the
Servicer during the preceding twelve months ended December 31 (or since the
Closing Date in the case of the first such statement) with certain standards
relating to the servicing of the Contracts, the Servicer's accounting records
and computer files with respect thereto and certain other matters. (Servicing
Agreement, Sections 3.02 and 10.02).
The Servicing Agreement will also provide for delivery to the Trustee, on
or before April 30 of such year, beginning April 30, 1997, of a certificate
signed by an officer of the Servicer stating that the Servicer has fulfilled its
obligations under the Agreement throughout the preceding twelve months ended
December 31 (or since the Closing Date in the case of the first such
certificate) or, if there has been a default in the fulfillment of any such
obligation, describing each such default. (Servicing Agreement, Sections 3.03
and 10.03).
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Copies of such statements and certificates may be obtained by Certificate
Owners or Class A Certificateholders by a request in writing addressed to the
Trustee at its Corporate Trust Office. (Agreement, Section 3.06).
Compliance with ERISA
On or before each Determination Date, the Servicer shall provide the
Trustee and each Rating Agency with an officer's certificate stating that none
of SET, JMFE, World Omni nor any of their respective affiliates for purposes of
ERISA (i) maintains an ERISA plan which, as of its last valuation date, had
unfunded current liability, (ii) anticipates that the value of the assets of any
ERISA plan it maintains would not be sufficient to cover any current liability
and (iii) is contemplating benefit improvements with respect to any plans then
maintained or the establishment of any new ERISA plans, either of which would
cause it to maintain an ERISA plan with unfunded current liability (the "ERISA
Compliance Test"). In the event that the Servicer does not timely make the
foregoing certifications, or any such certification is incorrect, the Reserve
Fund Cash Requirement shall be unlimited and all Excess Collections in respect
of the Distribution Date, after giving effect to all payments required to be
made therefrom on such Distribution Date, will be deposited into the Reserve
Fund until the ERISA Compliance Test is satisfied. On the Distribution Date
following the date on which such failure is cured, monies on deposit in the
Reserve Fund in excess of the Reserve Fund Cash Requirement shall be distributed
to the Seller (or to the Certificateholders to the extent allocable to the
Accelerated Principal Distribution Amount). See "Security for the
Certificates -- The Accounts -- The Reserve Fund -- The Reserve Fund Cash
Requirement" for a more complete description of the Reserve Fund Cash
Requirement. (Servicing Agreement, Section 10.03; Agreement, Sections 1.01, 3.03
and 3.04).
Servicing Compensation
The Servicer will be entitled to compensation for the performance of its
servicing obligations under the Servicing Agreement. The Servicer will be
entitled to receive on each Distribution Date, the Servicing Fee in respect of
the related Collection Period equal to one-twelfth of the product of 1.00% and
the Aggregate Net Investment Value as of the first day of the month preceding
the month in which such Distribution Date occurs (or, in the case of the first
Distribution Date, as of the Initial Cutoff Date); the portion of the Servicing
Fee allocable to the SUBI Interest will be 99.8% thereof. The Servicing Fee will
be calculated and paid based upon a 360-day year consisting of twelve 30-day
months. So long as World Omni is the Servicer, it may, by notice to the Trustee
and the Origination Trustee, on or before a Determination Date, elect to waive
the Servicing Fee with respect to the related Collection Period, so long as
World Omni believes that sufficient collections will be available from Interest
Collections on one or more future Distribution Dates to pay such waived
Servicing Fee, without interest. In such event, the Servicing Fee for such
Collection Period shall be deemed to equal zero for all purposes of the
Agreement and the Servicing Agreement.
The Servicer will also be entitled to additional servicing compensation in
the form of late fees and other administrative fees or similar charges paid with
respect to the Contracts, and earnings from the investment of Security Deposits
as described above under "Additional Document Provisions -- The Servicing
Agreement -- Security Deposits". The Servicer will not be entitled to retain any
Extension Fees paid in connection with extended Contracts as such amounts will
be required to be deposited into the SUBI Collection Account. The Servicer will
pay all expenses incurred by it in connection with its servicing activities
under the Servicing Agreement, including the payment of Uncapped Administrative
Expenses allocable to the SUBI Interest, and will not be entitled to
reimbursement of such expenses except to the extent any such expenses constitute
Liquidation Expenses in respect of a Contract or Leased Vehicle or reasonable
issuance expenses under an applicable insurance policy, or to the extent that
Uncapped Administrative Expenses are reimbursed out of Interest Collections.
(Servicing Agreement, Sections 2.05 and 9.06).
The Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of the Contracts as an agent for the Trustee under the
Servicing Agreement, including collecting and posting payments, responding to
inquiries of lessees on the Contracts, investigating delinquencies, sending
payment statements and reporting tax information to lessees, paying costs of
sale or other disposition of Leased Vehicles
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relating to defaulted Contracts and Leased Vehicles included in Matured Leased
Vehicle Inventory, policing the SUBI Assets, administering the Contracts,
including making Advances, accounting for collections, furnishing monthly and
annual statements to the Trustee with respect to distributions and generating
federal income tax information. (Servicing Agreement, Section 2.05).
Servicer Resignation and Termination
The Servicer may not resign from its obligations and duties under the
Servicing Agreement unless it determines that its duties thereunder are no
longer permissible by reason of a change in applicable law or regulations. No
such resignation will become effective until a successor servicer has assumed
the Servicer's obligations under the Servicing Agreement. The Servicer may not
assign the Servicing Agreement or any of its rights, powers, duties or
obligations thereunder except as otherwise provided therein or except in
connection with a consolidation, merger, conveyance, transfer or lease made in
compliance with the Servicing Agreement. (Servicing Agreement, Sections 2.10 and
9.11).
The rights and obligations of the Servicer under the Servicing Agreement
may be terminated following the occurrence and continuance of an Event of
Servicing Termination, as described under "Additional Document Provisions -- The
Servicing Agreement -- Rights Upon Event of Servicing Termination". (Servicing
Agreement, Sections 4.01 and 11.01).
Indemnification by the Servicer
The Servicer will indemnify the Trustee and its agents for any and all
liabilities, losses, damages and expenses that may be incurred by them as a
result of any act or omission by the Servicer in connection with the performance
of its duties under the Servicing Agreement. (Servicing Agreement, Section
9.08).
Events of Servicing Termination
"Events of Servicing Termination" under the Servicing Agreement with
respect to the SUBI Assets will consist of, among other things: (i) any failure
by the Servicer to deliver to the Origination Trustee for distribution to
holders of interests in the SUBI or to the Trustee for distribution to the
Certificateholders any required payment, which failure continues unremedied for
five Business Days after discovery of such failure by an officer of the Servicer
or receipt by the Servicer of notice thereof from the Trustee, the Origination
Trustee or holders of Certificates evidencing not less than 25% of the Voting
Interests of the Class A Certificates and the Class B Certificates, voting
together as a single class; (ii) any failure by the Servicer duly to observe or
perform in any material respect any other of its covenants or agreements in the
Servicing Agreement which failure materially and adversely affects the rights of
holders of interests in the SUBI or the Certificateholders and which continues
unremedied for 60 days after written notice of such failure is given as
described in clause (i) above; (iii) failure by the Servicer to deliver to the
Origination Trustee or the Trustee any report required to be delivered to the
Origination Trustee or the Trustee pursuant to the Servicing Agreement within
ten Business Days after the date such report is due; (iv) any representation,
warranty or statement of the Servicer made in the Servicing Agreement or any
other document relating to the Origination Trust to which the Servicer is a
party or by which it is bound or any certificate, report or other writing
delivered pursuant to the Servicing Agreement shall prove to be incorrect in any
material respect as of the time when the same shall be made which continues
unremedied for 30 days after written notice of such failure is given as
described in clause (i) above; (v) failure by the Servicer to pay when due the
premium in respect of any Contingent and Excess Liability Insurance Policy; and
(vi) the occurrence of certain Insolvency Events relating to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance referred to
under clause (i) above for a period of ten Business Days, referred to under
clause (ii) for a period of 90 days, referred to under clause (iii) for a period
of 20 Business Days, or referred to under clause (iv) for a period of 60 days,
shall not constitute an Event of Servicing Termination if such failure or delay
was caused by act of God or other similar occurrence. Upon the occurrence of any
such event, the Servicer shall not be relieved from using all commercially
reasonable efforts to perform its obligations in a timely manner in accordance
with the terms of the Servicing Agreement and the Servicer shall provide to the
Trustee, the Origination Trustee, the Seller and
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the Certificateholders prompt notice of such failure or delay by it, together
with a description of its efforts to so perform its obligations. (Servicing
Agreement, Sections 4.01 and 11.01).
Rights Upon Event of Servicing Termination
As long as an Event of Servicing Termination remains unremedied, the
Origination Trustee, upon the direction of the Trustee or holders of
Certificates evidencing not less than 51% of the Voting Interests of the Class A
Certificates and the Class B Certificates, voting together as a single class,
may terminate all of the rights and obligations of the Servicer under the
Servicing Agreement with respect to the SUBI Assets. In the event of such a
termination affecting the SUBI Assets, the Trust Agent generally will succeed to
the rights, powers, responsibilities, duties and liabilities of the Servicer
under the Servicing Agreement with respect to the SUBI Assets (excluding certain
specific obligations listed in the Servicing Agreement) or provide for a new
Servicer to be approved by each Rating Agency. The Trust Agent or other new
Servicer, will receive substantially the same servicing compensation to which
the Servicer otherwise would have been entitled. If, however, a bankruptcy
trustee or similar official has been appointed for the Servicer, and no Event of
Servicing Termination other than such appointment has occurred, such trustee or
official may have the power to prevent the Origination Trustee, the Trustee or
such Certificateholders from effecting a transfer of servicing. Notwithstanding
the termination of the Servicer's rights and powers in such event, the Servicer
will remain obligated to perform certain specific obligations listed in the
Servicing Agreement and to reimburse the Trust Agent for any losses incurred in
performing certain such obligations, and will be entitled to payment of certain
amounts payable to it for services rendered prior to such termination.
(Servicing Agreement, Sections 4.01 and 11.01).
The holders of Certificates evidencing not less than 51% of the Voting
Interests of the Class A Certificates and the Class B Certificates, voting
together as a single class, with the consent of the Origination Trustee and the
Trustee (which consents shall not be unreasonably withheld) may waive any
default by the Servicer in the performance of its obligations under the
Servicing Agreement and its consequences with respect to the SUBI Assets, other
than a default in making any required deposits to or payments from an Account in
accordance with the Servicing Agreement or in respect of a covenant or provision
of the Servicing Agreement that cannot be modified or amended without the
consent of each Certificateholder (in which event the related waiver will
require the approval of holders of all of the Certificates). No such waiver will
impair the rights of the Certificateholders with respect to subsequent defaults.
(Servicing Agreement, Section 4.01; Agreement, Sections 8.02 and 9.03).
No Petition
The Servicer will agree not to institute, or join in, any bankruptcy or
similar proceeding against the Seller, WOLSI, ALFI L.P., the Origination Trustee
or the Origination Trust until one year and one day after final payment of all
financings involving interests in the Origination Trust. (Servicing Agreement,
Section 5.14).
Amendment
The Servicing Agreement may be amended from time to time in a writing
signed by the Origination Trustee and the Servicer, with the approval of the
Trustee (which approval may be given in the circumstances described under
"Additional Document Provisions -- Additional Agreement
Provisions -- Amendment"). Any such amendment relating to the UTI or any Other
SUBI may require certain other approvals. (Servicing Agreement, Sections 5.02
and 12.02).
Termination
The Servicing Agreement shall terminate upon the earlier to occur of (i)
the termination of the Origination Trust, (ii) the discharge of the Servicer in
accordance with its terms or (iii) the termination of the Agreement. (Servicing
Agreement, Section 5.01).
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Governing Law
The Servicing Agreement will be governed by the laws of the State of
Alabama.
CERTAIN LEGAL ASPECTS OF THE ORIGINATION TRUST AND THE SUBI
THE ORIGINATION TRUST
The Origination Trust may be deemed to be a business trust under Alabama
law. In an Alabama business trust, the trust property is managed for the profit
of the beneficiaries, as opposed to a common "asset preservation" trust, in
which the trustee is charged with the mere maintenance of trust property. The
principal requirement for the formation of a business trust in Alabama is the
filing of the trust instrument with the appropriate state authority. The
Origination Trust Agreement has been, and the SUBI Trust Agreement will be, so
filed. The Origination Trust also has been qualified as a business trust
authorized to transact business in certain other states where it is required to
be qualified.
Because the Origination Trust has been registered as a business trust for
Alabama and other state law purposes, like a corporation, it may be eligible to
be a debtor in its own right under the United States Bankruptcy Code, as further
described under "Risk Factors -- Insolvency of World Omni; Substantive
Consolidation with World Omni".
THE SUBI
The SUBI will be issued pursuant to the SUBI Trust Agreement and will
evidence a beneficial interest in the SUBI Assets. The SUBI will not represent a
direct interest in the SUBI Assets, nor will it represent an interest in any
Origination Trust Assets other than the SUBI Assets. Except under the limited
circumstances described under "Risk Factors -- Structural
Considerations -- Allocation of Origination Trust Liabilities", payments made on
or in respect of such other Origination Trust Assets will not be available to
make payments on the Certificates or to cover expenses of the Origination Trust
allocable to the SUBI Assets, as further described under "The Trust and the
SUBI -- The SUBI".
INSOLVENCY RELATED MATTERS
As described under "Risk Factors -- Structural Considerations -- Allocation
of Origination Trust Liabilities", each holder or pledgee of the UTI and any
Other SUBI will be required to expressly disclaim any interest in the SUBI
Assets, and to fully subordinate any claims to the SUBI Assets in the event that
this disclaimer is not given effect. Although no assurance can be given, in the
unlikely event of a bankruptcy of ALFI L.P., the Seller believes that the SUBI
Assets would not be treated as part of ALFI L.P.'s bankruptcy estate and that,
even if they were so treated, the subordination by holders and pledgees of the
UTI and Other SUBIs should be enforceable. In addition, as described under "Risk
Factors -- Insolvency of World Omni; Substantive Consolidation with World Omni",
the Seller has taken steps in structuring the transactions contemplated hereby
that are intended to make it unlikely that the voluntary or involuntary
application for relief by World Omni under any Insolvency Laws will result in
consolidation of the assets and liabilities of ALFI, ALFI L.P., WOLSI, the
Seller, the Origination Trust or the Trust with those of World Omni. If,
however, (i) a court concluded that the assets and liabilities of ALFI, ALFI
L.P., the Seller, WOLSI, the Origination Trust or the Trust should be
consolidated with those of World Omni in the event of the application of
applicable Insolvency Laws to World Omni, (ii) a filing were made under any
Insolvency Law by or against ALFI, ALFI L.P., the Seller, WOLSI, the Origination
Trust or the Trust or (iii) an attempt were made to litigate any of the
foregoing issues, delays in payments on the Certificates and possible reductions
in the amount of such payments could occur.
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CERTAIN LEGAL ASPECTS OF THE
CONTRACTS AND THE LEASED VEHICLES
BACK-UP SECURITY INTERESTS
The Contracts are "chattel paper" as defined in the UCC. Pursuant to the
Alabama UCC, when a debtor's chief executive office is in Alabama, a
non-possessory security interest in or transfer of chattel paper may be
perfected by filing a UCC-1 financing statement with the Alabama Department of
State. The chief executive offices of each of the Seller and the Origination
Trust are located in Alabama.
As described under "Risk Factors -- Structural Considerations -- Back-up
Security Interest in Certain SUBI Assets", if the Certificates were to be
recharacterized as loans secured by the SUBI Assets, the Trustee will be deemed
to have a perfected security interest in certain SUBI Assets, including the
Contracts. On or prior to the Closing Date, "protective" UCC-1 financing
statements will be filed in the States of Alabama, Florida and Illinois to
effect this perfection. The Trustee's security interest in that circumstance
could be subordinate to the interest of certain other parties who take
possession of the Contracts before the filing described above has been
completed. Specifically, the Trustee's security interest in a Contract could be
subordinate to the rights of a purchaser of such Contract who takes possession
thereof without knowledge or actual notice of the Trustee's security interest.
The Contracts will not be stamped to reflect the foregoing back-up security
arrangements.
Any perfected security interest of the Trustee in the Contracts will be
unaffected by any change of location of any lessee, since, under the UCC, this
back-up security interest will be perfected by the filing of a UCC-1 financing
statement in the jurisdiction in which the chief executive office of the
"debtor" (in this case, the Origination Trust) is located, not the location of
any lessee.
VICARIOUS TORT LIABILITY
Although the Origination Trust will own the leased vehicles, they will be
operated by the lessees and their respective invitees. State laws, including the
laws in the Five State Area, differ as to whether anyone suffering injury to
person or property involving a leased vehicle may bring an action against the
owner of the vehicle merely by virtue of that ownership.
In Alabama and Georgia, a victim of such an accident has no such cause of
action against the owner of a leased vehicle arising from the negligent
operation of such leased vehicle unless the owner has negligently entrusted or
negligently continues to entrust the vehicle to an inappropriate lessee.
In Florida, under Section 324.021(9)(b), Florida Statutes, the owner of a
motor vehicle that is subject to a lease having an initial term of at least one
year is exempt from liability arising out of an accident in which the leased
vehicle is involved if the lessee is required under the lease to maintain
certain specified levels of insurance and such insurance is in effect. In 1991,
in a case involving finance leases, the Florida Supreme Court ruled that this
statute is constitutional and that a Florida owner/lessor that complies with the
statute will not be deemed the owner of the leased vehicle for purposes of
financial responsibility for liability or tort claims arising out of the
negligent operation of the leased vehicle or the negligent acts of the operator.
In 1992, the Florida Supreme Court held that this statute is applicable to true
leases as well as finance leases. In March 1996, the Florida Supreme Court
strictly interpreted the requirements of Section 324.021(9)(b), ruling that the
existence of a lessor's blanket contingent liability insurance policy did not
satisfy the statutory requirement that the lessee have insurance in effect at
the time of the accident and denying the lessor the liability exemption provided
in the statute. However, effective with respect to actions brought on or after
June 1, 1996, the statute was amended to provide that a lessor's blanket
contingent liability insurance policy with certain required policy limits will
be deemed to satisfy the statute's requirements for the liability exemption. The
Origination Trust's insurance coverage meets these requirements.
In North Carolina, a lessor of a motor vehicle generally is not responsible
to injured parties for a lessee's negligent use of the leased vehicle when all
control has been relinquished to the lessee, unless the lessor knew or in the
exercise of reasonable care should have known that the leased vehicle was
defective or unsafe at the
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time of delivery to the lessee and the defect or unsafe condition caused injury,
or if the lessor negligently entrusted the vehicle to an incompetent lessee.
As more fully described under "Risk Factors -- Vicarious Tort Liability",
following an accident involving a Leased Vehicle, under certain circumstances
the Origination Trust may be the subject of an action for damages as a result of
its ownership of such Leased Vehicle. To the extent that applicable state law
permits such an action, the Origination Trust and the Origination Trust Assets
may be subject to liability. However, the laws of many States, including each of
the States in the Five State Area, either do not permit such suits, or the
lessor's liability is capped at the amount of any liability insurance that the
lessee was required to, but failed to, maintain. Although the Origination
Trust's insurance coverage is substantial, in the event that all applicable
insurance coverage were exhausted and damages were assessed against the
Origination Trust, claims could be imposed against the assets of the Origination
Trust, including the Leased Vehicles. However, such claims would not take
priority over any SUBI Assets to the extent that the Trustee has a prior
perfected security interest therein (such as would be the case, in certain
limited circumstances, with respect to the Contracts) as further described under
"Risk Factors -- Structural Considerations -- Back-up Security Interest in
Certain SUBI Assets". If any such claims were imposed against the assets of the
Origination Trust, investors in the Class A Certificates could incur a loss on
their investment.
REPOSSESSION OF LEASED VEHICLES
In the event that a default by a lessee has not been cured within a certain
period of time after notice, the Servicer will ordinarily retake possession of
the related leased vehicle. Some jurisdictions require that the lessee be
notified of the default and be given a time period within which to cure the
default prior to repossession. Generally, this right to cure may be exercised on
a limited number of occasions in any one-year period. In these jurisdictions, if
the lessee objects or raises a defense to repossession, an order must be
obtained from the appropriate state court, and the vehicle must then be
repossessed in accordance with that order. Other jurisdictions permit
repossession without notice (although in Florida, Georgia and North Carolina a
course of conduct in which the lessor has accepted late payments has been held
to create a right of the lessee to receive prior notice), but only if the
repossession can be accomplished peacefully. If a breach of the peace cannot be
avoided, judicial action is required.
In Georgia, a leased vehicle may be repossessed without notice, but only if
the repossession can be accomplished without a breach of the peace. If a breach
of the peace cannot be avoided, the lessor must seek a writ of possession in a
state court action or pursue other judicial action to repossess such leased
vehicle.
After the Servicer has repossessed a Leased Vehicle, it may provide the
lessee with a period of time within which to cure the default under the related
Contract. If by the end of such period the default has not been cured, the
Servicer will attempt to sell the Leased Vehicle. The Net Repossessed Vehicle
Proceeds therefrom may be less than the remaining amounts due under the Contract
at the time of default by the lessee.
DEFICIENCY JUDGMENTS
The proceeds of sale of a leased vehicle generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
amounts due under the related lease contract. While some states impose
prohibitions or limitations on deficiency judgments if the net proceeds from
resale of a leased vehicle do not cover the full amounts due under the related
lease contract, a deficiency judgment can be sought in those states (including
each of the States in the Five State Area) that do not prohibit directly or
limit such judgments. However, in some states (including Florida), a lessee may
be allowed an offsetting recovery for any amount not recovered at resale because
the terms of the resale were not commercially reasonable. In any event, a
deficiency judgment would be a personal judgment against the lessee for the
shortfall, and a defaulting lessee would be expected to have little capital or
sources of income available following repossession. Therefore, in many cases, it
may not be useful to seek a deficiency judgment. Even if a deficiency judgment
is obtained, it may be settled at a significant discount.
In Georgia, amounts recoverable by the lessor of a leased vehicle from a
lessee upon default or early termination are not considered to be "deficiency
judgments", but damages for breach or early termination of
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the related lease contract. In the case of liquidated damages provided for in
the Contracts, the only limitation or prohibition on such damages is that they
are reasonable in light of the anticipated harm caused by the default. Georgia
law does not require that any excess proceeds from disposition of a leased
vehicle be paid to a lessee. Under the Georgia Motor Vehicle Warranty Rights
Act, however, where a lessor or lessee has exercised its rights against the
manufacturer and obtained a replacement vehicle and the lessor realizes a gain
from disposition of the replacement vehicle, the lessor must refund to the
lessee the lesser of any offset for use paid by the lessee to the manufacturer
or the gain realized by the lessor.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws impose requirements
upon lessors and servicers involved in consumer leasing. The federal Consumer
Leasing Act of 1976 and Regulation M, issued by the Board of Governors of the
Federal Reserve System, for example, require that a number of disclosures be
made at the time a vehicle is leased, including the amount of any down payment,
a description of the lessee's liability at the end of the lease term, the amount
of any periodic payments and the circumstances under which the lessee may
terminate the lease prior to the end of the lease term. The various consumer
protection laws would apply to the Origination Trustee as a "co-lessor" of the
Contracts and may also apply to the Trust as holder of a beneficial interest in
the Contracts. The failure to comply with such consumer protection laws may give
rise to liabilities on the part of the Servicer, the Origination Trust and the
Origination Trustee, including liabilities for statutory damages and attorneys'
fees. In addition, claims by the Servicer, the Origination Trust and the
Origination Trustee may be subject to set-off as a result of such noncompliance.
Courts have applied general equitable principles in litigation relating to
repossession and deficiency balances. These equitable principles may have the
effect of relieving a lessee from some or all of the legal consequences of a
default.
In several cases, consumers have asserted that the self-help remedies of
lessors violate the due process protection provided under the Fourteenth
Amendment to the Constitution of the United States. Courts have generally found
that repossession and resale by a lessor do not involve sufficient state action
to afford constitutional protection to consumers.
Many states, including each State in the Five State Area, have adopted laws
(each, a "Lemon Law") providing redress to consumers who purchase or lease a
vehicle that remains out of conformance with its manufacturer's warranty after a
specified number of attempts to correct a problem or after a specific time
period. Should any Leased Vehicle become subject to a Lemon Law, a lessee could
compel the Origination Trust to terminate the related Contract and refund all or
a portion of payments that previously have been paid. Although the Origination
Trust may be able to assert a claim against the manufacturer of any such
defective Leased Vehicle, there can be no assurance any such claim would be
successful.
Historically, less than one-half of one percent of all automobiles and
light duty trucks leased by World Omni (including lease contracts owned by the
Origination Trustee on behalf of the Origination Trust or by certain special
purpose subsidiaries of World Omni) have become the subject of an action under
any of the Lemon Laws of any jurisdiction. As noted below, World Omni will
represent and warrant to the Trustee as of the Initial Cutoff Date and as of
each Subsequent Cutoff Date that none of the Initial Leased Vehicles or the
related Subsequent Leased Vehicles, as the case may be, is out of compliance
with any law, including a Lemon Law. Nevertheless, there can be no assurance
that one or more Leased Vehicles will not become subject to return (and the
related Contract terminated) in the future under a Lemon Law.
Representations and warranties will be made in the SUBI Trust Agreement
that each Contract complies with all requirements of law in all material
respects. If any such representation and warranty proves to be incorrect with
respect to any Contract, and is not timely cured, World Omni will be required
under the Servicing Agreement to deposit an amount equal to the Reallocation
Payment (together with, in certain circumstances during the Amortization Period,
an amount equal to the Reallocation Deposit Amount) in respect of such Contract
into the SUBI Collection Account unless the breach is cured. See "Additional
Document Provisions -- The SUBI Trust Agreement -- The SUBI, the Other SUBIs and
the UTI" and
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"The Contracts -- Representations, Warranties and Covenants" for further
information regarding the foregoing representations and warranties.
OTHER LIMITATIONS
In addition to laws limiting or prohibiting deficiency judgments, numerous
other statutory provisions, including applicable Insolvency Laws, may interfere
with or affect the ability of a lessor to enforce its rights under an automobile
or light duty truck lease contract. For example, if a lessee commences
bankruptcy proceedings, the lessor's receipt of rental payments due under the
lease contract is likely to be delayed. In addition, a lessee who commences
bankruptcy proceedings might be able to assign the lease contract to another
party even though the lease prohibits assignment.
CERTAIN INCOME TAX CONSIDERATIONS
FEDERAL TAXATION
General
Set forth below is a discussion representing the opinion of Brown & Wood
LLP, special federal income tax counsel to the Seller and counsel for the
Underwriters, as to material federal income tax consequences to holders of the
Class A Certificates who are original owners and who hold the Class A
Certificates as capital assets under the Internal Revenue Code of 1986, as
amended (the "Code"). This discussion does not purport to be complete or to deal
with all aspects of federal income taxation or any aspects of state or local
taxation that may be relevant to Class A Certificateholders or Certificate
Owners in light of their particular circumstances, nor to certain types of Class
A Certificateholders or Certificate Owners subject to special treatment under
the federal income tax laws (for example, banks and life insurance companies).
This discussion is based upon present provisions of the Code, the regulations
promulgated thereunder and judicial and ruling authorities, all of which are
subject to change, which change may be retroactive. The parties do not intend to
seek a ruling from the Internal Revenue Service ("IRS") on any of the issues
discussed below. Moreover, there can be no assurance that if such a ruling were
sought, the IRS would rule favorably. Prospective investors should consult their
own tax advisors with regard to the federal income tax consequences of the
purchase, ownership or disposition of the Class A Certificates, as well as the
tax consequences arising under the laws of any state, foreign country or other
taxing jurisdiction.
Characterization of the Class A Certificates as Indebtedness
The Seller, the Trustee, each Certificateholder, and each Certificate Owner
(by acquiring a beneficial interest in a Class A Certificate) will express in
the Agreement their intent that, for federal, state and local income and
franchise tax purposes, the Class A Certificates will be indebtedness, secured
by the assets of the Trust. The Seller and the Trustee, by entering into the
Agreement, and each Certificateholder and each Certificate Owner, by acquiring a
beneficial interest in a Class A Certificate, will agree to treat the Class A
Certificates as indebtedness for federal, state and local income and franchise
tax purposes. However, because different criteria are used to determine the
non-tax accounting characterization of the transaction, the Seller will treat
the transaction, for financial accounting purposes, as a sale of an ownership
interest in the Origination Trust Assets and not as the issuance of a debt
obligation.
In general, the characterization of a transaction for federal income tax
purposes is based upon economic substance, and the substance of the transaction
in which the Class A Certificates are issued is consistent with the treatment of
the Class A Certificates as debt for federal income tax purposes. Although there
are certain judicial precedents holding that under appropriate circumstances a
taxpayer should be required to treat a transaction in accordance with the form
chosen by the taxpayer regardless of the transaction's substance, the operative
provisions of the transaction and the Agreement will not be inconsistent with
treating the Class A Certificates as debt and, accordingly, these authorities
should not be applied to require sale characterization for federal income tax
purposes. The determination of whether the economic substance of a property
transfer is a sale or a loan secured by the transferred property depends upon
numerous factors designed to determine
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whether the transferor has relinquished (and the transferee has obtained)
substantial incidents of ownership in the property. The primary factors examined
are whether the transferee has the opportunity to gain if the property increases
in value, and has the risk of loss if the property decreases in value. Based
upon its analysis of such factors, Brown & Wood LLP is of the opinion that, for
federal income tax purposes the characterization of the Class A Certificates
should be governed by the substance of the transaction and accordingly, (i) the
Trust will not be treated as an association taxable as a corporation and (ii)
the Class A Certificates will properly be characterized as indebtedness that is
secured by the Trust assets.
Taxation of Interest and Discount Income
Assuming that the Certificate Owners are owners of debt obligations for
federal income tax purposes, interest generally will be taxable as ordinary
income for federal income tax purposes when received by the Certificate Owners
utilizing the cash method of accounting and when accrued by Certificate Owners
utilizing the accrual method of accounting. Interest received on the Class A
Certificates may also constitute "investment income" for purposes of certain
limitations of the Code concerning the deductibility of investment interest
expense.
Original Issue Discount. Under regulations issued with respect to the
original issue discount ("OID") provisions of the Code, the Class A Certificates
will be deemed to have been issued with OID in an amount equal to the excess of
the "stated redemption price at maturity" of the Class A-1, Class A-2 or Class
A-3 Certificates, as the case may be (generally equal to their principal amount
as of the date of original issuance plus all interest other than "qualified
stated interest" payable prior to or at maturity), over their original issue
price (in this case, the initial offering price at which a substantial amount of
the related Class of Class A Certificates is sold to the public). Qualified
stated interest generally means interest payable at a single fixed rate or
qualified variable rate provided that such interest payments are unconditionally
payable at intervals of one year or less during the entire term of the Class
A-1, Class A-2 or Class A-3 Certificates, as the case may be. Under the OID
provisions of the Code, interest will only be treated as qualified stated
interest if it is "unconditionally payable". Interest will be treated as
"unconditionally payable" only if Certificateholders have reasonable remedies to
compel payment of interest deficiencies (e.g., default and acceleration rights).
Because Class A Certificateholders will not be entitled to penalty payments of
interest on interest deficiencies, and Class A Certificateholders will have no
default and acceleration rights in the event of interest shortfalls, interest
paid on the Class A Certificates may not be treated by the IRS as qualified
stated interest, and, in such event, would be treated as OID. A Class A
Certificateholder must include OID income over the term of the related Class A
Certificate under a constant yield method. In general, OID must be included in
income in advance of the receipt of cash representing that income, regardless of
the Certificateholder's method of accounting.
In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a Class A Certificate and its issue price. A
holder of a Class A Certificate must include such OID in gross income as
ordinary interest income as it accrues under a method taking into account an
economic accrual of the discount. In general, OID must be included in income in
advance of the receipt of the cash representing that income. The amount of OID
on a Class A Certificate will be considered to be zero if it is less than a de
minimis amount determined under the Code.
The issue price of a Class A Certificate is the first price at which a
substantial amount of Class A Certificates are sold to the public (excluding
bond, bonuses, brokers, underwriters or wholesalers). If less than a substantial
amount of a particular Class of Class A Certificates is sold for cash on or
prior to the Closing Date, the issue price of such Class will be treated as the
fair market value of such Class on the Closing Date. The issue price of a Class
A Certificate also includes the amount paid by a Class A Certificateholder for
accrued interest that relates to a period prior to the issue date of the Class A
Certificate. The stated redemption price at maturity of a Class A Certificate
includes the original principal amount of the Class A Certificate, but generally
will not include distributions of interest if such distributions constitute
"qualified stated interest."
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Under the de minimis rule, OID on a Class A Certificate will be considered
to be zero if such OID is less than 0.25% of the stated redemption price at
maturity of the Class A Certificate multiplied by the weighted average maturity
of the Class A Certificate. Certificateholders generally must report de minimis
OID pro rata as principal payments are received, and such income will be capital
gain if the Class A Certificate is held as a capital asset. However, accrual
method holders may elect to accrue all de minimis OID as well as market discount
under a constant interest method.
The holder of a Class A Certificate issued with OID must include in gross
income, for all days during its taxable year on which it holds such Class A
Certificate, the sum of the "daily portions" of such original issue discount.
The amount of OID includible in income by a Certificateholder will be computed
by allocating to each day during a taxable year a pro rata portion of the
original issue discount that accrued during the relevant accrual period.
If a Certificateholder purchases a Class A Certificate issued with OID at
an "acquisition premium" (i.e., at a price in excess of the adjusted issue price
of the Class A Certificate, but less than or equal to the "stated redemption
price at maturity"), the amount includible by such Certificateholder in income
in each taxable year as OID will be reduced by that portion of the premium
properly allocable to such year.
Although the matter is not entirely clear, the Seller currently intends to
report all stated interest on the Class A Certificates as qualified stated
interest and not as OID.
Market Discount. Certificate Owners should be aware that the resale of a
Class A Certificate may be affected by the market discount rules of the Code.
These rules generally provide that, subject to a de minimis exception, if a
holder acquires a Class A Certificate at a market discount (i.e., at a price
below its "adjusted issue price") and thereafter recognizes gain upon a
disposition of the Class A Certificate, the lesser of such gain or the portion
of the market discount that accrued while the Class A Certificate was held by
such holder will be treated as ordinary interest income realized at the time of
the disposition. A taxpayer may elect to include market discount currently in
gross income in taxable years to which it is attributable, computed using either
a ratable accrual or a yield to maturity method.
Premium. A Certificate Owner who purchases a Class A Certificate for more
than its stated redemption price at maturity will be subject to the premium
amortization rules of the Code. Under those rules, the Certificate Owner may
elect to amortize such premium on a constant yield method. Amortizable premium
reduces interest income on the related Class A Certificate. If the Certificate
Owner does not make such an election, the premium paid for the Class A
Certificate generally will be included in the tax basis of the Class A
Certificate in determining the gain or loss on its disposition.
Each Certificate Owner should consult his own tax advisor regarding the
impact of the original issue discount, market discount, and premium amortization
rules.
Sales of Class A Certificates
In general, a Certificate Owner will recognize gain or loss upon the sale,
exchange, redemption or other taxable disposition of a Class A Certificate
measured by the difference between (i) the amount of cash and the fair market
value of any property received (other than amounts attributable to, and taxable
as, accrued stated interest) and (ii) the Certificate Owner's tax basis in the
Class A Certificate (as increased by any OID or market discount previously
included in income by the holder and decreased by any deductions previously
allowed for amortizable bond premium and by any payments, other than qualified
stated interest payments, received with respect to such Class A Certificate).
Subject to the market discount rules discussed above and to the more than
one-year holding period requirement for long-term capital gain treatment, any
such gain or loss generally will be long-term capital gain or loss, provided
that the Class A Certificate was held as a capital asset. The federal income tax
rates applicable to capital gains for taxpayers other than individuals, estates
and trusts are currently the same as those applicable to ordinary income;
however, the maximum ordinary income rate for individuals, estates and trusts is
generally 39.6%, whereas the maximum long-term capital gains rate for such
taxpayers is 28%. Moreover, capital losses generally may be used only to offset
capital gains.
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Federal Income Tax Consequences to Foreign Investors
The following information describes the United States federal income tax
treatment of investors that are not United States persons ("Foreign Investors")
if the Class A Certificates are treated as debt. The term "Foreign Investor"
means any person other than (i) a citizen or resident of the United States, (ii)
a corporation, partnership or other entity organized in or under the laws of the
United States or any state or political subdivision thereof or (iii) an estate
or trust the income of which is includible in gross income for United States
federal income tax purposes, regardless of its source.
The Code and Treasury regulations generally subject interest paid to a
Foreign Investor to a withholding tax at a rate of 30% (unless such rate were
changed by an applicable treaty). The withholding tax, however, is eliminated
with respect to certain "portfolio debt investments" issued to Foreign
Investors. Portfolio debt investments include debt instruments issued in
registered form for which the United States payor receives a statement that the
beneficial owner of the instrument is a Foreign Investor. The Class A
Certificates will be issued in registered form; therefore, if the information
required by the Code is furnished (as described below) and no other exceptions
to the withholding tax exemption are applicable, no withholding tax will apply
to the Class A Certificates.
For the Class A Certificates to constitute portfolio debt investments
exempt from United States withholding tax, the withholding agent must receive
from the Certificate Owner an executed IRS Form W-8 signed under penalty of
perjury by the Certificate Owner stating that the Certificate Owner is a Foreign
Investor and providing such Certificate Owner's name and address. The statement
must be received by the withholding agent in the calendar year in which the
interest payment is made, or in either of the two preceding calendar years.
A Certificate Owner that is a nonresident alien or foreign corporation will
not be subject to United States federal income tax on gain realized on the sale,
exchange or redemption of such Class A Certificate, provided that (i) such gain
is not effectively connected with a trade or business carried on by the
Certificate Owner in the United States, (ii) in the case of a Certificate Owner
that is an individual, such Certificate Owner is not present in the United
States for 183 days or more during the taxable year in which such sale, exchange
or redemption occurs and (iii) in the case of gain representing accrued
interest, the conditions described in the immediately preceding paragraph are
satisfied.
Backup Withholding
A Certificate Owner may be subject to a backup withholding at the rate of
31% with respect to interest paid on the Class A Certificates if the Certificate
Owner, upon issuance, fails to supply the Trustee or his broker with such
Certificate Owner's taxpayer identification number, fails to report interest,
dividends or other "reportable payments" (as defined in the Code) properly, or
under certain circumstances, fails to provide the Trustee or his broker with a
certified statement, under penalty of perjury, that such Certificate Owner is
not subject to backup withholding. Information returns will be sent annually to
the IRS and to each Certificate Owner setting forth the amount of interest paid
on the Class A Certificates and the amount of tax withheld thereon.
FLORIDA INCOME TAXATION
The Florida Administrative Code includes a rule (the "Loan Rule"),
promulgated under the Florida Income Tax Code, which provides that a financial
organization earning or receiving interest from loans secured by tangible
property located in Florida will be deemed to be conducting business or earning
or receiving income in Florida, and will be subject to Florida corporate income
tax irrespective of the place of receipt of such interest. A "financial
organization" is defined to include any bank, trust company, savings bank,
industrial bank, land bank, safe deposit company, private banker, savings and
loan association, credit union, cooperative bank, small loan company, sales
finance company or investment company. If the Loan Rule were to apply to an
investment in the Class A Certificates, then a financial organization investing
in the Class A Certificates would be subject to Florida corporate income tax on
a portion of its income at a maximum rate of 5.5%, and would be required to file
an income tax return in Florida, even if it has no other
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Florida contacts. English, McCaughan & O'Bryan, P.A., special Florida counsel to
the Seller, is of the opinion that if the matter were properly presented to a
court having jurisdiction, and assuming interpretation of relevant law on a
basis consistent with existing authority, such court would hold that the Loan
Rule should not apply to an investment in the Class A Certificates or the
receipt of interest thereon by a financial organization with no other Florida
contacts. Consequently, prospective investors are urged to consult their own tax
advisers as to the applicability of Florida taxation to their investments in the
Certificates and to their ability to offset any such Florida tax against any
other state tax liabilities that such investors might have.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit pension, profit sharing
or other employee benefit plans ("Benefit Plans") from engaging in certain
transactions with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to such Benefit Plans. ERISA
also imposes certain duties on persons who are fiduciaries of Benefit Plans
subject to ERISA. Under ERISA, any person who exercises any authority or control
with respect to the management or disposition of the assets of a Benefit Plan is
considered to be a fiduciary of such Benefit Plan (subject to certain exceptions
not here relevant). A violation of these "prohibited transaction" rules may
result in liability under ERISA and the Code for such persons.
Neither ERISA nor the Code defines the terms "plan assets". Under Section
2510.3-101 of the United States Department of Labor ("DOL") regulations (the
"Regulation"), a Plan's assets may include an interest in the underlying assets
of an entity (such as a trust) for certain purposes, including the prohibited
transaction provisions of ERISA and the Code, if the Plan acquires an "equity
interest" in such entity. The Seller believes that the Certificates will give
Certificateholders an equity interest in the Trust for purposes of the
Regulation. Under the Regulation, when a Plan acquires an equity interest that
is neither a "publicly offered security" nor a security issued by an investment
company registered under the Investment Company Act of 1940, the underlying
assets of the entity will be considered "plan assets" unless the entity is an
"operating company" or equity participation in the entity by benefit plan
investors is not "significant". For this purpose, such participation is
significant if immediately after the most recent acquisition of any equity
interest in the entity, whether or not from an issuer or an underwriter, 25% or
more of the value of any class of equity interest is held by "benefit plan
investors", which are defined as Benefit Plans and employee benefit plans not
subject to ERISA (e.g., governmental plans).
The Trust will not be an "operating company" as defined in the Regulation,
and it will not be an investment company registered under the Investment Company
Act of 1940. A "publicly-offered security" is defined under the Regulation as a
security that is "freely transferable" (which is presumed if the face amount of
each Certificate is $10,000 or less), "widely held" (with at least 100 holders
of each of the Class A-1 Certificates, the Class A-2 Certificates and the Class
A-3 Certificates independent of the Trust and of one another as of the initial
offering) and part of a class of securities registered under Sections 12(b) or
12(g) of the Exchange Act or sold to the public pursuant to an effective
registration statement under the Securities Act, and the class of which the
Class A Certificates are a part is required to be registered under the Exchange
Act within 120 days after the end of the Trust's fiscal year. The Seller
anticipates that the Class A Certificates will be freely transferable, but does
not expect that the registration requirements under the Exchange Act will be
met. The Underwriters can give no assurances that there will be at least 100
holders of each of the Class A-1 Certificates, the Class A-2 Certificates and
the Class A-3 Certificates (independent of the Trustee and each other) who will
purchase the Class A Certificates as of the initial offering in order to satisfy
the "widely held" requirement.
If at any time immediately after the most recent acquisition of any Class A
Certificates, 25% or more of the value of any Class of Certificates is held by
benefit plan investors, then all or some portion of the assets of the Trust
would constitute plan assets. There can be no assurance that less than 25% of
the value of any Class of Certificates will be held by benefit plan investors.
Accordingly, the assets of the Trust may be deemed to include the assets of
Benefit Plans that are Class A Certificateholders, and transactions between the
Trust and "parties in interest" or "disqualified persons" with respect to such
Benefit Plans might be prohibited
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<PAGE> 95
transactions under Section 406 of ERISA and Section 4975 of the Code. Thus, for
example, if a participant in a Benefit Plan that is a Class A Certificateholder
is a lessee in respect of a Contract, a prohibited transaction could occur.
The DOL has granted to World Omni and its affiliates, including the Seller,
an administrative exemption (Prohibited Transaction Exemption 96-12; Exemption
Application No. D-09840, et al., 61 Fed. Reg. 10025-31 (March 12, 1996)
("Exemption")) from certain of the prohibited transaction rules of ERISA. The
Exemption applies to the initial purchase, the holding and the subsequent resale
by Benefit Plans of certificates similar to the Class A Certificates, provided
that certain specified conditions (certain of which are specified below) are
met. The Seller believes all conditions of the Exemption other than those within
the control of the investors have been or will be met.
For the Exemption to apply to the acquisition by a Benefit Plan of Class A
Certificates, the Class A Certificates would be required to be offered and sold
initially to the public (including Benefit Plans) pursuant to an underwriting
arrangement with one or more underwriters which have received one of a group of
administrative exemptions from certain of the prohibited transaction rules of
ERISA. Such exemptions apply with respect to the initial purchase, the holding
and the subsequent resale by Benefit Plans of certificates representing
interests in asset backed pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of such exemption. The DOL has granted such an administrative
exemption to the managing Underwriter (Prohibited Transaction Exemption 89-90;
Exemption Application No. D-6555, 54 Fed. Reg. 42597 (1989), as amended;
Exemption Application No. D-8342, 55 Fed. Reg. 48939 (1990), as amended).
Among the other conditions that are required to be satisfied for the
Exemption to apply to the acquisition by a Benefit Plan of the Class A
Certificates are the following (each of which the Seller believes has been or
will be met in connection with the Class A Certificates):
(i) The acquisition of the Class A Certificates by a Benefit Plan is
on terms (including the price for the Class A Certificates) that are at
least as favorable to the Benefit Plan as they would be in an arm's length
transaction with an unrelated party.
(ii) The rights and interests evidenced by the Class A Certificates
acquired by the Benefit Plan are not subordinated to the rights and
interests evidenced by any other Class of Certificates, and the rights and
interests evidenced by the SUBI Interest are not subordinated to the rights
and interests evidenced by Other SUBI Certificates or UTI Certificates.
(iii) The Class A Certificates acquired by the Benefit Plan have
received a rating at the time of such acquisition that is in one of the
three highest generic rating categories from Standard & Poor's, Moody's,
Duff & Phelps Credit Rating Co. ("Duff & Phelps") or Fitch Investors
Service, Inc. ("Fitch").
(iv) The sum of all payments made to the Underwriters in connection
with the distribution of the Class A Certificates represents not more than
reasonable compensation for underwriting the Class A Certificates. The sum
of all payments made to and retained by the Seller pursuant to the sale of
the SUBI Interest to the Trust represents not more than the fair market
value of the interest in the Contracts and Leased Vehicles represented
thereby. The sum of all payments made to and retained by the Servicer with
regard to the SUBI Assets represents not more than reasonable compensation
for the Servicer's services under the Servicing Agreement and reimbursement
of the Servicer's reasonable expenses in connection therewith.
(v) The Revolving Period ends no more than 15 consecutive months from
the Closing Date and (A) all Subsequent Contracts meet the same terms and
conditions for eligibility as the Initial Contracts, and (B) the addition
of Subsequent Contracts does not result in the reduction of the ratings on
the Class A Certificates received from any of Moody's, Standard & Poor's,
Duff & Phelps or Fitch.
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<PAGE> 96
(vi) After the Revolving Period ends, the average Lease Rate for the
Contracts included in the SUBI Assets shall not be more than 200 basis
points greater than the average Lease Rate for the Initial Contracts.
(vii) Principal Collections that are reinvested in Subsequent
Contracts during the Revolving Period are first invested in an eligible
lease contract with the earliest origination date, then in an eligible
lease contract with the next earliest origination date and so forth,
beginning with the lease contracts that have been reserved specifically for
such purpose at the time of the initial allocation of lease contracts to
the SUBI, but excluding those specific lease contracts reserved for
allocation to or allocated to Other SUBIs.
In addition, it is a condition that the Benefit Plan investing in the Class
A Certificates be an "accredited investor" as defined in Rule 501(a)(1) of
Regulation D of the Commission under the Securities Act.
The Exemption does not apply to Benefit Plans sponsored by the Seller, the
Underwriters, the Trustee, the Servicer, any lessee with respect to Contracts
allocated to the SUBI Assets constituting more than 5% of the aggregate
unamortized principal balance of the SUBI Assets, or any affiliate of such
parties (the "Restricted Group"). As of the date hereof, no lessee with respect
to the Contracts allocated to the SUBI Assets constitutes more than 5% of the
aggregate unamortized principal balance of the Trust (i.e., more than 5% of
99.8% of the Aggregate Net Investment Value as of the Initial Cutoff Date).
Moreover, the Exemption provides relief for sales, exchanges or transfers
between a Benefit Plan and the underwriter or sponsor with discretionary
investment authority over such Benefit Plan's assets, from certain
self-dealing/conflict of interest prohibited transactions, only if, among other
requirements, (i) a Benefit Plan's investment in the Class A Certificates does
not exceed 25% of all of the Class A Certificates outstanding at the time of the
acquisition, and (ii) immediately after the acquisition, no more than 25% of the
assets of a Benefit Plan with respect to which the person who has discretionary
authority or renders investment advice are invested in Class A Certificates
representing an interest in a trust containing assets sold or serviced by the
same entity.
Due to the complexities of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is important that the fiduciary
of a Benefit Plan considering the purchase of Class A Certificates consult with
its counsel regarding the applicability of Exemption and the prohibited
transaction provisions of ERISA and the Code to such investment. Moreover, each
Benefit Plan fiduciary should determine whether, under the general fiduciary
standards of investment prudence and diversification, an investment in the Class
A Certificates is appropriate for the Benefit Plan, taking into account the
overall investment policy of the Benefit Plan and the composition of the Benefit
Plan's investment portfolio.
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated October 18, 1996 (the "Underwriting Agreement"), the
Underwriters named below (the "Underwriters"), for whom CS First Boston
Corporation is acting as representative (the "Representative"), have severally
but not jointly agreed to purchase from the Seller the following respective
principal amounts of Class A-1 Certificates, Class A-2 Certificates and Class
A-3 Certificates:
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF
CLASS A-1 CLASS A-2 CLASS A-3
UNDERWRITER CERTIFICATES CERTIFICATES CERTIFICATES
- ------------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
CS First Boston Corporation...................... $ 65,000,000 $ 70,000,000 $ 52,514,497
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................ 65,000,000 70,000,000 52,514,497
BA Securities, Inc............................... 65,000,000 70,000,000 52,514,497
Salomon Brothers Inc ............................ 65,000,000 70,000,000 52,514,497
------------ ------------ ------------
Total.................................. $260,000,000 $280,000,000 $210,057,988
============ ============ ============
</TABLE>
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<PAGE> 97
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent that the Underwriters
will be obligated to purchase all the Class A Certificates if any are purchased.
The Underwriting Agreement provides that, in the event of a default by an
Underwriter, in certain circumstances the purchase commitments of the
non-defaulting Underwriter may be increased or the Underwriter Agreement may be
terminated.
The Seller has been advised by the Representative that the Underwriters
propose to offer the Class A-1 Certificates, the Class A-2 Certificates and the
Class A-3 Certificates to the public initially at the public offering prices set
forth on the cover page of this Prospectus and, through the Representative, to
certain dealers at such prices less a concession of 0.150%, 0.150% and 0.150% of
the principal amount per Class A-1 Certificate, Class A-2 Certificate and Class
A-3 Certificate, respectively, and the Underwriters and such dealers may allow a
discount of 0.125%, 0.125% and 0.125% of such principal amount per Class A-1
Certificate, Class A-2 Certificate and Class A-3 Certificate, respectively, on
sales to certain other dealers. After the initial public offering, the public
offering price and concessions and discounts to dealers may be changed by the
Underwriters.
The Seller and World Omni have jointly and severally agreed to indemnify
the Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or contribute to payments which the Underwriters may be
required to make in respect thereof.
It is expected that delivery of the Class A Certificates will be made
against payment therefor on or about the date specified in the last paragraph of
the cover page of this Prospectus, which is the fourth business day following
the date hereof. Under Rule 15c6-1 of the Commission under the Exchange Act,
trades in the secondary market generally are required to settle in three
business days, unless the parties to any such trade expressly agree otherwise.
Accordingly, purchasers who wish to trade Class A Certificates on the date
hereof will be required, by virtue of the fact that the Class A Certificates
initially will settle four business days after the date hereof, to specify an
alternate settlement cycle at the time of any such trade to prevent a failed
settlement. Purchasers of Class A Certificates who wish to trade Class A
Certificates on the date hereof should consult their own advisor.
Upon receipt of a request by an investor who has received an electronic
Prospectus from an Underwriter or a request by such investor's representative
within the period during which there is an obligation to deliver a Prospectus,
the Seller or the Underwriters will promptly deliver, or cause to be delivered,
without charge, a paper copy of the Prospectus.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Class A Certificates in Canada is being made only
on a private placement basis exempt from the requirement that the Seller prepare
and file a prospectus with the securities regulatory authorities in each
province where trades of the Class A Certificates are effected. Accordingly, any
resale of the Class A Certificates in Canada must be made in accordance with
applicable securities laws which will vary depending on the relevant
jurisdiction, and which may require resales to be made in accordance with
available statutory exemptions or pursuant to a discretionary exemption granted
by the applicable Canadian securities regulatory authority. Purchasers are
advised to seek legal advice prior to any resale of the Class A Certificates.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Class A Certificates in Canada who receives a purchase
confirmation will be deemed to represent to the Seller and the dealer from whom
such purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such Class A Certificates
without the benefit of a prospectus qualified under such securities laws, (ii)
where required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions".
95
<PAGE> 98
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of foreign issuers and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liabilities provisions of the U.S. federal securities laws.
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Ontario purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada. Following a recent decision of the U.S. Supreme
Court, it is possible that Ontario purchasers will not be able to rely upon the
remedies set out in Section 12(2) of the Securities Act if the securities are
being offered under a U.S. private placement memorandum.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Class A Certificates to whom the Securities Act (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any Class A Certificates acquired by such purchaser pursuant to this offering.
Such report must be in the form attached to British Columbia Securities
Commission Blanket Order BOR #95/17, a copy of which may be obtained from the
Seller. Only one such report must be filed in respect of Class A Certificates
acquired on the same date and under the same prospectus exemption.
RATINGS OF THE CLASS A CERTIFICATES
It is a condition of issuance that each of Moody's and Standard & Poor's
rates each Class of Class A Certificates in its highest rating category. The
ratings of the Class A Certificates will be based primarily upon the value of
the Initial Contracts, the Reserve Fund and the terms of the Seller Interest and
the Class B Certificates. There is no assurance that any such rating will not be
lowered or withdrawn by the assigning Rating Agency if, in its judgment,
circumstances so warrant. In the event that a rating with respect to any Class
of Class A Certificates is qualified, reduced or withdrawn, no person or entity
will be obligated to provide any additional credit enhancement with respect to
such Class of Class A Certificates.
The ratings of the Class A Certificates should be evaluated independently
from similar ratings on other types of securities. A rating is not a
recommendation to buy, sell or hold the related Class A Certificates, inasmuch
as such rating does not comment as to market price or suitability for a
particular investor. The ratings of each Class of Class A Certificates addresses
the likelihood of the payment of principal of and interest on such Certificates
pursuant to their terms.
There can be no assurance as to whether any rating agency other than
Moody's and Standard & Poor's will rate the Class A Certificates, or, if one
does, what rating will be assigned by such other rating agency. A rating on any
Class of Class A Certificates by another rating agency, if assigned at all, may
be lower than the ratings assigned to such Class A Certificates by each of
Moody's and Standard & Poor's.
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<PAGE> 99
LEGAL MATTERS
Certain legal matters with respect to the Class A Certificates will be
passed upon for the Seller by Williams & Connolly, Washington, D.C. Certain
other legal matters will be passed upon for the Seller with respect to New York
and Illinois law, by McDermott, Will & Emery, New York, New York and Chicago,
Illinois, with respect to Alabama law, by Hand Arendall, L.L.C., Birmingham,
Alabama, and with respect to Florida law, by English, McCaughan & O'Bryan, P.A.,
Fort Lauderdale, Florida. Brown & Wood LLP, San Francisco, California will act
as special federal income tax counsel to the Seller and as counsel for the
Underwriters.
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<PAGE> 100
INDEX OF CAPITALIZED TERMS
Set forth below is a list of the capitalized terms used in this Prospectus
and the pages on which the definitions of such terms may be found.
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------ -----
<S> <C>
ABS............................................. 47
Accelerated Principal Distribution Amount....... 14
Accounts........................................ 67
Additional Loss Amounts......................... 74
Additional Loss Contract........................ 70
Administrative Lien............................. 32
Administrative Lienholders...................... 32
Advance......................................... 19,78
Agency Agreement................................ 75
Aggregate Net Investment Value.................. 15
Agreement....................................... 5
ALFI............................................ 5
ALFI L.P........................................ 5
Alternate Reserve Fund Formula.................. 69
Amortization Date............................... 12
Amortization Period............................. 12
Annual Appraisal................................ 69
Appraisal Test.................................. 69
Benefit Plans................................... 92
Business Day.................................... 10
Capped Contingent and Excess Liability
Premiums...................................... 55
Capped Origination Trust Administrative
Expenses...................................... 55
Capped Trust Administrative Expenses............ 55
Cede............................................ 9
Cedel........................................... 9
Cedel Participants.............................. 61
Certificate Balance............................. 9
Certificate Distribution Amount................. 59
Certificate Owner............................... 9
Certificate Principal Loss Amount............... 55
Certificate Rates............................... 53
Certificates.................................... 7
Charge-off Rate................................. 70
Charge-off Rate Test............................ 70
Charged-off Amount.............................. 51
Charged-off Contract............................ 51
Claims.......................................... 76
Class........................................... 50
Class A Certificate Balance..................... 9
Class A Certificateholders...................... 10,50
Class A Certificates............................ 2,7
Class A Interest................................ 8
Class A Percentage.............................. 13
Class A-1 Allocation Percentage................. 21
Class A-1 Certificate Balance................... 8
Class A-1 Certificate Factor.................... 49
Class A-1 Certificate Principal Loss Amount..... 54
Class A-1 Certificate Rate...................... 2,10
Class A-1 Certificateholders.................... 9
Class A-1 Certificates.......................... 2,7
Class A-1 Interest.............................. 8
Class A-1 Interest Carryover Shortfall.......... 55
Class A-2 Allocation Percentage................. 21
Class A-2 Certificate Balance................... 8
Class A-2 Certificate Factor.................... 49
Class A-2 Certificate Principal Loss Amount..... 54
Class A-2 Certificate Rate...................... 2,10
Class A-2 Certificateholders.................... 10
Class A-2 Certificates.......................... 2,7
Class A-2 Interest.............................. 8
Class A-2 Interest Carryover Shortfall.......... 55
Class A-3 Allocation Percentage................. 21
Class A-3 Certificate Balance................... 8
<CAPTION>
TERM PAGE
- ------------------------------------------------ -----
<S> <C>
Class A-3 Certificate Factor.................... 49
Class A-3 Certificate Principal Loss Amount..... 54
Class A-3 Certificate Rate...................... 2,10
Class A-3 Certificateholders.................... 10
Class A-3 Certificates.......................... 2,7
Class A-3 Interest.............................. 8
Class A-3 Interest Carryover Shortfall.......... 55
Class B Allocation Percentage................... 56
Class B Certificate Balance..................... 9
Class B Certificate Principal Carryover
Shortfall..................................... 56
Class B Certificate Principal Loss Amount....... 54
Class B Certificate Rate........................ 53
Class B Certificateholders...................... 13
Class B Certificates............................ 2,7
Class B Interest................................ 8
Class B Interest Carryover Shortfall............ 55
Class B Percentage.............................. 13
Class Certificate Balance....................... 8
Closing Date.................................... 8
Code............................................ 88
Collection Period............................... 11
Collections..................................... 12,57
Commission...................................... 2
Contingent and Excess Liability Insurance
Policies...................................... 71
Contract Rights................................. 25
Contracts....................................... 6
Cooperative..................................... 63
Current Contracts............................... 70
Cutoff Dates.................................... 56
Deerfield Office................................ 34
Dealers......................................... 5
Definitive Certificates......................... 50
Delinquency Rate................................ 70
Delinquency Test................................ 70
Deposit Date.................................... 16
Depositaries.................................... 9
Determination Date.............................. 53
Discounted Contract............................. 11
Discounted Principal Balance.................... 15
Distribution Account............................ 65
Distribution Date............................... 2,9
DOL............................................. 92
DTC............................................. 9
DTC Participants................................ 61
Duff & Phelps................................... 93
Early Amortization Event........................ 58
Early Termination Charge........................ 41
ERISA........................................... 20,92
ERISA Compliance Test........................... 81
Euroclear....................................... 9
Euroclear Operator.............................. 63
Euroclear Participants.......................... 61
Events of Servicing Termination................. 82
Excess Collections.............................. 54
Exchange Act.................................... 2
Exemption....................................... 93
Extension Fee................................... 36
Fair, Isaac..................................... 35
Final Scheduled Distribution Date............... 10
First Bank...................................... 5
Fitch........................................... 93
Five State Area................................. 7
Foreign Investors............................... 91
</TABLE>
98
<PAGE> 101
<TABLE>
<CAPTION>
TERM PAGE
- ------------------------------------------------ -----
<S> <C>
Full Termination Ratio.......................... 37
Global Securities............................... 100
Indirect DTC Participants....................... 62
Initial Certificate Balance..................... 8
Initial Class A Certificate Balance............. 8
Initial Class A-1 Certificate Balance........... 8
Initial Class A-2 Certificate Balance........... 8
Initial Class A-3 Certificate Balance........... 8
Initial Class B Certificate Balance............. 8
Initial Contracts............................... 6
Initial Cutoff Date............................. 6
Initial Deposit................................. 18
Initial Leased Vehicles......................... 6
Insolvency Event................................ 28
Insolvency Laws................................. 28
Interest Collections............................ 12
Interest Period................................. 10
Investor Interest............................... 8
Investor Percentage............................. 13
IRS............................................. 88
JMFE............................................ 7,33
Lease Rate...................................... 15
Leased Vehicles................................. 6
Lemon Law....................................... 87
Liquidated Contract............................. 70
Liquidation Expenses............................ 16
Liquidation Proceeds............................ 16
Loan Rule....................................... 91
Loss Amounts.................................... 22
Matured Contract................................ 15
Matured Leased Vehicle Expenses................. 16
Matured Leased Vehicle Inventory................ 15
Matured Leased Vehicle Proceeds................. 16
Maturity Date................................... 41
Mobile Center................................... 34
Monthly Payments................................ 15
Moody's......................................... 20
Net Insurance Proceeds.......................... 66
Net Liquidation Proceeds........................ 12
Net Matured Leased Vehicle Proceeds............. 17
Net Repossessed Vehicle Proceeds................ 12
Nonrecoverable Advance.......................... 78
OID............................................. 89
Omnibus Proxy................................... 63
Origination Trust............................... 1,5
Origination Trust Agreement..................... 14
Origination Trust Assets........................ 1,32
Origination Trustee............................. 5
Other SUBI Assets............................... 24
Other SUBI Certificates......................... 31
Other SUBI Supplement........................... 74
Other SUBIs..................................... 5
Outstanding Principal Balance................... 15
Participants.................................... 61
Payment Ahead................................... 16
PBGC............................................ 25
Permitted Investments........................... 68
Prepayment...................................... 65
Prepayment Assumption........................... 47
Principal Allocation............................ 13
Principal Collections........................... 11
Rating Agencies................................. 20
Realized Value.................................. 41
Realization Test................................ 69
Reallocation Deposit Amount..................... 51
Reallocation Payment............................ 45
<CAPTION>
TERM PAGE
- ------------------------------------------------ -----
<S> <C>
Record Date..................................... 10
Registration Statement.......................... 2
Regulation...................................... 92
Repossessed Vehicle Expenses.................... 16
Repossessed Vehicle Proceeds.................... 16
Representative.................................. 94
Required Amount................................. 18
Required Deposit Ratings........................ 67
Reserve Fund.................................... 68
Reserve Fund Cash Requirement................... 68
Reserve Fund Deficiency......................... 68
Reserve Fund Supplemental Requirement........... 69
Reserve Fund Tests.............................. 69
Residual Value.................................. 15
Residual Value Loss Amount...................... 22
Residual Value Surplus.......................... 17
Residual Value Surplus Account.................. 67
Residual Value Tests............................ 69
Restricted Group................................ 94
Retained SUBI Interest.......................... 6
Revolving Period................................ 10
Schedule of Contracts and Leased Vehicles....... 44
Securities Act.................................. 2
Security Deposits............................... 78
Seller.......................................... 1,5
Seller Amounts.................................. 52
Seller Interest................................. 2,8
Seller Percentage............................... 52
Servicer........................................ 7
Servicer Letter of Credit....................... 66
Servicer's Certificate.......................... 80
Servicing Agreement............................. 7
Servicing Fee................................... 19
SET............................................. 7,33
Standard & Poor's............................... 20
SUBI............................................ 1,5
SUBI Assets..................................... 2,6
SUBI Certificate................................ 14
SUBI Collection Account......................... 65
SUBI Interest................................... 5
SUBI Supplement................................. 14
SUBI Trust Agreement............................ 14
Subsequent Contracts............................ 6
Subsequent Cutoff Date.......................... 56
Subsequent Leased Vehicles...................... 6
Support Agreement............................... 33
Terms and Conditions............................ 64
TMS............................................. 33
Transfer Date................................... 11
Trust........................................... 1,5
Trust Agent..................................... 14,75
Trustee......................................... 1,5
Turned-In Vehicle Test.......................... 69
UCC............................................. 25
Unallocated Principal Collections............... 52
Uncapped Administrative Expenses................ 54
Underwriters.................................... 94
Underwriting Agreement.......................... 94
U.S. Person..................................... 102
UTI............................................. 5
UTI Assets...................................... 24
UTI Certificates................................ 31
Voting Interests................................ 59
WOLSI........................................... 7
World Omni...................................... 1,5
</TABLE>
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ANNEX 1
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Class A
Certificates (the "Global Securities") will be available only in book-entry
form. Investors in the Global Securities may hold such Global Securities through
any of DTC, Cedel or Euroclear. The Global Securities will be tradeable as home
market instruments in both the European and U.S. domestic markets. Initial
settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedel and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the name of
Cede, as nominee of DTC. Investors' interests in the Global Securities will be
represented through financial institutions acting on their behalf as direct and
indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices applicable to conventional eurobonds, except that there
will be no temporary global security and no "lock-up" or restricted period.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in the
same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to book-entry
securities in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear Purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
accounts of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or
100
<PAGE> 103
Euroclear Participant at least one business day prior to settlement. Cedel or
Euroclear will instruct the respective Depositary, as the case may be, to
receive the Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date, on the basis of actual days elapsed and a
360 day year. Payment will then be made by the respective Depositary to the DTC
Participant account against delivery of the Global Securities. After settlement
has been completed, the Global Securities will be credited to the respective
clearing system and by the clearing system, in accordance with its usual
procedures, to the Cedel Participant's or Euroclear Participant's account. The
Global Securities credit will appear the next day (European time) and the cash
debit will be back-valued to, and the interest on the Global Securities will
accrue from, the value date (which would be the preceding day when settlement
occurred in New York). If settlement is not completed on the intended value date
(i.e., the trade fails), the Cedel or Euroclear cash debit will be valued
instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon to finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participants a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing systems, through the
respective Depositaries, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the respective Depositaries, as appropriate, to deliver the bonds
to the DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date on the basis of actual days elapsed and a
360 day year. The payment will then be reflected in the account of the Cedel
Participant or Euroclear Participant the following day, and receipt of the cash
proceeds in the Cedel Participant's or Euroclear Participant's account would be
back-valued to the value date (which would be the preceding day, when settlement
occurred in New York). Should the Cedel Participant or Euroclear Participant
have a line of credit with its respective clearing system and elect to be in
debit in anticipation of receipt of the sale proceeds in its account, the
back-valuation will extinguish any overdraft charges incurred over that one-day
period. If settlement is not completed on the intended value date (i.e., the
trade fails), receipt of the cash proceeds in the Cedel Participant's or
Euroclear Participant's account would instead be value as of the actual
settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would
101
<PAGE> 104
automatically fail on the sale side unless affirmative action were taken. At
least three techniques should be readily available to eliminate this potential
problem:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC Participant
no later than one day prior to settlement, which would give the Global
Securities sufficient time to be reflected in their Cedel or Euroclear
account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the trade
so that the value date for the purchase from the DTC Participant is at
least one day prior to the value date for the sale to the Cedel Participant
or Euroclear Participant.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding through Cedel or Euroclear
(or through DTC if the holder has an address outside the U.S.) will be subject
to the 30% U.S. withholding tax that generally applies to payments of interest
(including original issue discount) on registered debt issued by U.S. Persons,
unless (i) each clearing system, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business in the
chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 or the Tax Certificate changes, a new Form W-8
or Tax Certificate, as the case may be, must be filed within 30 days of such
change.
Exemption for non-U.S. Person with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are beneficial owners of Global Securities
residing in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate (depending on the treaty terms) by filing Form
1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty provides
only for a reduced rate, withholding tax will be imposed at that rate unless the
filer alternatively files Form W-8. Form 1001 may be filed by the Certificate
Owner or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includible in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all aspects
of U.S. Federal income tax withholding that may be relevant to foreign holders
of the Global Securities. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of the
Global Securities.
102
<PAGE> 105
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE SELLER OR ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE SELLER SINCE SUCH DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Index................................. 3
Overview of Transaction............... 4
Summary............................... 5
Risk Factors.......................... 21
The Trust and the SUBI................ 29
The Origination Trust................. 31
Use of Proceeds....................... 33
The Seller............................ 33
World Omni............................ 33
The Contracts......................... 39
Maturity, Prepayment and Yield
Considerations...................... 45
Class A Certificate Factors and
Trading Information; Reports to
Class A Certificateholders.......... 49
Description of the Certificates....... 50
Security for the Certificates......... 65
Additional Document Provisions........ 72
Certain Legal Aspects of the
Origination Trust and the SUBI...... 84
Certain Legal Aspects of the Contracts
and the Leased Vehicles............. 85
Certain Income Tax Considerations..... 88
ERISA Considerations.................. 92
Underwriting.......................... 94
Notice to Canadian Residents.......... 95
Ratings of the Class A Certificates... 96
Legal Matters......................... 97
Index of Capitalized Terms............ 98
Global Clearance, Settlement and Tax
Documentation Procedures............ 100
</TABLE>
------------------
UNTIL JANUARY 16, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. UPON RECEIPT OF A REQUEST BY AN INVESTOR WHO
HAS RECEIVED AN ELECTRONIC PROSPECTUS OR A REQUEST BY SUCH INVESTOR'S
REPRESENTATIVE WITHIN THE PERIOD DURING WHICH THERE IS A PROSPECTUS DELIVERY
OBLIGATION, THE SELLER OR THE UNDERWRITERS WILL PROMPTLY DELIVER, OR CAUSE TO BE
DELIVERED, WITHOUT CHARGE, A PAPER COPY OF THE PROSPECTUS.
- ------------------------------------------------------
- ------------------------------------------------------
LOGO
World Omni
1996-B Automobile Lease
Securitization Trust
$750,057,988
$260,000,000
5.95% Automobile Lease
Asset Backed Certificates,
Class A-1
$280,000,000
6.20% Automobile Lease
Asset Backed Certificates,
Class A-2
$210,057,988
6.25% Automobile Lease
Asset Backed Certificates,
Class A-3
World Omni Lease
Securitization L.P.
Seller
World Omni Financial Corp.
Servicer
PROSPECTUS
CS First Boston
Merrill Lynch & Co.
BA Securities, Inc.
Salomon Brothers Inc
------------------------------------------------------
<PAGE> 106
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND PAYMENT.
Expenses in connection with the offering of the Class A Certificates being
registered herein are estimated as follows:
<TABLE>
<S> <C>
SEC registration fee...................................................... $227,333
Legal fees and expenses................................................... 200,000
Accounting fees and expenses.............................................. 50,000
Blue sky fees and expenses................................................ 25,000
Rating agency fees........................................................ 175,000
Trustee fees and expenses................................................. 25,000
Printing.................................................................. 45,000
Miscellaneous............................................................. 2,667
--------
Total........................................................... $750,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 17-108 of the Delaware Revised Uniform Limited Partnership Act
provides that, subject to such standards and restrictions, if any, as are set
forth in its partnership agreement, a limited partnership may, and shall have
the power to, indemnify and hold harmless any partner or other person from and
against any and all claims and demands whatsoever.
Pursuant to Section 4.08 of the Agreement of Limited Partnership of World
Omni Lease Securitization L.P. (the "Registrant"), the Registrant will, to the
fullest extent permitted by law, indemnify World Omni Lease Securitization,
Inc., the general partner of the Registrant, and its directors, officers,
shareholders, agents, affiliates and employees acting within the scope of their
authority against their losses and expenses sustained by reason of their acts on
behalf of the Registrant or in furtherance of the interests of the Registrant,
if the acts were not fraudulent or in bad faith and did not constitute willful
or wanton misconduct or gross negligence.
Reference is also made to Section 7 of the Underwriting Agreement (see
Exhibit 1.1), which provides for indemnification of the Registrant under certain
circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
a. Exhibits:
<TABLE>
<C> <C> <S>
1.1 -- Form of Underwriting Agreement*
3.1 -- Articles of Incorporation of World Omni Lease Securitization, Inc. (incorporated by
reference from Exhibit 3.1 to Registration Statement on Form S-1, File No. 33-85036
(the "1994-B Registration Statement"))
3.2 -- Bylaws of World Omni Lease Securitization, Inc. (incorporated by reference from
Exhibit 3.2 to the 1994-B Registration Statement)
3.3 -- Amended and Restated Agreement of Limited Partnership of World Omni Lease
Securitization L.P. between World Omni Lease Securitization, Inc. and World Omni
Financial Corp., dated as of July 1, 1994 (incorporated by reference from Exhibit
3.3 to the 1994-B Registration Statement)
</TABLE>
II-1
<PAGE> 107
<TABLE>
<C> <C> <S>
4.1 -- Form of Securitization Trust Agreement between World Omni Lease Securitization L.P.
and First Bank National Association, as Trustee (including forms of Class A
Certificates)*
5.1 -- Opinion of McDermott, Will & Emery with respect to legality*
8.1 -- Opinion of Brown & Wood LLP with respect to federal income tax matters*
8.2 -- Opinion of English, McCaughan & O'Bryan, P.A. with respect to certain Florida tax
matters
10.1 -- Second Amended and Restated Trust Agreement among Auto Lease Finance L.P., VT Inc.
and First Bank National Association (as successor to Bank of America Illinois),
dated as of July 1, 1994 (incorporated by reference from Exhibit 10.1 to the 1994-B
Registration Statement)
10.2 -- Form of Supplement 1996-B to Trust Agreement among Auto Lease Finance L.P., VT Inc.
and First Bank National Association (as successor to Bank of America Illinois)
(including form of the SUBI Certificate)*
10.3 -- Second Amended and Restated Servicing Agreement between VT Inc. and World Omni
Financial Corp., dated as of July 1, 1994 (incorporated by reference from Exhibit
10.3 to the 1994-B Registration Statement)
10.4 -- Form of Supplement 1996-B to Servicing Agreement between VT Inc. and World Omni
Financial Corp.*
10.5 -- Articles of Incorporation of Auto Lease Finance, Inc. (incorporated by reference
from Exhibit 10.5 to the 1994-B Registration Statement)
10.6 -- Bylaws of Auto Lease Finance, Inc. (incorporated by reference from Exhibit 10.6 to
the 1994-B Registration Statement)
10.7 -- Amended and Restated Agreement of Limited Partnership between Auto Lease Finance,
Inc. and World Omni Financial Corp., dated as of July 1, 1994 (incorporated by
reference from Exhibit 10.7 to the 1994-B Registration Statement)
10.8 -- Amendment No. 1 to Second Amended and Restated Trust Agreement among Auto Lease
Finance L.P., VT Inc. and First Bank National Association (as successor to Bank of
America Illinois), dated as of November 1, 1994 (incorporated by reference from
Exhibit 10.8 to the 1994-B Registration Statement)
10.9 -- Second Amended and Restated Assignment Agreement among World Omni Financial Corp.,
Auto Lease Finance L.P. and VT Inc., dated as of July 1, 1994 (incorporated by
reference from Exhibit 10.9 to Registration Statement on Form S-1, File No.
33-95404)
10.10 -- Amendment No. 1 to Second Amended and Restated Assignment Agreement among World Omni
Financial Corp., Auto Lease Finance L.P. and VT Inc., dated as of October 1, 1995
(incorporated by reference from Exhibit 10.10 to Registration Statement on Form S-1,
File No. 333-00794 (the "1996-A Registration Statement"))
10.11 -- Support Agreement, dated as of October 1, 1995 between World Omni Financial Corp.
and World Omni Lease Securitization L.P. (incorporated by reference from Exhibit
10.11 to the 1996-A Registration Statement)
10.12 -- Amendment No. 1 to Support Agreement between World Omni Financial Corp. and World
Omni Lease Securitization L.P., dated as of May 1, 1996*
10.13 -- Form of Amendment No. 2 to Support Agreement, between World Omni Financial Corp.,
and World Omni Lease Securitization L.P.*
23.1 -- Consent of McDermott, Will & Emery (included as part of Exhibit 5.1)
23.2 -- Consent of Brown & Wood LLP (included as part of Exhibit 8.1)
23.3 -- Consent of English, McCaughan & O'Bryan, P.A. (included as part of Exhibit 8.2)
23.4 -- Consent of Williams & Connolly*
23.5 -- Consent of Hand Arendall, L.L.C.*
24.1 -- Power of Attorney*
</TABLE>
- ---------------
* Previously filed.
II-2
<PAGE> 108
b. Financial Statement Schedules:
Not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
(a) To provide to the Underwriters at the closing date specified in the
Underwriting Agreement certificates in such denominations and registered in such
names as required by the Underwriters to provide prompt delivery to each
purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, 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 Act and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the Registrant
of expenses incurred or paid by a director, officer or controlling person of
such Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act will be deemed to be part of this registration statement as of the
time it was declared effective.
(d) For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus will be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time will be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE> 109
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO REGISTRATION STATEMENT ON FORM S-1 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY
OF DEERFIELD BEACH AND STATE OF FLORIDA, ON THE 17TH DAY OF OCTOBER, 1996.
WORLD OMNI LEASE SECURITIZATION L.P.
By: WORLD OMNI LEASE SECURITIZATION, INC.,
as General Partner
By: /s/ A. TUCKER ALLEN
-----------------------------------
Name: A. Tucker Allen
Title: Vice President and Corporate
Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS AMENDMENT NO. 2 TO REGISTRATION STATEMENT ON FORM S-1 HAS BEEN SIGNED BELOW
BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------- -----------------
<C> <S> <C>
/s/ A. TUCKER ALLEN Director and Vice President and October 17, 1996
- ------------------------------------------ Corporate Treasurer of the
A. Tucker Allen General Partner of the
Registrant (Principal
Financial and Accounting
Officer)
* Director of the General Partner October 17, 1996
- ------------------------------------------ of the Registrant
Lawrence S. Rich
* Director of the General Partner October 17, 1996
- ------------------------------------------ of the Registrant
Jeffrey B. Shapiro
* Director of the General Partner October 17, 1996
- ------------------------------------------ of the Registrant
Christopher C. Wheeler
* Director and President of the October 17, 1996
- ------------------------------------------ General Partner of the
Daryl P. Smith Registrant (Principal
Executive Officer)
* A. TUCKER ALLEN
- ------------------------------------------
A. Tucker Allen
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 110
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE
- ------ -------------------------------------------------------------------------------------
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement*
3.1 -- Articles of Incorporation of World Omni Lease Securitization, Inc.
(incorporated by reference from Exhibit 3.1 to Registration Statement on
Form S-1, File No. 33-85036 (the "1994-B Registration Statement"))
3.2 -- Bylaws of World Omni Lease Securitization, Inc. (incorporated by
reference from Exhibit 3.2 to the 1994-B Registration Statement)
3.3 -- Amended and Restated Agreement of Limited Partnership of World Omni
Lease Securitization L.P. between World Omni Lease Securitization, Inc.
and World Omni Financial Corp., dated as of July 1, 1994 (incorporated
by reference from Exhibit 3.3 to the 1994-B Registration Statement)
4.1 -- Form of Securitization Trust Agreement between World Omni Lease
Securitization L.P. and First Bank National Association, as Trustee
(including forms of Class A Certificates)*
5.1 -- Opinion of McDermott, Will & Emery with respect to legality*
8.1 -- Opinion of Brown & Wood LLP with respect to federal income tax matters*
8.2 -- Opinion of English, McCaughan & O'Bryan, P.A. with respect to certain
Florida tax matters.....................................................
10.1 -- Second Amended and Restated Trust Agreement among Auto Lease Finance
L.P., VT Inc. and First Bank National Association (as successor to Bank
of America Illinois), dated as of July 1, 1994 (incorporated by
reference from Exhibit 10.1 to the 1994-B Registration Statement)
10.2 -- Form of Supplement 1996-B to Trust Agreement among Auto Lease Finance
L.P., VT Inc. and First Bank National Association (as successor to Bank
of America Illinois) (including form of the SUBI Certificate)*
10.3 -- Second Amended and Restated Servicing Agreement between VT Inc. and
World Omni Financial Corp., dated as of July 1, 1994 (incorporated by
reference from Exhibit 10.3 to the 1994-B Registration Statement)
10.4 -- Form of Supplement 1996-B to Servicing Agreement between VT Inc. and
World Omni Financial Corp.*
10.5 -- Articles of Incorporation of Auto Lease Finance, Inc. (incorporated by
reference from Exhibit 10.5 to the 1994-B Registration Statement)
10.6 -- Bylaws of Auto Lease Finance, Inc. (incorporated by reference from
Exhibit 10.6 to the 1994-B Registration Statement)
10.7 -- Amended and Restated Agreement of Limited Partnership between Auto Lease
Finance, Inc. and World Omni Financial Corp., dated as of July 1, 1994
(incorporated by reference from Exhibit 10.7 to the 1994-B Registration
Statement)
10.8 -- Amendment No. 1 to Second Amended and Restated Trust Agreement among
Auto Lease Finance L.P., VT Inc. and First Bank National Association (as
successor to Bank of America Illinois), dated as of November 1, 1994
(incorporated by reference from Exhibit 10.8 to the 1994-B Registration
Statement)
</TABLE>
<PAGE> 111
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE
- ------ -------------------------------------------------------------------------------------
<C> <C> <S> <C>
10.9 -- Second Amended and Restated Assignment Agreement among World Omni
Financial Corp., Auto Lease Finance L.P. and VT Inc., dated as of July
1, 1994 (incorporated by reference from Exhibit 10.9 to Registration
Statement on Form S-1, File No. 33-95404)
10.10 -- Amendment No. 1 to Second Amended and Restated Assignment Agreement
among World Omni Financial Corp., Auto Lease Finance L.P. and VT Inc.,
dated as of October 1, 1995 (incorporated by reference from Exhibit
10.10 to Registration Statement on Form S-1, File No. 333-00794 (the
"1996-A Registration Statement"))
10.11 -- Support Agreement, dated as of October 1, 1995 between World Omni
Financial Corp. and World Omni Lease Securitization L.P. (incorporated
by reference from Exhibit 10.11 to the 1996-A Registration Statement)
10.12 -- Amendment No. 1 to Support Agreement between World Omni Financial Corp.
and World Omni Lease Securitization L.P., dated as of May 1, 1996*
10.13 -- Form of Amendment No. 2 to Support Agreement between World Omni
Financial Corp. and World Omni Lease Securitization L.P.*
23.1 -- Consent of McDermott, Will & Emery (included as part of Exhibit 5.1)
23.2 -- Consent of Brown & Wood LLP (included as part of Exhibit 8.1)
23.3 -- Consent of English, McCaughan & O'Bryan, P.A. (included as part of
Exhibit 8.2)
23.4 -- Consent of Williams & Connolly*
23.5 -- Consent of Hand Arendall, L.L.C.*
24.1 -- Power of Attorney*
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 8.2
[ENGLISH, MCCAUGHAN & O'BRYAN, P.A. LETTERHEAD]
October 17, 1996
Lee W. Harvath, Jr.
World Omni Lease Securitization, L.P.
6150 Omni Park Drive
Mobile, Alabama 36609
Re: WORLD OMNI 1996-B
AUTOMOBILE LEASE SECURITIZATION TRUST
Ladies and Gentlemen:
We are acting as special Florida tax counsel for World Omni Financial
Corp., a Florida corporation ("WOFCO"), World Omni Lease Securitization L.P., a
Delaware limited partnership ("WOLS LP" or the "Seller"), World Omni Lease
Securitization, Inc., a Delaware corporation ("WOLSI"), Auto Lease Finance,
Inc., a Delaware corporation ("ALFI"), Auto Lease Finance L.P., a Delaware
limited partnership ("ALFI LP"), World Omni LT, an Alabama trust (the
"Origination Trust"), and World Omni 1996-B Automobile Lease Securitization
Trust (the "Securitization Trust" or the "Trust") (WOFCO, the Seller, WOLSI,
ALFI, ALFI LP, the Origination Trust and the Securitization Trust are referred
to collectively as the "Clients") in connection with certain matters of Florida
law arising in connection with the proposed offering by the Seller of (a)
$__________ principal amount of _____% Automobile Lease Asset Backed
Certificates, Class A-1, $__________ principal amount of _____% Automobile
Lease Asset Backed Certificates, Class A-2, and $___________ principal amount
of ____% Automobile Lease Asset Backed Certificates, Class A-3 (collectively,
the "Class A Certificates"), and (b) $_________ principal amount of _____%
Automobile Lease Asset Backed Certificates, Class B (the "Class B
Certificates", and together with the Class A Certificates, the "Investor
Certificates"), to be issued pursuant to a Securitization Trust Agreement,
dated as of October 1, 1996, (the "Securitization Trust Agreement") between the
Seller and First Bank National Association, a national banking association
(successor to Bank of America Illinois ("BA Illinois"), an Illinois banking
corporation) ("First Bank"), as trustee (the "Trustee"). Simultaneously with
the issuance of the Investor Certificates, pursuant to the Securitization Trust
Agreement, the Securitization Trust will issue a certificate representing the
interest in the Securitization Trust not evidenced by the Investor Certificates
(the "Seller Certificate" and, together with the Investor Certificates, the
"Certificates"). This opinion (the "Opinion") is being delivered,
<PAGE> 2
World Omni Lease Securitization, L.P.
October 17, 1996
Page 2
with the consent of the Clients, to you and CS First Boston Corporation
("First Boston") in its capacity as representative of the Underwriters(1)
pursuant to Sections 6(d)(1)(c) and 6(d)(4) of the Underwriting Agreement
dated October __, 1996 (the "Underwriting Agreement"), among the Seller, WOFCO
and the Underwriters; ____________________, in its capacity as Placement Agent
(in such capacity, the "Placement Agent") pursuant to Section 7(c) of the
Private Placement Agency Agreement dated October ___, 1996 (the "Placement
Agency Agreement") among the Seller, WOFCO and ________________ (in such
capacity, the "Placement Agent"); and ___________________, as Purchaser (in
such capacity, the "Purchaser") pursuant to Section 6(c) of the Purchase
Agreement dated October ___, 1996 (the "Purchase Agreement") among the Seller,
the Placement Agent and the Purchaser.
This Opinion is solely for the benefit of and may be relied upon only
by (a) you, (b) CS First Boston Corporation, _______________ as Placement
Agent and Purchaser, Brown & Wood LLP, as counsel to the Underwriters, and
________________ as counsel to the Placement Agent and Purchaser, in connection
with the transactions contemplated by the Underwriting Agreement, the Placement
Agency Agreement and the Purchase Agreement, (c) Moody's Investors Service,
Inc. and Standard & Poor's Ratings Services, in connection with the rating of
the Investor Certificates, (d) First Bank as Trustee, and as trust agent for
the Origination Trust (the "Trust Agent"), and (e) the parties set forth on
Annex A hereto as lenders to ALFI LP (the Persons listed in (a), (b), (c), (d),
and (e), collectively, the "Reliance Parties"). This Opinion may not be relied
upon by, nor may copies be delivered to, any other Person or used for any other
purpose without our prior written consent except as required by any bank
regulatory agency.
Capitalized terms for which meanings are provided in the
Securitization Trust Agreement, the Underwriting Agreement, the Placement
Agency Agreement, or the Purchase Agreement, unless otherwise defined herein,
are used herein with such meanings. Captions used in this Opinion are for
convenience only, and should not be regarded as having any independent meaning.
We are members of the Bar of the State of Florida and do not express
any opinion with respect to the applicability of the laws of any jurisdiction
other than the State of Florida. We do not express any opinion with respect to
the application or applicability of: (a) any other state or federal tax laws
or regulations; or (b) pension and employee benefit laws and regulations, to
the transactions contemplated by the Reviewed Documents (as hereinafter
defined) (the "Transactions").
____________________
(1) As used in this Opinion, "Underwriters" refers to CS First
Boston Corporation and those entities listed on Schedule I
to the Underwriting Agreement (as hereinafter defined).
<PAGE> 3
World Omni Lease Securitization, L.P.
October 17, 1996
Page 3
DOCUMENTS REVIEWED; INVESTIGATIONS; ASSUMPTIONS
In connection with this Opinion, we have examined copies of the
following documents (the "Reviewed Documents"):
(a) the Securitization Trust Agreement;
(b) the Second Amended and Restated Servicing Agreement dated as
of July 1, 1994 between VT Inc., as trustee of World Omni
LT, WOFCO, and, for certain limited purposes, ALFI LP (the
"Second Amended and Restated Servicing Agreement");
(c) the Supplement 1996-B to Servicing Agreement dated as of
October 1, 1996 among VT Inc., as trustee of World Omni LT,
WOFCO and, for certain limited purposes only, First Bank and
WOLSI as General Partner of World Omni Lease Securitization
L.P. (the "Servicing Supplement B");
(d) the Second Amended and Restated Trust Agreement dated as of
July 1, 1994, as amended by Amendment No. 1 to Second
Amended and Restated Trust Agreement dated as of November 1,
1994, each among World Omni LT, ALFI LP, VT Inc., and, for
certain limited purposes only, BA Illinois(2) (as so amended,
the "Second Amended and Restated Trust Agreement");
(e) the Supplement 1996-B to Trust Agreement dated as of October
1, 1996 between ALFI LP, VT Inc., as Trustee of World Omni
LT, and, for certain limited purposes only, First Bank and the
Seller (the "Trust Supplement B");
(f) the World Omni Lease Securitization L.P. Amended and Restated
Limited Partnership Agreement dated as of July 1, 1994
between WOLSI, as General Partner, and WOFCO, as Limited
Partner (the "WOLS LP Amended and Restated Limited Partnership
Agreement");
(g) the Auto Lease Finance L.P. Amended and Restated Limited
Partnership Agreement dated as of July 1, 1994 between ALFI,
as General Partner, and WOFCO, as Limited Partner (the "ALFI
LP Amended and Restated Limited Partnership Agreement");
__________________________________
(2) Please note that First Bank, although not a signatory to the Second
Amended and Restated Trust Agreement, is the successor in interest to
BA Illinois by virtue of its appointment as successor Trust Agent for
the Origination Trust.
<PAGE> 4
World Omni Lease Securitization, L.P.
October 17, 1996
Page 4
<TABLE>
<S> <C>
(h) the SUBI Certificate Purchase and Sale Agreement dated as of
October 1, 1996 between ALFI LP and the Seller (the "SUBI
Certificate Purchase and Sale Agreement");
(i) the Backup Security Agreement dated as of October 1, 1996
among WOFCO, ALFI LP, VT Inc., as trustee of World Omni LT,
WOLS LP and First Bank, as Trustee (the "Backup Security
Agreement");
(j) the Second Amended and Restated Assignment Agreement dated as
of July 1, 1994 between WOFCO and ALFI LP as amended by
Amendment No. 1 dated as of October 1, 1995 (the "Second
Amended and Restated Assignment Agreement");
(k) the Intercreditor Agreement dated as of November 1, 1994 among
WOFCO, ALFI LP, the Seller, VT Inc., BA Illinois as Trustee,
BA Illinois as trustee for the World Omni 1994-A Automobile
Lease Securitization Trust (the "1994-A Securitization
Trust"), and BA Illinois as Trust Agent for the Origination
Trust and the parties listed on Appendix A attached thereto,
together with all Accession Agreements supplementary thereto
(together, the "Intercreditor Agreement");(3)
(l) the Accession Agreement to Intercreditor Agreement dated as of
October 1, 1995 (the "1995-A Accession Agreement") executed by
the Seller and First Bank as Trustee (the "1995-A
Securitization Trustee") of the World Omni 1995-A Automobile
Lease Securitization Trust (the "1995-A Securitization
Trust");
(m) the Accession Agreement to Intercreditor Agreement dated as of
May 1, 1996 (the "1996-A Accession Agreement") executed by the
Seller and First Bank as Trustee (the "1996-A Securitization
Trustee") of the World Omni 1996-A Automobile Lease
Securitization Trust (the "1996-A Securitization Trust");
(n) the Accession Agreement to Intercreditor Agreement dated as of
October 1, 1996 (the "Accession Agreement"), executed by the
Seller and Trustee;
(o) the Support Agreement dated as of October 1, 1995 by World
Omni Financial Corp. and World Omni Lease Securitization L.P.
(the "Support
</TABLE>
__________________________________
(3) Please note that First Bank, although not a signatory to the
Intercreditor Agreement, is the successor in interest to BA Illinois
by virtue of its appointment as: (a) successor Trustee for the
Securitization Trust; (b) successor trustee for the 1994-A
Securitization Trust; and (c) successor Trust Agent for the
Origination Trust.
<PAGE> 5
World Omni Lease Securitization, L.P.
October 17, 1996
Page 5
Agreement"), as amended by Amendment No. 1 dated as of May 1,
1996, as amended by Amendment No. 2 dated as of October 1,
1996;
(p) the Underwriting Agreement;
(q) the Placement Agency Agreement;
(r) the Private Placement Memorandum for the Class B Certificates
dated __________, 1996;
(s) the Purchase Agreement dated _________, 1996 (the "Purchase
Agreement") among the Seller, WOFCO and the Purchaser; and
(t) the registration statement on Form S-1 (No. 333-11449) filed
by the Seller with the Securities and Exchange Commission
(the "Commission") on September 5, 1996 pursuant to the
Securities Act of 1933, as amended (the "Act"), as amended by
Amendment No. 1 thereto filed with the Commission on ________,
1996, (the registration statement in the amended form in which
it became effective on ________, 1996 and the related
prospectus contained therein, the "Registration Statement" and
the "Prospectus").
In addition to the Reviewed Documents, we have reviewed originals or
copies certified or authenticated to our satisfaction of all such corporate
records, agreements, instruments and documents of the Clients, certificates of
public officials, any certificates provided to us by the officers of any of the
Clients and other certificates and opinions, and have made such other
investigations, as we have deemed necessary in connection with the opinions set
forth herein. In our examination, we have assumed the capacity of natural
persons, the genuineness of all documents submitted to us as originals, the
conformity to originals of all documents submitted to us as copies, and the
authenticity of the originals from which any such copies were made, none of
which assumptions have we independently confirmed. We have also relied,
without further independent investigation, as to certain matters of fact, on
information obtained from public officials, from officers of the Clients and
from other sources believed by us to be responsible.
We have assumed without further investigation that all officer's
certificates (which expressly permit our reliance on such certificates) and
other information and documentation provided to us by any of the Clients are
true, complete and not misleading and that all statements and assumptions of
fact set forth therein and herein are and will remain true and valid. Each
assumption specifically described in this Opinion is made with the express
consent and approval of the Reliance Parties. However, with respect to the
assumptions we have made and as to our reliance upon such matters of fact and
information, to our knowledge, there is no information that conflicts with such
assumptions or that would make such reliance unwarranted.
<PAGE> 6
World Omni Lease Securitization, L.P.
October 17, 1996
Page 6
This Opinion is given as of the date hereof, and we expressly disclaim
any obligation to update this Opinion or to give notice to any Reliance Party
or any third party of any future changes in facts or law, including changes
that might affect the opinions set forth herein.
OPINIONS
Based on the foregoing, it is our opinion (4) that:
1. THE INVESTOR CERTIFICATES AS DEBT; CLASSIFICATION AS A
PARTNERSHIP
(a) Based upon the assumptions, authorities and reasoning
set forth below, upon their issuance in accordance with the Reviewed Documents
the Class A Certificates will represent debt (i.e., will be treated as
indebtedness) and the Class B Certificates should represent debt (i.e., should
be treated as indebtedness) under Florida law.
Florida law references standard, accepted definitions
and sources in defining the term "debt." For example, in Holman et al. v.
Hollis, 94 Fla. 614 (1927), the court stated that the accepted definition of
"debt" is: "That which is due from one person to another, whether money, goods,
or services; that which one person is bound to pay to another; a thing owed."
Similarly, in Turner v. Gruver, 168 So.2d 192 (Fla. 3rd DCA 1964), after citing
Holman with approval, the court cited Black's Law Dictionary for the
proposition that a debt is: "... an obligation to pay a sum certain; or a sum
which may be ascertained by simple mathematical calculation from known facts;
regardless of whether the liability arises by contract or by operation of law."
See, also, Waters' Dictionary of Florida Law. The Investor Certificates will
represent debt under all such definitions and, accordingly, the Investor
Certificates will represent debt under Florida law generally.
Brown & Wood LLP, special tax counsel to the Clients,
has opined and, with the consent of the Reliance Parties, we have assumed, that
the Class A Certificates will represent debt, rather than equity, and that the
Class B Certificates should represent debt, rather than equity, for federal
income tax purposes, and we know of no reason why we should not so assume.
Accordingly, because Florida income tax law utilizes federal definitions and
concepts, the Class A Certificates will represent debt, rather than equity, and
the Class B Certificates should represent debt, rather than equity, for Florida
income tax purposes. Moreover, because the factors utilized in distinguishing
debt
__________________________________
(4) In rendering this opinion as of the date hereof, we are assuming that
the Transactions will occur as set forth in the versions of the
Reviewed Documents which have been delivered to us as of the date
hereof and the facts and circumstances known to us concerning the
Transactions and the parties thereto will be the same as of the date
the Transactions occur as known by us to exist as of the date hereof.
<PAGE> 7
World Omni Lease Securitization, L.P.
October 17, 1996
Page 7
from equity for federal income tax purposes are well developed and based upon
standard, accepted criteria, the Class A Certificates will represent debt,
rather than equity, and the Class B Certificates should represent debt, rather
than equity, for purposes of Florida law generally.
In addition to generally defining the term "debt",
Florida law also uses it in several specific contexts, none of which is
inconsistent with finding that the Investor Certificates represent debt for
purposes of Florida law. For example, it is clear that the Investor
Certificates will represent debt for purposes of the Florida Statutes governing
attachment and garnishment. Similarly, it is clear that the Investor
Certificates will represent debt for purposes of the Florida Statutes governing
fraudulent conveyances.
A debt is distinguished from an advancement, in that
a debt is founded on a valuable consideration, entails the obligation of
repayment, and confers on the creditor the right to enforce it in the courts.
See 17 Fla. Jur. 2d, Decedents' Property, Section 92, citing 3 Am. Jur. 2d,
Advancements, Section 2. It is clear that the Investor Certificates will be
based upon valuable consideration, compel repayment and permit enforcement in a
Florida court.
In distinguishing a debt from a trust, it has been
held that the matter depends upon the manifested intention of the parties, and
that, if it is intended that the person receiving money shall have unrestricted
use thereof, being liable to pay a similar amount with or without interest, a
debt is created. Bankers Life & Casualty Co. v. Gaines Constr. Co., 199 So.2d
482 (Fla. 3rd DCA 1967). It is manifestly clear on the face of the Reviewed
Documents that the Transactions contemplate the creation of a debtor-creditor
relationship between the Issuer and the holders of the Investor Certificates.
In light of the foregoing, and because the Investor
Certificates will represent unconditional promises to pay sums certain plus
interest on definitely ascertainable dates, it is our opinion that the Class A
Certificates will represent debt (i.e., will be treated as indebtedness) and
the Class B Certificates should represent debt (i.e., should be treated as
indebtedness), for purposes of Florida law.
(b) Notwithstanding the opinions expressed above in this
numbered paragraph 1, in the event that the Class B Certificates are not
treated as debt for Florida tax purposes, then it is our opinion that (i) the
Trust will not be classified as an association taxable as a corporation for
Florida income tax purposes, (ii) the Trust will instead either be disregarded
as an entity or classified as a partnership between the Seller and the holder
or holders of Class B Certificates, and (iii) if the Trust is characterized as
a partnership formed between the Seller and the holder or holders of the Class
B Certificates, the portion of the amounts paid to each such Class B
Certificate holder corresponding to interest paid on the Class B Certificates
will be classified as a "guaranteed payment" for the use of capital within the
meaning of Code Section 707(c), and all remaining taxable income or
<PAGE> 8
World Omni Lease Securitization, L.P.
October 17, 1996
Page 8
loss of such partnership and any separately allocated items thereof will be
allocated solely to the Seller. As partners of a partnership, corporate
holders of Class B Certificates may be subject to Florida income tax, currently
at a 5.5% rate, on their share of all or a portion of the Trust's taxable
income to the extent that such income is apportioned to Florida under Florida
law.
2. FLORIDA LOAN RULE
Although the matter is not free from doubt, and assuming that the
Investor Certificates are deemed to be debt pursuant to numbered paragraph 1
herein, if the matter were properly presented to a Florida court having
jurisdiction, and assuming interpretation of relevant law on a basis consistent
with existing authority, such Florida court would hold that Florida
Administrative Code Section 12C-1.011(1)(s) (the "Loan Rule") will not be
applied so as to subject the holder of an Investor Certificate with absolutely
no other Florida contacts(5) to Florida income or franchise taxation solely as a
result of an investment in an Investor Certificate.
The Loan Rule provides that a financial organization is subject to
Florida income or franchise taxation if it earns or receives interest from
loans secured by real or tangible property located in Florida, even if it has
no other Florida contacts. Section 220.15(6), F.S., defines the term
"financial organization" to include any bank, trust company, savings bank,
industrial bank, land bank, safe deposit company, private banker, savings and
loan association, credit union, cooperative bank, small loan company, sales
finance company and investment company.
A threshold issue is the meaning of the term "loans" under the Loan
Rule. In this regard, some guidance is provided in TAA 90(M)-005 (December 12,
1990).(6) At issue there was a Massachusetts investment company, which was to
invest in a portfolio of tax-exempt municipal securities of Florida issuers,
including the State, counties, municipalities and political subdivisions,
agencies and instrumentalities of the State of Florida. It was found that,
under the scenario described, the company would not be subject to Florida income
taxation. It also was noted that, should the company obtain any loans secured
by real or tangible property located in Florida, it would become subject to
Florida income tax.
__________________________________
(5) Other Florida contacts, which might require a different opinion than
the one given herein, might include the purchase of any other asset
backed security from a Florida issuer, or the making of any secured
loan in Florida, or other minimal contacts, such as sending into
Florida any employee, agent or contractor, or having any affiliate in
Florida. No opinion is given herein as to such circumstances.
(6) A Technical Assistance Advisement or TAA is a particular response by
the Florida Department of Revenue to an inquiry made by a particular
taxpayer, and generally may not be relied upon by any other taxpayer.
However, the reasoning of a particular TAA may be instructive.
<PAGE> 9
World Omni Lease Securitization, L.P.
October 17, 1996
Page 9
The class of securities described in the TAA includes some which might
be secured by real or tangible property located in Florida, such as industrial
development bonds. Thus, the TAA suggests a distinction between bonds or other
debt securities, particularly those which are publicly offered, which might not
be subject to the Loan Rule, and loans arising out of more traditional
commercial settings, which might be subject to the Loan Rule.
Such a distinction was further suggested by TAA 93(M)-003 (April 2,
1993). At issue there was a Massachusetts Business Trust, which included a
fund invested in tax-exempt municipal securities of Florida issuers. The TAA
noted that the Fund would become subject to Florida income taxation if the Fund
held loans secured by mortgages, deeds of trust, or other liens upon real or
tangible personal property located in Florida. However, the TAA then noted
that: "Investment in Florida Bonds, including general obligation bonds ('GOs'),
revenue bonds ('RBs'), and industrial revenue bonds ('IRBs') will not in itself
subject the Fund to Florida income tax. While these bonds may be secured, the
investment in these publicly traded bonds is to be distinguished from a private
loan secured by a mortgage, deed of trust, or other lien upon real or tangible
personal property located within Florida."
A similar distinction, one between bonds and notes, has been made
under Rev. Rul. 79-251. 1979-2 Cum. Bull. 271. The Ruling considered a
taxpayer, which purchased mortgage-backed, pass-through trust certificates, and
would have been subject to tax if it were deemed to be receiving interest from
mortgage notes. However, the Ruling determined that, in part because the
certificates were freely transferrable, the certificates were bonds rather than
notes, and the taxpayer was not subject to federal income tax, because it was
receiving interest on a bond rather than interest on the underlying mortgage
notes.(7)
A similar distinction has been made under the federal and Florida
securities laws. Although the applicable statutes treat notes as securities,
applicable case law has created a distinction between securities and certain
notes arising in traditional commercial settings. See Reves v. Ernst & Young,
110 S.Ct. 945 (1990); Chemical Bank v. Arthur Andersen & Co., 726 F.2d 930 at
939 (CA2 1984); Hunssinger v. Rockford Business Credits, Inc., 745 F.2d 484, 488
(CA7 1984); Exchange Nat'l Bank of Chicago v. Touche Ross & Co., 544 F.2d 1126,
1137 (CA2 1976); Juanita McClure v. First National Bank of Lubbock, Texas,
__________________________________
(7) Also of note is the fact that the Ruling dealt with a pass-through,
"grantor" trust. Although each beneficiary of a grantor trust
generally is "treated as the owner" of a portion of the trust, the
Ruling did not extend the legal "fiction" so as to treat the taxpayer
as the owner of and the recipient of interest on any of the underlying
mortgages (the trust assets). Similarly, although the Securitization
Trust generally is being disregarded and treated as a mere security
device, it might not have to be entirely disregarded, and the
Certificate Holders might not have to be treated as secured by
tangible property. Rather, they might be treated as secured by
intangible property, that is, by a pledge of the beneficial interest
owned by the Securitization Trust. See 1959 Op. Atty. Gen. 059-229
(Nov. 16, 1959). The Loan Rule does not apply to loans secured
by intangible property.
<PAGE> 10
World Omni Lease Securitization, L.P.
October 17, 1996
Page 10
497 F.2d 490, 492-494 (1974); and State v. Fried, 357 So.2d 211 (1978). In our
opinion the Investor Certificates would be treated as securities rather than
mere notes under the federal and Florida securities laws.
Although the TAA and the Loan Rule might be interpreted differently,
the most rational and compelling interpretation is that which differentiates
between bonds or other debt securities, particularly those which are publicly
offered, which might not be subject to the Loan Rule, and loans arising in more
traditional commercial settings, which might be subject to the Loan Rule.
Moreover, such a distinction might provide a basis for preserving the Loan Rule
from invalidation on constitutional grounds.
The Loan Rule is subject to constitutional attack both under the Due
Process Clause of the Fourteenth Amendment to the U.S. Constitution and under
the Commerce Clause (Article I, sec. 8, cl. 3 of the U.S. Constitution). Both
the Due Process and the Commerce Clauses require that there be some connection
or "nexus" between a state and a person sought to be taxed by the state, and
both of those nexus requirements were recently reviewed by the U.S. Supreme
Court in Quill Corporation v. North Dakota, 112 S.Ct. 1904 (1992).
The nexus requirement under the Due Process Clause is the more easily
met of the two nexus requirements. Generally, it will be met if a person
purposefully directs its activities towards the residents of a state, so as to
establish some definite link or minimum connection with the state, such that
the person has fair warning that it may be subject to the jurisdiction of the
state and such that requiring the person to defend a suit in the state would be
reasonable and would not offend traditional notions of fair play and
substantial justice. See Quill, at pages 1909 through 1911, and the cases
therein cited.
It seems questionable to suggest that a single purchase of a single
security in a nationally marketed public offering (or in a private offering
derivative to such nationally distributed public offering) constitutes
purposeful direction of one's activities toward Florida residents, or otherwise
establishes a definite link or minimal connection with the State of Florida, so
as to give one fair warning and cause it to be reasonable and inoffensive to
require one to defend a suit in the State of Florida.
While the Due Process Clause focuses on concerns over fundamental
fairness, the Commerce Clause is concerned with the effects of state regulation
on the national economy. Accordingly, the nexus requirement under the Commerce
Clause is different from and more stringent than the nexus requirement under
the Due Process Clause. Under the Commerce Clause, there must, among other
things, be a "substantial nexus" between the person and the state and a tax
must be "fairly related" to services provided by the state. See Quill, at
pages 1911 et seq., and the cases there cited, including Complete Auto Transit,
Inc. v. Brady, 430 U.S. 274 (1977).
<PAGE> 11
World Omni Lease Securitization, L.P.
October 17, 1996
Page 11
At issue in Quill was a North Dakota law which on its face imposed a use
tax collection duty on every vendor who advertised in North Dakota three times
in a single year. The Supreme Court stated that the North Dakota law
illustrated well how a state tax might unduly burden interstate commerce. See
Quill, at footnote 6, and accompanying test.
The Loan Rule is subject to the same objections as the North Dakota law
found to be unconstitutional in Quill. The Supreme Court found it unreasonably
burdensome that the North Dakota law required only three contacts per year. On
its face, the Loan Rule requires only one contact with Florida at any time. The
Supreme Court found it unreasonably burdensome that the North Dakota law might
subject a person to similar laws in multiple jurisdictions, thus leading to a
plethora of filing requirements. The same is true of the Loan Rule. Moreover,
it is also true that the Loan Rule presents the very real possibility of a
person being subjected to multiple taxation. In addition, without diminishing
the significance of the interests which the Supreme Court protected in Quill,
we note that the free flow of credit and free access to sources of credit are
of particular and vital importance to interstate commerce and the national
economy. The Loan Rule might strangle that flow by making it more difficult,
more expensive or, in some cases, perhaps even impossible to access national or
regional credit markets through public offerings of securities.(8)
The dubious constitutional status of the Loan Rule is exacerbated by
its uncertain scope and its uncertain statutory underpinning.(9) For example,
although it may be argued that the concept of "doing business" in Florida, for
purposes of the Florida income and franchise tax, need not be entirely the same
as the concept of "transacting business" in Florida, for purposes of the
Florida intangible tax, it is nevertheless of note that Section 199.175(b)3,
F.S., an intangible tax statute, provides that the "ownership of any interest
in a participation or syndication loan or pool of loans, notes, or receivables
shall not be sufficient to support a finding that the owner of such interest is
transacting business" in Florida.
Under the circumstances, a Florida court should determine that it is
entitled to the benefit of a clear and reasonable statute, rather than a vague
and questionable
__________________________________
(8) The Loan Rule also might fail under the Commerce Clause by causing the
tax to be "discriminatory" against interstate commerce because it is
not "fairly apportioned." For example, on its face, the Loan Rule
might cause all of the income from a loan to be apportioned to
Florida, even if only a very small part of the security for the loan
consists of Florida real or tangible property.
(9) It is true that Section 220.15, F.S., includes somewhat similar
provisions relating to financial organizations. However, it is an
apportionment statute, which presupposes that the financial
organizations are subject to tax. It does not address the nexus
issue. It is interesting to note, however, that its provisions
include some which are at least partially consistent with those of the
intangible tax statute discussed in the text following this footnote.
<PAGE> 12
World Omni Lease Securitization, L.P.
October 17, 1996
Page 12
administrative pronouncement, and should refuse to enforce the Loan Rule
pending some specific action on the part of the Florida legislature.
Further, even if the Investor Certificates were deemed to be loans for
purposes of the Loan Rule, and even if the Loan Rule were upheld on
constitutional grounds, the Investor Certificates should not be taxable under
the Loan Rule since they are not secured directly by real or tangible personal
property located in Florida. The holders of the Investor Certificates merely
have a beneficial interest in the assets of the Securitization Trust which in
turn has a beneficial interest in the assets of the Origination Trust.
Although the corpus of the Origination Trust does contain vehicles, some of
which are located in Florida, the Investor Certificates are not directly
secured by those vehicles.
Our opinions in this numbered paragraph 2 are limited to the possible
subjugation of holders of Investor Certificates, which holders are financial
organizations with no other Florida contacts, to Florida income or franchise
taxation solely as a result of their investment in an Investor Certificate.
The opinions in this numbered paragraph 2 do not purport to deal with any other
aspect of the Florida tax laws, do not address the tax consequences that would
arise if the Class B Certificates were deemed not to be debt and the Trust were
characterized as a Partnership formed between the Seller and the holder or
holders of the Class B Certificates as is further described in numbered
paragraph 1, do not address any tax consequences to any other natural or other
person or persons, and do not address any federal tax consequences, any other
state tax consequences or any local tax consequences.
The opinions expressed herein are limited to the matters expressly set
forth herein, and no opinion is to be inferred or implied beyond the matters so
stated. Captions used in this Opinion are for convenience only, and should not
be regarded as having any independent meaning. The foregoing Opinion is
expressly subject to there being no material change in the law after the date
hereof.
We hereby consent to the filing of this Opinion as an exhibit to the
Registration Statement. We also consent to the use of our name under the
headings "Legal Matters" and "Certain Income Tax Considerations - Florida
Income Taxation" in the Prospectus constituting part of the Registration
Statement.
Very truly yours,
ENGLISH, McCAUGHAN & O'BRYAN, P.A.
By: /s/ Lee W. Harvath, Jr.
-------------------------------
Lee W. Harvath, Jr., President
<PAGE> 13
ANNEX A
LIST OF LENDERS
RECEIVABLES CAPITAL CORPORATION, a Delaware corporation ("RCC");
CORPORATE ASSET FUNDING COMPANY, INC., a Delaware corporation ("CAFCO");
CIESCO L.P., a Delaware limited partnership ("CIESCO");
CITIBANK, N.A. ("Citibank");
DRESDNER BANK AG, NEW YORK BRANCH;
ENTERPRISE FUNDING CORPORATION, a Delaware corporation (EFC");
CREDIT SUISSE NEW YORK BRANCH, a branch of Credit Suisse, a Swiss banking
corporation duly licensed under the laws of the State of New York, individually
("Credit Suisse");
ALPINE SECURITIZATION CORP., a Delaware corporation ("Alpine")
CREDIT SUISSE, as agent for Credit Suisse and Alpine;
BANK OF AMERICA ILLINOIS (f/k/a Continental Bank and Continental Bank N.A.)
("Bank of America Illinois"), as agent and administrative agent for RCC;
CITICORP NORTH AMERICA, INC., a Delaware corporation, as agent for CAFCO,
CIESCO and Citibank;
NATIONSBANK N.A., a national banking association, as agent for EFC; and
BANK OF AMERICA ILLINOIS, as Collateral Agent
MARKET STREET FUNDING CORPORATION
PNC BANK, NATIONAL ASSOCIATION
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION
BAYERISCHE VEREINSBANK AG
